department of the treasury internal_revenue_service washington d c date cc dom fs it a tl-n-54-99 number release date uilc memorandum for internal_revenue_service national_office field_service_advice from subject attorney deborah a butler assistant chief_counsel cc dom fs this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend taxpayer dollar_figurey a b independent distributor parent owner c fiscal_year fiscal_year d issues whether taxpayer s two settlement payments of dollar_figurey to the parent_corporation of an independent distributor and to the percent owner of that parent_corporation resolving a legal dispute over the termination of the independent distributor s right to distribute taxpayer s products are deductible under i r c ' or capitalized under sec_263 whether professional service_costs including internal and external accounting and legal fees incurred in connection with the settlement of the legal dispute are deductible under sec_162 or capitalized under sec_263 conclusions both dollar_figurey settlement payments incurred to regain control_over its distribution and end the independent distributor s right to distribute are costs incurred to protect or re-acquire a capital_asset and thus are capital expenditures the professional fees were incurred for the disposition or acquisition of a capital_asset and are thus capital expenditures facts taxpayer is the united_states importer and distributor of products manufactured overseas taxpayer distributes the products through a distributor network which then supplies retailers taxpayer has divided its distributor network into a distribution regions for the years at issue a subsidiary of taxpayer was the distributor in all but b regions for those b regions taxpayer had entered into successive distributor agreements with the independent distributors the issues in this case involve taxpayer and one of its independent distributors aindependent distributor independent distributor was owned by a company aparent which was in turn owned by a sole shareholder a100 owner parent had entered c of successive distributor agreements doing business with taxpayer for many years with the approval of taxpayer parent had assigned its rights to distribute in its region to independent distributor toward the end of one of the distributor agreements taxpayer informed parent and independent distributor that taxpayer would not renew its distribution agreement taxpayer intended to regain control_over its distribution in this region by having the distribution function performed by its subsidiary in response to taxpayer s notification of intent not to renew its distributor agreement parent and independent distributor filed a lawsuit against taxpayer preventing taxpayer from ending the distributor arrangement the parties settled the case as part of the settlement taxpayer and parent independent distributor agreed to enter into one final distribution agreement for a period of d years with no extensions or renewals permitted at the end of that final distribution agreement taxpayer would re-acquire the rights to distribute its products in the region and parent would have no further rights to distribute the products another part of the settlement involved an option taxpayer acquired an option to acquire the distribution rights two years prior to the expiration of the final distribution agreement to exercise this option taxpayer had to provide notification by a certain date pay a set fee to parent for sales occurring from the time of the option being exercised until the end of the final distribution agreement a two-year period and agree to purchase the assets and assume any leases of independent distributor with no amount being paid for going_concern_value some years into the final distribution agreement taxpayer provided the proper notification to exercise its option to acquire the distribution rights of parent prior to the end of the final distribution agreement in response parent filed lawsuits against taxpayer and its overseas parent in reaction taxpayer filed a countersuit parent alleged that the final distribution agreement was procured by fraud because taxpayer underallocated products to independent distributor after entering into the agreement taxpayer violated federal laws including consumer laws and by engaging in such conduct taxpayer was estopped from exercising its rights under the option provision of the final distribution agreement taxpayer s countersuit sought declaratory and injunctive relief under the terms and conditions of the final distribution agreement parent s lawsuits were designed to unwind the final distribution agreement and to re-open the possibility that independent distributor could remain a distributor for taxpayer the lawsuits were settled to resolve all existing and potential disputes the parties entered into two supplemental settlement agreements one agreement was between taxpayer and parent independent distributor and the other agreement was between taxpayer and owner the supplemental agreements were treated as amendments to the final distribution agreement the supplemental agreements terminated all litigation terminated the relationships and provided for covenants not to compete consistent with the final distribution agreement taxpayer purchased the assets and the leases of independent distributor and assumed certain liabilities as of the option date most significantly in addition to the purchase of the assets and assumption of the liabilities taxpayer agreed to make settlement payments two settlement payments were required one to parent and one to owner for the same amount dollar_figurey the dollar_figurey settlement payment to parent was payable in five installments the dollar_figurey settlement payment to owner was payable in one lump sum taxpayer made the pro_rata and lump sum settlement payments in fiscal_year taxpayer deducted in fiscal_year the dollar_figurey payment to independent distributor s parent and the dollar_figurey payment to owner as a sec_162 ordinary and necessary business_expense taxpayer capitalized the costs of purchasing the assets of independent distributor taxpayer also deducted as a sec_162 ordinary_and_necessary_expense professional fees incurred in fiscal_year including payments for outside attorneys appraisals and arbitration fees and a portion of in-house fees associated with the acquisition of the independent distributor law and analysis deduction v capitalization sec_162 generally allows a deduction for all ordinary and necessary expenses paid_or_incurred during the taxable_year sec_263 generally provides that no deduction shall be allowed for the cost of permanent improvements or betterments made to increase the value of any property treas reg ' a -2 a clarifies that sec_263 requires the capitalization of costs incurred to acquire property having a useful_life substantially beyond the close of the taxable_year expenditures that otherwise are deducible under sec_162 nevertheless are not deductible currently if they are also capitalizable under sec_263 sec_161 and sec_261 503_us_79 403_us_345 expenditures which create or enhance a capital_asset must be capitalized 418_us_1 ait has long been recognized as a general matter that costs incurred in the acquisition or disposition of a capital_asset are to be treated as capital expenditures woodward v commissioner 379_us_572 a payment to acquire a business is in the nature of a capital_expenditure 61_tc_727 a payment to acquire or re-acquire a franchise and its territory is a capital_expenditure 63_tc_414 acq 1975_1_cb_3 athe line of demarcation between currently deductible and capital expenditures is often a shadowy one and the courts have long struggled with the problem of devising standards for characterizing the costs of litigation 59_tc_708 footnote omitted the tax_court and other courts following the supreme court in 372_us_39 and woodward v commissioner 379_us_572 have concluded that the origin and character of the claim with respect to which a settlement payment was incurred governs the tax character of that liability 68_tc_749 citing 427_f2d_429 7th cir cert_denied 401_us_908 473_f2d_1217 7th cir likewise the origin and character of the claim with respect to which legal and other fees were incurred governs the tax character of the those liabilities id 59_tc_708 for example legal expenses and settlement payments incurred in defending against a claim that would injure or destroy business are deductible as ordinary and necessary business_expenses but legal expenses and settlement payments incurred to defend or protect title to property are nondeductible capital expenditures 628_f2d_516 9th cir if the settlement payment was made to resolve a claim which arose in the process of acquisition of a capital_asset or to extinguish a claim involving ownership rights to a capital_asset regardless of the taxpayer s subjective motivation for agreeing the make the payment it constitutes a capital_expenditure entwicklungs finanzierungs t c pincite under these general provisions courts have held that legal brokerage accounting and similar costs incurred in the acquisition or disposition of such property are also capital expenditures woodward u s pincite this case involves settlement payments of dollar_figurey amount_paid to both parent and owner this case also involves professional fees incurred in dealing with the litigation and determining the settlement payments accordingly the determination regarding whether to capitalize or deduct the settlement payments and the legal fees depends on the origin and character of the claim to which the liabilities were incurred the origin and character of the claim against taxpayer giving rise to the settlement payments and professional fees arose out of the distribution rights taxpayer had negotiated with parent independent distributor the distribution rights were embodied in successive distribution agreements taxpayer had made with parent independent distributor those distribution agreements permitted parent independent distributor to be the exclusive supplier of taxpayer s merchandise in a specific distribution region specifically the claim arose out of taxpayer s desire to end the distributorship relationship two years early by exercising its option in the final distribution agreement the taxpayer s distribution rights are a capital_asset as those rights provided the possessor significant long-term benefits the ability to be the sole source distributor to retailers in a geographic region for as long as taxpayer s products were manufactured and sold see treas reg ' a -2 a 503_us_79 litigation of taxpayer s distribution rights clearly involves a claim to extinguish ownership rights to a capital_asset the distribution agreement furthermore the settlement payments also sprung from a claim to re-acquire the capital_asset of the distribution agreement in either case because the claim giving rise to the settlement payments involve litigation over a capital_asset costs incurred must be treated as nondeductible capital expenditures and may not be deducted under sec_162 68_tc_749 628_f2d_516 likewise professional fees incurred to litigate and protect the capital_asset incurred in the disposition or acquisition of a capital_asset are also capital expenditures which may not be deducted under sec_162 woodward 379_us_572 amortization period while the settlement payments and the professional fees must be capitalized a capital_expenditure usually is amortized and depreciated over the life of the relevant asset or where no specific asset or useful_life can be ascertained is deducted upon dissolution of the enterprise indopco u s pincite the concept is to match expense with the revenues of the taxable_period to which they are properly attributable id pincite commissioner v idaho power co u s pincite taxpayer desired to end the distributor relationship with parent independent distributor and perform those functions internally by having taxpayer s subsidiary become the distributor parent independent distributor on the other hand desired to maintain the relationship in perpetuity to that end they had filed suits to prevent taxpayer from ending the distributor relationship prior to the final distribution agreement in settlement of the those proceedings taxpayer and parent independent distributor entered into the final distribution agreement at the time when taxpayer properly exercised its option to accelerate the termination of the distributor relationship a new series of suits and countersuits began ultimately with settlement payments made to both parent and owner along with the purchase of the assets and assumption_of_liabilities and leases the distributor relationship was terminated one argument is that the extinguishment of parent s ability to distribute and taxpayer s re- acquisition are analogous to a franchiser franchisee relationship a payment to acquire or re-acquire a franchise and its territory is a capital_expenditure amortizable over the remaining useful_life of the agreement 63_tc_414 the rodeway inns court analogized to cases involving the termination of a lease prematurely such cases hold that the payment is made to obtain possession of property distribution rights in this situation for the duration of the lease and that the payment thus is amortizable over that period even though the lessor thereby re-acquires the right to deal with the property as it wishes so long as it wishes id pincite citations omitted the settlement payments and the professional fees were incurred after taxpayer exercised its option under the final distribution agreement the option permitted taxpayer to re-acquire its distribution rights two years early under rodeway inns a court could determine that the settlement payments and professional fees are amortizable over the remaining period of the final distribution agreement the two years fiscal_year and fiscal_year another argument can be made that the expenditures incurred have no ascertainable life the underlying capital_asset taxpayer s distribution rights will provide revenues to taxpayer as long as taxpayer and its parent continue to manufacture and sell their products the litigation ----------------------prior to the final distribution agreement and the litigation entered into when the option was exercised under the final distribution agreement involved the ability to be the sole source distributor to retailers in a geographic region for as long as taxpayer s products were manufactured and sold the ownership rights to the capital_asset distribution rights has an unknowable useful_life taxpayer extinguished parent s ability to distribute and re-acquired its rights to distribute its products in a geographical region case development hazards and other considerations ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------- we believe the stronger argument is that the amortization period is for the final two years of the final distribution agreement following rodeway inns taxpayer is re-acquiring its distribution rights and is merely doing so in advance of when it was to receive those rights that is by entering into the final distribution agreement parent independent distributor had already contracted away their rights to distribute taxpayer s products upon the completion of the final distribution agreement taxpayer s exercise of the option merely accelerated by two years the relinquishment of the distribution rights arguing for no amortization entails greater hazards_of_litigation to make this argument you would need evidence that ----------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- ------------ if you have any further questions please call deborah a butler assistant chief_counsel by thomas d moffitt senior technician reviewer associate chief_counsel domestic


internal_revenue_service number release date index number ------------------------------------------ ------------ -------------------------------------------- ------------------------------------- re ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------------ telephone number ---------------------- refer reply to cc psi plr-133639-17 date date legend date date decedent revocable_trust date individual a individual b individual c residuary_trust law firm accounting firm date x dear -------------------- ------------------------ ----------------------- ---------------------------------------------------------- ----------------------------------------------------------------------------------- ------------------------- -------------------------- -------------------------------- ----------------- ---------------------------------------------------------------------- -------------------------------------------- ---------------------------------------- -------------------- ------------ this letter responds to your authorized representative’s letter of date and subsequent correspondence requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to sever a_trust under sec_26_2654-1 of the generation-skipping_transfer gst tax regulations facts the facts and representations submitted are summarized as follows plr-133639-17 on date decedent executed revocable_trust on date decedent executed the tenth amended and restated declaration of revocable_trust revocable_trust became irrevocable upon decedent’s death on date decedent was survived by children and further lineal_descendants decedent was the initial trustee of revocable_trust individual a individual b and individual c are the current trustees of revocable_trust and executors under sec_2203 article five paragraph of revocable_trust generally provides that after certain specific bequests the residue of revocable_trust is to be held in further trust known as residuary_trust residuary_trust has gst tax potential article seven paragraph directs the trustee to divide any trust created under revocable_trust into two separate subtrusts of equal or unequal value whenever in the trustee’s discretion the division is necessary or desirable to minimize transfer or other taxes article eleven paragraph provides that all provisions of revocable_trust shall be construed in a manner consistent with decedent’s objective of efficiently using available gst tax exemptions and to the extent possible of creating and maintaining trusts that have inclusion ratios either of zero or of one and are thus either entirely exempt or entirely non-exempt the executors of decedent’s estate engaged law firm to prepare decedent’s form_706 united_states estate and generation-skipping_transfer_tax return accounting firm was retained to advise decedent’s estate as to income_tax issues arising by reason of decedent’s death during the administration of decedent’s estate law firm and accounting firm met with the executors to discuss distributions to children and grandchildren under the terms of revocable_trust however law firm and accounting firm did not advise decedent’s estate that any gifts or distributions to grandchildren would have a gst impact moreover decedent’s estate was not advised to divide residuary_trust into two separate trusts a gst exempt residuary_trust and a gst non-exempt residuary_trust to effectuate decedent’s gst planning as directed under the terms of revocable_trust on date form_706 was timely filed on behalf of decedent’s estate the form_706 did not evidence any intent to divide residuary_trust into the gst exempt residuary_trust and gst non-exempt residuary_trust moreover there were several reporting and computational errors on schedule r of form_706 it is represented that decedent had previously allocated dollar_figurex to skip persons during decedent’s lifetime and had remaining gst_exemption available you have requested an extension of time to sever residuary_trust into a gst exempt residuary_trust and a gst non-exempt residuary_trust and a ruling that plr-133639-17 the automatic allocation rules of sec_2632 will operate to cause the unused portion of decedent’s gst_exemption to be allocated to the gst exempt residuary_trust law and analysis sec_2601 imposes a tax on every generation-skipping_transfer sec_2611 provides that the term generation-skipping_transfer means a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the gst tax is determined by multiplying the taxable_amount by the applicable_rate sec_2641 provides that the term applicable_rate means with respect to any gst transfer the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2642 provides that generally the inclusion_ratio with respect to any property transferred in a gst is the excess of one over the applicable_fraction determined for the trust sec_2642 provides that in general the applicable_fraction is a fraction the numerator of which is the amount of the gst_exemption allocated to the trust and the denominator of which is the value of the property transferred to the trust reduced by the sum of any federal estate_tax or state death_tax actually recovered from the trust attributable to such property and any charitable deduction allowed under sec_2055 or sec_2522 with respect to such property sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption amount which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2632 provides that in general any portion of an individual’s gst_exemption which has not been allocated within the time prescribed by sec_2632 shall be deemed to be allocated as follows a first to property which is the subject of a direct_skip occurring at such individual’s death and b second to trusts with respect to which such individual is the transferor and from which a taxable_distribution or a taxable_termination might occur at or after such individual’s death sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that a decedent’s unused gst_exemption is automatically allocated on the due_date for filing the form_706 or form 706na to the extent not otherwise allocated by the plr-133639-17 decedent’s executor on or before that date unused gst_exemption is allocated pro_rata subject_to the rules of sec_26_2642-2 on the basis of the value of the property as finally determined for purposes of chapter chapter value first to direct skips treated as occurring at the transferor’s death the balance if any of unused gst_exemption is allocated pro_rata subject_to the rules of sec_26_2642-2 on the basis of the chapter value of the nonexempt_portion of the trust property to trusts with respect to which a taxable_termination may occur or from which a taxable_distribution may be made no automatic allocation of gst_exemption is made to a_trust that will have a new transferor with respect to the entire trust prior to the occurrence of any gst with respect to the trust the automatic allocation is irrevocable sec_2652 provides that for purposes of chapter the term transferor means a in the case of any property subject_to the tax imposed by chapter the decedent and b in the case of any property subject_to the tax imposed by chapter the donor an individual shall be treated as transferring any property with respect to which such individual is the transferor sec_26_2654-1 provides that the severance of a_trust that is included in the transferor’s gross_estate or created under the transferor’s will into two or more trusts is recognized for purposes of chapter if the governing instrument does not require or otherwise direct severance but the trust is severed pursuant to discretionary authority granted either under the governing instrument or under local law and a the terms of the new trusts provide in the aggregate for the same succession of interests and beneficiaries as are provided in the original trust b the severance occurs or a reformation proceeding if required is commenced prior to the date prescribed for filing the federal estate_tax_return including extensions actually granted for the estate of the transferor and c either - the new trusts are severed on a fractional basis if severed on a fractional basis the separate trusts need not be funded with a pro_rata portion of each asset held by the undivided trust the trusts may be funded on a non pro_rata basis provided funding is based on either the fair_market_value of the assets on the date of funding or in a manner that fairly reflects the net appreciation or depreciation in the value of the assets measured from the valuation_date to the date of funding or if the severance is required by the terms of the governing instrument to be made on the basis of a pecuniary amount the pecuniary payment is satisfied in a manner that would meet the requirements of sec_26_2654-1 if it were paid to an individual plr-133639-17 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-1 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 are satisfied therefore decedent’s estate is granted an extension of time of days from the date of this letter to sever residuary_trust into a gst exempt residuary_trust and a gst non-exempt residuary_trust in a manner consistent with the requirements of sec_26_2654-1 further the automatic allocation rules of sec_2632 apply to automatically allocate decedent’s unused gst_exemption to the gst exempt residuary_trust the severance should be reported on a supplemental form_706 for the estate of decedent the supplemental form_706 should be filed with the internal_revenue_service center cincinnati ohio a copy of this letter should be attached to the supplemental form_706 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the plr-133639-17 material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel passthroughs special industries leslie h finlow by ____________________________ leslie h finlow senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-120213-02 date date company state a b c d trust trust date date date date plr-120213-02 dear this letter responds to your letter dated date and subsequent correspondence submitted on behalf of company requesting inadvertent termination relief under sec_1362 of the internal_revenue_code facts company incorporated in state on date and elected to be an s_corporation effective date on date company had two shareholders a and b on date company transferred its stock to trust and trust c is the income_beneficiary of trust d is the income_beneficiary of trust company retained new accountants to prepare its federal_income_tax returns on or about date on or about date it was discovered that qualified_subchapter_s_trust qsst elections under sec_1361 were not filed for trust and trust thus company’s s election had terminated on date company represents that since date it has filed returns as an s_corporation and has treated trust and trust as qssts c and d have reported trust and trust 2's share of company’s income and other items on their individual tax returns respectively company and its shareholders agree to make any adjustments consistent with the treatment of company as an s_corporation as may be required by the commissioner law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect for the taxable_year sec_1361 defines the term small_business_corporation as a domestic_corporation that is not an ineligible_corporation and that does not a have more than shareholders b have as a shareholder a person other than an estate and other than a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that a_trust all of which is treated under subpart e of part i of subchapter_j of this chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder for purposes of sec_1361 sec_1361 states that a qsst whose beneficiary makes an election plr-120213-02 under sec_1361 will be treated as a_trust described in sec_1361 and the qsst's beneficiary will be treated as the owner for purposes of sec_678 of that portion of the trust that consists of s_corporation stock with respect to which the election under sec_1362 is made under d a the beneficiary of a qsst may elect to have sec_1361 apply under d d this election will be effective up to days and two months before the date of the election sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder in the corporation at any time during the period specified agrees to make adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the termination period then notwithstanding the circumstances resulting in the termination the corporation shall be treated as an s_corporation during the period specified by the secretary sec_1_1362-4 of the income_tax regulations provides that for purposes of sec_1_1362-4 the determination of whether a termination was inadvertent is made by the commissioner the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should determine that the termination was inadvertent the fact that the terminating event was not reasonably within the control of the corporation and was not part of a plan to terminate the election or the fact that the event took place without the knowledge of the corporation notwithstanding its due diligence to safeguard itself against such an event tends to establish that the termination was inadvertent conclusions based on the facts submitted and representations made we conclude that company's s_corporation_election terminated on date when c and d failed to make timely qsst elections for trust and trust respectively under sec_1361 we further conclude that the termination of company’s s_corporation_election was inadvertent within the meaning of sec_1362 plr-120213-02 under sec_1362 company will be treated as if it were an s_corporation from date and thereafter provided company’s s_corporation_election is valid and is not otherwise terminated under sec_1362 however this ruling is contingent on c and d filing qsst elections for trust and trust respectively with an effective date of date with the appropriate service_center within days from the date of this ruling a copy of this letter must be attached to the qsst elections during the period of termination trust and trust will be treated as if they were qssts accordingly the shareholders of company in determining their respective income_tax liabilities must include their pro_rata share of the separately and nonseparately computed items of company under sec_1366 make any adjustments to stock basis under sec_1367 and take into account any distributions made by company under sec_1368 if company or any of the shareholders fail to treat company as described above this ruling shall be null and void except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether company is otherwise qualified to be an s_corporation or whether trust and trust are valid qssts this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely mary beth collins senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures cc copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------- ------------------------------------------------------ ----------------------------------- ------------------------------------------------------- ------------------------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ---------------- telephone number -------------------- refer reply to cc ita b07 plr-140158-14 date date re request for extension of time to make the election not to deduct additional first year depreciation taxpayer seller buyer property x state y state z year year date date date date date legend -------------------------------------------------------------- --------------------------------------------- -------------------------------------------------- ------------------------------------------------------------ -------- ------------ ------ ------ ----------------------- -------------------------- -------------------------- --------------------- -------------------- plr-140158-14 date --------------------------- dear ------------ this letter responds to a letter dated date in which taxpayer requests an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make an election not to deduct additional first year depreciation under sec_168 of the internal_revenue_code for all classes of qualified_property placed_in_service by taxpayer in the taxable_year ended date the year taxable_year taxpayer represents the facts as follows facts taxpayer is an accrual_method taxpayer that keeps its book and records on a calendar_year end effective date taxpayer became a member of a group for which buyer files a consolidated u s federal_income_tax return prior to this date taxpayer was owned by seller and was required to file a separate u s federal_income_tax return taxpayer is a state z limited_liability_company that has elected to be treated as a corporation for tax purposes effective date its first tax_return was for the year taxable_year taxpayer through its subsidiary limited_liability companies that are disregarded entities for u s tax purposes owns and operates property x which is located in state y and reached commercial operation in year property x is taxpayer’s sole asset on date seller and buyer entered into a purchase and sale agreement p s agreement whereby seller agreed to sell all of its ownership interests in taxpayer to buyer the closing of the transaction was effective on date buyer and seller agreed in the p s agreement that taxpayer would elect out of bonus_depreciation under sec_168 with respect to assets acquired during the tax period ending on or prior to the closing date of date under the p s agreement seller was responsible for preparing and filing the taxpayer’s federal_income_tax return for the year taxable_year this return was due on date taxpayer timely filed for an extension to file this return such that the extended due_date was date plr-140158-14 seller engaged an accounting firm to prepare taxpayer’s federal_income_tax return for the year taxable_year due to complex accounting issues and internal staffing issues at the accounting firm the accounting firm was unable to prepare this return by the extended due_date of date this fact was not communicated to seller in time for seller to engage a different tax preparer accordingly taxpayer did not timely file its federal_income_tax return for the year taxable_year after taxpayer submitted this request for an extension of time to make the election not to deduct additional first year depreciation taxpayer filed its federal_income_tax return for the year taxable_year on that return taxpayer did not deduct additional first year depreciation for any property placed_in_service by taxpayer during the year taxable_year taxpayer also attached a statement to that return indicating that taxpayer is electing not to deduct the additional first year depreciation for all classes of property placed_in_service during that taxable_year ruling requested taxpayer requests an extension of time pursuant to sec_301_9100-3 to make the election not to deduct the additional first year depreciation deduction under sec_168 for all classes of qualified_property placed_in_service by taxpayer during the taxable_year ended on date law and analysis sec_168 allows a 50-percent additional first year depreciation deduction in the placed-in-service year for qualified_property acquired by a taxpayer after date and before date or acquired by a taxpayer after date after date in the case of qualified_property described in sec_168 or c and placed_in_service by the taxpayer before date before date in the case of qualified_property described in sec_168 or c sec_168 provides that a taxpayer may elect not to deduct the additional first year depreciation for any class of property placed_in_service during the taxable_year the term class of property is defined in sec_1_168_k_-1 of the income_tax regulations as meaning in general each class of property described in sec_168 for example 5-year_property see section dollar_figure of revproc_2008_54 2008_2_cb_722 rules similar to the rules in sec_1_168_k_-1 for qualified_property or for 30-percent additional first year depreciation deduction apply for purposes of sec_168 as currently in effect sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made by the due_date including extensions of the federal tax_return for the taxable_year in which the property is placed_in_service by the taxpayer plr-140158-14 sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made in the manner prescribed on form_4562 depreciation and amortization and its instructions the instructions to form_4562 for the taxable_year ended on date provided that the election not to deduct the additional first year depreciation is made by attaching a statement to the taxpayer’s timely filed tax_return indicating that the taxpayer is electing not to deduct the additional first year depreciation and the class of property for which the taxpayer is making the election under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusions based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly taxpayer is granted an extension to the date on which taxpayer filed its federal_income_tax return for the taxable_year ending on date to make the election not to deduct the additional first year depreciation under sec_168 for all classes of property placed_in_service by taxpayer during that taxable_year that qualify for the additional first year depreciation deduction this letter does not grant an extension of time for filing taxpayer’s federal_income_tax return for the taxable_year ending on date except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter under any provisions of the code including other subsections of sec_168 specifically no opinion is expressed or implied on whether property x is placed_in_service by taxpayer during the year taxable_year or whether any item of depreciable_property placed_in_service by taxpayer during the year taxable_year is eligible for the additional first year depreciation deduction plr-140158-14 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent the ruling contained in this letter is based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request_for_ruling it is subject_to verification on examination in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer’s authorized representative we are also sending a copy of this letter to the appropriate operating division director sincerely s kathleen reed kathleen reed chief branch office of the associate chief_counsel income_tax accounting enclosures copy of this letter copy for purposes cc


t c memo united_states tax_court john douponce petitioner v commissioner of internal revenue respondent docket no filed date john douponce pro_se marilyn devin for respondent memorandum findings_of_fact and opinion ruwe judge on date respondent issued a final_determination disallowing petitioner's claim to abate interest petitioner timely filed a petition under sec_6404 and rule the issue for decision is whether ‘ sec_6404 was redesignated as sec_6404 by the continued - - respondent's denial of petitioner's request to abate interest was an abuse_of_discretion findings_of_fact some of the facts have been stipulated and are so found the stipulation and attached exhibits are incorporated herein by this reference petitioner resided in los angeles california when the petition was filed petitioner filed delinguent federal_income_tax returns for and on or about date petitioner filed a delinquent federal_income_tax return for on or about date the amounts of tax shown on the returns tax withheld and interest and penalties assessed for these years are as follows credit for late filing late payment tax reported tax penalty penalty interest year assessed withheld assessed assessed assessed dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure big_number big_number dollar_figure dollar_figure dollar_figure big_number big_number dollar_figure dollar_figure dollar_figure from date to date petitioner made monthly payments of dollar_figure all of which were applied to his liabilities in date a credit from petitioner's taxable_year of ' continued internal_revenue_service restructuring reform act of rra publaw_105_206 sec_3309 112_stat_685 unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended rule references are to the tax_court rules_of_practice and procedure - - dollar_figure was applied to his account for on date a credit from petitioner's taxable_year of dollar_figure was similarly applied to when the date payment was applied petitioner's entire liability for tax and penalties for was extinguished the sum of dollar_figure the balance after satisfying the tax and penalty liability was applied to interest that had accrued for in date petitioner submitted an offer_in_compromise with respect to the balances owed for and on date after additional exchanges of correspondence between petitioner and respondent petitioner's offer_in_compromise was rejected on the ground that there was no doubt as to liability also on or about date petitioner telephoned respondent's glendale california office to ascertain the balance then outstanding on his accounts for and an employee of respondent told petitioner that the following amounts had been assessed and remained outstanding 1988---nothing 1990--dollar_figure and for 1991--dollar_figure respondent’s employee also told petitioner to add dollar_figure to each of these amounts petitioner understood these amounts to be the full amounts of his liabilities for these years including all tax due penalties and interest on date petitioner paid respondent the amounts of dollar_figure for and dollar_figure for these payments were credited to petitioner’s and accounts on date on date respondent assessed q4e- a dollar_figure failure to pay penalty for and at that point all assessments for and had been paid however some additional interest for each of the years and had not been assessed on date respondent issued a notice_of_intent_to_levy with respect to unpaid interest in the following amounts year amount sec_676 dollar_figure s491 petitioner paid without delay petitioner sought a refund of the interest and his claim was denied petitioner appealed and on date respondent abated part of the dollar_figure late payment penalties which petitioner had added to his date payments insofar as petitioner's dispute constituted a claim_for_refund of interest respondent determined that petitioner was not entitled to relief pursuant to sec_6404 and mailed petitioner a notice of disallowance opinion petitioner argues that respondent abused his discretion in not abating the interest that accrued on petitioner’s and liabilities petitioner argues he was provided with amounts of his total liability for tax penalties and interest in a telephone conversation with an employee of respondent on date petitioner contends these amounts when paid should have satisfied his liability for interest under sec_6404 the commissioner may abate part or all of an assessment of interest on any deficiency or payment of income_tax to the extent that any error or delay in payment is attributable to erroneous or dilatory performance of a ministerial_act by an officer or for abatement to be appropriate contributed significantly to the intended for the commissioner to employee of the commissioner the taxpayer must not have error or delay congress abate interest under section sec_6404 as enacted in and as applicable here provides e assessments of interest attributable to errors and delays by internal_revenue_service ---- in general --in the case of any assessment of interest on a any deficiency attributable in whole or in part to any error or delay by an officer_or_employee of the internal_revenue_service acting in his official capacity in performing a ministerial_act or b any payment of any_tax described in sec_6212 to the extent that any delay in such payment is attributable to such officer_or_employee being dilatory in performing a ministerial_act the secretary may abate the assessment of all or any part of such interest for any period for purposes of the preceding sentence an error or delay shall be taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved and after the internal_revenue_service has contacted the taxpayer in writing with respect to such deficiency or payment - - e where failure to abate interest would be widely perceived as grossly unfair but not that it be used routinely to avoid payment of interest h rept pincite 1986_3_cb_1 s rept pincite 1986_3_cb_1 prior to contacting respondent to obtain payout amounts on date there was no erroneous or dilatory performance of a ministerial_act by an officer_or_employee of the commissioner that contributed to a delay or error in the payment of the interest which had accrued on petitioner's outstanding tax_liabilities since there was no erroneous or dilatory performance of a ministerial_act the commissioner lacked authority to abate interest under these circumstances it can hardly be an abuse of his discretion to refuse to abate interest that accrued prior to date for the period from may to date when petitioner made his payments of dollar_figure and dollar_figure any interest which accrued was solely due to petitioner's failure to pay his outstanding tax_liabilities again in these circumstances there was no erroneous or dilatory performance of a ministerial_act and the commissioner lacked authority to abate interest for the period from may to date when respondent finally notified petitioner of additional interest by issuing a notice_of_intent_to_levy the facts dictate a - different outcome the commissioner's refusal to abate the interest on interest after all of petitioner's liability for tax and penalties had been satisfied is an abuse_of_discretion petitioner asked an employee of respondent what the total amount due was for and respondent’s employee told petitioner the total amount due and petitioner promptly paid those amounts however the employee did not include all of the accrued but unassessed interest in the amounts given to petitioner petitioner promptly discharged his liability for interest when he was notified of it on date it is reasonable to assume the only reason for the delay of in excess of months was caused by respondent's failure to tell petitioner the correct amounts due when petitioner requested that information on date respondent acknowledges on brief that under some circumstances giving an incorrect payout figure may constitute a ministerial_act and respondent may abate interest attributable to that act in the circumstances of this case the commissioner should have abated the interest on unpaid interest that accrued for the period from may to the date on which petitioner made full payment respondent’s failure to do so was an abuse_of_discretion decision will be entered pursuant to the foregoing


internal_revenue_service number release date index number ---------------------- ---------------------------------------------------- ----------------------------- --------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ---------------- telephone number -------------------- refer reply to cc psi b01 plr-141233-14 date may legend x ---------------------------------------------------------- ---------------- cfc trust trustee business regulatory body date date state a country a jurisdiction jurisdiction treaty ----------------------------------- --------------------------------------------------------------------------------- ------------------------------------------ -------------------------------------------------------------- -------------------------------------- -------------------------------------------------------- ---------------- ---------------- ------------ ----------- ---------------------------------- ------------------------------------------------ --------------------------------------------------------- plr-141233-14 trust deed law dear ----------- ------------------------------------------------------------------ --------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- -------------------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x cfc trustee and trust requesting a ruling on the application of sec_671 and sec_7701 of the internal_revenue_code facts the following facts and representations were submitted by x x is a corporation organized under the laws of state a as of date x is the owner of cfc a limited_company incorporated in jurisdiction in country a cfc is a controlled_foreign_corporation within the meaning of sec_957 of the code cfc is engaged in business in country a cfc established trust by trust deed trust is governed by the laws of jurisdiction in country a under law trust is a validly created trust trust is required to file tax returns in country a and has a country a tax identification_number cfc utilizes trust to satisfy its requirements under law to segregate hold and invest assets to ensure that cfc is able to meet its obligations with respect to business_trust and cfc are regulated by several government bodies in country a including regulatory body trustee is the trustee of trust trustee is a limited_company incorporated in jurisdiction in country a on date trustee was formed for the main purpose of serving as the trustee of trust under the trust deed trustee has broad powers to manage trust assets including the power to buy and sell assets trustee has a duty to preserve and protect the assets of trust under law trustee has an investment agreement with an external asset manager the investment agreement provides that the investment policy of trust is conservative and the objective of the investment strategy is to protect and conserve trust assets for the benefit of cfc to ensure that it has adequate resources as required under law the ownership of trust is divided into units each unit represents an undivided beneficial_interest in the assets of trust cfc has at all times been the sole unitholder plr-141233-14 of trust cfc may not unilaterally assign or transfer all or a portion of its interest in trust without the consent of trustee x represents that given the purpose of trust it is not contemplated that cfc would transfer its interest in trust under the trust deed all of trust’s net_income is required to be distributed annually to cfc as the sole unitholder of trust trustee has discretion to distribute principal to cfc cfc may redeem its interest in trust at any time although in certain cases cfc may have to wait up to sixty days cfc as the sole unitholder may also amend or revoke trust you have requested the following rulings trust is classified as a_trust for federal tax purposes under sec_301_7701-4 of the procedure and administration regulations cfc will be treated as the owner of trust for purposes of sec_671 of the code law and analysis ruling sec_301_7701-1 provides in part that the code prescribes the classification of various organizations for federal tax purposes whether an organization is an entity separate from its owners for federal tax purposes is a matter of federal tax law and does not depend on whether the organization is recognized as an entity under local law sec_301_7701-1 provides that the classification of organizations that are recognized as separate entities is determined under sec_301_7701-2 sec_301_7701-3 and sec_301_7701-4 unless a provision of the code provides for special treatment of that organization sec_301_7701-4 provides in part that generally the term trust as used in the code refers to an arrangement created either by a will or by an inter_vivos declaration whereby trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules applied in chancery or probate_court usually the beneficiaries of such a_trust do no more than accept the benefits thereof and are not the voluntary planners or creators of the trust arrangement however the beneficiaries of such a_trust may be the persons who create it and it will be recognized as a_trust under the code if it was created for the purpose of protecting or conserving the trust property for beneficiaries who stand in the same relation to the trust as they would if the trust had been created by others for them generally an arrangement will be treated as a_trust under the code if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and therefore are not associates in a joint enterprise for the conduct of business for profit plr-141233-14 based solely on the facts submitted and representations made we conclude that trust is classified as a_trust for federal tax purposes under sec_301_7701-4 ruling sec_671 provides in part that where it is specified in subpart e part i subchapter_j subpart e that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under this chapter in computing taxable_income or credits against the tax of an individual sec_672 and sec_1_672_f_-1 provide that subpart e sec_671 through applies only to the extent such application results in an amount if any being currently taken into account directly or through one or more entities under this chapter in computing the income of a citizen or resident_of_the_united_states or a domestic_corporation sec_672 provides in part that a controlled_foreign_corporation as defined in sec_957 shall be treated as a domestic_corporation for purposes of sec_672 sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both sec_677 provides in part that the grantor is treated as the owner of any portion of a_trust whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed or held or accumulated for future distribution to the grantor or the grantor’s spouse according to the information submitted cfc is a controlled_foreign_corporation as defined in sec_957 thus sec_672 will not prevent cfc from being treated as the owner of trust for purposes of sec_671 if cfc is otherwise treated as the owner under subpart e under the trust deed trustee is required to pay all trust income to cfc and trustee is authorized to pay in its discretion amounts from principal to cfc further cfc may amend or revoke trust or alternatively redeem its interest in trust at any time therefore cfc will be treated as the owner of trust under sec_676 and sec_677 plr-141233-14 conclusion based solely on the facts submitted and the representations made we conclude as follows as of date trust is classified as a_trust for federal tax purposes under sec_301_7701-4 cfc will be treated as the owner of trust for purposes of sec_671 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically set forth above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed regarding trust or cfc’s entitlement to treaty benefits under treaty which depends on the tax classification of trust under country a law and not united_states tax law further this ruling will be void if trust has more than one holder of unit interests this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely faith p colson faith p colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no -------------- telephone number ---------------------- refer reply to cc psi b01 plr-140648-13 date date internal_revenue_service number release date index number -------------------------------------- ------------------------------------------ ---------------------------------- ----------------------- legend x ------------------------------------------ ------------------------------------------ date ------------------------ state ----------- dear ------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the code facts x was incorporated under the laws of state on date x’s sole shareholder intended that x elect to be treated as an s_corporation effective date however form_2553 election by a small_business_corporation was not timely filed law and analysis sec_1362 of the code provides that a small_business_corporation may elect to be treated as an s_corporation sec_1362 of the code provides guidance on when the s election becomes effective if an s election is made within the first two and one-half months of a plr-140648-13 corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the corporation makes an election after the first two and one-half months of a corporation’s taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year sec_1362 of the code provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not file a timely election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely election therefore x is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective date an original form_2553 along with a copy of this letter must be submitted to the relevant service_center within days from the date of this letter except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely david r haglund david r haglund branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number cc pa cbs br1 release date uilc memorandum for associate area_counsel small_business self- employed cc sb stl from subject alan c levine chief branch collection bankruptcy summonses taxpayer’s challenge to underlying tax_liability in collection_due_process proceeding where taxpayer agreed to assessment this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend taxpayer tax_year a tax_year b issue whether a taxpayer in an appeal to the united_states tax_court from a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination may dispute the merits of an adjustment to the taxpayer’s income resulting in additional tax when the taxpayer agreed to the assessment of the tax following an examination by executing irs form_4549 income_tax exami- nation changes conclusion in an appeal to the tax_court from a notice_of_determination a taxpayer who has agreed to the assessment of liability by executing form_4549 may not challenge that liability because the taxpayer had a prior opportunity to contest the liability and the executed form is a waiver of the right to tax_court review of the liability facts in an examination of the taxpayer’s income_tax returns for tax years a and b the taxpayer’s filing_status was changed from head_of_household to married_filing_separately and exemptions for dependents were disallowed the adjustments resulted in additional tax for both tax years the taxpayer signed an irs form 4549-cg income_tax examination changes listing the adjustments and his resulting liability the form contains the following statement i do not wish to exercise my appeal rights with the internal_revenue_service or to contest in the united_states tax_court the findings in this report therefore i give my consent to the immediate_assessment and collection of any increase in tax and penalties shown above plus additional interest as provided by law i accept any decrease in tax and penalties shown above i understand that this report is subject_to acceptance by the appropriate irs official the irs assessed the additional tax and sent a notice_of_intent_to_levy to the taxpayer pursuant to the notice_of_levy the taxpayer was given an opportunity for a collection_due_process cdp hearing before an appeals officer the taxpayer requested a hearing but did not appear for one the appeals officer issued a notice_of_determination finding that the proposed levy action was appropriate the taxpayer then filed a petition for review with the tax_court in his petition as well as his request for a cdp hearing the taxpayer has argued the merits of the adjustments that resulted in the increases in tax law and analysis sec_6330 provides taxpayers with the right to a cdp hearing prior to levy if requested and discusses the matters to be considered at a hearing at the hearing a taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy including the appropriateness of collection efforts spousal de- cg is a defunct suffix standing for computer generated fenses and collection alternatives sec_6330 the taxpayer’s underlying liability may also be considered at the hearing if the taxpayer did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability sec_6330 emphasis added neither the statute nor its legislative_history defines what constitutes an opportunity to dispute such tax_liability however because the statute gives taxpayers cdp rights in the form of a hearing before an appeals officer and subsequent judicial review it is consistent to limit the prior-opportunity restriction on those rights to a prior opportunity before either appeals or a court the regulation implementing sec_6330 states that a n opportunity to dispute a liability includes a prior opportunity for a conference with appeals that was offered either before or after the assessment of liability sec_301_6330-1q a-e2 the regulation also provides that a taxpayer may not raise an issue that was raised and consid- ered at a previous cdp hearing or in any other previous administrative or judicial proceeding if the taxpayer participated meaningfully in such hearing or proceeding sec_301_6330-1 the requirement that the prior opportunity have been one before appeals or a court is satisfied in this case-the form_4549 that the taxpayer signed is an acknowledg- ment that the taxpayer had appeal rights with the internal_revenue_service or before the united_states tax_court with regard to the liability listed on the form the taxpayer could not waive rights that he did not have thus he had an opportu- nity to contest liability prior to his request for a cdp hearing moreover the tax_court has held that a signed form_4549 bars the taxpayer from contesting underlying liability before the court 117_tc_324 the facts of the aguirre case are virtually identical to the instant situation the aguirres filed joint returns for through that were exam- ined and adjusted and the petitioners signed a form_4549 agreeing to the assess- ment of liability in response to a notice_of_intent_to_levy the petitioners requested a cdp hearing the record before the court did not indicate whether a hearing was held but the petitioners requested the hearing only to challenge their underlying tax_liability and their petition to the court was likewise solely a challenge to liability the court found that the petitioners waived their right to the judicial review they sought entitling the respondent to summary_judgment the court pointed out that although sec_6330 provides an opportunity to contest liability where the tax- payer has not received a statutory_notice_of_deficiency this was of no benefit to the petitioners because they chose not to receive such notice by agreeing to the assessments please call if you have any further questions