internal_revenue_service number release date index number ------------------------------------------------- ------------------------------------------------------ ---------------------------------------- ----------------------- ------------------------------------------------ - - department of the treasury washington dc person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-127484-06 date date trust ---------------------------------------------------------- trustee -------------------------------------------------- -------------------------------------------------------------------------------- ------------------------- charity --------------------------------------------------------------------------------- ------------------------------------- -------------------------------------------------------------------------------- ------------ --------------------- grantors ------------------------------------ state beneficiaries -------------------------------------------------------------------- ---------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------- -------------------------------------------------------------------- ------------------------------------------------------ -------------------------------------------------------------------- ------------------------------------------------------------- -------------------------------------------------------------------- plr-127484-06 ------------------------------------------------ -------------------------------------------------------------------- ------------- -------------------------------------------------------------------- ---------------------------------------------------- -------------------------------------------------------------------- ----------------------------------------------- -------------------------------------------------------------------- a dear ---- ------ ------------------ this letter responds a letter dated date submitted on behalf of the trust requesting certain rulings concerning the proposed termination of the trust facts the information submitted states that the trust was formed by grantors under the laws of state on a the trust is a charitable_remainder_unitrust the unitrust amounts of which are paid to each of the beneficiaries individually a beneficiary for life upon the death of a beneficiary that beneficiary’s subshare terminates and the remainder is transferred to the charity a public charity that is a donor_advised_fund under the terms of the trust each beneficiary’s subshare constitutes a separate trust because of reduced investment performance and administrative expenses the trust its trustee and the beneficiaries have agreed to terminate the trust earlier than its terms provide in terminating the trust will distribute to the beneficiaries pro_rata shares of the trust’s assets equal to the present_value of the beneficiaries’ respective interests measured on the date of termination and will distribute the remainder to the charity the amounts distributed to the beneficiaries will be determined and distributed pursuant to the valuation rules under sec_7520 of the internal_revenue_code and sec_1 of the income_tax regulations it is represented that the proposed termination of the trust will be made pursuant to a court order resulting from a proceeding in which the state attorney_general is a party each beneficiary has submitted an affidavit representing that to the best of the beneficiary’s knowledge and belief the beneficiary has no medical_condition that is expected to result in a shorter life expectancy than that set forth in sec_1_72-9 table plr-127484-06 ruling sec_664 provides that the amounts distributed by a charitable_remainder_annuity_trust or a charitable_remainder_unitrust shall be considered as having the following characteristics in the hands of a beneficiary to whom is paid the annuity described in sec_664 or the payment described in sec_664 first as amounts of income other than gains and amounts treated as gains from the sale_or_other_disposition of capital assets includible in gross_income to the extent of such income of the trust for the year and such undistributed_income of the trust for prior years second as capital_gain to the extent of the capital_gain of the trust for the year and the undistributed_capital_gain of the trust for prior years third as other income to the extent of such income of the trust for the year and such undistributed_income of the trust for prior years and fourth as a distribution of trust corpus for purposes of sec_664 the trust shall determine the amount of its undistributed_capital_gain on a cumulative net_basis thus sec_664 provides rules to determine the character of the annual unitrust amounts distributed by a charitable_remainder_unitrust to the unitrust beneficiary any regular unitrust_amount distributed to the beneficiaries by the trust prior to termination of the trust will have the characteristics in the hands of the beneficiaries as determined under sec_664 however money and property received by the beneficiaries upon the termination of the trust do not represent a distribution of an annual unitrust_amount therefore sec_664 is not applicable to this amount rather the beneficiaries are disposing of their interests in the trust in exchange for money and property in a transaction that is governed by sec_1001 sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in ' for determining gain and the loss shall be the excess of the adjusted_basis provided in ' for determining loss over the amount_realized sec_1001 provides that the amount_realized from the sale_or_other_disposition of property is the sum of any money received plus the fair_market_value of the property other than money received under ' c except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under ' on the sale_or_exchange of property shall be recognized sec_1001 generally provides that in determining the gain_or_loss from the sale of a term_interest_in_property the portion of the adjusted_basis that is plr-127484-06 determined under sec_1014 or sec_1015 shall be disregarded sec_1001 defines a term_interest_in_property to include an income_interest in a_trust however sec_1001 provides that the term_interest rule described in sec_1001 shall not apply to a sale_or_other_disposition of property that is a part of a transaction in which the entire_interest in property is transferred to any person or persons sec_1_1001-1 provides that for purposes of determining the gain_or_loss from the sale_or_other_disposition of a term_interest_in_property a taxpayer shall not take into account that portion of the adjusted_basis of such interest which is determined pursuant to sec_1015 relating to the basis_of_property acquired by gift or by a transfer in trust to the extent that such adjusted_basis is a portion of the adjusted uniform basis of the entire property as defined in sec_1_1014-5 sec_1_1001-1 states that the exception in sec_1001 applies when the entire_interest in property is sold or otherwise disposed as part of a single transaction to a third person or persons sec_1223 provides that the term long-term_capital_gain means gain from the sale_or_exchange of a capital_asset held for more than one year sec_1221 defines the term capital_asset as property held by the taxpayer with certain listed exceptions not applicable here revrul_72_243 1972_1_cb_233 provides that the proceeds received by the life_tenant of a_trust in consideration for the transfer of the life tenant’s entire_interest in the trust to the holder of the remainder_interest are treated as an amount_realized from the sale_or_exchange of a capital_asset under sec_1222 the right to income_for_life from a_trust estate is a right in the estate itself see 157_f2d_235 2d cir cert_denied 330_us_826 accordingly although the proposed transaction takes the form of a distribution of the present values of the respective interests of each beneficiary and the charity it is in substance a sale of each beneficiary’s unitrust_interest to the charity the remainder beneficiary because the disposition of each beneficiary’s interest is not part of a transaction in which the entire_interest in the trust is transferred to a third party the adjusted_basis in each beneficiary’s interest is disregarded under sec_1001 in determining gain realized by each beneficiary moreover any gain realized by the beneficiaries upon the early termination of the trust will be long-term_capital_gain ruling sec_4941 imposes an excise_tax on any act of self-dealing between a private_foundation and any of its disqualified persons defined in sec_4946 plr-127484-06 sec_4941 provides in part that an act of self dealing includes any sale_or_exchange between a disqualified_person and a private_foundation sec_4946 provides that the term disqualified_person with respect to a private_foundation includes a substantial_contributor to the foundation including the creator or the trust a family_member of a substantial_contributor including children and a foundation_manager including a trustee sec_53_4946-1 of the foundation and similar excise_tax regulations provides that for purposes of sec_4941 only the term disqualified_person shall not include any organization which is described in sec_501 other than an organization described in sec_509 sec_4947 describes split-interest_trusts as those that are not exempt from federal_income_tax under sec_501 not all of the unexpired interests in which are devoted to purposes in sec_170 and which have amounts in trust for which a deduction was allowed under sec_170 sec_545 sec_556 sec_642 sec_2055 sec_2106 or sec_2522 furthermore split-interest_trusts are subject_to the rules of sec_507 sec_508 sec_4941 sec_4943 except b except as provided in b and sec_53_4947-1 provides that under sec_4947 sec_4941 does not apply to any amounts payable under the terms of a split-interest trust to income beneficiaries unless a deduction was allowed under sec_170 sec_2055 or sec_2522 with respect to the income_interest of such beneficiary revrul_69_486 1969_2_cb_159 concerns a non-pro rata distribution of trust property in_kind by a trustee who had no authority to make such a distribution and did so as a result of a mutual agreement by the beneficiaries one of which is a charitable_organization the distribution was made as a final distribution of trust property the trust property consisted of notes that had not appreciated in value and common_stock that had appreciated in value by agreement all of the notes were distributed to the charity and the stock to the individual beneficiary the ruling holds that the distribution was equivalent to a pro_rata distribution of the stock and notes to both followed by an exchange of the charity’s share of the common_stock for the individual’s pro_rata share of the notes the trust is described in sec_4947 by having income beneficiaries the beneficiaries and a charitable remainderman the charity described in sec_509 and sec_170 by being described in sec_4947 the trust is subject_to the provisions of sec_507 sec_4941 and sec_4945 as if it were a private_foundation the beneficiaries are disqualified persons with respect to the trust within the meaning of plr-127484-06 sec_4946 however the beneficiaries are not disqualified persons with respect to the charitable_remainder beneficiary the charity because the charity is a donor_advised_fund that is a public charity described in sec_509 sec_4941 applies to certain transactions between private_foundations and disqualified persons by early termination the trust will distribute lump sums to the beneficiaries and the charity equal to the actuarial value of their interests in the trust and the distributions will also be treated as a constructive_sale or exchange between the income beneficiaries the beneficiaries and the charitable remainderman the charity of the trust see revrul_69_486 generally payments to the beneficiaries by the trust would constitute self- dealing however because the distribution to each of the beneficiaries equals the actuarial value of the respective beneficiary’s income_interest the exception to self- dealing provided by sec_53_4947-1 applies and the distribution will not be an act of self- dealing furthermore because the charity is a public charity sec_4941 does not apply to the transaction between the beneficiaries and the charity therefore based on the above law and discussion the early termination of the trust will not be considered an act of self-dealing under sec_4941 except for the specific ruling above we express or imply no opinion concerning the federal_income_tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed as to whether the trust otherwise qualifies as a charitable_remainder_trust under sec_664 under a power_of_attorney on file with this office we are sending a copy of this letter to the trust’s authorized representative this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent s sincerely james a quinn senior counsel branch office of associate chief_counsel passthroughs and special industries enclosure copy of this letter for sec_6110 purposes


government entities xxxxxxxxkkxkxkxk kxxxxkxkxxkxkxxxkkxk xxxxxxxkxxkxxxkk uniform issue list department of the treasury internal_revenue_service washington d c apr tep rat legend taxpayer a plan b xxxxxxxxxxxxkxx xxxxxxxxxxkxkxkk financial_institution c xxxxxxxxxxxkkx company d xxxxxxxxxxkxkkx financial_institution e xxxxxxxxxxxxxx account f amount date xxxxxxxxxxxxkkx xxxxxxxxxxxxxx xxxxxxxxxxxxkk dear xxxxxxxxxxxxxx this letter is in response to your request dated date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age represents that she received a distribution from plan b totaling amount taxpayer a asserts that her failure to accomplish a rollover of amount within the 60-day period prescribed by sec_402 was due to the failure of financial_institution c to follow taxpayer a’s instructions taxpayer a also represents that amount has not been used for any other purpose xkxkxxkxxkxxxxkxkxkx page c taxpayer a represents that she was employed by company d and participated in pian b which was administered by financial_institution e plan b was terminated on date on date taxpayer a telephoned financial_institution c for instructions on how to complete a direct_rollover to an ira based on verbal instructions from a representative of financial_institution c taxpayer a opened a new account intending it to be an ira due to the incorrect instructions received from a representative of financial_institution c the account created was a non-ira account financial_institution c issued an account number which taxpayer a used on the same day to complete the required contract termination withdrawal form specifying that she had chosen the direct_rollover option and would be rolling the distribution to her new ira at financial_institution c taxpayer a requested a check made payable to financial_institution c fbo taxpayer a with the new account number on date a distribution check in amount was mailed to taxpayer a and on date taxpayer a mailed the check to financial_institution c with instructions to deposit the check in her individual rollover account however financial_institution c deposited the funds in the non-ira account the mistake was discovered in early when taxpayer a sought financial advice and a reallocation of her investments documentation submitted includes a letter from financial_institution c recognizing the mistake and agreeing to reimburse the costs relating to the application_for a waiver of the 60-day period based on the foregoing facts and representations you request a ruling that the internal_revenue_service waive the day rollover requirement with respect to the distribution of amount from plan b sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 states that such rollover must be accomplished within days following the day on which the distributee received the property an individual_retirement_account ira constitutes one form of eligible_retirement_plan sec_402 of the code provides in relevant part that the secretary may waive the 60-day requirement under sec_402 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable contro of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code rollover distributions sec_401 provides the rules for governing direct transfers of eligible xx xxkxkkxkkxkxkkk page sec_1_401_a_31_-1 of the income_tax regulations regulations q a-15 provides in relevant part that an eligible_rollover_distribution that is paid to an eligible_retirement_plan in a direct_rollover is a distribution and rollover and not a transfer of assets and liabilities revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish timely rollover was due to the failure of financial_institution c to follow her instructions to deposit amount in an ira which resulted in amount being deposited into account f a non-ira account therefore pursuant to sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from plan b taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount into a rollover ira provided all other requirements of sec_402 of the code except the 60-day requirement are met with respect to such contribution the contribution of amount into an ira will be considered a valid rollover_contribution within the meaning of sec_402 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent xx xxxxxxxxxxxx page a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office lf you wish to inquire about this ruling please contact xxxxxxxxxxxxxxx id xxxxxxxxxxxxxkx at xxx xxx-xxxx please address all correspondence to se t ep ra t1 sincerely coble c -therd carlton watkins manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


internal_revenue_service number release date index number ----------------------------- -------------------------------------- ------------------------------ ------------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------- id no ----------------- telephone number --------------------- refer reply to cc fip plr-123410-15 date date legend taxpayer activity year year date date date date percentage z y banker counterparty tax officer auditors recent id statement dear ------------------ -------------------------------------- ------------------------ ------ ------ ------------------- ------------------- ------------------ ------------------- ---------- -- ----------- ---------------- ---------------------------------------- ------------------------------------------------------------------------ ------------------------------ ----------------------------------------- this letter is in response to a letter from your authorized representatives requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for taxpayer to satisfy the requirements of sec_1_1275-6 of the income_tax regulations relating to the identification requirements of sec_1_1275-6 for integration of a qualifying_debt_instrument and a sec_1_1275-6 hedge plr-123410-15 facts taxpayer is the domestic parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return on a calendar-year basis during the first z months of year taxpayer began to consider issuing convertible notes to fund activity as well as other business operations taxpayer’s long- time advisor and investment banker banker provided taxpayer with materials explaining the accounting and tax treatment of issuing convertible debt and entering into a convertible_bond hedging_transaction to hedge the conversion feature the transaction consists of purchased call options that offset the conversion feature under the convertible notes together with written call options at a higher strike_price the materials prepared by banker explained that the economic dilution associated with issuing convertible debt by effectively raising the conversion price to the strike_price under the warrants and that the cost of the purchased call options would be deductible over the life of the convertible notes for tax purposes shortly before date taxpayer’s board_of directors approved a convertible note offering and appointed a special pricing committee to review and approve the final terms of the financing on date the committee approved the terms of the financing including the purchase of call options and the sale of warrants on date taxpayer executed a confirmation with counterparty for taxpayer’s purchase of y call options with respect to its stock purchased call options corresponding to the convertible notes expected to be issued the purchased call options are automatically exercised when a corresponding number of the convertible notes have been converted on date taxpayer entered into a separate confirmation with counterparty under which taxpayer sold warrants warrants to counterparty on date taxpayer issued senior convertible notes that pay interest at percentage and mature on date convertible notes on date taxpayer also paid the premium for the purchased call options from the proceeds of the convertible notes from the presentation and communications with banker and its legal advisor taxpayer did not become aware that it must take any affirmative action such as identifying the convertible notes and purchased call options under sec_1_1275-6 in order to treat them as an integrated transaction taxpayer believed that integrated treatment was the default tax treatment for the convertible notes and the purchased call options tax officer declared that taxpayer intended to integrate the convertible notes and the purchased call options as part of taxpayer’s financial audit for year auditors reviewed taxpayer’s tax provision in year and requested a copy of its documentation meeting the plr-123410-15 requirements of sec_1_1275-6 and e taxpayer’s sole tax professional was unaware of the requirements and had not prepared the documentation on date taxpayer prepared and retained as part of its books_and_records documentation that it believes meets the requirements of sec_1_1275-6 and e the recent id statement taxpayer has requested an extension of time under sec_301_9100-1 to satisfy the requirements of sec_1_1275-6 and e using the recent id statement taxpayer makes the following additional representations treating the requirements of sec_1_1275-6 and e as a regulatory election the request for relief was filed before the failure to make the regulatory election was discovered by the internal_revenue_service service granting the relief requested will not result in taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than taxpayer would have had if the election had been timely made taking into account the time_value_of_money taxpayer did not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of the internal_revenue_code at the time taxpayer requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences taxpayer did not choose to not file the election taxpayer is not using hindsight in requesting this relief in addition affidavits on behalf of taxpayer have been provided as required by sec_301_9100-3 law and analysis sec_1_1275-6 generally provides for the integration of a qualifying_debt_instrument within the meaning of sec_1_1275-6 qdi with a sec_1_1275-6 hedge or combination of sec_1_1275-6 hedges if the combined cash flows of the components are substantially equivalent to the cash flows on a noncontingent debt_instrument that pays interest at a fixed rate or qualified_floating_rate see sec_1_1275-6 sec_1_1275-6 provides generally that a qdi and a sec_1_1275-6 hedge are an integrated transaction if the requirements in sec_1_1275-6 through vii are satisfied sec_1_1275-6 requires that the taxpayer satisfy the identification plr-123410-15 requirements of sec_1_1275-6 on or before the date the taxpayer enters into the sec_1_1275-6 hedge sec_1_1275-6 provides that for each integrated transaction a taxpayer must enter and retain as part of its books_and_records the following information the date the qdi was issued or acquired or is expected to be issued or acquired by the taxpayer and the date the sec_1_1275-6 hedge was entered into by the taxpayer a description of the qdi and the sec_1_1275-6 hedge and a summary of the cash flows and accruals resulting from treating the qdi and the sec_1_1275-6 hedge as an integrated transaction sec_301_9100-1 provides in part that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides in part that the term election includes an application_for relief in respect of tax a request to adopt change or retain an accounting_method or accounting_period but does not include an application_for an extension of time for filing a return under sec_6081 sec_301_9100-1 also provides in part that the term regulatory election means an election whose due_date is prescribed by a regulation published in the federal_register or by a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 through c ii sets forth rules that the service generally will use to determine whether under the facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 for an automatic_extension sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under sec_301_9100-3 before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith sec_301_9100-3 provides that the interests of the government are prejudiced if either granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money or the taxable_year in which a timely regulatory election should have been made is closed sec_301_9100-3 provides that a taxpayer is deemed to have not acted reasonably and in good_faith if the taxpayer uses hindsight in requesting relief if specific facts have changed since the due_date for making the election that make the election advantageous to a taxpayer the service will not ordinarily grant relief in such plr-123410-15 a case the service will grant relief only when the taxpayer provides strong_proof that the taxpayer's decision to seek relief did not involve hindsight conclusions based on the information submitted and representations made we conclude that taxpayer has satisfied the requirements for granting a reasonable extension of time under sec_301_9100-3 to satisfy the requirements of sec_1_1275-6 relating to the identification requirements of sec_1_1275-6 for integration of the convertible notes and the purchased call options caveats this ruling is limited to the timeliness of satisfying the requirements of sec_1_1275-6 relating to the identification requirements of sec_1_1275-6 in order to treat the convertible notes and the purchased call options as integrated transactions this ruling's application is limited to the facts representations code sections and regulations cited herein 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 in particular no opinion is expressed or implied concerning the integration of the convertible notes and the purchased call options including but not limited to whether the recent id statement is adequate for purposes of sec_1_1275-6 whether the purchased call options and warrants should be treated as a single instrument or whether the commissioner could integrate under sec_1_1275-2 the convertible notes the purchased call options and the warrants as a single synthetic position moreover no opinion is expressed with regard to whether the tax_liability of taxpayer is not lower in the aggregate for all years to which the regulatory election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director's office will determine such tax_liability for the years involved if the director's office determines that such tax_liability is lower that office will determine the federal_income_tax effect the ruling contained in this letter is 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 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-123410-15 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely charles w culmer senior technician reviewer branch office of the associate chief_counsel financial institutions products enclosure copy of this letter for sec_6110 purposes


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date uil the honorable carl levin united_states senator michigan avenue room detroit michigan attention --------------- cc tege eoeg et2-------------- conex-101298-08 reference ------------------------------- dear senator levin this letter is in response to your inquiry of date on behalf of your constituent ------------------------------ -------------wrote about his social_security_benefits entitlement he is concerned that he is not currently entitled to social_security_benefits because his employer did not withhold federal_insurance_contribution_act fica_taxes as required although we are precluded by disclosure provisions in the internal_revenue_code from discussing ----------------personal tax situation we provide the following information for your use in assisting ------------ you also provided several additional enclosures related to ----------------concern including a letter from his employer the --------------------------------------------------------------- which states that it established a deferred_compensation plan in ------------------------ ------------------------------------------------------------------------------------------------------------------ the letter indicates that -------- --------------------------------------------------------------------------- ---------------------------------------------------- the letter also provides that the ------------------ provides for --------------------------------------------------------------------------------------------------- ------------------------------------ the law provides that employment for fica purposes generally includes service in the employ of a state of any political_subdivision thereof or of any instrumentality of any one or more of the foregoing there is an exception to this general_rule if the employee is a member of a retirement_system internal_revenue_code code sec_3121 in order for a defined_contribution_plan to be a retirement_system for conex-101298-08 purposes of code sec_3121 the plan must make allocations to the employee’s account not including earnings_of at least percent of the employee’s compensation_for service for the state political_subdivision or instrumentality employment_tax regulation regulation sec_31 b - e iii a a retirement_system may include a plan described in section code sec_457 regulation sec_31_3121_b_7_-2 code sec_457 defines an eligible_deferred_compensation_plan and sec_457 provides that employers eligible to establish and maintain such a plan includes states political subdivisions and agencies or instrumentalities of the foregoing you provided a copy of a closing_agreement between the internal_revenue_service irs and --------------executed --------- ---------------------- the closing_agreement states that the ---------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------- maintenance of a sec_457 plan that qualifies as a retirement_system would normally exempt an employer from providing fica coverage for its employees however code sec_3121 provides that employment for fica purposes includes service included under an agreement entered into pursuant to sec_218 of the social_security act -------- maintains a sec_457 plan that appears to qualify as a retirement_system but as indicated by the closing_agreement the irs incorrectly notified --------------that services performed by its employees were not covered by a sec_218 agreement the --------------------------------------office has apparently confirmed that -------- is part of ------------------ and as such its employees are covered by a sec_218 agreement the closing_agreement resolves the question of fica coverage for the employees of -------- for the years beginning after --------------------------- the closing_agreement suggests that the sec_218 agreement is effective for years beginning after -------------------------- the parties to the closing_agreement agreed that fica_taxes would be paid with respect to wages paid to -------- employees beginning on ---------------------- the -------- also agreed to provide forms w-2c for years beginning after -------------------------- to employees whose wages they adjusted pursuant to the agreement the irs is authorized to collect the fica_taxes but does not have authority to determine whether an individual is eligible for social_security_benefits that jurisdiction lies with the social_security administration social_security act section c h and cfr e permit the addition of earnings to an employee’s account at any time when an employer failed to report to the social_security administration any or less than the correct amount of wages for an employee those increased wages will then be used to determine that individual’s entitlement to social_security_benefits to the extent any individual affected by the closing_agreement described above is concerned about his or her social_security credits we suggest that the individual conex-101298-08 contact the social_security administration at the address below and provide copies of materials related to the wages the -------- failed to report for fica purposes copies of forms w-2c and of the closing_agreement as well as forms w-2 for years from ---------- --------may be helpful in this regard the individual should specifically ask what steps must be taken to have his or her earnings record adjusted for those periods in which the employer did not properly withhold and pay fica_taxes the inquiry should be addressed to social_security administration office of public inquiries windsor park building baltimore maryland i hope this information is helpful if you have any questions or need further assistance in this matter please contact --------------------of my staff at ----- ------------- sincerely catherine e livingston deputy division counsel deputy associate chief_counsel exempt_organizations employment_tax government entities tax exempt government entities


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 plr-126595-10 date december company ------------------------------------------------------------------------------------------------- ----------------------- country --------------- date --------------------------- dear ----------------------------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of company requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a partnership for federal tax purposes facts company was formed under the laws of country on date company represents that it is a foreign_entity eligible to elect to be treated as a partnership for federal tax purposes as company was not properly advised regarding the consequences of making or not making an entity election company failed to file form_8832 entity classification election electing to treat company as a partnership effective date law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner plr-126595-10 sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time 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 code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register 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 the evidence including affidavits described in sec_301_9100-3 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 plr-126595-10 conclusion based solely on the information submitted and the representations made we conclude that company has satisfied requirements of sec_301_9100-1 and sec_301_9100-3 consequently company is granted an extension of time of one hundred twenty days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a partnership effective date a copy of this letter should be attached to the form_8832 this ruling is contingent on the owners of company filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief these returns may include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it according to sec_6110 of the code this ruling 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 company’s authorized representative plr-126595-10 the ruling contained in this letter is 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_ruling it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by s danielle m grimm acting senior technician reviewer branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service date number release date cc el gl br1 gl-804005-98 uilc memorandum for southern california district_counsel from alan c levine chief branch general litigation subject effect of failure to revoke under sec_6325 we are responding to your date inquiry this document is not to be cited as precedent issue what effect does failing to revoke under sec_6325 have on the government’s lien where the lien is a self-releasing lien facts the fact pattern that you have described is as follows the service did not timely refile its original notice_of_federal_tax_lien within the refiling period the service later refiled it but did not send the taxpayer a notice of the refiling given this fact pattern you ask the following questions since the federal lien is self-releasing after the end of the collection_period whether revocation under sec_6325 is necessary does failing to revoke affect only the government’s lien priority because it releases the notice_of_federal_tax_lien or does it affect the federal_tax_lien would the lack of revocation prevent the government from foreclosing on the taxpayer’s interest_in_real_property law and analysi sec_1 since the federal lien is self-releasing after the end of the collection_period whether revocation under sec_6325 is necessary a self-releasing lien is a term of art and should be defined all federal_tax_lien notices filed after are self-releasing in addition to serving the function of protecting the government’s priority against other creditors of the debtor taxpayer a self-releasing gl-804005-98 lien serves as a certificate of release after the expiration of the statutory period for collection the form used by the service to file a notice_of_federal_tax_lien provides unless notice of lien is refiled by the date specified this notice shall on the day following such date operate as a certificate of release as defined in sec_6325 a 205_br_668 bankr d mass citing irs form y sec_6323 addressed the procedures for filing a notice_of_federal_tax_lien the filing of the notice does not affect the validity of the tax_lien but protects the government’s priority against other creditors of the taxpayer debtor sec_6323 provides that in order for a filed notice_of_federal_tax_lien to remain effective the notice must be refiled within the required_refiling_period the required_refiling_period is defined as a the one-year period ending days after the expiration of years after the date of the assessment of the tax and b the one-year period ending with the expiration of years after the close of the preceding required_refiling_period for such notice of lien sec_6323 if the service does not refile the notice_of_federal_tax_lien during the appropriate filing period then the existing notice_of_federal_tax_lien will act as a certificate of revocation therefore if the service desires to have a lien continue on the taxpayer’s property it must issue a certificate of revocation under the special conditions described in sec_6325 to revoke the certificate of release see i r m does failing to revoke affect only the government’s lien priority because it releases the notice_of_federal_tax_lien or does it affect the federal_tax_lien a self-releasing lien provides for a certificate of release if a notice_of_federal_tax_lien is not timely refiled therefore unless a certificate of revocation is issued for a certificate of release the federal_tax_lien no longer exists a certificate of revocation is appropriate under the following circumstances in sec_6325 if the secretary determines that a certificate of release or nonattachment of a lien imposed by sec_6321 was issued erroneously or improvidently or if a certificate of such lien was issued pursuant to a collateral_agreement entered into in connection with a compromise under sec_7122 which has been breached and if the period of limitation on collection after assessment has not expired the secretary may revoke such certificate and reinstate the lien sec_6325 further provides that the reinstated lien is effective on the date the notice of revocation is mailed to the taxpayer and shall have the same force and effect until the expiration of the period of limitation on collection after assessment as a lien imposed by sec_6321 therefore the service can protect the federal_tax_lien if the collection_period has not expired by issuing a certificate of revocation see sec_6325 please note that rra sec_3401 sec_6320 effective requires that the taxpayer be given notice and opportunity for a hearing not more than business days after the day of the filing of the notice_of_federal_tax_lien sec_6320 gl-804005-98 would the lack of revocation prevent the government from foreclosing on the taxpayer’s interest_in_real_property sec_6321 provides if any person liable to pay tax neglects or refuses to pay the same after demand the amount including interest additional_amount addition_to_tax or assessable penalty together with any costs that may accrue in addition thereto shall be a lien in favor of the united_states upon all property and rights to property whether real or personal belonging to such person the government has the power to foreclose on the taxpayer’s interest in property by means of this lien see eg united_states v o’day u s dist lexis m d fla therefore if the lien is released without a revocation of the release the government loses its authority to foreclose on the taxpayer’s interest_in_real_property conclusion after the expiration of the statutory period of collection a self-releasing lien operates as a certificate of release if the service allows the notice_of_federal_tax_lien to expire without refiling the lien then the lien is released if the service does not file a certificate of revocation the certificate of release will operate to destroy the federal_tax_lien if you have any further questions please call cc assistant regional_counsel gl western


internal_revenue_service number release date index number ---------------------------- ------------------- ------------------------------------- ----------------------- ---------------------------- - department of the treasury washington dc person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc ita b04 - plr-165083-03 date date ---------------- ------------- ----------------------------------------- ----------------------------------------------------------------- ---------------------------- legend legend taxpayer ------------------------------------- tin state n a b c dear ---------------------------- this is in response to your letter of date requesting on behalf of the above-named taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file an election under sec_168 of the internal_revenue_code the election the material information submitted for consideration is summarized below taxpayer is a for-profit corporation incorporated in n taxpayer is owned by a and b who are non-profit corporations and tax-exempt entities under sec_501 a’s and b’s mission is to provide housing for low-income tenants taxpayer is a tax-exempt_controlled_entity within the meaning of sec_168 under sec_168 taxpayer may elect not to be treated as a tax-exempt_controlled_entity for purposes of sec_168 taxpayer is a general_partner of c a limited_partnership whose purpose is to acquire rehabilitate and operate three buildings as a low-income_housing project under sec_42 the buildings are certified_historic_structures as that term is defined in sec_47 and are eligible for rehabilitation tax_credits under sec_47 plr-165083-03 under c’s closing certificate taxpayer was to make an election under sec_168 to be treated as a taxable entity the election was necessary so that the alternate depreciation system under sec_168 would not be applied to c’s property and to enable c’s rehabilitation_expenditures to give rise to the rehabilitation tax_credit taxpayer’s prior accountant was engaged to prepare c’s and taxpayer’s tax returns for the year ended date based upon the information submitted taxpayer intended to make an election under sec_168 on a timely filed federal_income_tax return for its first tax_year ended date however the prior accountant prepared c’s form_1065 but failed to prepare taxpayer’s form_1120 timely and therefore the election under sec_168 was not timely made subsequently taxpayer engaged a new accounting firm in date who became aware of taxpayer's failure to timely file a federal_income_tax return for the year ended date and make an election under sec_168 the taxpayer is seeking relief under sec_301_9100-1 and sec_301_9100-3 for failure to make a timely election sec_168 provides that for purposes of sec_168 if any property which is not tax-exempt_use_property is owned by a partnership which has both a tax-exempt_entity and a person who is not a tax-exempt_entity as partners and any allocation to the tax-exempt_entity of partnership items is not a qualified_allocation then an amount equal to such tax-exempt entity's proportionate share of such property shall be treated as tax-exempt_use_property sec_168 provides that for purposes of sec_168 any tax-exempt_controlled_entity shall be treated as a tax-exempt_entity sec_168 provides that for purposes of sec_168 a tax-exempt_controlled_entity may elect not to be treated as a tax-exempt_entity such an election is irrevocable and will bind all tax-exempt entities holding an interest in the tax-exempt_controlled_entity sec_301_9100-7t requires elections under sec_168 to be made by the due_date of the tax_return for the first taxable_year for which the election is to be effective therefore the election is a regulatory election under sec_301_9100-1 under sec_301_9100-1 and sec_301_9100-3 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i provided the taxpayer demonstrates 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 plr-165083-03 based on the facts and information submitted including the affidavits submitted and representations made we conclude that taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government accordingly the requirements of the regulations for granting relief in this case have been satisfied and we grant an extension of time until days from the date_of_issuance of this letter for taxpayer to file the election taxpayer must file an amended federal_income_tax return for its tax_year ending on date and attach thereto the election and information set forth in sec_301_9100-7t taxpayer should also attach a copy of this letter to the amended_return in addition pursuant to sec_301_9100-7t a copy of the election statement should also be attached to the federal_income_tax returns of each of the tax-exempt shareholders or beneficiaries of taxpayer 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 s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant 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 sincerely robert a berkovsky branch chief office of associate chief_counsel income_tax accounting cc


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si - plr-120101-98 date date legend coop city a b llc dear this is in response to a letter dated date submitted on your behalf by your authorized representative the letter request a ruling regarding the application of subchapter_t of the internal_revenue_code to a proposed transaction described below coop is a cooperative operating under the provisions of subchapter_t of the code coop processes b into and coop markets these processed products and returns the net_earnings to its members on a patronage basis coop is located in city a it was incorporated in to among other things engage in any activity in connection with the marketing selling harvesting preserving drying processing manufacturing canning packing grading storing handling or utilization of any agricultural product produced or delivered to it by its members or the manufacturing or marketing of the by-products articles of incorporation article ii b and to act as agent or representative of any member or members in any such activities and to that end to enter into contracts with its members for the exclusive and irrevocable right to purchase and market their b id d and to do each and every thing necessary suitable or proper for the accomplishment of any of the purchases or the attainment of any one or more of the objects enumerated c onducive to or expedient for the interest or benefit of the association and to contract accordingly and in addition p ossess all powers rights and privileges a s may be necessary or incidental to the purpose for which the association is organized id k the cooperative owns and operates its own b processing facility for its year ending coop had total sales of dollar_figure of which dollar_figure was from the sale of b and the balance resulting from the sale of coop’s earnings totalled dollar_figure all of the allocation was paid to the coop’s members in cash in proportion to the amount of b the coop purchased from each of its members the board_of directors of coop wants to improve its profitability and reposition the cooperative in anticipation of changing economic conditions resulting from nafta and the possibility that b support prices might be cut in future farm bills for the past ten years the market price of b has ranged between dollar_figure and dollar_figure cents per pound under nafta it is expected that mexico will continue to improve its production of b and become an ever larger competitor in the domestic b market there is also concern that b price supports will be in jeopardy when the present farm bill expires all in all there will be significant market pressure on b prices in the coming years unless the cooperative repositions itself it cannot survive that expected economic storm accordingly coop proposes to align itself with llc who will thereafter process the b produced by coop’s members llc is a very successful processor and marketer of b its annual business volume is three times larger than coop’s llc is owned by two corporations not co- ops and it has an excellent management team and record of financial success for its recent fiscal_year end the llc processed slightly under million tons of b which compares to the coop’s volume of approximately big_number tons none of coop’s members now sell any of their b production to the llc llc is however a natural partner for coop because the llc and the cooperative operate in close proximity to each other repositioning coop with the llc will dramatically reduce the cost per ton of processing b and permit the cooperative to compete more dynamically in the b market coop’s cost of production for the crop direct costs plus overhead was dollar_figure per ton adding coop’s volume to the llc’s business will permit the cooperative to take advantage of economies of scale and size total operating costs direct costs plus overhead are projected to decrease to dollar_figure per ton as a result of realigning coop with llc consequently economies of size and scale will have caused the cooperative to realize a dollar_figure per ton reduction in the cost of production a reduction in the cooperative’s cost structure naturally a reduction in coop’s cost structure will dramatically improve its patronage_earnings over the past five year the cooperative’s average annual patronage_earnings are dollar_figure realigning with llc has the potential of increasing the co-op’s annual earnings by dollar_figure million on the upside so that total patronage_earnings are expected to be dollar_figure million if either or both of the board’s concerns about the farm bill or nafta develop the cooperative would at least have a reasonable fighting chance of weathering those events if it starts with annual earnings_of dollar_figure million dollars rather than only dollar_figure of earnings if cooperative cannot realign itself with llc the cooperative may not survive coop shall have a supply agreement with each of its members that commits the member to deliver its b to the coop for processing and the coop to arrange for b processing and marketing services on behalf of its members coop in turn will contract with the llc to process the b that the cooperative will receive under its member supply agreements coop will purchase b from its producers and will pay the producers the market price for the b delivered coop will sell the b to llc who will process the b the coop’s share of the llc’s earnings attributable to the marketing of coop’s members b will be distributed to coop’s members on the basis of the number of tons of b each member sells to the coop coop will convey its b processing facility and equipment plus an anticipated cash infusion of dollar_figure million to the llc in exchange for an ownership voting member interest in the llc coop along with the two existing corporations will own the llc coop’s ownership_interest is expected to be somewhere between and coop’s voting rights will equal its ownership_interest between and coop anticipates that it will operate with few or no employees it will hire llc under arms-length terms to undertake administrative activities such as bookkeeping coop will reimburse llc for the salaries and other expenses of the llc s employees who perform those activities and for the other expenses such as performing bookkeeping functions on computer this proposed structure will not alter the cooperative’s status it will continue to be democratically controlled and so long as new b producers otherwise qualify for membership in the cooperative those producers will receive a membership and be permitted to vote in the cooperative’s affairs it will continue to have a pre-existing legal_obligation to return net_earnings from patronage to its members based on the quantity or value of product delivered to it and its capital is subordinated sec_1381 of the internal_revenue_code_of_1986 as amended provides in part that part of subchapter_t shall apply to any corporation operating_on_a_cooperative_basis other than certain organizations not relevant to this ruling application sec_1382 of the code provides that except as provided in subsection b the gross_income of any organization to which subchapter_t applies shall be determined without any adjustment by reason of any allocation or distribution to a patron out of the net_earnings of such organization or by reason of any amount_paid to a patron as a per- unit retain allocation sec_1382 of the code provides in part that in determining the taxable_income of an organization to which part of subchapter_t applies there shall not be taken into account amounts paid during the payment period for the taxable_year as patronage_dividends to the extent paid in money qualified written notices of allocation or other_property with respect to patronage occurring during such taxable_year for purposes of title_26 any amount not taken into account under the preceding sentence shall be treated in the same manner as an item_of_gross_income and a deduction therefrom sec_1388 of the code defines a patronage_dividend as an amount_paid to a patron by an organization to which part of subchapter_t applies on the basis of quantity or value of business done with or for such patron under an obligation of such organization to pay such amount which obligation existed before the organization received the amount so paid and which is determined by reference to the net_earnings of the organization from business done with or for its patrons such term does not include any amount_paid to a patron to the extent that a such amount is out of earnings other than from business done with or for patrons or b such amount is out of earnings from business done with or for other patrons to whom no amounts are paid or to whom smaller amounts are paid with respect to substantially identical transactions sec_1_1382-3 of the income_tax regulations provides the following definition of the term income derived from sources other than patronage ie nonpatronage income as used in this paragraph the term income derived from sources other than patronage means incidental income derived from sources not directly related to the marketing purchasing or service activities of the cooperative association for example income derived from the lease of premises from investment in securities or from the sale_or_exchange of capital assets constitutes income derived from sources other than patronage although the regulations under sec_1382 of the code are concerned with exempt farmer’s cooperatives the service and the courts have uniformly applied the regulations to both exempt and nonexempt cooperatives see eg 87_tc_435 sec_1_1388-1 of the income_tax regulations defines the term patron to include any person with whom or for whom the cooperative association does business on a cooperative basis whether a member or a nonmember of the cooperative association and whether an individual a_trust estate partnership company corporation or cooperative association revrul_69_576 1969_2_cb_166 refined the definition of patronage and nonpatronage income providing that the classification of an item_of_income as from either patronage or nonpatronage sources is dependent on the relationship of the activity generating the income to the marketing purchasing or service activities of the cooperative if the income is produced by a transaction that actually facilitates the accomplishment of the cooperative’s marketing purchasing or service activities the income is from patronage sources however if the transaction producing the income does not actually facilitate the accomplishment of these activities but merely enhances the overall profitability of the cooperative being merely incidental to the association’s cooperative operation the income is from nonpatronage sources a number of cases have held that where a cooperative earns income as a result of an activity that actually facilitates or is directly related to its cooperative purpose the income is properly characterized as patronage-sourced 410_fsupp_1100 d oregon dividends from a corporate glue manufacturing joint_venture astoria plywood corporation v united_states u s t c d oregon lease termination_payment st louis bank for cooperatives v united 624_f2d_1041 cl_ct interest on working_capital gain on the sale of an automobile interest on bonds held to meet capital requirements 675_f2d_988 8th cir dividend on stock owned in a bank for cooperatives 765_f2d_1102 cafc interest on working_capital rent sprinkler income illinois grain corporation 81_tc_435 interest on working_capital barge rents dundee citrus growers association 62_tcm_879 interest on pool proceeds earned prior to distribution 995_f2d_101 7th cir interest on working_capital in this case coop will receive a distributive_share of llc income because of its status as an owner of llc the portion of the distributive_share of llc income that is attributable to the processing and marketing of coop’s members b is patronaged sourced income eligible for the patronage_dividend deduction under sec_1382 of the code accordingly based solely on the above we rule that coop’s share of llc operating income attributable to the processing and marketing of coop’s members’ b is income from patronage sources eligible for the patronage_dividend deduction this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than the sections described above sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely yours walter woo walter woo senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries


internal_revenue_service number release date index number 468a ---------------------------- --------------------------------------- --------------------------- --------------------------------- 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 b6 plr-114607-09 date date re subsequent special transfer ----------------------------------------------- legend taxpayer parent plant location date method commission a commission b commission c1 commission c2 fund director dear ------------- ------------------------------------- ein ---------------- ----------------------------------- ein ---------------- ----------------------------------------------- -------------------------------- ------------------ ----------- ------------------------------------------------ ------------------------------------------------------------------- ----------------------------------------------------- --------------------------------------------------------------- ------------------------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- this letter responds to your request dated --------------------- for a schedule of deduction amounts for a subsequent special transfer pursuant to sec_468a of the internal_revenue_code and sec_1_468a-8t c of the temporary income_tax regulations and a mandatory review of a revised schedule of ruling amounts pursuant to sec_468a of the internal_revenue_code and sec_1_468a-3t f iii of the temporary income_tax regulations with regard to a qualified nuclear decommissioning reserve fund that the taxpayer has established for the plant and associated facilities taxpayer was previously granted schedules of ruling amounts and schedules of deduction amounts most recently on ------------------ taxpayer submitted supplemental plr-114607-09 information by letter on -----------------and ------------------ information was submitted pursuant to sec_1_468a-3t e taxpayer represents the facts and information relating to its request for a schedule of deduction amounts and a schedule of ruling amounts as follows taxpayer a subsidiary of parent is included in a consolidated_return filed by parent taxpayer is the sole owner and operator of the plant the plant is situated at location plant’s amended operating license is scheduled to expire on date the estimated base cost for decommissioning plant is based on an independent study and the proposed method of decommissioning the plant is method taxpayer is subject_to the jurisdiction of commission a commission b and commission c1 and commission c2 the jurisdictional percentages for these commissions are ----------- ----------- --------- and ----------- respectively none of the commissions have amended any aspects of taxpayer’s recovery_of decommissioning costs since the most recent schedule of ruling amounts based upon the assumptions used in taxpayer’s most recent schedule of ruling amounts as adopted by commission a commission b commission c1 and commission c2 it is estimated that fund assets will earn an after-tax rate of return of --- -----percent the total cost of decommissioning plant is estimated to be dollar_figure------------------- ------- dollars this base cost of decommissioning plant is escalated at a ---- percent yearly rate resulting in a total future cost to taxpayer of decommissioning plant of dollar_figure----- --------------------- ------- dollars under ratemaking assumptions used during the first proceeding before commission a the plant would no longer be included in rate base in ------- in the prior schedule of ruling amounts issued under sec_468a of the code as in effect prior to the estimated_useful_life of the plant is --- years --------------- and the estimated period for which the fund is to be in effect is --- years --------------- thus the percentage of the total estimated costs qualifying for deduction in the schedule of ruling amounts under prior_law was -------- percent sec_468a as amended by the energy tax incentives act of the act publaw_109_58 119_stat_594 allows an electing taxpayer to deduct payments made to a nuclear decommissioning reserve fund sec_468a limits the amount that may be paid into the nuclear decommissioning fund in any year to the ruling_amount applicable to that year prior to the changes made by the act the deduction was limited to the lesser_of the amount plr-114607-09 included in the utility’s cost of service for ratemaking purposes or the ruling_amount generally as a result only regulated utilities could take advantage of sec_468a the act amendment of sec_468a eliminated the cost-of-service limitation accordingly decommissioning costs of an unregulated nuclear power plant may now be funded by deductible contributions to a qualified nuclear decommissioning fund sec_468a provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund the total nuclear decommissioning cost of that nuclear power plant over the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate prior to the changes made by the act deductible contributions were limited to the amount necessary for an electing taxpayer to fund the plant’s post-1983 nuclear decommissioning costs determined as if decommissioning costs accrued ratably over the estimated_useful_life of the plant provided that the taxpayer elected to establish a fund in prior_law also did not allow a taxpayer electing to establish a fund later than to contribute to that fund any amount in excess of that amount necessary to fund the ratable portion of the plant’s nuclear decommissioning costs beginning in the year the fund is established sec_468a now allows a taxpayer to contribute to a nuclear decommissioning fund the entire cost of decommissioning the plant including both the pre-1984 amount that was denied under the law prior to the act as well as any amount attributable to any year after in which a taxpayer had not established a fund under sec_468a sec_468a provides that the deduction for the contribution of the previously-excluded amount is allowed ratably over the remaining useful_life of the nuclear plant sec_468a provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within 2½ months after the close of the tax_year this section applies to payments made pursuant to either a schedule of ruling amounts or a schedule of deduction amounts sec_1_468a-1t a provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1t b of the regulations is a taxpayer that has a qualifying plr-114607-09 interest in any portion of a nuclear power plant a qualifying interest is among other things a direct ownership_interest sec_1_468a-2t b provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year the limitation on the amount of cash payments for purposes of sec_1 468a- 2t b does not apply to any special transfer permitted under sec_1_468a-8t sec_1_468a-3t a provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3t a provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on reasonable assumptions concerning the after-tax rate of return to be earned by the amounts collected for decommissioning the total estimated cost of decommissioning the nuclear plant and the frequency of contributions to a nuclear decommissioning fund for a taxable_year under sec_1_468a-3t a the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3t a provides that the taxpayer bears the burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the regulations and that it is based on reasonable assumptions that section also provides additional guidance regarding how the service will determine whether a proposed schedule of ruling amounts is based on reasonable assumptions for example if a public_utility commission established or approved the currently applicable rates for the furnishing or sale by the taxpayer of electricity from the plant the taxpayer can generally satisfy this burden_of_proof by demonstrating that the schedule of ruling amounts is calculated using the assumptions used by the public_utility commission in its most recent order in addition a taxpayer that owns an interest in a deregulated nuclear plant may submit assumptions used by a public_utility commission that formerly had regulatory jurisdiction over the plant as support for the assumptions used in calculating the taxpayer’s proposed schedule of ruling amounts with the understanding that the assumptions used by the public_utility commission may be given less weight if they are out of date or were developed in a proceeding for a different taxpayer the use of other industry standards such as the assumptions underlying the taxpayer's most recent financial assurance filing with the nrc are described by the plr-114607-09 temporary regulations as an alternative means of demonstrating that the taxpayer has calculated its proposed schedule of ruling amounts on a reasonable basis sec_1_468a-3t a further provides that consistency with financial_accounting statements is not sufficient in the absence of other supporting evidence to meet the taxpayer’s burden_of_proof sec_1_468a-3t b provides that in general the ruling_amount for any_tax year in the funding_period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3t c the funding_period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the last day of the estimated_useful_life of the nuclear power plant to which the fund relates sec_1_468a-3t c provides rules for determining the estimated_useful_life of a nuclear plant for purposes of sec_468a in general under sec_1_468a-3t c i a if the plant was included in rate base for ratemaking purposes for a period prior to date the date used in the first such ratemaking proceeding as the estimated date on which the nuclear plant will no longer be included in the taxpayer’s rate base is the end of the estimated_useful_life of the nuclear plant sec_1_468a-3t c i b provides that if the nuclear plant is not described in sec_1_468a-3t c i a the last day of the estimated_useful_life of the nuclear plant is determined as of the date the plant is placed_in_service under sec_1_468a-3t c i c any reasonable method may be used in determining the estimated_useful_life of a nuclear power plant that is not described in sec_1_468a-3t c i a sec_1_468a-3t d provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant sec_1_468a-3t d provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3t e enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3t f provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3t e the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year plr-114607-09 sec_1_468a-8t a provides that under the provisions of sec_468a as described above a taxpayer may make a special transfer of cash or property to the nuclear decommissioning fund this special transfer is not subject_to the sec_468a limitation the amount of the special transfer is the present_value of the pre-2005 nonqualifying percentage of the estimated future costs of decommissioning the nuclear plant that was disallowed under sec_468a prior to the act sec_1_468a-8t a defines the pre-2005 nonqualifying percentage as equal to percent reduced by the sum of the qualifying percentage used in determining the taxpayer’s last schedule of ruling amounts for the fund under sec_468a as it existed prior to the act and the percentage transferred in any previous special transfer sec_1_468a-8t a provides that the taxpayer is not required to transfer the entire amount eligible for the special transfer in one year but must take any prior special transfers into account in calculating the pre-2005 qualifying percentage further pursuant to sec_1_468a-8t c a taxpayer making a special transfer in more than one year must request a new schedule of deduction amounts in connection with each special transfer sec_1_468a-8t b provides that the deduction for the special transfer is allowed ratably over the remaining useful_life of the nuclear plant under sec_1 468a- 8t b iii the deduction for property contributed in a special transfer is limited to the lesser_of the fair_market_value of the property or the taxpayer’s basis in the property under sec_1_468a-8t b the taxpayer recognizes no gain_or_loss on the special transfer of property the taxpayer’s basis in the fund is not increased by reason of the special transfer of property and the fund’s basis in the property transferred in the special transfer is the same as the transferee’s basis in that property immediately prior to the special transfer sec_1_468a-8t c provides that taxpayer may not make a special transfer to a qualified nuclear decommissioning fund unless the taxpayer requests from the irs a schedule of deduction amounts in connection with such transfer a request for a schedule of deduction amounts may be made in connection with a request for a schedule of ruling amounts but in such case the calculations for both the schedule of ruling amounts and the schedule of deduction amounts must be separately_stated as stated above prior to the changes made by the act deductible contributions were limited to the lesser_of the amount necessary to fund the plant’s post-1983 nuclear decommissioning costs or the amount necessary to fund the plant’s decommissioning costs for that portion of the plant’s estimated_useful_life for which a fund had been established under that prior_law taxpayer was allowed to contribute --- -------- percent of the amounts necessary to fully decommission its share of the plant sec_468a allows a taxpayer to contribute to the nuclear decommissioning fund the pre-1984 amount that was denied under the law prior to the act plr-114607-09 thus taxpayer is able to contribute the additional --------percent of the amounts necessary to decommission its ownership share of plant the original special transfer occurred in ------- and relates back to the ------- tax_year the value of this special transfer is dollar_figure----------------- ------- dollars this amount represents --------percent of the amounts necessary for taxpayer to decommission its ownership share of the plant as a result the taxpayer is now able to contribute --------percent of the amounts necessary to decommission its ownership of the plant taxpayer may deduct the amount of the subsequent special transfer in ------- the value of the subsequent special transfer is dollar_figure------------------ --------dollars the total future cost of decommissioning the plant as of the date of this request is dollar_figure-------------------- --------- dollars the value of that amount as of the date of this request is dollar_figure------------------------- --------------------------------------------------------------------------------------------------------- ------- dollars we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we conclude that because the useful_life of the plant as defined by sec_1_468a-3t c ended in ------- taxpayer may make a subsequent special transfer of dollar_figure------------------ ------- dollars in --- ------- as set forth below schedule of deduction amounts year ------- deduction amount dollar_figure------------------ the subsequent special transfer amount stated above is the maximum amount permitted to be transferred to the fund under sec_468a if taxpayer transfers a lesser amount to the fund the taxpayer may deduct that lesser amount ratably over the period of years described above further in the event that taxpayer transfers a lesser amount for ------- in order to make an additional special transfer in a later year taxpayer must request a new schedule of deduction amounts and in that request must take the ------- transfer into account and recalculate the pre-2005 qualifying percentage in such request we note that if taxpayer elects to make a special transfer of property for all or a portion of this special transfer the amount of the deduction is the lesser_of the fair_market_value of the property transferred or the basis of the property in the hands of the taxpayer immediately prior to the transfer in either event the deduction of the taxpayer with respect to the property is limited to the taxpayer’s basis in the property plr-114607-09 we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we reach the following conclusions pursuant to sec_1_468a-3t a taxpayer has met its burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the code and regulations and is based on reasonable assumptions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1t b of the regulations taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3t d of the regulations pursuant to sec_1_468a-3t a taxpayer has demonstrated that by following the assumptions approved by the commissions the proposed schedule of ruling amounts is consistent with the principles of sec_468a and the regulations thereunder and that such schedule is based on reasonable assumptions the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the ruling_amount applicable to the fund as set forth under sec_1_468a-2t b of the regulations based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code we have approved the following revised schedule of ruling amounts approved schedule of ruling amounts year each year --------------- comm a dollar_figure--------------- -------- comm b dollar_figure-------------- --------- comm c comm c-other dollar_figure------------ dollar_figure---------- total dollar_figure--------------- if any of the events described in sec_1_468a-3t f occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received plr-114607-09 except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office the original of this letter is being sent to the taxpayer’s authorized representative we are also sending a copy of this letter_ruling to the director and to the taxpayer pursuant to sec_1_468a-7t a a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch passthroughs special industries cc


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc psi b06 conex-112382-10 number info release date uil 25c the honorable c w bill young member u s house of representatives 113th street seminole fl attention ------------------ dear congressman young i am responding to your inquiry dated date on behalf of your constituent ------ ---------------------- -------------- purchased a heat pump in -------------- chose his heat pump because it met all of the requirements for the tax_credit -------------- believed he would receive a dollar_figure tax_credit because the heat pump manufacturer provided a flyer to -------------- stating that if a taxpayer owes no tax_liability the taxpayer can expect a dollar_figure refund the law allows a taxpayer a credit in the amount of percent of expenditures_for qualified_energy_property including certain heat pumps sec_25c of the internal_revenue_code the law caps the credit at dollar_figure for the combined and tax years the congress provided that this tax_credit is nonrefundable a nonrefundable tax_credit can only decrease or eliminate a tax_liability a taxpayer will not receive a refund for any amount that exceeds his or her tax_liability for the year generally -------------- would only be eligible for the full dollar_figure tax_credit if he had either paid dollar_figure in taxes during the taxable_year or owed dollar_figure in taxes at the end of the year in contrast when a tax_credit is refundable a taxpayer will receive a tax_refund even if the taxpayer’s tax_liability is already reduced to zero or the taxpayer pays no tax at all i am sorry that -------------- received erroneous information from the manufacturer of the product we understand that he is frustrated about receiving incorrect information we work to provide taxpayers with information about the tax_credits through communications such as our website and telephone hotlines we want to make this information easy to find for both consumers and manufacturers i have enclosed a q a page from our website discussing energy incentives for individuals the third answer conex-112382-10 on the document explains that this credit is nonrefundable and will only allow a taxpayer to lower his or her tax_liability to zero unfortunately we cannot ensure that manufacturers will always be aware of and provide the correct information to their customers i hope this information is helpful if you have any further questions on this matter please contact ----------------------- at ---------------------or me at ---------------------for further assistance sincerely curt g wilson associate chief_counsel passthroughs special industries enclosure