internal_revenue_service number release date index numbers ------------------ --------------------------------- --------------------------- -------------------------------- ------------------------------ 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 corp plr-124351-05 date date legend parent ------------------------------------------------------------------------- fsub ---------------- fsub fsub fsub --------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ----------------------------------------------------- -------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ -------------------------------------------- ----------------------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ --------------------------------------------------------------------- ------------------------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ----------------------------------- -------------------------------------------- distributing ---------------------------------------------------------------------------- ------------------------------------------------------------------------ controlled ----------------------------- ---------------------------------------------------------------------------- --------------------------------------------------------------------- sub 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--------------------------------------------------------------------- fsub ---------------------------------------------------------------------------- sub ---------------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------- ------------------------------ ------------------------------- --------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------------------- ---------------------------- plr-124351-05 fsub ---------------------------------------------------------------------------- partnership --------------------------------------------------------------------------------------- business a business b ----------------------------------- ------------------------------------------- ---------------------------------------------------- name a date a country a state a a ----------------------------- ------------------- ----------- ------------- ------------- dear --------------- this letter responds to your date letter requesting rulings on certain federal_income_tax consequences of a proposed transaction the information provided in that letter and in later correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process in particular this office has not reviewed any information pertaining to and has made no determination regarding whether the transaction i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 summary of facts plr-124351-05 parent a foreign_corporation is the common parent of a corporate group composed of various domestic and foreign_corporations engaged in business a and business b parent wholly owns fsub fsub fsub and distributing distributing is the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return distributing is a holding_company that conducts business a and business b indirectly through subsidiaries distributing wholly owns controlled sub sub sub sub sub sub sub sub sub sub and fsub sub wholly owns sub sub wholly owns sub sub wholly owns fsub fsub wholly owns fsub financial information has been received indicating that business a as conducted by controlled and business b as conducted by sub has each had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years proposed transaction for what are represented to be valid business purposes distributing has proposed the following transaction to separate its business a from its business b i distributing will contribute all of the outstanding_stock of sub and sub to sub in constructive exchange for sub stock ii sub and sub will convert from state a corporations to state a limited_liability companies each of sub and sub will thus be disregarded as an entity separate from sub sub will change its name to name a sub sub and sub will together be referred to as the service companies hereinafter iii fsub will declare and pay a cash dividend to fsub of up to approximately dollar_figurea and fsub will then declare and pay a cash dividend of approximately the same amount to distributing iv distributing will contribute all of the outstanding_stock of fsub to sub in constructive exchange for sub stock v controlled will pay an intercompany payable that it owes to distributing using cash and sub may merge downstream into sub vi distributing will contribute all of the outstanding_stock of sub or sub if sub merges downstream into sub sub sub sub sub sub and sub and any intercompany receivables and payables related to these corporations to controlled in constructive exchange for controlled stock the contribution plr-124351-05 vii after steps i - v and the contribution distributing will distribute all of the outstanding_stock of controlled to parent the distribution viii parent will contribute all of the outstanding_stock of distributing and the other business b companies to fsub in exchange for additional fsub stock ix parent will form fsub as a wholly owned subsidiary and contribute all of the outstanding_stock of fsub to fsub in exchange for additional fsub stock x parent will contribute all of the outstanding_stock of fsub to fsub in exchange for additional fsub stock xi following step x parent may contribute all of the outstanding_stock of fsub to fsub in exchange for additional fsub stock xii sub may contribute all of the outstanding_stock of fsub to sub in constructive exchange for sub stock xiii sub may contribute all of the outstanding_stock of fsub to fsub in constructive exchange for fsub stock xiv fsub may merge with or be dissolved into fsub pursuant to country a law representations b no part of the consideration to be distributed by distributing will be received the taxpayer has made the following representations regarding the contribution a any indebtedness owed by controlled to distributing after the distribution will and the distribution not constitute stock_or_securities by parent as a creditor employee or in any capacity other than that of a shareholder of distributing representative of sub 10’s present operations and with regard to sub there have been no substantial operational changes since the date of the last financial statements submitted representative of controlled’s present operations and with regard to controlled there have been no substantial operational changes since the date of the last financial statements submitted except for the sale of the interest in partnership in date a d the five years of financial information submitted on behalf of controlled is c the five years of financial information submitted on behalf of sub is plr-124351-05 of the gross assets of distributing will consist of the stock and securities of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 e immediately after the distribution at least percent of the fair_market_value j the liabilities assumed as determined under sec_357 by controlled in the h the distribution is not used principally as a device for the distribution of the f following the distribution distributing and controlled will each continue the active_conduct of its business independently and with their own separate employees although certain services will be provided by the service companies to distributing g the distribution is carried out for the corporate business purposes of fit and focus and risk reduction the distribution is motivated in whole or substantial part by one or more of these corporate business purposes earnings_and_profits of distributing controlled or both i the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing in the contribution will each equal or exceed the sum of the liabilities assumed as determined under sec_357 by controlled contribution will have been incurred in the ordinary course of business and will be associated with the assets transferred k to the extent any transfer in the proposed transaction is an early disposition of property for which an investment_credit has been or will be claimed under sec_46 the income_tax_liability for the taxable_year in which the investment_credit_property including any building to which sec_47 applies is transferred will be adjusted pursuant to sec_50 or a or sec_47 as in effect before amendment by public law title 104_stat_1388 if applicable to reflect the early disposition of the property time of or after the distribution_deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further distributing’s excess_loss_account if any with respect to the controlled stock will be included in income immediately before the distribution see sec_1_1502-19 l no intercorporate debt will exist between distributing and controlled at the m immediately before the distribution any items of income gain loss q for purposes of sec_355 immediately after the distribution no person p for purposes of sec_355 immediately after the distribution no person n payments made in connection with all continuing transactions between o no two parties to the transaction are investment companies as defined in plr-124351-05 distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length sec_368 and iv determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution r the distribution is not part of a plan or a series of related transactions within the meaning of sec_1_355-7t pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation s neither distributing nor controlled was a united_states_real_property_holding_corporation as defined in sec_897 at any time during the five-year period ending on the distribution date and neither distributing nor controlled will be a united_states_real_property_holding_corporation immediately after the distribution distributing in the contribution will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by controlled in connection with the exchange ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the exchange and iii the amount of cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the exchange the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately_after_the_exchange t the total fair_market_value of the assets transferred to controlled by plr-124351-05 distributing in the contribution will equal or exceed the aggregate adjusted_basis of the transferred assets u the total fair_market_value of the assets transferred to controlled by rulings based solely on the information submitted and the representations made we rule as follows on the contribution and the distribution the contribution followed by the distribution will qualify as a reorganization under sec_368 distributing and controlled will each be a_party_to_a_reorganization under sec_368 no gain_or_loss will be recognized by distributing on the contribution sec_357 and sec_361 no gain_or_loss will be recognized by controlled on the contribution sec_1032 the basis of each asset received by controlled in the contribution will equal the basis of that asset in the hands of distributing immediately before its transfer sec_362 the holding_period of each asset received by controlled in the contribution will include the period during which distributing held that asset sec_1223 no gain_or_loss will be recognized by distributing on the distribution sec_361 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of parent on its receipt of controlled stock in the distribution sec_355 the aggregate basis of the distributing stock and the controlled stock in the hands of parent immediately after the distribution will equal the aggregate basis of the distributing stock held by parent immediately before the distribution allocated between the stock of distributing and controlled in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 and sec_358 the holding_period of the controlled stock received by parent in the distribution will include the holding_period of the distributing stock on which the distribution is made provided the distributing stock is held as a capital_asset on the date of the distribution sec_1223 plr-124351-05 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 caveats we express no opinion about the tax treatment of the proposed transaction described above under other provisions of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding i whether the distribution satisfies the business_purpose requirement of sec_1_355-2 ii whether the distribution is used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both iii whether the distribution and an acquisition or acquisitions are part of a plan or series of related transactions under sec_355 and iv steps i through v and steps viii through xiv of the proposed transaction procedural statements this ruling 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 each taxpayer involved in this transaction should attach a copy of this ruling letter to the taxpayer’s federal_income_tax return for the taxable_year in which the transaction is completed under the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives sincerely _________________________ richard k passales senior counsel branch office of associate chief_counsel corporate


tcmemo_2010_83 united_states tax_court robert linda whitmarsh petitioners v commissioner of internal revenue respondent docket no filed date robert linda whitmarsh pro sese kevin w coy for respondent memorandum opinion cohen judge respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax and an accuracy-related_penalty of dollar_figure under sec_6662 after concessions the issue for decision is whether petitioners are liable for the accuracy-related_penalty under sec_6662 all section references are to the internal_revenue_code for the year in issue and all rule references are to the tax_court rules_of_practice and procedure background this case was submitted fully stipulated under rule and the stipulated facts are incorporated as our findings by this reference petitioners resided in california at the time the petition was filed petitioners each owned a 50-percent share in sign arts products corp and were employees of sign arts products corp at all relevant times in date sign arts products corp enrolled in the idp corporate benefit services inc multiple employer welfare_benefit_plan and trust the idp plan the idp plan provided life_insurance to employees of enrolled employers sign arts products corp contributed to the idp plan on petitioners’ behalf from until the idp plan used those contributions to purchase insurance on petitioners’ lives from western reserve life assurance co of ohio western reserve beginning in washington trust bank held the western reserve policies as trustee of the trust which formed part of the idp plan in date the idp plan distributed the western reserve policies to petitioners on date the idp plan terminated the internal_revenue_service irs received a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc reflecting petitioners’ receipt of dollar_figure of income from the distribution of the western reserve policy insuring mr whitmarsh’s life the irs also received a form 1099-r reflecting petitioners’ receipt of dollar_figure of income from the distribution of the western reserve policy insuring mrs whitmarsh’s life petitioners completed their joint federal_income_tax return for on date and timely filed it petitioners’ return was prepared and signed by an accountant on their form_1040 u s individual_income_tax_return petitioners reported pensions and annuities totaling dollar_figure and dollar_figure as the taxable_amount petitioners reported a total_tax of dollar_figure in the supplemental information petitioners filed with their return petitioners stated the following regarding the forms 1099-r amounts these amounts should have been reported with taxable amounts to mr and mrs whitmarsh of dollar_figure and dollar_figure respectively corrected 1099rs will be issued by the end of date with the correct taxable amounts the taxable amounts that petitioners listed on the return correspond to the net surrender values of the western reserve life_insurance policies insuring petitioners as of date as reported in a letter from western reserve dated date to petitioners’ insurance agent washington trust bank later issued revised forms 1099-r to petitioners reporting dollar_figure of income to mr whitmarsh and dollar_figure of income to mrs whitmarsh petitioners concede that the deficiency in federal_income_tax determined in the notice_of_deficiency is correct discussion petitioners contest the imposition of an accuracy-related_penalty under sec_6662 sec_6662 and b and imposes a 20-percent accuracy-related_penalty on any underpayment of federal_income_tax attributable to a taxpayer’s negligence or disregard of rules or regulations or a substantial_understatement_of_income_tax sec_6662 defines substantial_understatement_of_income_tax as an amount exceeding the greater of percent of the tax required to be shown on the return or dollar_figure under sec_7491 the commissioner bears the burden of production with regard to penalties and must come forward with sufficient evidence indicating that it is proper to impose penalties 116_tc_438 however once the commissioner has met the burden of production the burden_of_proof remains with the taxpayer including the burden of proving that the penalties are inappropriate because of reasonable_cause or substantial_authority id pincite petitioners’ underpayment_of_tax is a substantial_understatement_of_income_tax on their form_1040 petitioners reported dollar_figure as the total_tax they now concede that there was a deficiency of dollar_figure the deficiency is greater than dollar_figure and than percent of the amount of tax required to be shown on the return respondent’s burden of production has been met the accuracy-related_penalty under sec_6662 is not imposed with respect to any portion of the underpayment as to which the taxpayer acted with reasonable_cause and in good_faith sec_6664 higbee v commissioner supra pincite the decision as to whether a taxpayer acted with reasonable_cause and in good_faith is made on a case-by-case basis taking into account all of the pertinent facts and circumstances including the taxpayer’s experience knowledge and education sec_1_6664-4 income_tax regs generally the most important factor is the extent of the taxpayer’s effort to assess the taxpayer’s proper tax_liability id a taxpayer’s reliance on erroneous information reported on a form_w-2 form_1099 or other information_return indicates reasonable_cause and good_faith provided the taxpayer did not know or have reason to know that the information was incorrect id reliance on professional advice may constitute reasonable_cause and good_faith but only if under all the circumstances such reliance was reasonable 471_f3d_1021 9th cir affg tcmemo_2004_269 89_tc_849 affd 904_f2d_1011 5th cir affd 501_us_868 sec_1_6664-4 income_tax regs petitioners could not rely on the revised forms 1099-r simply because they believed that the initial forms 1099-r were incorrect it was not reasonable for petitioners to rely on revised figures that substantially reduced their income without explanation and justification of the revision although the record is unclear as to when the revised forms 1099-r were issued petitioners stated in the attachment to their tax_return that revised forms 1099-r would be issued by the end of date absent more detailed information regarding the circumstances we cannot conclude that petitioners acted reasonably in relying on forms 1099-r that had not yet been issued at the time they filed their return petitioners argue that they have no background in tax law and that they relied on western reserve their insurance broker and their accountant in preparing their federal_income_tax return they claim that the original 1099’s did show taxable but when questioned the insurance_company changed to the taxable_amount that was claimed on our return petitioners fail to address a number of important issues first they have failed to provide or identify evidence that they reasonably relied on their insurance broker for federal_income_tax advice or that their insurance broker was a competent professional with sufficient expertise in the relevant tax laws see 115_tc_43 affd 299_f3d_221 3d cir second petitioners have failed to provide evidence that they reasonably relied on their accountant’s advice they claim that their accountant relied on the revised forms 1099-r issued by the insurance_company but those forms were neither issued by the insurance_company nor in hand when the return was filed there is no evidence of petitioners’ accountant’s qualifications or that petitioners provided their accountant with all the information necessary to determine the proper tax treatment of the distribution see neonatology associates p a v commissioner supra pincite 108_tc_147 estate of goldman v commissioner tcmemo_1996_29 petitioners may not avoid liability for an accuracy-related_penalty under sec_6662 simply by showing that their federal_income_tax return was prepared by someone else see estate of goldman v commissioner supra citing 66_tc_817 remanded on other grounds 603_f2d_491 5th cir third the forms 1099-r were issued by washington trust bank not by western reserve as petitioners claim and there is no evidence that western reserve provided petitioners with any_tax advice finally although washington trust bank did eventually provide the revised forms 1099-r corresponding to the amount that petitioners reported on their form_1040 petitioners have not provided any context for the revision petitioners claim that washington trust bank modified the forms 1099-r when questioned but petitioners do not say who questioned washington trust bank or what those questions were there is no evidence that washington trust bank provided petitioners with tax_advice the only evidence petitioners offer to prove that they relied on professional advice is the revised forms 1099-r reported by washington trust bank and petitioners’ accountant’s signature on petitioners’ form_1040 petitioners have failed to prove that they acted with reasonable_cause and in good_faith under sec_6664 for the reasons explained above decision will be entered for respondent


t c summary opinion united_states tax_court christine ann elliott petitioner v commissioner of internal revenue respondent docket no 676-06s filed date christine ann elliott pro_se catherine g chang for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure this case involves petitioner’s election to seek relief from joint_and_several_liability for federal_income_tax for the tax_year the issue for decision is whether petitioner is entitled to relief under sec_6015 c or f background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time of the filing of the petition petitioner resided in kentfield california petitioner has a history of temporal lobe epilepsy and is borderline learning disabled in arithmetic when petitioner was years old she underwent involuntary electric shock treatment after her parents admitted her to a hospital petitioner alleges that the electric shock treatment left her with dyslexia short- term and long-term memory loss cognitive deficiencies and seizure disorders for which she has had to compensate for the past years petitioner married kirk elliott in during tax_year petitioner held an individual_retirement_account ira in her own name with the resources trust company petitioner had been married previously and her first husband established the account for her pursuant to their divorce settlement during tax_year petitioner and mr elliott agreed that petitioner would request an early ira distribution mr elliott filled out at least two forms requesting early distributions from petitioner’s ira the forms indicated that petitioner elected to not have federal_income_tax withheld from the gross distribution amount requested petitioner signed all of the forms requesting early distributions from her ira and during tax_year received distributions totaling dollar_figure resources trust company directly deposited the early ira_distributions into a bank account jointly held by petitioner and mr elliott petitioner and mr elliott filed a joint federal_income_tax return for tax_year but did not report the early distributions from petitioner’s ira petitioner and mr elliott filed for divorce in date but at the time of trial the divorce was not yet final although an internal_revenue_service form_8857 request for innocent spouse relief was not made a part of the record respondent does not deny that petitioner submitted a request for relief on date respondent issued a notice_of_determination denying petitioner’s request for relief under sec_6015 c and f on date petitioner there is no indication in the record whether a notice_of_deficiency was issued but petitioner does not contest the amount of tax due or that it was properly assessed filed with this court a stand-alone petition contesting respondent’s determination discussion generally married taxpayers may elect to file a joint federal_income_tax return sec_6013 each spouse filing a joint_return is jointly and severally liable for the accuracy of the return and the entire tax due for that year sec_6013 a spouse who has filed a joint_return may however seek relief from joint_and_several_liability by following procedures established in sec_6015 sec_6015 under sec_6015 a requesting spouse may seek relief from liability under sec_6015 or if eligible may allocate liability according to the provisions under sec_6015 if relief is not available under sec_6015 or c then an individual may seek equitable relief under sec_6015 sec_6015 permits relief from joint_and_several_liability where it is inequitable to hold the individual liable for any unpaid tax or any deficiency or any portion of either except as otherwise provided in sec_6015 petitioner bear sec_2 sec_6015 vests the court with jurisdiction to review an election for relief from joint_and_several_liability arising from a stand-alone petition cases brought under sec_6015 have become known as stand alone cases because only the right to spousal relief is in issue independent of any deficiency proceeding see 114_tc_354 114_tc_324 the burden_of_proof rule a 119_tc_306 affd 101_fedappx_34 6th cir sec_6015 sec_6015 provides relief from joint_and_several_liability for tax including interest penalties and other_amounts to the extent that such liability is attributable to an understatement_of_tax to be eligible for relief the requesting spouse must satisfy the following five elements of sec_6015 a a joint_return has been made for a taxable_year b on such return there is an understatement_of_tax attributable to erroneous items of individual filing the joint_return c the other individual filing the joint_return establishes that in signing the return he or she did not know and had no reason to know that there was such understatement d taking into account all the facts and circumstances it is inequitable to hold the other individual liable for the deficiency in tax for such taxable_year attributable to such understatement and e the other individual timely elects in such form as the secretary may prescribe the benefits of this subsection with respect to the last three elements petitioner is not the other individual described in sec_6015 the ira was petitioner’s separate_account to which mr elliott had no access without petitioner’s signature petitioner admitted that she signed the early distribution forms and that the money was transferred from her individual ira to her joint account with mr elliott she knew of the transactions and did not ask mr elliott whether the amounts were reported on their joint federal_income_tax return petitioner cannot be granted relief for understatements that are attributable to her own erroneous items see 121_tc_73 we agree with respondent that petitioner is not entitled to relief under sec_6015 sec_6015 sec_6015 allows a taxpayer who is eligible and so elects to limit his or her liability to the portion of a deficiency that is properly allocable to the taxpayer as provided in sec_6015 sec_6015 generally this avenue of relief allows a spouse to elect to be treated as if a separate_return had been filed rowe v commissioner tcmemo_2001_ to be eligible for relief under sec_6015 the requesting spouse must be no longer married to be legally_separated from or have lived at least months apart from the individual with whom the tax_return was filed sec_6015 relief under sec_6015 is not available however to a taxpayer if it is shown that the taxpayer had actual knowledge when signing the return of any item giving rise to a deficiency sec_6015 in the case of omitted income knowledge of the item includes knowledge of receipt of the income see 112_f3d_1258 5th cir affg in part and revg in part tcmemo_1995_572 sec_1_6015-3 income_tax regs petitioner and mr elliott separated in and they had lived apart for over months at the time of the filing of the petition however as noted above the items giving rise to the deficiency on the joint_return are the unreported early distributions from petitioner’s separate ira petitioner allowed mr elliott to fill out the early distribution forms petitioner signed her name to the forms and the distribution was deposited into petitioner and mr elliott’s joint bank account petitioner admitted that she knew about the ira withdrawals and that she discussed it with mr elliott before they withdrew the amounts petitioner argues that her cognitive deficiencies and learning disabilities prevent her from understanding forms and numbers so she had to rely on others including mr elliott to prepare her tax returns and handle her finances petitioner testified that mr elliott filled out financial forms and she signed them trusting that her husband was doing what was in her best interest since she could not comprehend the forms even though petitioner could not comprehend forms she testified that she asked mr elliott questions to determine whether the amounts on the return were correct she admitted however that she did not ask him whether the ira_distributions were reported on the return the court is sympathetic to petitioner’s situation but a spouse requesting relief under sec_6015 has a duty_of inquiry 114_tc_276 based on the foregoing petitioner had actual knowledge of the distribution from her ira see sec_1_6015-3 income_tax regs and this precludes the court from granting her relief under sec_6015 sec_6015 since petitioner is not entitled to relief under sec_6015 or c we consider whether petitioner qualifies for relief under sec_6015 sec_6015 provides that a taxpayer may be relieved from joint_and_several_liability if it is determined after considering all the facts and circumstances that it is inequitable to hold the taxpayer liable for the unpaid tax or deficiency this court reviews the commissioner’s denial of relief pursuant to sec_6015 under an abuse_of_discretion standard 114_tc_324 butler v commissioner supra pincite petitioner bears the burden of proving that respondent’s denial of equitable relief under sec_6015 was an abuse_of_discretion see rule a alt v commissioner supra pincite petitioner must demonstrate that respondent exercised his discretion arbitrarily capriciously or without sound basis in fact 118_tc_106 affd 353_f3d_1181 10th cir as directed by sec_6015 the commissioner has prescribed guidelines for determining whether a spouse qualifies for relief under subsection f the applicable provisions are found in revproc_2003_61 2003_2_cb_296 modifying revproc_2000_15 2000_1_cb_447 according to revproc_2003_61 sec_4 c b pincite of the guideline the requesting spouse must satisfy seven conditions threshold conditions before the commissioner will consider a request for relief under sec_6015 the threshold conditions of this section are stated in the conjunctive and each condition must be satisfied to be eligible to submit a request for equitable relief under sec_6015 id under revproc_2003_61 sec_4 the income_tax_liability from which the requesting spouse seeks relief must be attributable to an item of the individual with whom the requesting spouse filed the joint_return unless one of four stated exceptions applies the only exception relevant to petitioner’s case applies if the requesting spouse establishes that he or she was the victim of abuse prior to the time the return was signed and that fear of retaliation prevented the requesting spouse from challenging the treatment of items on the return revproc_2003_61 sec_4 d c b pincite petitioner alleges that mr elliott was abusive but the abuse she reported was toward her daughter and she was not aware of the abuse until years after the return at issue was signed since the reported abuse does not meet the requirements of this exception and the disbursement from petitioner’s ira is attributable to her we agree with respondent that petitioner has not met the threshold requirements for relief found in revproc_2003_61 sec dollar_figure of the applicable guidelines since petitioner has not met the threshold requirements we find that respondent did not act arbitrarily capriciously or without sound basis in fact and therefore conclude that petitioner does not qualify for relief under sec_6015 to reflect the foregoing decision will be entered for respondent


te significant index no tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c nov set ep ck az re dear this letter constitutes notice that your requests for a a modification of the waiver of the minimum_funding_standard granted to the plan for the plan_year ending date and b a waiver of the minimum_funding_standard for the plan for the plan_year ending date have been granted the waiver of the minimum_funding_standard which was granted for the plan for the plan_year ending date has been modified by removing conditions and contained in the ruling letter dated date the waiver of the minimum_funding_standard for the plan for the plan_year ending date has been granted subject_to the following conditions collateral acceptable to the pbgc is provided to the plan for the full amount of the waivers by the later of a days from the date of the ruling letter or b the earlier of i the date the pbgc notifies the service in writing that this condition has not been met or ii days from the date of the ruling letter the company provides the pbgc with a copy of any ruling_request it makes under sec_412 of the code starting with the quarterly contribution due on date the company makes the required quarterly contributions to the plan in a timely fashion while the plan is subject_to a waiver of the minimum_funding_standard for this purpose the total amount of each quarterly contribution will be determined in accordance with sec_430 and sec_430 of the code and can be comprised of several installments made prior to the respective due_date of the quarterly contribution the company makes contributions to the plan in amounts sufficient to meet the minimum_funding requirements for the plan for the plan years ending date through by date through respectively without applying for a waiver of the minimum_funding_standard the company does not make an election seeking funding relief under the preservation of access to care for medicare beneficiaries and pension relief act of pra for the plan_year ending date and the hospital provides proof of payment of all contributions described above in a timely manner to the service and to the pbgc using the addresses or fax numbers below information must be provided to both or other individuals designated by the respective agencies using the addresses or fax numbers below internal_revenue_service metro tech center fulton street brooklyn ny fax pension_benefit_guaranty_corporation disc k street n w washington dc fax you agreed to these conditions in a letter dated date if any one of these conditions is not met the modification of the waiver of the minimum_funding_standard granted to the plan for the plan_year ending date and the waiver of the minimum_funding_standard granted for the plan for the plan_year ending date is retroactively null and void the conditional waiver granted for the plan for the plan_year ending date has been granted in accordance with sec_412 of the internal_revenue_code code and sec_303 of employee_retirement_income_security_act_of_1974 erisa both as in effect prior to the pension_protection_act of ppa '06 the amount for which this waiver has been granted is equal to the contributions that would otherwise be required to reduce the balance in the funding_standard_account of the plan to zero as of date the company is a sec_503 tax-exempt not-for-profit corporation on date the company assumed operations of the system from the hospital commission of the county the company operate sec_2 hospitals an outpatient healthcare facility and a nursing home under a 50-year lease agreement with the county in the last few years the company has been faced with the same difficulties affecting other non-profit hospitals rising staffing costs flat or lower reimbursement rates and increasing numbers of uninsured and underinsured patients the company is the largest provider of healthcare services in the county and also serves a sizable portion of the uninsured and underinsured population in surrounding areas the state is the only remaining all-payor state where a government agency regulates the rates that hospitals can charge for services in general all hospitals in the state must charge regulated rates this business restraint is exacerbated by the fact that hospitals in a nearby jurisdiction are not subject_to these restraints therefore large health insurers have negotiated better rates in the nearby jurisdiction and have chosen to limit their contracts with the hospital also the high proportion of indigent patients has forced the hospital to contract for coverage from many physicians which is critical for the continued operation of the hospital and to provide services to the community the hospital serves supplemental payments to independent physicians providing hospital- based services have caused the hospital to suffer losses furthermore rising costs associated with the maintenance of the plan have cased the hospital to suffer severe cash-flow restraints the financial information provided by the company clearly shows that it has suffered a substantial business hardship however the county and state have recognized the hospital’s need for increased reimbursement rates and additional revenue to fund operations the hospital is a crucial health care provider in the county and the state and the county have committed themselves to finding a solution to the hospital’s financial hardship based on information provided by the company it has continued to make contributions to the plan since filing the ruling the requests described above in fact the funding waiver has been fully amortized assuming the modification request is granted and sufficient contributions have been made to the plan to date to make the company fully caught-up with required plan funding assuming the modification request and the funding waiver request are granted financial projections also indicate that the company will generate sufficient cash flows to be able to meet the minimum_funding requirements of the plan for the fiscal years ending date through assuming that the funding waiver is modified and the funding waiver is granted furthermore while there was a question as to whether the company made an election seeking funding relief under the preservation of access to care for medicare beneficiaries and pension relief act of pra for the plan_year ending date we have determined that based on the facts and circumstances such an election was not made accordingly the company's requests for a a modification of the waiver of the minimum_funding_standard granted to the plan for the plan_year ending date and b a waiver of the minimum_funding_standard for the plan for the plan_year ending date have been granted your attention is called to sec_412 of the code and sec_304 of erisa both in effect prior to ppa ’06 which describe the consequences that would result in the event either the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived funding deficiencies remain unamortized please note that any amendment to a profit sharing plan or any other retirement plans covering employees covered by the plan maintained by the company to increase the liabilities of those plans would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan by the company covering employees covered by the plan would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent we have sent a copy of this letter to the and to the we suggest that you furnish a copy of this letter to the enrolled_actuary who is responsible for the completion of the schedule b if you require further assistance in this matter please contact sincerely yours ged qos andrew e zuc employee_plans rulings agreements an director


internal_revenue_service number release date index number 2207a ---------------------- ------------------------- ---------------------------- --------------------------- legend department of the treasury washington dc person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 - plr-138032-09 date february -------------------- ------------------------ decedent spouse --------------------------------------------------------------------- child child child child individual individual date date date date ---------------------- ------------------ ---------------- ----------------- ------------------ --------------------------------- --------------------------- --------------------- -------------------- -------------------------- marital trust ----------------------------- will -------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------- ----------------------------------- court ------------------------------------------------------------------------------ --------------------------------------- order --------------------------------------------- final order ---------------------------------------------------- state -------------- plr-138032-09 x ----------- dear ------------ this responds to your date letter and other correspondence requesting rulings regarding the federal gift and estate_tax consequences of spouse’s disposition of an interest in marital trust as described below the facts submitted and representations made are as follows decedent died on date survived by spouse and decedent’s children child child child and child children who are all adults article iii paragraph of decedent’s will will provides for the creation of marital trust under paragraph of article vi of will spouse is to receive all of the net_income of marital trust at least quarterly spouse is entitled to receive such principal as the trustee other than spouse deems necessary for spouse’s support maintenance health and other necessities under paragraph of article vi at spouse’s death the remaining principal of marital trust will be distributed to decedent’s issue as spouse appoints in his will in default of this appointment the remaining principal will be divided into equal shares for decedent’s children the share of a deceased child with surviving issue will be held for those issue as a group each share will be held as a separate trust under the terms of article vii of will under paragraph dollar_figure of article vii of will the beneficiary of each trust will receive any income and principal the trustees deem necessary for the support maintenance education and other necessities of the beneficiary the beneficiary’s spouse or the beneficiary’s issue trust principal will be distributed to a beneficiary as follows at age at age and the balance at age if a beneficiary dies before the final distribution the beneficiary has a testamentary general_power_of_appointment over the remaining trust balance any unappointed portion will be distributed by right of representation to the beneficiary’s then living issue or if none to decedent’s then living issue decedent’s personal representative elected on the form_706 united_states estate and generation-skipping_transfer_tax return to treat marital trust as qualified_terminable_interest_property qtip under sec_2056 of the internal_revenue_code prior to date a date prior to date marital trust held cash cash equivalents bonds publicly_traded_securities and a promissory note note and spouse and individual were the trustees of marital trust individual is not related to decedent spouse or children plr-138032-09 prior to date spouse concluded that he did not need principal distributions from marital trust and that he did not want to exercise his testamentary power over the trust thus children and spouse as beneficiary of and as trustee of marital trust petitioned court to request an order authorizing the trustees to divide marital trust into trust and trust and terminate marital trust on date court issued order authorizing the trustees to divide and terminate marital trust trust will hold the actuarial present_value of spouse’s income_interest in marital trust trust will hold the balance of marital trust property on date children spouse as beneficiary of and as trustee of marital trust and individual as trustee of marital trust executed an agreement agreement agreement sets forth the steps for completing the division and termination of marital trust in the agreement the parties agreed that spouse’s gift of his qualifying_income interest will be net of federal gift_tax and that spouse will exercise his right of recovery under sec_2207a of the internal_revenue_code to recover the gift_tax attributable to the gift under sec_2519 agreement also provides that individual will serve as sole trustee of the children’s trusts to be established under order and agreement and that spouse will renounce all interest in his testamentary_power_of_appointment over marital trust property under order and agreement all of the following steps are to occur simultaneously on the same date the trustee of marital trust will allocate note to trust and terminate trust the trustee of marital trust will distribute note and dollar_figurex in cash to spouse and will distribute the balance of trust net of gift_taxes in equal shares to separate trusts one trust for each of child child child and child in accordance with articles vi and vii of will children’s trusts the trustee of marital trust will terminate trust and distribute the assets net of gift_taxes in equal shares to the children’s trusts on date court issued final order ratifying and confirming order and the above-described transaction was completed you have requested the following rulings spouse is treated as making a net_gift of the remainder_interest in marital trust under sec_2519 upon the distribution of marital trust property on date spouse is treated as making a net_gift of spouse’s qualifying_income interest in marital trust less the value of note and dollar_figurex in cash retained by spouse under sec_2511 upon the distribution of marital trust property on date no portion of the property of the marital trust will be included in spouse’s gross_estate pursuant to sec_2044 plr-138032-09 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2044 provides for the inclusion in the gross_estate of the surviving_spouse of the value of qualified_terminable_interest_property for which a deduction was allowed under sec_2056 in the decedent's gross_estate under sec_2044 sec_2044 does not apply with respect to qualified_terminable_interest_property treated as transferred for gift_tax purposes by the surviving_spouse during her lifetime under sec_2519 sec_2501 imposes a tax on the transfer of property by gift sec_2511 provides that the gift_tax imposed by sec_2501 shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that the gift_tax is a primary and personal liability of the donor is an excise upon his act of making the transfer is measured by the value of the property passing from the donor and attaches regardless of the fact that the identity of the donee may not then be known or ascertainable sec_2512 provides that where property is transferred for less than adequate_consideration in money_or_money's_worth the amount_of_the_gift is the amount by which the value of the property transferred exceeds the value of the consideration received in exchange sec_2519 provides that for gift_tax purposes any disposition by the surviving_spouse of all or part of a qualifying_income_interest_for_life in any property for which a deduction was allowed under sec_2056 is treated as a transfer by the surviving_spouse of all interests in the property other than the qualifying_income interest the transfer of the qualifying_income interest is a transfer subject_to gift_tax under sec_2511 sec_25_2519-1 provides that the amount treated as a transfer under sec_2519 upon a disposition of all or part of a qualifying_income_interest_for_life in qualified_terminable_interest_property is equal to the fair_market_value of the entire property subject_to the qualifying_income interest determined on the date of the disposition including any accumulated income and not reduced by any amount excluded from total gifts under sec_2503 with respect to the transfer creating the interest less the value of the qualifying_income interest in the property on the date of the disposition the gift_tax consequences of the disposition of the qualifying_income interest are determined separately under sec_25_2511-2 plr-138032-09 sec_25_2519-1 provides that the amount treated as a transfer under sec_25_2519-1 is further reduced by the amount of gift_tax the donee spouse is entitled to recover under sec_2207a if the donee spouse is entitled to recover gift_tax under sec_2207a the amount_of_the_gift tax recoverable and the value of the remainder_interest treated as transferred under sec_2519 are determined by using the same interrelated computation applicable for other transfers in which the transferee assumes the gift_tax liability the gift_tax consequences of failing to exercise the right of recovery are determined separately under sec_25_2207a-1 under sec_2207a and sec_25_2207a-1 if an individual is treated as transferring an interest in property by reason of sec_2519 the individual is entitled to recover from the person receiving the property as defined in sec_25_2207a-1 the amount of gift_tax attributable to that property under sec_25_2207a-1 if the property is in trust at the time of the transfer the person receiving the property is the trustee and any person who has received a distribution of the property prior to the expiration of the right of recovery if the property does not remain in trust under sec_25_2207a-1 the failure of a person to exercise a right of recovery provided by sec_2207a is treated as a transfer for federal gift_tax purposes of the unrecovered amounts to the persons from whom the recovery could have been obtained revrul_75_72 1975_1_cb_310 holds that if at the time of the transfer a gift is made subject_to a condition that the gift_tax is to be paid_by the donee or out of the transferred property then the donor receives consideration for the transfer in the amount_of_the_gift tax to be paid_by the donee thus under sec_2512 the value_of_the_gift is the fair_market_value of the property passing from the donor less the amount_of_the_gift tax to be paid_by the donee or from the property itself revrul_81_223 1981_2_cb_189 holds that in determining the amount_of_the_gift tax_liability that is to be subtracted from the value of the transferred property the donor's available unified_credit must be used to reduce the gift_tax liability that the donee has assumed to the extent the unified_credit is available based on the facts submitted and representations made and assuming court issues final order and that the proposed division and termination of marital trust are effective under state law we conclude as follows spouse is treated as making a net_gift of the remainder_interest in marital trust under sec_2519 upon the distribution of marital trust property on date spouse is treated as making a net_gift of spouse’s qualifying_income interest in marital trust less the value of note and dollar_figurex in cash retained by spouse under sec_2511 upon the distribution of marital trust property on date plr-138032-09 no portion of the property of the marital trust will be included in spouse’s gross_estate pursuant to sec_2044 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 the ruling in this letter pertaining to the federal estate_tax applies only to the extent that the relevant section of the internal_revenue_code is in effect during the period at issue 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 this ruling is directed only to the taxpayer requesting it sec_6110 of provides that it may not be used or cited as precedent sincerely _________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosure copy of letter for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 6--plr-152905-01 date date taxpayer plant d1 d2 d3 d4 d5 dear this letter responds to your request dated d1 submitted on behalf of taxpayer requesting under sec_301_9100-3 of the procedure and administration regulations an extension of time to file a request for a revised schedule of ruling amounts for plant under sec_1_468a-3 of the income_tax regulations for the period beginning d2 and ending d3 taxpayer was required to file the request for a revised schedule of ruling amounts for plant under sec_1_468a-3 on or before d4 taxpayer did not file the request until d5 taxpayer has submitted a new request for a schedule of ruling amounts for the period beginning d2 and ending d3 at the same time that it submitted this request for an extension of time sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin plr-152905-01 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 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 based solely on the facts and the representations made the requirements of sec_301_9100-1 and sec_301_9100-3 have been met consequently taxpayer’s request dated d1 for a revised schedule of ruling amounts for plant under sec_1_468a-3 for the period beginning d2 and ending d3 will be treated as timely filed except as specifically ruled upon 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 internal_revenue_code provides that it may not be used or cited as precedent we are sending a copy of this letter to the industry director natural_resources lm nr in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your representative sincerely yours paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division mar 20né uniform issue list legend custodian a bank b amount d amount e amount f amount g dear this letter is in response to a request for a letter_ruling dated date as supplemented by additional information dated date in which you have applied for a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested years old on july funds totaling amount d were distributed from a youare traditional individual_retirement_account ira under code sec_408 maintained with custodian a and deposited in a non retirement account with bank b funds totaling amount e were used for personal expenses included in amount e is amount f which is your required_minimum_distribution under sec_401 for taxable_year - with the remaining funds you purchased two cashier checks amount g and placed them in a safety deposit box at bank b due to some stress and confusion you were unable to understand the rollover requirements for this transaction asa result you failed to complete the rollover of amount g within the 60-day limit contained in sec_408 based on the above facts and representations you request that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount g from custodian a because the failure to waive such requirement would be against equity or good conscience sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distribute as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 lr b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed bya 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 by you demonstrates that the rollover of funds from your ira to another ira was not made within days some of the funds were taken out of the ira as a required_minimum_distribution under code sec_401 another part of the ira funds was used for personal expenses due to some confusion you were unable to understand the rollover rules of sec_408 could not reasonably satisfy the requirement that the funds not used for personal expenses or representing a required_minimum_distribution under sec_401 be deposited in an ira within days of the distribution from custodian a therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount g in your ira account with custodian a you are granted a period of days from the issuance of this tuling letter to complete the rollover of amount g to an ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contributions amount g will be considered rollover_contributions within the meaning of sec_408 of the code under these circumstances you 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_61 k of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact se t ep ra t1 at sincerely yours carlton watkins manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice cc


o f f i c e o f c h i e f c o u n se 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 washington d c date number release date conex-145676-11 uil the honorable john mccain united_states senator east camelback road suite phoenix arizona attention ------------------ dear senator mccain this letter responds to your inquiry dated date on behalf of your constituent ---------------------------- ---------------------asked about modifying the optional safe_harbor method in revproc_2009_20 for deducting theft losses from certain fraudulent investment arrangements specifically --- asked about allowing investors to use the procedure when the death of a lead figure has foreclosed the possibility of criminal charges against the lead figure we released revproc_2011_58 on date this revenue_procedure modifies revproc_2009_20 to address situations in which the death of a lead figure has foreclosed the possibility of a criminal charge i am enclosing a copy of the revenue_procedure conex-145676-11 i hope this information is helpful if you have any questions please call me or ------- --------------------- office_of_chief_counsel income_tax and accounting division at -------- --------------------- sincerely andrew j keyso deputy associate chief_counsel income_tax and accounting enclosure


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date sep s v agysq0-0o cs q 1e0o by contact person identification_number telephone number dear sir or madam this is in reference to a letter dated date requesting advance approval of your grant procedures under sec_4945 of the internal_revenue_code the information submitted indicates that grants will be administered and supervised by b b is exempt from federal_income_tax under sec_501 c of the internal_revenue_code and has been classified as other than a private_foundation under sec_509 and sec_170 a vi your scholarship program is called c under the terms of an agreement you will make annual contributions to b to benefit fifty-two students one per each state and e and f who will be selected to receive dollar_figure scholarships from these winners ten national winnerg will be identified to receive additional awards at dollar_figure each the ten national winners will also receive a computer and an offer of a paid internship with d an independent review panel through the b selection process will choose the winners at the state level that you will be given the opportunity to select the ten national winners from a name blind_pool of twenty state winners in selecting winners consideration will be given to students’ demonstrated achievement in a non-academic environment academic record and potential leadership and participation in school and community activities work experience statement of education and career goals unusual personal or family circumstances and recommendations nonacademic achievement will be weighted pincite percent with academic achievement pincite percent applicants will be united_states citizens or legal residents who are in their senior year of high school and plan to enroll full-time in an accredited two-year or four-year college or itis contemplated university in the united_states b will prepare and furnish application forms receive all applications determine the utilizing selection criteria whereby each candidate is evaluated based on the recipients and amount to be awarded notify the recipients of the award confirm enrollment in an educational_institution make payment of the award and supervise and investigate the use of the grant funds by the recipients in their educational programs recipients are determined solely by b following scholastic aptitude as measured by performance on the scholastic aptitude test scholastic performance measured by rank in class counselor appraisal and interests activities and leadership contributions in addition financial need is taken into consideration the c program does not involve scholarships granted to children of employees of a particular company scholarships will only be awarded to students that plan to enroll in an institution that meets the requirements of sec_170 of the code the recipient will not be restricted in his her course of study sec_4945 of the code provides for the imposition of taxes on each taxable_expenditure of a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 sec_4945 of the code provides that sec_4945 shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if it is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_institution described in sec_170 because your scholarships are not employer-related grants the provisions of revproc_76_47 are not applicable based upon the information submitted and assuming your program will be conducted as proposed with a view to providing objectivity and nondiscrimination in the awarding of scholarship grants we rule that your grants to b for the awarding of scholarship grants comply with the requirements of sec_4945 of the code expenditures made in accordance with these procedures will not constitute taxable_expenditures within the meaning of sec_4945 of the code and as such are eligible for the exclusion from income provided for in sec_117 of the code to the extent that such grants are actually used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this ruling is conditioned on the understanding that there will be no material changes in the facts upon which it is based it is further conditioned on the understanding that no grants will be itn a easier etna ecr rrnnnnnn ses steerer uenonatoecvi4 vinci pnentn awarded to your organization's creators officers directors trustees or members of the selection committee or for a purpose inconsistent with the purposes described in sec_170 of the code the approval of your grant-making procedures is a one time approval of your system of standards and procedures for selecting recipients of grants that meet the requirements of sec_4945 of the code thus approval will apply to succeeding grant programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request we are informing the te_ge office of this action please keep a copy of this ruling with your organization’s permanent records - this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely the wetav back gerald v sack manager exempt_organizations technical group a sites stipe


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 fip b02 plr-105298-10 date date legend taxpayer ------------------------------------------------------------------------------ ----------------------------- employer -------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -- --------------------------------------------------------------------------- parent company a company b company c law firm state year year year year year ------------------------------------------------- ------------------------------- ----------------------------- ---------------------------------- --------------------------- ----------- ------- ------- ------- ------- ------- plr-105298-10 year year year dear ---------------- ------- ------- ------- this is in reply to a letter dated date and supplemental correspondence dated date requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations for taxpayer to file a written representation under sec_1_7872-15 of the income_tax regulations if this written representation under sec_1_7872-15 is considered timely filed and the other requirements under sec_1_7872-15 are satisfied then an otherwise noncontingent payment on a split-dollar loan that is nonrecourse to the borrower is not a contingent payment under sec_1_7872-15 facts employer and parent employer’s parent_corporation are state non-profit corporations exempt from taxation under sec_501 of the internal_revenue_code as organizations described in sec_501 and are classified as public_charities under sec_509 since year parent has had a split-dollar_life_insurance program for certain of its executive level employees and employees of its subsidiary corporations including employer in year parent hired company a to consult on matters relating to the split- dollar program and to administer the program company a recommended revising the split-dollar plan and in year parent implemented a new split-dollar_life_insurance program company b subsequently acquired company a and became parent’s consultant and administrator of the split-dollar program in year parent implemented a new split-dollar_life_insurance program current sdp upon the recommendation of company b the current sdp was entered into after the treasury department’s issuance of final regulations under sec_1_61-22 and sec_1_7872-15 pertaining to split-dollar_life_insurance arrangements the split-dollar regulations under the current sdp employer pays the premiums on a life_insurance_policy owned by taxpayer the premium payments made by employer are treated as loans pursuant to the split-dollar regulations whereby employer is the lender and the taxpayer is the borrower the parties to the loan taxpayer represents that the loans were to each have a stated_interest rate equal to the applicable_federal_rate so as not to be below-market split-dollar loans under the split-dollar regulations employer made plr-105298-10 the first loan under the current sdp to taxpayer in year taxpayer represents that a reasonable person would expect that all payments under the loans will be made as described in sec_1_7872-15 company b was instrumental in implementing the current sdp for parent employer and employee participants including taxpayer collectively plan participants company b was responsible for advising plan participants regarding the set-up of the current sdp determining the type of life_insurance policies associated with the current sdp and administering the current sdp taxpayer represents that taxpayer lacked knowledge and experience with regards to split-dollar_life_insurance arrangements and the split-dollar regulations and therefore relied on employer’s guidance representations conclusions and information regarding the current sdp employer in turn relied on company b’s guidance in developing implementing and administering the current sdp company b provided employer’s tax_return_preparer with a governing document pertaining to the current sdp but did not provide the preparer with a copy of the plan’s participation_agreement due to some confusing language in the governing document the tax_return_preparer erroneously concluded that the loans involved in the current sdp were recourse loans the tax_return_preparer has provided an affidavit stating that discussions with company b representatives regarding the current sdp confirmed his conclusion that the loans were recourse in nature therefore employer did not execute or file the written representations for nonrecourse split-dollar loans pursuant to sec_1_7872-15 and neither did taxpayer in year company b ceased administering the current sdp and employer hired company c to administer the current sdp due to the decline in the value of common stocks and many bonds from year to early year the cash surrender values of the life_insurance policies under the current sdp declined employer employed counsel from law firm to review the current sdp and advise employer on options to revise or terminate the plan counsel from law firm determined that under applicable state law the loans under the current sdp were not recourse loans but rather nonrecourse loans secured_by the life_insurance policies subsequently employer informed taxpayer that the loans were nonrecourse loans and that a written representation should have been filed by both taxpayer and employer to ensure that payments on the loans were not treated as contingent payments employer further explained that the written representation should have been made in year when the first loan was made to taxpayer under the plan and asked that taxpayer file a request for an extension of time to make the written representations under sec_1 d i and ii taxpayer makes the following representations the granting of relief under sec_301_9100-3 would not result in taxpayer having a lower tax_liability in the aggregate plr-105298-10 for all years to which the election applies than it would have had if the election had been timely made taking into account the time_value_of_money taxpayer did not knowingly choose not to file the election taxpayer did not use hindsight in requesting relief finally taxpayer represents that it is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 in support of its ruling_request taxpayer has submitted the affidavits of taxpayer employer’s chief_executive_officer employer’s tax_return_preparer and employer’s counsel from law firm regarding the events that led to taxpayer’s failure to make the regulatory election pursuant to sec_1_7872-15 and ii law and analysis sec_1_7872-15 of the regulations provides that except as provided in sec_1_7872-15 if a payment on a split-dollar loan is nonrecourse to the borrower the payment is a contingent payment for purposes of sec_1_7872-15 sec_1_7872-15 provides that an otherwise noncontingent payment on a split-dollar loan that is nonrecourse to the borrower is not a contingent payment under sec_1_7872-15 if the parties to the split-dollar_life_insurance arrangement represent in writing that a reasonable person would expect that all payments under the loan will be made sec_1_7872-15 describes the time and manner requirements for providing the written representation required by sec_1_7872-15 sec_1 d ii provides in part that the written representation be signed by both the borrower and lender not later than the last day including extensions for filing the federal_income_tax return of the borrower or lender whichever is earlier for the taxable_year in which the lender makes the first split-dollar loan under the split-dollar_life_insurance arrangement sec_301_9100-1 defines election to include an application_for relief in respect of tax a request to adopt change or retain an accounting_method or accounting_period the term does not include an application_for an extension of time for filing a return under sec_6081 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulation or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 sets forth parameters for determining whether under particular facts and circumstances the commissioner will grant an extension of time for regulatory elections that do not meet the requirements for an automatic_extension under plr-105298-10 sec_301_9100-2 sec_301_9100-3 provides that when a taxpayer does not meet the requirements for an automatic_extension under sec_301_9100-2 the taxpayer must provide evidence satisfactorily establishing that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the government sec_301_9100-3 provides that subject_to sec_301_9100-3 a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer satisfies at least one of the following five criteria i the request for relief was made before the service discovered the failure to make the regulatory election ii the failure to make the election was due to intervening events beyond the taxpayer’s control iii after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv the taxpayer reasonably relied on the written advice of the service or v the taxpayer reasonably relied upon a qualified_tax professional including a tax professional employed by the taxpayer and that tax professional failed to make or failed to advise the taxpayer to make the election sec_301_9100-3 provides that a taxpayer has not reasonably relied on a qualified_tax professional if the taxpayer knew or should have known that the professional was either i not competent to render advice on the regulatory election or ii not aware of all relevant facts sec_301_9100-3 provides that a taxpayer will not be deemed to have acted reasonably and in good_faith if taxpayer does one of the following i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and the subsequent tax consequences but chose not to make the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower 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 conclusion based on the information submitted and taxpayer’s representations we conclude that taxpayer has satisfied the requirements for granting a reasonable extension of time to file the written representation as required under sec_1 d i and ii taxpayer is therefore granted a period of time not to exceed days from the date of this letter to prepare and have both parties to the loan sign the written representation provided that the written representation is timely signed by both parties plr-105298-10 to the loan as required by this letter and filed with the taxpayer’s tax_return for year the written representation will be deemed effective for all years in which the arrangement has been in effect in accordance with sec_1_7872-15 a copy of the written representation should be attached to taxpayer’s tax_return for any subsequent taxable_year in which employer makes a split-dollar loan to taxpayer to which the representation applies except as specifically ruled upon above no opinion is expressed concerning any federal_income_tax consequences relating to the facts herein under any other provision of the code this ruling is limited to the timeliness of the filing requirement of the written representation under sec_1_7872-15 and ii no opinion is expressed with regard to whether taxpayer satisfied the other requirements under sec_1_7872-15 and ii the loan treatment requirements under sec_1_7872-15 or whether payments under the loan are otherwise noncontingent payments for purposes of sec_1_7872-15 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 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 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent 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 david b silber david b silber chief branch office of associate chief_counsel financial institutions and products