department of the treasury internal_revenue_service tege eo examinations mail stop dal tax_exempt_and_government_entities_division number release date legend org organization name xx date address address org address commerce st dallas texas allas t' date date taxpayer_identification_number person to contact employee identification_number employee telephone number phone fax last date to file a petition in tax_court september 20xx certified mail - return receipt dear this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code our favorable determination_letter to you dated october 20xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reason s organizations described in sec_501 and exempt under sec_501 must be both organized and operated exclusively for exempt purposes during the examination it was discovered that the org is performing services of a non-exempt nature for various companies and the state department of transportation the activities of org according to the articles of incorporation are for the furtherance of c purposes and are organized exclusively for education public outreach and research under the provision of all applicable laws for a non-profit entity in the state of state it is the service’s position that org failed to provide proof of an adequate amount of educational and outreach activities such as workshops community involvement and awareness school boards etc as was stated in the mission statement of org’s initial application contributions to your organization are no longer deductible under sec_170 after january 20xx you are required to file income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the tax_year ending december 20xx and for ail tax years thereafter in accordance with the instructions of the return processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination under the declaratory_judgment provisions of sec_7428 of the code a petition to the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia must be filed before the day after the date this determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication you may write to the united_states tax_court at the following address you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely nanette m downing director eo examinations enclosures publication internal_revenue_service department of the treasury tom martin drive room birmingham al taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax date date org address certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter rev catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition ina united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing acting director eo examinations enclosures publication publication report of examination letter rev catalog number 34809f form 886-a legend org organization name state state county project project xx date president president address addre sec_1 dir dir-1 co-1 co-2 co-3 exhibit i city city county companies tax years ending december 20xx january 20xx issues presented whether org is operated exclusively for exempt purposes described within internal_revenue_code sec_501 a whether org is engaged primarily in activities that accomplish an exempt_purpose b whether more than an insubstantial part of org’s activities are in furtherance of a non-exempt purpose background facts org was incorporated on december 20xx for the purpose of carrying on a lawful business in pursuance of the laws of the state of state relating to non-profit corporations in a determination_letter dated october 20xx org was determined to be exempt from federal_income_tax as an organization described in sec_501 org is located at address city state - in its articles of incorporation org stated its purpose is to operate a non-profit corporation whose primary purpose includes southeastern indian education research and public outreach to borrow money for the purpose of carrying on the business of this corporation to lease buy sell convey rent and mortgage or pledge both real and personal_property as the same shall be necessary or incidental to the carrying on of said business and generally to do all things that may be necessary or incidental to the carrying on of said business subject_to the limitations and restrictions imposed by law to make accept endorse execute and issue promissory notes bills of exchange bonds debentures or other obligations from time to time for the purchase of property or for any purpose in or about the business of the company to establish lines of credit with banking houses for the purposes herein above enumerated and set forth and to incur indebtedness and to raise borrow and secure the payment of money in any lawful manner including the issue and sale of other_disposition of warrants bonds debentures or obligations negotiable and transferable instruments and evidences of deeds of trust or otherwise for the purpose of adding additional capital or for any other purposes in or about its business or affairs without limit as to amount except as provided by statute this to be done on such terms and conditions and by such officers as said banking house or houses may require form 886-a exhibit i to acquire the property rights franchises certificates and good will including the whole for any part of the assets and in connections therewith assume no guarantee such liabilities of any person firm association or other corporation as this corporation may lawfully acquire or assume to pay for the same in cash or bonds of this corporation or otherwise to engage in any other lawful activity except that of banking or insurance the foregoing clauses shall be construed as powers as well as objects and purposes and the matters expressed in each clause shall except as otherwise expressly provided be in no wise limited by reference to or inference from the terms of any other clause which shall be regarded as independent objects purposes and power and the enumeration of specific objects purposes and powers shall not be construed to limit or restrict in any manner the meaning of general terms of any other clause which shall be regarded as independent objects purposes and powers and the enumeration of specific objects purposes and powers shall not be construed to limit or restrict in any manner the meaning of general terms of the powers of the corporation now or hereafter conferred by law nor shall the expression of one thing be deemed to exclude another not expressed although it be of like nature the articles were amended on september 20xx to include the following clause to operate a non-profit corporation whose primary purpose includes southeastern indian education research and public outreach said organization is organized exclusively for charitable religious educational and scientific purposes including for such purposes the making of distributions to organizations that qualify as exempt_organizations under sec_501 of the internal_revenue_code or corresponding section of any future federal tax code according to the form_1023 application_for recognition of exemption org was formed to facilitate native american participation in a curriculum of southeastern indian education outreach and research programs were to be developed to create an awareness and understanding of southeastern indian history and culture through the use of artifact collections map collections primary source historical documents eye- witness accounts land records oral history linguistics genealogy family papers and published materials the org will strive to provide a facility unlike any other presently functioning in the southeastern united sates in that it will bring widely scattered documents from many locations to one easily accessed location activity description the primary activity of org hereinafter org during the tax years ending december 20xx and january 20xx was completing cultural resource services for the state department of transportation co-1 and co-2 co-2 inc is an independent environmental research and consulting firm specializing in applied biological and environmental sciences with offices in city state and city state the company founded in 19xx by president provides a wide spectrum of environmental services including assessments of coastal marine and freshwater ecosystems form 886-a terrestrial surveys cultural resource surveys wetland impact analyses and mitigation permit coordination and nepa documentation during the examination it was discovered that the org is working along side another for- profit organization of a different name co-3 both organizations have the same director dir-1 and perform essentially the same activities except for the minimal educational and outreach activities performed by org the organization shares virtually the same employees projects and facility therefore it is difficult to distinguish between the for-profit organization and the non-for-profit organization exhibit i it was also noted in the minutes of the organization that on three separate occasions comments were made concerning the legitimacy of the activities as exempt_function activities this comment was also made by a potential attorney for the organization who expressed concerns regarding c goals education the founding members of org envisioned it as four different components with four different heads outreach education research and native american participation they wanted to involve native americans in research along with the scientists and archaeologists one of the ways they accomplish their goals is to perform outreach programs at schools in these lectures they tell the history of native americans and the importance of the preservation of archaeological artifacts they teach the importance of not looting sites because those artifacts cannot be recovered the county board_of education gave the organization a grant for an archaeological program in which kids participated in 20xx and kids in 20xx the children would visit the dig site and the org employees would walk them through the whole excavation process mapping documentation lab work and data entry the organization has also worked to have project project recognized as a national trail of tears site they received a grant from aldot for mapping and geological research of the project project they have held numerous presentations on the history of the site and a festival to commemorate it as a trail of tears site org was incorporated in 20xx but began planning activities began in 20xx while the organization has performed numerous exempt_function activities the non-exempt activities represent a substantial portion of the total activities of the organization law sec_501 of the internal_revenue_code provides that an organization described in sec_501 is exempt from income_tax sec_501 of the code exempts from federal_income_tax corporations organized and operated exclusively for charitable educational and other purposes provided that no part of the net_earnings inure to the benefit of any private_shareholder_or_individual the term charitable includes relief of the poor and distressed sec_1 c -1 d income_tax regulations form 886-a exhibit i the term educational includes a instruction or training of the individual for the purpose of improving or developing his capabilities and b instruction of the public on subjects useful to the individual and beneficial to the community treas reg in other words the two components of education are public c -1 d _ education and individual training sec_1_501_c_3_-1 of the regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section test it is not exempt if an organization fails to meet either the organizational_test or the operational sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose the existence ofa substantial nonexempt purpose regardless of the number or importance of exempt purposes will cause failure of the operational_test 326_us_279 educational_purposes include instruction or training of the individual for the purpose of improving or developing his capabilities and instruction of the public on in better business useful and beneficial subjects sec_1_501_c_3_-1 bureau of washington d c inc v united_states 326_us_279 the supreme court held that the presence of a single non-exempt purposes if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes the court found that the trade_association had an underlying commercial motive that distinguished its educational program from that carried out by a university in 302_f2d_934 ct_cl the court considered the status of an organization that provided analyses of securities and industries and of the economic climate in general the organization sold subscriptions to various periodicals and services providing advice for purchases of individual securities although the court noted that education is a broad concept and assumed for the sake of argument that the organization had an educational purpose it held that the organization had a significant non-exempt commercial purpose that was not incidental to the educational purpose and was not entitled to be regarded as exempt an organization must establish that it serves a public rather than a private interest and that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests treas reg prohibited private interests include those of unrelated third c -1 d ii form 886-a exhibit i parties as well as insiders 70_tc_1037 92_tc_1053 private benefits include an advantage profit fruit privilege gain or interest 78_tc_280 exempt organization’s position the exempt_organization will have a chance to respond when the report is sent to them government position during the examination it was discovered that the org is performing services of a non-exempt nature for various companies and the state department of transportation the activities of org according to the articles of incorporation are for the furtherance of c purposes and are organized exclusively for educational public outreach and research under the provision of all applicable laws for a non-profit entity in the state of state it is the service’s position that org failed to provide proof of an adequate amount of educational and outreach activities such as workshops community involvement and awareness school boards etc as was stated in the mission statement of org’s initial application a ruling or determination_letter recognizing exemption may not be relied upon if there is a material_change inconsistent with exemption in the character the purpose or the method of operation of the organization the term educational includes a instruction or training of the individual for the purpose of improving or developing his capabilities and b instruction of the public on subjects useful to the individual and beneficial to the community sec_1_501_c_3_-1 in other words the two components of education are public education and individual training substantially_all of org’s activities were not in furtherance of the exempt_purpose of the organization accordingly it is determined that org is not an organization described in sec_501 and is not exempt from income_tax under sec_501 effective january 20xx in conclusion org has not been operated exclusively for exempt purposes conclusion


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 b09 plr-115899-04 date july ------------------------ -------------------------- ------------------------ ------------------------------------------------- --------- --------------------------- ------- ----------- ------------------- ------- legend husband date wife trust x date year y date year accountant ------------------------------ dear ---- extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to make an allocation of husband’s generation-skipping_transfer gst_exemption husband and wife collectively grantors created trust for the benefit of their descendants article iii of the trust agreement provides that during the grantors’ lifetimes the trustees in their sole discretion may distribute trust net_income and or principal to or on behalf of one or more of the grantors’ descendants for their health education support or maintenance after taking into consideration all other income or property of the beneficiary upon the death of the last to die of the grantors the remaining trust principal is to be allocated to the grantors’ then living descendants per stirpes pursuant to the provisions of a_trust established for each separate descendant the facts and representations submitted are summarized as follows on date this is in response to your letter dated date requesting an husband transferred dollar_figurex in cash to trust on date date is in year plr-115899-04 husband and wife each filed a form_709 united_states gift and generation-skipping_transfer_tax return gift_tax_return for year reporting the transfer to trust on each return husband and wife elected to split_gifts under sec_2513 and allocated gst_exemption to the transfer husband has requested an extension of time to allocate gst_exemption to his sec_2513 provides that paragraph shall apply only if both spouses sec_2513 provides that a gift made by one spouse to any person other husband and wife transferred dollar_figurey in cash to trust on date date is in year husband notified accountant of the year transfer to trust and relied upon accountant to prepare his year gift_tax_return accountant inadvertently failed to file a gift_tax_return for year portion of the year transfer to trust than the other spouse shall for the purposes of this chapter be considered as made one-half by him and one-half by his spouse but only if at the time of the gift each spouse is a citizen or resident_of_the_united_states have signified under the regulations provided for in subsection b their consent to the application of paragraph in the case of all such gifts made during the calendar_year by either while married to the other sec_25_2513-2 of the gift_tax regulations provides that consent to the application of the provisions of sec_2513 with respect to a calendar_period shall in order to be effective be signified by both spouses if both spouses file gift_tax returns within the time for signifying consent it is sufficient if the consent of each spouse is signified on his own return skipping transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2632 provides that any allocation by an individual of his or her gst sec_2601 imposes a tax on every generation-skipping_transfer a generation- sec_2631 provides that for purposes of determining the inclusion_ratio sec_2642 provides that in determining whether to grant relief under sec_2642 provides generally that the secretary shall by regulation plr-115899-04 sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 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 or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except in subtitles e g h and i for regulatory elections that do not meet the requirements of sec_301_9100-2 must be made under the rules of sec_301_9100-3 date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an election described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-3 provides that in general requests for extensions of time notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time under sec_301_9100-1 a regulatory election includes an election whose due requests for relief under sec_301_9100-3 will be granted when the taxpayer sec_301_9100-3 provides that a taxpayer is deemed to have acted plr-115899-04 provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or to advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore husband is granted an extension of time of days from the date of this letter to file a form_709 for year the form_709 should include a notice of allocation properly allocating husband’s gst_exemption to the year transfer to trust the allocation will be effective as of the date of the transfer and the gift_tax value of the transfer to trust will be used in determining the amount of gst_exemption to be allocated to trust the inclusion_ratio for trust will be determined under sec_2642 and sec_2642 a copy of this letter should be attached to the supplemental form_709 and filed with the internal_revenue_service center cincinnati ohio a copy is included for this purpose concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 being sent to the taxpayer’s representative pursuant to the power_of_attorney on file with this office a copy of this letter is except as expressly provided herein no opinion is expressed or implied the rulings contained in this letter are based upon information and plr-115899-04 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 sincerely heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures cc copy of this letter for sec_6110 purposes copy of this letter


significant index no abeasurs department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jul rata in re this letter constitutes notice that with respect to the above-named defined benefit pension_plan your request for a waiver of the minimum_funding_standard for the plan_year ended june has been denied sec_412 of the code provides that in determining whether or not an employer is experiencing a temporary substantial business hardship it is reasonable to expect that the plan will be continued only if the waiver is granted on june power_of_attorney informed us that the plan is terminating _ david stirling the authorized representative listed on the the information furnished failed to demonstrate that the hardship was temporary and a denial of the request was proposed the company was informed of our tentative denial and was offered a conference of right by letter dated june you were given days to have a conference concerning our proposed denial the 21-day period stated in our letter has passed you have not communicated with us to arrange a conference therefore our tentative denial is now final 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 a copy of this letter is being sent to the employee_plans classification manager in and to the authorized representative listed on the power_of_attorney form on file with this office if you have any questions concerning this matter please contact sincerely mu ng po donna m prestia acting manager employee_plans actuarial group


internal_revenue_service number release date index number ------------------------------------------------------------ ------- ----------------------------------------- ---------------------------------------- --------------------------- in re -------------------------------------------------- --------------------------------------------------------- ----------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------------------------- telephone number --------------------- refer reply to cc psi b04 plr-154518-04 date september legend husband wife child child trust ------------------------ ------------------------ --------------------- -------------------- ---------------------------------------------------------------------- ---------------- ------------------ ---------------- ---------------------- -------------------------------------------------------- ------------------------------------------ -------------- -------------- -------------- -------------- -------------- --------------- date date date foundation foundation a b c d e f dear --------------- generation-skipping_transfer_tax gst consequences of certain amendments made to the trust this is in response to your letter of date concerning the you have requested the following rulings the amendments to trust do not shift a beneficial_interest in trust to any person in a generation lower than the persons who held the beneficial plr-154518-04 interests prior to the modification and do not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust under sec_26_2601-1 of the generation-skipping_transfer_tax regulations the amendments to trust are not constructive additions to trust because they constitute a release or lapse of a non-general power_of_appointment over a gst exempt trust and will not result in the loss of its exempt status the facts submitted are as follows and husband as trustee on date before date trust was created with wife as grantor article provides that trust is to terminate on the earlier of the deaths of both husband and wife or date trust is to be liquidated as soon as possible after termination and trust assets including any undistributed_income are to be distributed article provides that trust is irrevocable article provides that the trustee may pay or accumulate such amounts of income or principal to child as he may determine in his sole discretion however no successor trustee may distribute more than percent of the corpus within any calendar_year article provides that husband may by will appoint the corpus of the trust estate not including accumulated income to the date of his death to such beneficiaries as he may select that will not include his estate or the creditors of his estate in the event that he fails to exercise the special_power_of_appointment the trust estate is to be distributed according to the terms of trust article provides that upon termination of the trust the trust estate is to be distributed to child if child dies prior to the expiration of the term of trust the trust estate is to be distributed to child 2’s surviving issue per stirpes if child leaves no issue surviving the residue of trust is to be distributed to child 2’s brothers and sisters and the issue of any then deceased brother or sister per stirpes if a beneficiary is under the age of the trustee is to distribute percent of his share at the age of and the remainder is to be distributed at age if the issue has attained either of such ages at the time his share is established the trustee is to make immediate distribution to the issue for whom it is held of that portion until final distribution of a share is made the trustee is to pay to the issue for whom it is held such amounts of income and principal from his share necessary for his maintenance welfare and education to maintain his standard of living plr-154518-04 article further provides that all interests are to become indefeasibly vested years after the death of wife’s last surviving child and distribution is to be according to the above provisions if a beneficiary in whom an interest has been indefeasibly vested dies before his share has been distributed his share is to be distributed to his estate on date trust was amended and restated article of the amended trust provides that the trustee is to distribute the following amounts to child dollar_figurea at age dollar_figureb at age dollar_figurec at age dollar_figured at age dollar_figuree at age and dollar_figuree at age article provides that if child does not survive the payment dates but leaves lineal_descendants the payments mandated in article are to continue to be made as if child has survived will be divided into equal separate shares and will be distributed to child 2’s lineal_descendants by right of representation the share of any lineal descendant then under age will continue to be held in trust in accordance with the following a the trustee is to distribute to each lineal descendant for whom a separate share is established those amounts of income and principal that are necessary for the health education support and maintenance of the lineal descendant to enable the lineal descendant to maintain the standard of living to which he or she has become accustomed the trustee also may distribute to each lineal descendant for whom a separate share is established those amounts of income and principal that the trustee in its sole discretion considers advisable for any other purpose b the trustee is to distribute to each lineal descendant for whom a separate share is established one-fourth of the then remaining corpus of the separate share when the lineal descendant reaches age one-third of the then remaining corpus of the separate share when the lineal descendant reaches age one-half of the then remaining corpus of the separate share when the lineal descendant reaches age and the balance of the corpus of the separate share when the lineal descendant reaches age c if a lineal descendant for whom a separate share has been established does not survive the payment dates the payments will be paid to the deceased lineal descendant’s lineal_descendants by right of representation d if a lineal descendant for whom a separate share has been established does not survive the payment dates and does not leave lineal_descendants the payments will be paid to the deceased lineal descendant’s siblings in equal shares by right of representation e if a lineal descendant for whom a separate share has been established does not survive the payment dates and leaves neither lineal_descendants nor siblings the payments will be paid to child or to child 1’s lineal_descendants by right of plr-154518-04 representation if child is not then living until a total of dollar_figuref has been paid from trust to any beneficiaries at such time as the trust has distributed dollar_figuref the separate share established for the deceased lineal descendant will terminate article provides that notwithstanding paragraph child may by her will appoint from among his lineal_descendants the beneficiaries to whom payments are to be made from the trust after child 2’s death the portions that each are to receive and the times for payments in which case the trustee is to make payments to child 2’s lineal_descendants as designated by child in child 2’s will subject_to the provisions of article e article provides that in the event that child does not survive the payment dates and does not leave lineal_descendants the trustee is to pay to child or to child 1’s surviving lineal_descendants if child is not then living the payments mandated by article until a total of dollar_figuref has been paid from trust to any beneficiaries at such time as trust has paid dollar_figuref the trust is to terminate article provides that the trust is to terminate upon the final payment under article to child or child 2’s lineal_descendants or child or child 1’s lineal_descendants article provides that upon termination of trust or of any separate share of trust any property remaining in trust or the terminated separate share will be distributed to foundation provided however that if that foundation is not then in existence the property will be distributed to foundation provided that foundation qualifies under sec_501 of the internal_revenue_code article provides that if there remains in the hands of the trustee any part of the trust estate for which there is no named or described beneficiary such part will be distributed to foundation provided however that if that foundation is not then in existence the property will be distributed to foundation provided that foundation qualifies under sec_501 of the internal_revenue_code law and analysis ruling sec_1 and sec_2041 of the internal_revenue_code provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition that is of such nature that if it were a transfer of property owned by the decedent the property would be includible in the decedent's gross_estate under sec_2035 to inclusive for purposes of sec_2041 the power_of_appointment shall be considered to exist plr-154518-04 on the date of the decedent's death even though the exercise of the power is subject_to a precedent giving of notice or even though the exercise of the power takes effect only on the expiration of a stated period after its exercise whether or not on or before the date of the decedent's death notice has been given or the power has been exercised sec_2041 provides that a general_power_of_appointment is a power that is exercisable in favor of the individual possessing the power his estate his creditors or the creditors of his estate under sec_2041 a power to consume invade or appropriate property for the benefit of the decedent that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent is not a general_power_of_appointment sec_2601 imposes a tax on every generation-skipping_transfer the term ageneration-skipping transfer is defined in sec_2611 as a taxable_distribution a taxable_termination or a direct_skip under section a of the tax_reform_act_of_1986 act and sec_26_2601-1 the gst tax is generally applicable to generation-skipping transfers made after date however under section b a of the act and sec_26_2601-1 the gst tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides that except as provided under section sec_26_2601-1 provides that if an addition is made after date to an irrevocable_trust which is excluded from chapter by reason of sec_26_2601-1 a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the provisions of chapter b v b where any portion of a_trust remains in the trust after the post-date release exercise or lapse of a power_of_appointment over that portion of the trust and the release exercise or lapse is treated to any extent as a taxable transfer under chapter or the value of the entire portion of the trust subject_to the power that was released exercised or lapsed is treated as if that portion had been withdrawn and immediately retransferred to the trust at the time of the release exercise or lapse appointment this section provides that the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment as defined in sec_2041 sec_26_2601-1 provides a special rule for certain powers of plr-154518-04 will not be treated as an addition to the trust if -- such power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26_2601-1 and in the case of an exercise such power_of_appointment is not exercised in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of the trust extending beyond any life in being at the date of creation of the trust plus a period of twenty-one years judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax will not cause the trust to lose its exempt status the regulation provides that the rules contained in the paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides rules for determining when a modification sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a generation-skipping_transfer or the creation of a new generation-skipping_transfer a modification that is administrative in nature that only indirectly increases the amount transferred will not be considered to shift a beneficial_interest in the trust if child does not survive to receive the assets of trust upon termination of the trust the earlier of the deaths of both husband and wife or date subject_to husband’s special_power_of_appointment under the modified trust provisions child or child 2’s lineal_descendants if child does not survive will receive specified_payments when child reaches the ages provided in article upon termination the remaining property of trust will be distributed to foundation or foundation if foundation is not then in existence accordingly based on the facts submitted and representations made we conclude that the amendments to trust do not shift a beneficial_interest in trust to any person in a generation lower than the persons who held the beneficial interests prior to the modification and do not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust in this case the original trust provided for child or child 2’s lineal_descendants plr-154518-04 further under trust’s original provisions husband had a testamentary special_power_of_appointment that could be exercised in favor of beneficiaries other than his estate or the creditors of his estate the date amendments to trust caused husband’s power_of_appointment to lapse the special_power_of_appointment was created in an irrevocable_trust that is not subject_to chapter accordingly based on the facts submitted and representations made we conclude that amendments to trust are not constructive additions to trust because they constitute a lapse of a non-general power_of_appointment over a gst exempt trust and will not result in the loss of its gst exempt status in accordance with the power_of_attorney on file with this office a copy of this except as expressly provided herein no opinion is expressed or implied the rulings contained in this letter are based upon information and letter is being sent to your authorized representative concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer s requesting it sec_6110 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


t c memo united_states tax_court panagiota pam sotiropoulos petitioner v commissioner of internal revenue respondent docket no filed date jeffrey l gould for petitioner scott a hovey for respondent memorandum opinion lauber judge sec_901 permits a u s citizen or resident to claim a credit for income_tax paid to a foreign_country if the foreign tax paid is later 1all statutory references are to the internal_revenue_code code in effect for the tax years in issue and all rule references are to the tax_court rules_of_practice and procedure we round all monetary amounts to the nearest dollar refunded in whole or in part the taxpayer is required to notify the secre- tary who shall redetermine the amount of the tax for the year or years affected sec_905 any u s tax due as a result of the secretary’s redetermination is not subject_to deficiency procedures but shall be paid_by the taxpayer on notice_and_demand by the secretary sec_905 see sec_6213 petitioner is a u s citizen who lived and worked in the united kingdom on her federal_income_tax returns for she claimed foreign tax_credits based on the amounts of u k income_tax withheld from her wages by her employ- er her u k income_tax returns for the relevant periods however showed large overpayments she applied to have those overpayments returned to her and the u k government duly rebated to her substantially_all of the tax that had been withheld from her wages petitioner contended that these sums had not been re- funded because her ultimate entitlement to refunds remained under investigation in the united kingdom she accordingly did not notify the secretary by filing amended returns or otherwise pursuant to sec_905 following examination of petitioner’s returns the internal reve- nue service irs or respondent issued her a notice_of_deficiency in that notice the irs determined that the u k taxes she paid had been refunded and recom- puted her foreign tax_credits accordingly the irs also determined for each year an accuracy-related_penalty under sec_6662 after the case was docketed in this court respondent moved to dismiss for lack of jurisdiction he contended in that motion that he had erred in issuing the notice_of_deficiency that this case is not subject_to deficiency procedures and that sec_905 authorized him to redetermine petitioner’s tax and collect it from her upon notice and de- mand in 142_tc_269 we held that this court has jurisdiction to determine at a minimum whether sec_905 the statutory provision alleged to divest us of jurisdiction applies we thus held that we have jurisdiction to determine whether the u k taxes petitioner paid were refunded in whole or in part within the meaning the statute respon- dent subsequently moved for partial summary_judgment on this question conclu- ding as we do that the u k taxes in question were indeed refunded to petitioner we will grant respondent’s motion with the corollary that this case must be dis- missed insofar as it concerns the foreign_tax_credit adjustments properly subject_to redetermination by the secretary under sec_905 background the parties filed a stipulation of facts that is incorporated by this reference the following facts are derived from that stipulation amplified as necessary by the parties’ pleadings motion papers and the exhibits and declarations attached thereto petitioner resided in london england when she filed her petition petitioner is a u s citizen who lived in london england during she was employed by the london office of goldman sachs at all relevant times as a u k resident working in the united kingdom she was subject_to u k income_tax she received employee compensation from goldman sachs which withheld u k income_tax from her wages the withheld taxes denominated pay as you earn or paye taxes constituted prepayments of u k income_tax during petitioner made substantial investments in u k film partnerships that used structured transactions to generate large purported deduc- tions for u k tax purposes for each year she filed a u k income_tax return re- flecting among other things her estimated share of the film partnerships’ deduc- tions and losses after receiving final information from the partnerships she filed amended u k returns revising those estimates despite her u k residency petitioner as a u s citizen was required to file federal_income_tax returns for the years at issue for u s purposes she has al- 2for u k tax purposes petitioner reported on the basis of a fiscal_year end- ing april for purposes of determining her correct u s tax_liabilities for therefore the relevant u k tax years are her fiscal years ways been a calendar_year cash_basis taxpayer she filed timely returns on form sec_1040 u s individual_income_tax_return for and on each u s return petitioner elected to claim a foreign_tax_credit under sec_901 for each year she claimed a credit based on the amount of u k income_tax withheld from her wages by goldman sachs for and she reported having paid via wage withholding u k income_tax of dollar_figure dollar_figure and dollar_figure respectively after computing various limi- tations on the allowable credits she claimed on her and returns foreign tax_credits of dollar_figure dollar_figure and dollar_figure respectively she did not report on her u s returns any losses or other items attributable to the u k film partnerships petitioner’s original and amended u k returns for the relevant years showed large overpayments attributable chiefly to losses from the u k film part- 3respondent converted amounts paid in british pounds into dollars at what respondent determined to be the applicable exchange rate although the cor- rectness of respondent’s currency conversions is immaterial for purposes of decid- ing the instant motion for partial summary_judgment it could be relevant for com- puting any penalty ultimately determined to be due sec_905 allows a cash_basis taxpayer the option of claiming a foreign_tax_credit subject_to certain limitations in the year in which the taxes of the foreign_country accrued petitioner did not exercise this option rather she claimed for each year a credit based on the paye taxes withheld in cash from her wages by goldman sachs nerships petitioner applied to her majesty’s revenue and customs hmrc the u k taxing authority to have these overpayments returned to her hmrc complied with her request and rebated to her substantially_all of the u k income_tax that had been withheld from her wages petitioner did not notify the irs by filing amended returns or otherwise that the u k taxes for which she had claimed credits had been refunded in whole or in part see sec_905 the irs nevertheless ascertained through in- formation sharing that petitioner had invested in u k film partnerships that she had claimed substantial deductions attributable thereto and that she had filed u k returns requesting refunds upon examination of her returns the irs determined that she had received u k income_tax refunds of dollar_figure in dollar_figure in and dollar_figure in it therefore disallowed what it deter- mined to be appropriate amounts of her claimed foreign tax_credits rather than invoking sec_905 as authority for collecting the rede- termined tax upon notice_and_demand the irs sent petitioner a notice of deficien- cy for the reductions to petitioner’s foreign tax_credits were the only adjustments reflected in the notice_of_deficiency that notice determined tax defi- ciencies and accuracy-related_penalties as follows deficiency dollar_figure big_number big_number year penalty sec_6662 dollar_figure big_number big_number petitioner timely petitioned this court for redetermination of the deficien- cies and penalties approximately one year after filing his answer respondent moved to dismiss this case for lack of jurisdiction insofar as it concerns the adjust- ments to petitioner’s foreign tax_credits respondent submitted that he had erred in issuing the notice_of_deficiency that sec_905 authorized him to redeter- mine the amount of petitioner’s tax and collect it upon notice and de- mand and that foreign_tax_credit adjustments of the sort involved here are ex- pressly removed from deficiency procedures by a cross-reference from sec_6213 to sec_905 in sotiropoulos i we noted the well-settled rule that t his court always has jurisdiction to determine whether it has jurisdiction t c pincite citing 135_tc_70 we concluded that we have jurisdiction at a minimum to decide whether the statutory provision alleged to divest us of jurisdiction applies ie whether the u k taxes paid_by petitioner have been ‘refunded in whole or in part’ within the meaning of section c c id pincite we noted that this assumption of jurisdiction would afford petitioner a prepayment forum for resolving the central issue that she raises on the merits namely that the amounts she received from u k taxing authorities were not ‘refunds ’ id discussion a summary_judgment standard the purpose of summary_judgment is to expedite litigation and avoid costly time-consuming and unnecessary trials fla peach corp v commissioner 90_tc_678 the court may grant summary_judgment upon all or any part of the legal issues in controversy when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule a and b 98_tc_518 aff’d 17_f3d_965 7th cir in deciding whether to grant summary_judgment we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party sundstrand corp t c pincite however the nonmoving party may not rest upon the mere allegations or denials of his pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial rule d see sundstrand corp t c pincite respondent seeks partial summary_judgment on the ground that the over- payments of u k income_tax returned to petitioner were refunded within the meaning of sec_905 petitioner acknowledges that she received these payments the question we must decide is how they should be characterized for u s tax purposes this is essentially a question of law petitioner has pointed to no material dispute of fact affecting the disposition of this question and we con- clude that it may be adjudicated summarily b statutory background subject_to certain limitations a u s citizen may elect to take a foreign_tax_credit against her u s income_tax_liability for income taxes paid_or_accrued to a foreign_country or a u s possession sec_901 congress anticipated the diffi- culty of ascertaining at the time the u s return is filed the exact amount of for- 5respondent states that the accuracy-related_penalties determined in the no- tice of deficiency may fall under this court’s jurisdiction and may involve disput- ed facts however respondent has expressed his intention to concede these pen- alties if the court grants his motion for partial summary_judgment and dismisses the case insofar as it concerns the foreign_tax_credit adjustments respondent also states that the precise amounts of the refunded u k taxes and u s tax adjust- ments may still be at issue but should be resolvable under tax_court rule it is not clear that we have jurisdiction to determine the precise amounts of the refunded taxes-- sec_905 provides that the secretary shall rede- termine the amount of the tax --or of the asserted penalties but we need not address these issues in ruling on respondent’s motion for partial summary judg- ment petitioner’s liability if any for penalties will be resolved in further pro- ceedings after disposition of respondent’s motion for partial summary_judgment eign tax that will ultimately be allowable as a credit it accordingly provided in what is now sec_905 a special procedure for adjusting the - credit when the taxpayer’s ultimate foreign tax_liability varies from the amount claimed sec_905 specifies three situations in which a u s taxpayer’s foreign_tax_credit must be adjusted a accrued taxes when paid differ from the amounts claimed as credits by the taxpayer b accrued taxes are not paid before the date years after the close of the taxable_year to which such taxes relate or c any_tax paid is refunded in whole or in part the regulations describe these three situations as involving a foreign_tax_redetermination sec_1_905-3t temporary income_tax regs fed reg date if a foreign_tax_redetermination as thus defined occurs sec_905 provides that the taxpayer shall notify the secretary who shall redetermine the amount of the tax for the year or years affected because the 6the temporary regulations discussed in the text sec_1_905-3t and sec_1_905-4t temporary income_tax regs fed reg date were in effect through date they were amended in novem- ber but the provisions discussed herein remained substantially the same after that amendment these provisions were set to expire on date see sec_1_905-3t sec_1_905-4t temporary income_tax regs fed reg date the provisions discussed in the text were in effect at all times relevant to this case irs absent notice from the taxpayer generally will not know of revisions to the taxpayer’s foreign tax_liabilities the code has long required self-reporting of such changes see generally 1_tc_1028 discussing sec_131 of the revenue act of a predecessor of sec_905 sec_6689 provides a strong incentive for taxpayers to comply with their self-reporting obligations under sec_905 imposing an assessable penalty up to of the deficiency for failure to provide the notice required by sec_905 unless it is shown that such failure is due to reasonable_cause and not due to willful neglect with exceptions not relevant here the taxpayer is supposed to notify the secretary by filing an amended_return sec_1_905-4t temporary income_tax regs fed reg date an individual taxpayer is in- structed to include with her amended_return a revised form_1116 foreign_tax_credit and information sufficient to enable the irs to redetermine her u s tax_liability see sec_1_905-4t c temporary income_tax regs supra once the irs redetermines the taxpayer’s liability in accordance with sec_905 t he amount of tax if any due shall be paid_by the taxpayer on notice_and_demand by the secretary and the amount of tax overpaid if any shall be credited or refunded to the taxpayer sec_905 a cross-reference from sec_6213 confirms that the usual restrictions on assessment do not apply to sec_905 adjustments made by the secretary see sec_6213 for assessments without regard to restrictions imposed by this section in the case of-- a recovery_of foreign_income_taxes see sec_905 sec_1 4t b temporary income_tax regs supra subchapter_b of chapter of the code relating to deficiency procedures shall not apply with respect to the assessment of the amount due upon such redetermination c analysis petitioner has stipulated that the foreign tax_credits she claimed for corresponded to the u k income taxes withheld from her wages under the paye system and remitted by her employer to hmrc she has also stipulated that substantially_all of the tax thus paid was later returned to her by hmrc after she reported overpayments on her u k returns the question we must decide is whether this sequence of events falls within the scenario specified in sec_905 namely where any_tax paid is refunded in whole or in part we conclude that it does as a general_rule federal tax provisions should be read to incorporate do- mestic tax concepts absent a clear congressional expression that foreign concepts should control 302_us_573 this canon of construction has strong application even in the foreign_tax_credit context where foreign levies may often be at issue 493_us_132 in goodyear the supreme court held that the term accumulated_profits as it appeared in former sec_902 governing the indirect_foreign_tax_credit should be calculated in accordance with domestic tax principles id our starting point as in all cases involving statutory interpretation ‘must be the language employed by congress ’ id pincite quoting 442_us_330 words used in a statute are to be given their ordinary meaning in the absence of persuasive reasons to the contrary see eg 420_us_575 139_tc_255 sec_905 authorizes the secretary to redetermine a taxpayer’s foreign_tax_credit if the foreign tax paid is refunded in whole or in part a re- fund is commonly defined to include t he return of money to a person who overpaid such as a taxpayer who overestimated tax_liability or whose employer withheld too much tax from earnings black’s law dictionary 10th ed see also 78_f2d_97 10th cir refund means to pay back return restore make restitution that is the ordinary and pop- ular concept of the word the amount returned to petitioner by hmrc for each year which represented u k income_tax withheld by her employer in excess of the tax shown as due on her u k return falls easily within the ordinary meaning of the word refund the meaning of refunded in sec_905 was explicitly addressed by the trial_court in goodyear see goodyear tire rubber co v united_states cl_ct rev’d on other grounds and remanded 856_f2d_170 fed cir rev’d and remanded 493_us_132 the taxpayer there the u s parent of a worldwide group goodyear had claimed indirect foreign tax_credits for and based on u k taxes paid_by its u k subsidiary the u k sub- sidiary incurred losses in subsequent years and carried those losses back to and the u k subsidiary then applied for and received in and refunds of the u k tax it had paid for and invoking sec_905 the irs redetermined goodyear’s foreign tax_credits and assessed the resulting deficiencies the taxpayer paid the assessed taxes and following denial of its refund claim filed a refund_suit in the u s court of federal claims the issue addressed by the supreme court was whether the term accumu- lated profits in former sec_902 should be calculated in accordance with domestic or foreign tax principles at the trial level however goodyear raised a second and distinct legal issue whether the payments re- ceived by its foreign_subsidiary from the british government during and were properly classified and treated as refunds for years and under sec_905 goodyear cl_ct pincite the taxpayer argued that the term refund as used in sec_905 applie d only to refunds of incorrect foreign taxes in the case of a loss carryback goodyear noted the foreign tax initially reported and paid_by the foreign_subsidiary for the carryback_year was correct that being so goodyear urged that the subsequent event of a net_operating_loss should not disturb an earlier credit granted for a foreign tax which was correct when paid id pincite finding sec_905 to be plain and unambiguous the court squarely rejected this argument w hen statutory language is unambiguous words in the statute are considered to be used in their ordinary and usual sense the court agrees with defendant that the reason for the refund is imma- terial what is significant is that a tax_refund was paid to and re- ceived by plaintiff’s subsidiary the statutory term refund when construed in its ordinary and usual sense includes repayment of tax dollars stemming from a subsequent net_operating_loss the court would be hard-pressed to find any repayment of tax dollars to not be a refund as the term is used goodyear cl_ct pincite in the instant case petitioner indisputably received repayment s of tax dollars from hmrc and she agrees that she received these repayments under a claim of right cf n am oil consol v burnet 286_us_417 but she asserts that these repayments were not refunds because it was uncertain whether she would ultimately be able to keep this money hmrc characterized as tax_shelters the film partnerships in which she had invested and litigation on this subject is still pending in various u k courts petitioner avers that hmrc in the view of her tax advisers is likely to prevail in its challenge to the de- ductions generated by the film partnerships in which she had invested 7petitioner argues that the claim_of_right_doctrine does not apply here be- cause sec_905 takes a transactional approach to determining the correct foreign_tax_credit in her view sec_905 represents an exception to the an- nual accounting principle because there is no statute_of_limitations on sec_905 redeterminations by the secretary see pac metals corp t c pincite contrary to petitioner’s view the annual accounting principle is fully applicable here indeed sec_905 explicitly allows cash-basis taxpayers to elect accrual basis accounting when claiming foreign tax_credits in any event petitioner cites no authority for the proposition that sec_905 or the overall foreign_tax_credit regime applies on a transactional basis rather than an annual basis quite the contrary petitioner acknowledges correctly that the united_states eliminates double_taxation through foreign tax_credits by applying them globally and on an annual rather than a transactional basis we conclude that the claim_of_right_doctrine applies to the repayments of tax dollars that petitioner received no less than it would apply to any other tax_refund we accept petitioner’s averments as true but they are irrelevant in deter- mining whether the repayments of u k tax she received were refunds for u s tax purposes the term refund does not connote finality or the final_determination of a tax_liability every year millions of americans file form sec_1040 showing an overpayment and indicating the amount of the overpayment they want refunded to them in the absence of concerns about identity theft or other unusual circum- stances the irs usually pays such refunds more or less automatically notwith- standing payment of such refunds the irs routinely examines such returns and if it concludes that the taxpayer incorrectly computed the tax it may assess addition- al tax after exhausting deficiency procedures in short the fact that a taxpayer may ultimately have to repay the money initially refunded to her does not mean that she did not get a refund the overall structure of the foreign_tax_credit provisions likewise shows the error of petitioner’s argument as a cash_basis taxpayer petitioner is entitled to claim a credit for foreign_income_taxes when paid if her predictions prove correct and hmrc later collects additional u k tax from her she will be en- titled to claim a credit for those taxes for the year in which she pays them if the credits she claimed on her returns were not reduced to reflect the u k tax that was previously refunded she would in effect be allowed a double credit for the same tax petitioner contends that rejection of her argument may result in double_taxation contrary to the policies underlying the foreign_tax_credit and the u s - u k income_tax treaty she bases this contention on the assertion that if she is required to repay refunds previously received from h m r c and such repayments are considered creditable_foreign_taxes in the year of payment her personal circumstances are such that she would obtain no u s tax_benefit from such credits petitioner offers no explanation or factual support for this vague assertion but it is unpersuasive in any event it often happens that taxpayers because of individual circumstances or passage of time are unable to derive full benefit from contingent tax assets they have booked or expect to receive such as carryforwards of foreign tax_credits net operating losses passive losses or investment_interest this does not demonstrate any structural defect in the code and does not give rise to double_taxation it simply reflects the facts that the future is unpredictable and that taxable_income must be determined on an annual basis 8petitioner contends that respondent’s motion for partial summary_judgment should be denied because any failure of petitioner to notify the respondent of the continued in sum we conclude that the repayments of u k income_tax that petitioner received during represented previously paid foreign tax that was re- funded in whole or in part within the meaning of sec_905 to reflect this determination an order will be issued granting respondent’s motion for partial summary_judgment continued receipt of a refund at the time the repayments were received was due to rea- sonable cause the existence vel non of reasonable_cause may be relevant to petitioner’s liability for the sec_6662 accuracy-related_penalty and or the penalty imposed i f the taxpayer fails to notify the secretary of foreign_tax_redetermination see sec_6689 imposing penalty of up to unless failure was due to reasonable_cause and not due to willful neglect but the existence of reasonable_cause is irrelevant in determining whether the repayments of u k tax that petitioner received constituted refunds within the meaning of sec_905 respondent did not move for summary_judgment on the accuracy- related penalty as far as we know the irs has not determined a sec_6689 penalty and if it had that penalty as an assessable penalty would appear to lie outside our deficiency jurisdiction