tax_exempt_and_government_entities_division number release date date department of the treasury internal_revenue_service washington d c contact person identification_number contact number employer_identification_number form required to be filed tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final because you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file instructions and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance with their we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice action if you agree with our deletions you do not need to take any further in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your sincerely robert choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date contact person identification_number contact number fax number employer_identification_number a a n n u h dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 code based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below facts you were incorporated under the state nonprofit corporation act for charitable benevolent and educational_purposes or the fostering national amateur sports competition within the meaning of sec_501 of the internal_revenue_code sic you state that your primary activity will be largely limited to receiving contributions and investment_income and conducting activities in furtherance of the corporation’s exempt purposes which include serving underrepresented and minority interests in amateur athletics monitoring the administration of amateur athletics and ensure fairness in such administration promoting institutional and individual accountability for administrative decisions that offend notions of fair play and taking or providing support for others’ actions to challenge and correct administrative abuses in amateur athletics you state that you may make distributions to individuals and organizations in furtherance of these purposes specifically you state that you intend to act as a self-appointed watchdog monitoring intercollegiate and other amateur athletic administration and governance and stepping-in to oppose those policies or enforcement proceedings that offend fairness in college and other amateur athletics you further state that these activities center on fostering fair national amateur sports competition through public awareness and educational campaigns you state that you will engage in a myriad of initiatives including assistance in title ix compliance and application through education and tutoring education and oversight of performance enhancing substance abuse programs monitoring and curtailing exploitation of student-athletes promoting and seeking the elimination of the event in your letter dated date you state that in connection with the above activities you have not engaged in developed or planned any workshops you state that you anticipate the potential for conducting workshops with amateur athletics but you have not identified any workshops that you potentially could offer in the future educational materials developed criteria for participation in your programs or planned any workshops or seminars for any of your initiatives your website contains no information regarding any current or future workshops or seminars that you plan on offering to amateur athletes or universities the website is devoted entirely to raising funds for the purpose of initiating an anti-trust lawsuit against the event in addition you have not prepared any you state that a majority of your time will be spent on your grassroots movement of replacing the event with a fair and open m system for sport your website is devoted exclusively to raising funds for your legal fund according to your website amounts collected by your legal fund will be used to file a lawsuit against the event law sec_501 of the internal_revenue_code code provides that an organization described in sec_501 or d or sec_401 shall be exempt from taxation under this subtitle unless such exemption is denied under sec_502 or sec_503 sec_501 of the code describes in part an organization that is organized and operated exclusively for charitable or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment sec_501 of the code provides that an amateur sports organization which is organized and operated exclusively to foster national or international amateur sports competition may qualify for exemption from federal income taxes if such organization is also organized and operated primarily to conduct national or international competition in sports or to support and develop amateur athletes for national or international competition in such sports sec_1_501_c_3_-1 of the income_tax regulations regulations provides that in order to qualify for exemption an organization must be both organized and operated exclusively for one or more exempt purposes if an organization fails to meet either of the above tests the organization will not qualify for exemption sec_1_501_c_3_-1 of the regulations states that an organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it to carry on otherwise than as an insubstantial part of its activities activities which are not in furtherance of one or more exempt purposes even though the organization is by the terms of the articles of incorporation created for a purpose that is no broader than the purpose specified in sec_501 of the code sec_1_501_c_3_-1 of the regulations states that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose revrul_80_215 1980_2_cb_174 holds that a nonprofit organization formed to develop promote and regulate a sport for individuals under years of age by organizing local and statewide competitions promulgating rules organizing officials presenting seminars distributing a newsletter and otherwise encouraging growth of the sport qualifies for exemption under sec_501 of the code the ruling notes that trusts created for the purpose of promoting sports for children have been upheld as charitable on the basis of either combating juvenile delinquency or advancing education revrul_70_4 1970_1_cb_126 provides that an organization whose activities consisted primarily of the promotion and regulation of a sport for amateurs is not exempt as a sec_501 educational_organization because the promotion and regulation of a sport for amateurs as described neither improve nor develop the capabilities of the individual nor instruct the public on subjects useful to the individual and beneficial to the community revrul_67_291 1967_2_cb_184 held that an organization whose purpose and activities further the educational program of the university by providing necessary services to student athletes and coaches qualified for exemption under sec_501 of the code revrul_55_587 1955_2_cb_261 describes a nonprofit interscholastic athletic association formed for the purpose of promoting and protecting the health of high school athletes through uniform interscholastic competition under the direction and control of school officials and of cultivating the ideals of good sportsmanship loyalty and fair play the membership consists of approved and accredited public high schools of a state the association directs and controls interscholastic high school athletic competition prescribes eligibility rules for contestants and penalties for the violation of such rules as well as the rules of play in the various sports conducts sectional district and state meets or tournaments arranges schedules for contests trains and assigns game officials and makes suitable awards in state meets it was held that this organization is organized and operated primarily for educational_purposes and is tax exempt under sec_501 of the code in hutchinson baseball enterprises v commissioner t c pincite u s tax ct lexi sec_30 affd 696_f2d_757 10th cir the organization funded and operated an amateur baseball team leased and maintained baseball fields for_the_use_of little league american legion teams and a baseball camp and provided coaches for little league teams the court held and the tenth circuit affirmed that the promotion sponsorship and advancement of amateur sports is a charitable purpose within the meaning of sec_501 revproc_2010_9 2010_2_irb_258 provides in part that exempt status will be recognized in advance of operations if proposed operations can be described in sufficient detail to permit a conclusion that the organization will clearly meet the particular requirements of the section under which exemption is claimed proposed activities will be in furtherance of such purposes will not satisfy this requirement the organization must fully describe the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned and the nature of the contemplated expenditures where the organization cannot demonstrate to the satisfaction of the service that its proposed activities will be exempt a record of actual operations may be required before a ruling or determination_letter will be issued a mere statement of purposes or a statement that the presence of a single exemption regardless of the number or importance of truly business bureau of washington d c inc v united_states 326_us_279 non-exempt purpose if substantial in nature will destroy the exempt purposes better analysis based on the facts presented in your application we conclude that you are not organized or operated for exempt purposes accordingly you do not qualify for exemption as an organization described in sec_501 of the code your application and supporting documentation must demonstrate that your organization meets both the organization test and the operational_test under sec_1_501_c_3_-1 of the regulations exempt_organizations must operate exclusively for exempt purposes sec_501 of the code the term exclusively has been interpreted to mean primarily sec_1_501_c_3_-1 a single substantial non-exempt purpose is sufficient to prevent exemption better business bureau u s pincite if an organization fails either the organizational or operational_test it cannot qualify as an exempt_organization under sec_501 an organization will meet the requirements of the organizational_test only if its articles of incorporation limit the purpose of the organization to one or more exempt purposes and is not created for a purpose that is broader than the purposes specified in sec_501 of the code sec_1_501_c_3_-1 of the regulations your articles of incorporation include language that is broader than the purposes as specified in sec_501 therefore you are not organized exclusively for exempt purposes based on the information provided you do not qualify as either a sec_501 of the code educational and charitable_organization or sec_501 amateur sports organization like the organization in revrul_70_4 your activities consist primarily of the promotion and regulation of sport through your grassroots activity of replacing the event with a fair open american playoff this activity does not improve or develop the capabilities of the individual or instruct the public on subjects useful to the individual and beneficial to the community in addition your website is entirely devoted to the collection of contributions to your legal fund to install a m system for sport due to event federal sherman antitrust act violations further college athletic organizations that promote certain aspects of athletic competition have generally been held to be educational as an integral part of the university and thus exempt from federal_income_tax under sec_501 of the code your activities are not an integral part of the activities of a university as held in revrul_67_291 an athletic program is considered to be an integral part of the educational process of a university where the organization is providing necessary services to student athletes and coaches you are distinguishable from the organization described in revrul_67_291 your activities do not provide necessary services to student athletes and coaches revproc_2010_9 supra for example you have not provided any information on though you refer to educational activities that could be exempt you are not yet carrying out those activities and have not met your burden of disclosing all the facts bearing on your organization operations and finances that would allow us to make a decision about your future activities how many student athletes you expect to attend your seminars how you plan to advertise your activities or programs whether you will lease or purchase a facility and what kind of curriculum you will teach you state that you generally anticipate the potential for conducting workshops or seminars with amateur athletes but you have not planned to actually offer any future workshops or seminars or developed any documents or materials for any future or potential workshops or in addition your website provides no information about any future workshops or seminars an organization must fully describe the activities in which it seminars that may be offered expects to engage including the standards criteria procedures or other means adopted or planned and the nature of the contemplated expenditures you have not provided sufficient detail to conclude that you are operated for an exempt_purpose you are unlike the organization in hutchinson baseball enterprises v commissioner t c pincite u s tax ct lexi sec_30 affd 696_f2d_757 10th cir in that case the organization's primary activities resulted in the furtherance of amateur athletics the organization provided coaching and instruction for children and recruited only top amateur baseball players to play on the team it sponsored the organization also hired a coach general manager and trainer to work with the team in contrast you provide no formal or ongoing instruction to your members nor do you have any other characteristics that indicate that your activities are in the furtherance of amateur athletics the remaining issue is whether you are a sec_501 of the code qualified_amateur_sports_organization sec_501 requires that in addition to fostering amateur athletics a qualified amateur athletic organization must conduct national or international sports competition or support and develop amateur athletes for national or international competition in such sports the typical activities of amateur athletic organizations include promulgation of official rules and standards of play the chartering and supervision of teams the provision of coaching equipment and facilities and the organization of inter-team competition among others based on the information provided you do not qualify as a qualified_amateur_sports_organization under sec_501 of the code you are not operated for the purposes of conducting national or international sports competition or support and develop amateur athletes for national or international competition in sport conclusion accordingly we conclude that you do not qualify for exemption as an organization described in sec_501 of the code and you must file federal_income_tax returns you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications for more information about representation see publication practice_before_the_irs if you if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to protest as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service constitution ave n w washington dc if you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert choi director exempt_organizations rulings agreements


internal_revenue_service number release date index number ------------------- ------------------------------------------- ------------------------------------------- -------------------------------------------------- ---------------------------------------------- --------------------- ------------------------------------------ department of the treasury washington dc person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-121601-07 date date ----------------- --------------------------- -------------------------------------------- this responds to a letter dated date and subsequent correspondence legend x ------------------------------------------ country date dear ------------- submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a partnership under sec_301_7701-3 date x represents that x is a foreign_entity eligible to elect to be treated as a partnership however x inadvertently failed to timely file a form_8832 entity classification election electing to treat x as a partnership effective date entity for federal tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if the foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 provides guidance on the classification of a foreign the information submitted states that x was formed under the laws of country on sec_301_9100-1 through provide the standards the sec_301_9100-3 provides the standards the commissioner will use to sec_301_9100-1 provides that the commissioner may grant a reasonable sec_301_7701-3 provides that an entity classification election must be filed plr-121601-07 on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make the election determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclude that the requirements of sec_301_9100-1 and -3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a partnership effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose federal tax consequences of the facts described above under any other provision of the code the internal_revenue_code provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 of except as specifically set forth above no opinion is expressed concerning the based solely on the information submitted and the representations made we plr-121601-07 being sent to x’s authorized representatives pursuant to a power_of_attorney on file with this office a copy of this letter is sincerely william p o’shea associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------- ------------------------------------ ------------------------------------------- ------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ----------------- telephone number --------------------- refer reply to cc psi b03 plr-103567-12 date june company ------------------------------------------------------------------------------------------------- ----------------------- legend state date -------- ------------------- dear --------------- this letter responds to a letter dated date submitted on behalf of company requesting a ruling under sec_1362 of the internal_revenue_code facts company incorporated under the laws of state on date company intended that it be treated as an s_corporation as of date however a form_2553 election by a small_business_corporation was not timely filed company requests a ruling that it will be recognized as an s_corporation effective date law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding taxable plr-103567-12 year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a a small_business_corporation makes an election under sec_1362 for any taxable_year and b the election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then the election is treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply conclusion based solely on the facts submitted and representations made we conclude that company has established reasonable_cause for failing to make a timely election to be an s_corporation provided that company otherwise qualifies as an s_corporation we conclude that company will be recognized as an s_corporation effective date and thereafter if company files a completed form_2553 effective date with the appropriate service_center within days following the date of this letter a copy of this letter should be attached to form_2553 a copy is enclosed for that purpose 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 specifically we express or imply no opinion as to whether company is otherwise eligible to be an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative plr-103567-12 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely tara p volungis chief branch office of the associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy of this letter for sec_6110 purposes cc


tax exempt and government entities department of the treasury internal_revenue_service washington d c aug qe tep re az re dear this letter is in response to your request with respect to the above-referenced defined benefit pension_plan pursuant to revproc_90_49 for the plan_year commencing date revproc_90_49 sets forth the procedure whereby under certain circumstances a disallowance of the deduction of employer contributions to a qualified defined_benefit_plan may be obtained thereby fulfilling a condition under which such contributions could revert to the employer based on the information submitted we have determined that contributions amounting to dollar_figure which were made for the plan_year commencing date may be considered as disallowed solely for the purpose of applying revrul_91_4 therefore the return of contributions not exceeding dollar_figure would not adversely affect the qualified status of the pian providing this reversion occurs no later than one year from the date of this letter however if the amount is not returned by your tax filing_date including extensions filed for and granted the tax under sec_4972 would apply in granting this approval we are not expressing any opinions as to the accuracy or acceptability of any calculations or other material submitted with your request in this office when filing form_5500 for the plan_year commencing date a copy of this letter must be attached to the schedule sb form a copy of this letter should be furnished to the enrolled_actuary for the plan we have sent copies to your authorized representatives pursuant to a power_of_attorney on file if you require further assistance in this matter please contact sincerely yours dd azo david m ziegler manager employee_plans actuarial group


department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc psi genin-128344-09 o f f i c e o f t h e c h i e f c o u n s e l number info release date uil ----------------------- --------------------------- -------------------------- dear ------------- this letter responds to your request for information dated may you are requesting information about the amount of money that can be given to an irrevocable_trust without incurring a gift_tax the gift_tax applies to transfers of property by gift sec_2503 of the internal_revenue_code provides for an annual exclusion of the gift_tax the annual exclusion only applies to a gift of a present_interest the current annual exclusion amount is dollar_figure publication introduction to estate_and_gift_taxes provides further information including examples of how the annual exclusion applies for your assistance a copy of publication has been included with this letter this letter has called your attention to certain general principles of the law it is intended for informational purposes only and does not constitute a ruling see revproc_2009_1 sec_2 2009_1_irb_1 date if you have any additional questions please contact our office at -------------------- sincerely james f hogan senior technician reviewer branch office of associate chief_counsel passthroughs special industries


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc intl-plr date date legend number release date parent subsidiary cpa firm individual a individual b individual c dear this replies to a letter dated date in which subsidiary requests an extension of time under sec_301_9100-3 to file form_8279 election to be treated as a fsc or as a small_fsc as provided by temp sec_1 1t b q a effective for its first taxable_year beginning date and ending date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon 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 material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process individual a is a partner in cpa firm during late and early cpa firm in re plr provided tax consulting services to parent and advised parent of the benefits and requirements of establishing a foreign_sales_corporation cpa firm subsequently assisted parent with the incorporation of subsidiary which took place on date cpa firm also informed parent about the necessity to file on form_8279 an election to establish a foreign_corporation as a fsc within the prescribed period parent intended subsidiary to be created and maintained as a fsc and not a small_fsc individual b was the cpa firm manager who was advising parent on its fsc issues due to the substantial experience of individual b and the advanced level of his fsc expertise individual a did not require individual b to keep individual a informed of every communication individual b had with parent in early april of individual b informed individual a of his departure from cpa firm individual a discussed with individual b his obligation to ensure that all of his client responsibilities that were not met prior to his departure were communicated to individual a so that she could reassign them individual b left cpa firm on date individual c is the vice president of finance of parent and the vice president and treasurer of subsidiary individual c states that parent was advised by cpa firm that filing form_8279 would be required in order to elect fsc status for subsidiary individual c further states that individual b indicated that cpa firm would advise parent and provide filing instructions prior to the deadline for filing form_8279 parent and its officers had no prior experience with the foreign_sales_corporation provisions of the internal_revenue_code in september of upon reviewing the status of subsidiary individual c realized that form_8279 had never been filed individual c called a representative of cpa firm to inquire about the status of form_8279 and the related consequences individual a states that she was unaware the form_8279 had not been prepared and timely filed for subsidiary or that cpa firm had agreed to instruct parent on filing form_8279 the tax_return for subsidiary’s first fsc year due on date had not yet been filed when the ruling_request was submitted sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the standards set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301 -1 b defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement in re plr treas reg provides standards for extensions of time for making regulatory elections when the deadline for making the election is other than a due_date prescribed by statute sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that subject_to sec_301_9100-3 through iii a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election sec_1_921-1t q a provides that a corporation making an election to be treated as a fsc for its first taxable_year must make the election within days after the beginning of that year thus the commissioner has discretionary authority pursuant to sec_301_9100-1 to grant subsidiary an extension of time as requested provided that subsidiary acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government based on the facts and circumstances of this case we conclude that subsidiary satisfies sec_301_9100-3 accordingly subsidiary is granted an extension of time until days from the date of this ruling letter to file form_8279 effective for its first taxable_year beginning date this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to parent's authorized representatives in re plr sincerely _________________________ allen goldstein reviewer office of the associate chief_counsel international


department of the treasury internal_revenue_service washington d c contact person xxxxxxk identification_number xxxxxx telephone number xxxxxx employer_identification_number xxxxxx tax_exempt_and_government_entities_division date release number release date date xxxxkx xxxxxx xxxxkxk uniform issue list legend a xxxxxkx b xxxxkxx c xxxxxx m xxxxxx o xxxxxx x xxxxkxx date xxxxxx date xxxxxx dear this is in reply to your letter of date concerning the federal income and excise_tax consequences under sec_4941 of the internal_revenue_code code relating to the administration of an estate in the manner and for the purposes described below facts ais a privately held corporation that files its annual tax_return on form_1120 u s_corporation income_tax return b is the founder of a and x b is a substantial_contributor as defined in sec_507 of the code to x b is also the grantor of m c is married to b and is the grantor of o on date b founded and funded x to further religious and educational organizations x is exempt from federal_income_tax under sec_501 of the code and is a private_foundation within the meaning of sec_509 of the code x is the primary beneficiary of the estates of both b and c upon their deaths x will receive by way of bequest cash and notes received from the redemption of a non-voting shares held by m and o b's will leaves all of the assets owned by him at his death to m upon his death m will become irrevocable and it is anticipated that the executor and trustee will elect under sec_645 of the xxxxxx code to have m taxed as a part of b’s estate x is a beneficiary of m and pursuant to m’s terms x is to receive all a non-voting shares owned by m at b's death when c dies her will bequeaths her residuary_estate to o and o then transfers all of the a non-voting shares owned by it at c’s death to x during the administration of b’s estate and pursuant to the terms of an a shareholders’ agreement it is expected that when b dies a will elect to exercise its option under the shareholders’ agreement to purchase the a non-voting shares owned by m expected that upon c’s death a will elect to exercise its option to purchase the a non-voting shares owned by o in each case the a non-voting shares will be purchased in accordance with the terms of an a shareholders’ agreement for cash and or an a promissory note elects to issue one or more promissory notes to purchase the a non-voting shares each promissory note will provide interest_paid at not less than the applicable_federal_rate will have a term of no longer than years and will have a fair value of not less than the note’s face value similarly it is if a after the deaths of b and c a's purchase of the a non-voting shares from m and o will be submitted for approval to a probate_court or another court having proper jurisdiction over the estate m and o will transfer any cash and a promissory notes that they receive from the sale of their a non-voting shares to x a will remain obligated and continue to make interest and principal payments to x until the a promissory notes are satisfied in full ruling requested you have requested that x’s holding of an a promissory note and its receipt of a promissory note payments from a after the period of estate administration terminations will meet all of the requirements of sec_53 d -1 b of the foundation regulations and therefore will not be deemed acts of self-dealing subject_to excise_tax under sec_4941 of the code law sec_501 of the code provides in part for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable scientific or educational_purposes provided no part of the organization’s net_earnings inures to the benefit of any private_shareholder_or_individual sec_507 defines a substantial_contributor as any person who contributed or bequeathed an aggregated amount of more than dollar_figure to a private_foundation if such amount is more than percent of the total contributions and bequests received by the foundation before the close of the taxable_year of the foundation in which the contribution or bequest is received by the foundation from such person in the case of a_trust the term substantial_contributor also means the creator of the trust sec_509 provides that unless specifically excepted a domestic or foreign organization described in sec_501 is a private_foundation and subject_to the excise_taxes of chapter of the code xxxxxx sec_4941 of the code imposes an excise_tax on acts of self-dealing between a private_foundation and any of its disqualified persons as defined in sec_4946 sec_4941 of the code defines self-dealing as including the sale_or_exchange of property and the lending of money or other extension of credit between a private_foundation and a disqualified_person whether done directly or indirectly sec_4946 provides in part that the term disqualified_person means with respect to a private_foundation a person who is - a a substantial_contributor to the foundation d a member_of_the_family of any individual described in subparagraph a e a corporation of which persons described in subparagraph a or d own more than percent of the total combined voting power g a_trust or estate in which persons described in subparagraph a or d hold more than percent of the beneficial_interest sec_53 d -1 b of the foundation regulations foundation regulations relating to transactions during the administration of an estate or revocable_trust provides that the term indirect self-dealing shall not include a transaction with respect to a private foundation’s interest or expectancy in property whether or not encumbered held by an estate or revocable_trust including a_trust which has become irrevocable on a grantor’s death regardless of when title to the property vests under local law if - i the administrator or executor of an estate or trustee of a revocable_trust either - a b c possess a power of sale with respect to the property has the power to reallocate the property to another beneficiary or is required to sell the property under the terms of any option subject_to which the property was acquired by the estate or revocable_trust ii iii such transaction is approved by the probate_court having jurisdiction over the estate or by another court having jurisdiction over the estate_or_trust or over the private_foundation such transaction occurs before the estate is considered terminated for federal_income_tax purposes pursuant to paragraph a of sec_1_641_b_-3 of the regulations or in the case of a revocable_trust before it is considered subject_to sec_4947 iv the estate_or_trust receives an amount which equals or exceeds the fair_market_value of the foundation’s interest or expectancy in such property at the time of the transaction taking into account the terms of any option subject_to which the property was acquired by the estate_or_trust and v with respect to transactions occurring after date the transaction either - a b c results in the foundation receiving an interest or expectancy at least as liquid as the one it gave up results in the foundation receiving an asset related to the active carrying out of its exempt purposes or ls required under the terms of any option which is binding on the estate_or_trust sec_53_4941_d_-2 of the foundation regulations provides in part that except in the case of the receipt and holding of a note pursuant to a transaction described in sec_4941 d - b of the foundation regulations an act of self-dealing occurs when a note the obligor of which is a disqualified_person is transferred by a third party to a private_foundation which becomes the creditor under the note analysis generally transactions between a disqualified_person and a foundation are subject_to the self- dealing rules set forth in sec_4941 of the code sec_4941 defines self-dealing to include any direct or indirect sale_or_exchange or leasing of property between a private_foundation and a disqualified_person under sec_53 d -1 b of the regulations the sale by an estate of property in which a private_foundation has an expectancy under a will can be an act of indirect self-dealing if the transaction described above were determined to be an act of self-dealing it would subject the self-dealing persons to an excise_tax on each act of self- dealing between a disqualified_person and a private_foundation pursuant to sec_4941 however in order to apply sec_4941 we must first determine if there are disqualified persons in the transaction with the private_foundation here b is a disqualified_person with respect to x under sec_4946 of the code as a substantial_contributor to x sec_507 of the code defines a substantial_contributor as any person who contributed an aggregate amount of more than dollar_figure to a private_foundation if such amount is more than percent of total contributions b has contributed substantially more than dollar_figure which you state was more than of total contributions additionally c is a disqualified_person with respect to x pursuant to sec_4946 of the code that section states that a member’ of the family of a disqualified_person includes the spouse children of and grandchildren of a disqualified_person c is the spouse of a disqualified_person thus c is a disqualified_person with respect to x xxxxxx however transactions during the administration of an estate regarding the foundation’s interest or expectancy in property held by such estate are not self-dealing if all five conditions set forth in sec_53 d -1 b of the regulations are met such exception to the self-dealing rules is commonly referred to as the estate administration exception sec_53 d -1 a of the foundation regulations states that the term self-dealing means any direct or indirect transaction described in sec_53_4941_d_-2 sec_53_4941_d_-2 provides that the lending of money and other extension of credit between a private_foundation and a disqualified_person shall constitute an act of self-dealing for example an act of self-dealing occurs where a note the obligor of which is a disqualified_person is transferred by a third party to a private_foundation which becomes the creditor under the note however sec_53_4941_d_-2 also provides that such a transfer of a note to a private_foundation does not constitute self-dealing if the foundation receives and holds the note pursuant to a transaction described in sec_53 d -1 b x is the primary beneficiary of the estates of both b and c upon their deaths x will receive by way of bequest cash and notes received from the redemption of a non-voting shares held by m and o ais a disqualified_person under sec_4946 with regard to x because b owns more than of the total combined voting power of a and he is a substantial_contributor with respect to x where a note has been issued subject_to all the safeguards enumerated in sec_53 d - b receipt and continued holding of the promissory note will not be deemed an extension of credit between a foundation and a disqualified_person for purposes of sec_4941 therefore x's holding of an a promissory note and its receipt of a promissory note payments from a after the period of estate administration termination will meet the requirements of sec_53 d - b because i ii iii the trustees of m and o are required to sell the a non-voting shares under the terms of the shareholder agreement with a when b dies a will elect to exercise its option to purchase the a non-voting shares from m and when c dies a will elect to exercise its option to purchase the a non-voting shares from o after the deaths of b and c the transfers will be approved by the probate_court or other court having proper jurisdiction over each estate m and o will transfer any cash and a promissory notes that they receive from the sale of their a non-voting shares to x iv the exercise of a’s option to purchase the a non-voting shares from m and qo binding on m and o is ruling x’s holding of an a promissory note and its receipt of a promissory note payments from a after the period of estate administration terminations will meet the requirements of section xxxxxx d -1 b of the foundation regulations and therefore will not be deemed acts of self-dealing subject_to excise_tax under sec_4941 of the code this private_letter_ruling request was submitted prior to the issuance of revproc_2011_4 section in which a no-rule position was announced with regard to self-dealing issues involving the issuance of a promissory note by a disqualified_person during the administration of an estate_or_trust this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice 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 by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolved questions concerning your federal_income_tax status this ruling should be kept in your permanent records 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 in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely steven grodnitzky manager exempt_organizations technical group enclosure notice


t c summary opinion united_states tax_court jackson m browning petitioner v commissioner of internal revenue respondent docket no 7312-10s filed date jackson m browning pro_se tamara l kotzker and robert a varra for respondent summary opinion gale judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed 1unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as in effect for the year at issue and all rule references are to the tax continued 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 respondent determined a dollar_figure deficiency in petitioner’s federal_income_tax the issues for decision are whether petitioner is entitled to a dependency_exemption deduction a child_tax_credit and a dependent_care_credit for his son for the taxable_year background some of the facts have been stipulated and are so found the stipulation of facts supplemental stipulation of facts and accompanying exhibits are incorporated herein by this reference petitioner’s son h b was born in petitioner and h b ’s mother dane gallardo never married and were living separately throughout permanent orders issued by the district_court adams county colorado state court following a hearing held on date adjudicated petitioner the natural father of h b granted him hours of regular parenting time per week and additional parenting time on specified holidays and ordered him to pay monthly continued court rules_of_practice and procedure all dollar amounts are rounded to the nearest dollar 2pursuant to rule a we refer to minor children by their initials child_support to ms gallardo petitioner and ms gallardo had split the custody of h b evenly before date and strictly abided by the custody provisions of the permanent orders thereafter thus ms gallardo had custody of h b for the greater portion of the permanent orders required petitioner and ms gallardo to alternate claiming the tax dependency_exemption for h b they granted petitioner the right to claim the exemption for and succeeding odd-numbered years and ms gallardo the right to claim the exemption for and succeeding even-numbered years petitioner was not entitled to claim h b as a dependent for a given year unless he had paid all court-ordered child_support for that year the permanent orders were signed by ms gallardo’s attorney indicating they were approved as to form but not by ms gallardo personally petitioner timely filed his federal_income_tax return for therein he claimed with respect to h b a dependency_exemption deduction of dollar_figure a dollar_figure child_tax_credit and a dollar_figure dependent_care_credit petitioner did not submit a form_8332 release of claim to exemption for child of divorced or separated parents with his return nor did he ask ms gallardo to execute such a form before filing his return on date respondent timely issued to petitioner a notice_of_deficiency wherein he disallowed the dependency_exemption deduction child_tax_credit and dependent_care_credit claimed by petitioner for with respect to h b and determined a dollar_figure deficiency in early petitioner asked ms gallardo to execute a form_8332 for by letter to petitioner dated date ms gallardo’s attorney took the position that ms gallardo was not obligated to execute a form_8332 for because petitioner had not paid all the child_support required by the permanent orders in an effort to compel ms gallardo to execute the form petitioner sought a 3as discussed infra form_8332 is the document by which a parent entitled to a dependency_exemption by virtue inter alia of having custody of a child for the greater portion of a calendar_year the custodial_parent can release his or her claim to a dependency_exemption to the other parent the noncustodial_parent see sec_152 sec_1_152-4 income_tax regs 4we note that the amount of the credits disallowed on the face of the notice_of_deficiency dollar_figure exceeds the determined deficiency dollar_figure a form_4549 income_tax examination changes accompanying the notice_of_deficiency credits petitioner with reporting dollar_figure of total_tax due on his return however the copy of petitioner’s return stipulated by the parties reports total_tax due of dollar_figure a schedule of adjustments attached to the notice_of_deficiency indicates that the dollar_figure discrepancy likely resulted from respondent’s treating petitioner as having claimed a dependent_care_credit of dollar_figure rather than the dollar_figure shown on the return remedial contempt order from the state court that would direct ms gallardo to execute a form_8332 for with respect to the dependency_exemption claim for h b action on petitioner’s request for a remedial contempt order was pending at the time of trial in this case after the trial in this case on the day set by the state court for the hearing on remedial contempt ms gallardo executed a form_8332 on which she agreed not to claim an exemption with respect to h b for the form on which ms gallardo’s signature is dated date was received into evidence pursuant to the parties’ stipulation discussion i dependency_exemption deduction sec_151 and c allows taxpayers an annual exemption deduction for each dependent as defined in sec_152 a dependent is either a qualifying_child or a qualifying_relative sec_152 an individual who meets the four requirements in sec_152 a - d with respect to a taxpayer is a qualifying_child of that taxpayer the pertinent factor in this case is the residence requirement to be a qualifying_child the individual must have the same principal_place_of_abode as the taxpayer for more than one-half of the taxable_year sec_152 h b did not reside with petitioner for more than one-half of accordingly h b was not petitioner’s qualifying_child under sec_152 for that year an individual who meets the four requirements in sec_152 a - d with respect to the taxpayer is a qualifying_relative the two pertinent requirements here are that the taxpayer must provide over one-half of the individual’s support for the taxable_year and the individual must not be a qualifying_child of the taxpayer or any other taxpayer for the taxable_year sec_152 and d petitioner did not prove that he provided over one-half of h b ’s support in he also failed to establish that h b was not the qualifying_child of another taxpayer for eg ms gallardo accordingly h b was not petitioner’s qualifying_relative under sec_152 however sec_152 provides a special rule for parents who are seperated divorced or living apart for the last six months of the calendar_year under which a child can be treated as the qualifying_child or qualifying_relative of the noncustodial parent5 notwithstanding the residence requirement of sec_152 or the support requirement of sec_152 under sec_5because ms gallardo had custody of h b for the greater portion of she was the custodial_parent and petitioner was the noncustodial_parent for that year see supra note e and a and b a child that receives over one-half of his support during the calendar_year from his parents and is in the custody of one or both of his parents for more than one-half of the calendar_year shall be treated as the qualifying_child of the noncustodial_parent if a the custodial_parent signs a written declaration in such manner and form as the secretary may by regulations prescribe that such custodial_parent will not claim such child as a dependent for any taxable_year beginning in such calendar_year and b the noncustodial_parent attaches such written declaration to the noncustodial parent’s return for the taxable_year beginning during such calendar_year the internal_revenue_service irs issued form_8332 to standardize the written declaration required by sec_152 see nixon v commissioner tcmemo_2011_249 the temporary_regulation applicable for a taxable_year beginning in required that a noncustodial_parent claiming a dependency_exemption under sec_152 attach to his or her return either a completed 6we are satisfied on the basis of petitioner’s testimony and the terms of the permanent orders that h b received over one-half of his support from and resided for more than one-half of the calendar_year with his parents during respondent does not contend otherwise 7form requires the name of the child the signature of the custodial_parent confirming his or her consent not to claim an exemption for the child the year s for which the claim is being released the date of the custodial parent’s signature the custodial parent’s social_security_number and the name and social_security_number of the noncustodial_parent see 114_tc_184 form_8332 or a document conforming to the substance of form_8332 sec_1 4t a q a-3 temporary income_tax regs fed reg date before its amendment in sec_152 allowed a noncustodial_parent to claim a child as a dependent if he or she provided a threshold_amount of support for the child during the taxable_year and the custodial_parent failed to clearly establish that he or she provided more support than the noncustodial_parent see deficit_reduction_act_of_1984 pub_l_no sec_423 stat pincite h_r rept no part pincite u s c c a n h_r conf rept no pincite 1984_3_cb_1 the former rule often presented difficult problems of proof and substantiation and caused the irs to become involved in disputes between parents over levels of 8the state court permanent orders are not a valid substitute for a form_8332 in this case because they do not bear ms gallardo’s signature but only her attorney’s approving the documents as to form see miller v commissioner t c pincite 9the temporary_regulation was replaced by a permanent regulation effective for taxable years beginning after date t d 2008_2_cb_323 see also sec_1_152-4 income_tax regs the permanent regulation similarly requires a noncustodial_parent claiming a dependency_exemption to attach a completed form_8332 or conforming document to his or her return however under the permanent regulation a written declaration not on a form_8332 must be a document executed for the sole purpose of serving as a written declaration under sec_1_152-4 income_tax regs support h_r rept no part supra pincite9 u s c c a n pincite0 congress amended sec_152 to provide the exemption to the custodial_parent without regard to the parents’ relative support unless the custodial_parent expressly waives his or her right to the exemption in writing thereby providing a bright-line_rule which did not require irs involvement in support disputes id pincite u s c c a n pincite see also armstrong v commissioner t c ___ ___ slip op pincite date consistent with congressional intent we have required strict adherence to sec_152 and the applicable regulations see 114_tc_184 sec_152 provides that a noncustodial_parent may claim the dependency_exemption for a child if the noncustodial_parent attaches the custodial parent’s signed written waiver in a form prescribed by regulations to his or her return for the taxable_year we have concluded in a number of cases that a noncustodial_parent who fails to attach a form_8332 to his or her return as filed is ineligible to claim the dependency_exemption see santana v commissioner tcmemo_2012_49 espinoza v commissioner tcmemo_2011_108 chamberlain v commissioner tcmemo_2007_178 brissett v commissioner tcmemo_2003_310 paulson v commissioner tcmemo_1996_560 presley v commissioner tcmemo_1996_553 here petitioner did not obtain a signed form_8332 from ms gallardo until date after she had already claimed the dependency_exemption for h b and the period of limitations for her taxable_year had almost certainly closeddollar_figure thus allowing petitioner the deduction at this juncture would result in the dependency_exemption for h b having been deducted twice for for the foregoing reasons we conclude that petitioner has not satisfied the requirements of sec_152 and is therefore not entitled to claim a dependency_exemption for h b for ii child_tax_credit sec_24 allows a credit for each qualifying_child of a taxpayer a qualifying_child for this purpose is a qualifying_child as defined in sec_152 who has not attained the age of sec_24 since we have determined above that h b was not petitioner’s qualifying_child for within the meaning of sec_152 even as augmented by the special rule_of section 10in contrast the document signed by the custodial_parent in armstrong v commissioner t c ___ ___ slip op pincite date existed at the time the noncustodial_parent filed his return but was not submitted with the return 11respondent contends that the period of limitations for ms gallardo’s taxable_year has closed and that she claimed a dependency_exemption for h b for that year petitioner has not disputed the foregoing e it follows that petitioner is not entitled to a child_tax_credit for h b for dollar_figure see himes v commissioner tcmemo_2010_97 iii dependent_care_credit sec_21 allows a credit to taxpayers with respect to whom there are one or more qualifying individuals equal to a percentage of the employment-related_expenses paid_by the taxpayer during the taxable_year for purposes of sec_21 a qualifying_individual includes a dependent as defined in sec_152 who has not attained age sec_21 generally employment-related_expenses include expenses for household services and care of a qualifying_individual incurred to enable the taxpayer to be gainfully_employed sec_21 because we have determined that h b was not petitioner’s dependent under sec_152 for even taking into account the special rule_of sec_152 for parents living apart petitioner is not entitled to a credit under sec_21 moreover even if h b had qualified as petitioner’s dependent under the special 12while the cross-reference in sec_24 to sec_152 does not expressly incorporate the special rule_of sec_152 the legislative_history shows that congress intended such an incorporation see h_r conf rept no pincite- u s c c a n staff of j comm on taxation general explanation of tax legislation enacted in the 108th congress pincite j comm print rule_of sec_152 the dependent_care_credit is available only to the custodial_parent in these circumstances see sec_21 iv conclusion while the result with respect to the dependency_exemption and child_tax_credit may seem harsh in this case given that petitioner was entitled under the terms of the state court’s permanent orders to have ms gallardo provide to him a form_8332 on a timely basis her failure to do so cannot be remedied in this proceeding we are a court of limited jurisdiction generally lacking equitable powers and must apply the federal tax statutes and regulations as written as previously discussed sec_152 was intended by congress to preclude the irs and the federal courts from becoming embroiled in disputes between parents over child_support issues and the like petitioner’s remedy if any for ms gallardo’s failure to comply with the permanent orders by providing him with a timely executed form_8332 lies with the state court accordingly we sustain the deficiency respondent determined in petitioner’s income_tax to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number --------------------------------- ----------------- ------------------------------------------ -------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number -------------------- refer reply to cc psi b01 plr-100699-08 date date legend x -------------------------------------------------- ----------------- state date date date -------- ----------------- ---------------------- ---------------------- trust -------------------------------------------------- -------------------------------------------------------- dear ------------ this responds to a letter dated date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts according to the information submitted x was incorporated on date under the laws of state x elected to be treated as an s_corporation effective date on date stock in x was transferred to trust pursuant to the terms of the will of a deceased shareholder trust qualified as a permissible s_corporation shareholder under sec_1361 for the two-year period beginning on the date plr-100699-08 on date trust became an ineligible shareholder of x as a result x’s election to be an s_corporation terminated x represents that trust has at all times since the transfer of x stock to trust met the requirements of a qualified_subchapter_s_trust qsst within the meaning of sec_1361 however the beneficiary of trust failed to timely file an election under sec_1361 for trust to be a qsst x represents that x and trust were unaware of the need to file a qsst election in order for trust to continue to qualify as an eligible s_corporation shareholder beginning on date x further represents that it did not intend for its s_corporation_election to terminate and the termination was not motivated by tax_avoidance finally x and its shareholders agree to make any adjustments required by the secretary consistent with the treatment of x as an s_corporation law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation that is not an ineligible_corporation and that does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be an s_corporation shareholder sec_1361 provides that for purposes of sec_1361 a_trust with respect to stock transferred to it pursuant to the terms of a will is a permitted shareholder but only for the 2-year period beginning on the day on which such stock is transferred to it sec_1361 provides that a qsst whose beneficiary makes an election under sec_1361 will be treated as a_trust described in sec_1361 and the qsst’s beneficiary will be treated as the owner for purposes of sec_678 of that portion of the qsst’s s_corporation stock to which the election under sec_1362 applies sec_1361 defines a qsst as a_trust a the terms of which require that i during the life of the current income_beneficiary there shall be only one income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current beneficiary in the trust shall terminate on the earlier of the beneficiary’s death or plr-100699-08 the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to that beneficiary and b all of the income with the meaning of sec_643 of which is distributed or required to be distributed currently to one individual who is a citizen or resident_of_the_united_states sec_1362 provides that an election under sec_1362 shall be terminated whenever the corporation ceases to be a small_business_corporation sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was terminated under paragraph or of sec_1362 the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in termination steps were taken so that the corporation is once more a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the circumstances resulting in the termination the corporation will be treated as continuing to be an s_corporation during the period specified by the secretary conclusion based solely on the information submitted and the representations made we conclude that x’s s election terminated on date when trust became an ineligible s_corporation shareholder and that the termination was inadvertent within the meaning of sec_1362 therefore x will be treated as continuing to be an s_corporation from date and thereafter provided that x’s s_corporation_election was otherwise valid and was not otherwise terminated under sec_1362 this ruling is contingent upon x and all of its shareholders treating x as having been an s_corporation and trust as having been a qsst for the period beginning date and thereafter within days from the date of this letter the beneficiary of trust must file an election to treat trust as a qsst effective date with the appropriate service_center a copy of this letter should be attached to the election if these conditions are not met then this ruling is null and void 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 specifically no opinion is expressed concerning whether x is otherwise eligible to be treated as an s_corporation or whether trust is eligible to be treated as a qsst plr-100699-08 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s david r haglund senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


internal_revenue_service number info release date index number ----------------------------- ------------------------------- ------------------------------ department of the treasury washington dc person to contact --------------------- id no ----------- telephone number --------------------- refer reply to cc psi b1 - genin-150278-03 date nov taxpayer --------------------------- dear ----------------- this responds to your letter dated date in which it was requested that we recognize taxpayer’s election to be an s_corporation effective date a corporation which meets the definition of a small_business_corporation under sec_1362 of the internal_revenue_code may elect to be treated as an s_corporation in order for an s_corporation_election to be effective for the taxable_year in which it is made it must be made within the first two and one-half months of the corporation’s taxable_year sec_1362 if an s election is made after that time then the corporation will not be treated as an s_corporation until the taxable_year following the one in which the s election was filed sec_1362 an election made after the first two and one-half months of the taxable_year in which it is intended to be effective may be treated as effective if the secretary determines that there was reasonable_cause for the corporation’s failure to make a timely election sec_1362 announcement copy enclosed provides guidance on seeking relief for late s_corporation elections generally to request relief for a late s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a private_letter_ruling are set out in revproc_2003_1 copy enclosed in addition revproc_2003_1 requires taxpayers to submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their tax_return for the most recent 12-month taxable_year qualify for a reduced user_fee in the amount of dollar_figure if you qualify for the reduced fee you must include a statement certifying your gross_income for the last 12-month taxable_year otherwise the higher fee will apply if you decide to submit a formal request for a private_letter_ruling please review appendix b of revproc_2003_1 and be certain to include all required procedural statements also include the proper user_fee and any documents that substantiate your intent to be an s_corporation from inception please refer your request to our office by adding the following to the address we hope that this information is helpful to you if you have additional questions please contact rebekah myers at not a toll-free call as requested in the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer s dianna k miosi sincerely dianna k miosi chief branch office of office of the associate chief_counsel passthroughs and special industries attn cc pa t p o box ben franklin station washington dc direct to cc psi room enclosures announcement revproc_2003_1


t c memo united_states tax_court willis clark petitioner v commissioner of internal revenue respondent docket no filed date held p’s case is dismissed for failure properly to prosecute pursuant to rule b tax_court rules_of_practice and procedure with respect to income_tax deficiencies determined for taxable years and held further p is liable for civil_fraud penalties for and in accordance with sec_6663 i r c willis clark pro_se nicholas j richards for respondent -- - memorandum findings_of_fact and opinion nims judge respondent determined the following deficiencies and penalties with respect to petitioner’s federal income taxes for the taxable years and taxable_income tax penalty year deficiency sec_6663 dollar_figure dollar_figure big_number big_number unless otherwise indicated all section references are to sections of the internal_revenue_code in effect for the years at issue and all rule references are to the tax_court rules_of_practice and procedure the issues for decision are whether petitioner’s case should be dismissed for failure properly to prosecute with respect to the deficiencies determined by respondent and whether petitioner is liable for civil_fraud penalties pursuant to sec_6663 findings_of_fact procedural background on date respondent issued to petitioner a statutory notice determining that petitioner was liable for deficiencies and fraud penalties for the and taxable years the deficiencies were based in large part upon respondent’s determination that petitioner received unreported income during those years on date petitioner filed a petition with this court disputing the full amount of the deficiencies and penalties petitioner at that time resided in riverside california respondent then answered the petition and further set forth specific allegations of fact in support of the fraud penalties petitioner’s subsequent reply denied nearly all of respondent’s affirmative allegations and maintained that petitioner’s tax reporting was full and accurate after close of the pleadings this case was set for trial and copies of the court’s standing_pretrial_order were served on the parties therein petitioner and respondent were directed to begin discussions as soon as practicable to stipulate facts to the maximum extent possible and to submit trial memoranda if a basis of settlement could not be reached prior to trial the pretrial order also warned generally that any unexplained failure to comply with its provisions could result in sanctions including dismissal and stated specifically that failure to cooperate in the stipulation process was a potential ground for such sanctions on date at which time this case was calendared for trial beginning on date respondent’s counsel wrote q4e- to petitioner proposing a conference for date the stated purpose of the conference was to commence the process of obtaining informal_discovery and preparing a stipulation of facts neither petitioner nor a representative attended this meeting on date respondent then served on petitioner interrogatories a request for admissions and a request for production of documents petitioner responded on date to respondent’s request for admissions but sent no response to either the interrogatories or the request for production of documents as a result respondent on date filed motions to compel responses to interrogatories and to compel production of documents these motions were granted by the court and petitioner was ordered to comply on or before date petitioner failed to do so meanwhile on date respondent’s counsel sent to petitioner a proposed stipulation of facts thereafter following several unsuccessful attempts to communicate regarding the pending discovery matters and proposed stipulation respondent on date requested and was given leave to file a motion for an order under rule f to show cause why proposed facts in evidence should not be accepted as established this motion was granted and petitioner was ordered to show cause at trial on date why the facts and evidence recited in - - respondent’s proposed stipulation of facts should not be deemed established respondent also submitted a trial memorandum prior to trial petitioner did not on date petitioner appeared at the call of this case petitioner asked for an extension primarily on grounds that he had been unable to obtain an attorney and that alleged medical reasons prevented him from proceeding in support of his medical claims petitioner provided two documents one was a single-paragraph memorandum from petitioner stating that he was physically unable to undergo the stress of a public hearing or trial and also referencing the second document this second document was a letter dated date from a physician at the jerry l pettis memorial veterans’ hospital to the riverside office of the jury commissioner recommending that petitioner be permanently excused from jury duty on account of multiple medical problems the court then explained to petitioner that he could represent himself and that the eleventh-hour allegations of medical problems were not a sufficient basis for further delay ample time and opportunity had existed prior to trial for petitioner to prepare his case and to communicate with the court regarding any relevant situations the court therefore informed petitioner that the government would be permitted to proceed with its case regardless of whether petitioner elected to stay and -- - participate petitioner chose at that point to leave the courtroom and has had no further contact with the court following petitioner’s departure the court made absolute the rule f order to show cause ordering that the facts set forth in respondent’s proposed stipulation of facts be accepted as established for purposes of this case and that the exhibits attached thereto be received into evidence in light of these developments respondent also moved orally to dismiss petitioner’s case insofar as concerned the tax deficiencies determined in the statutory notice for failure properly to prosecute the court took this motion under advisement and respondent then presented testimony and documentary_evidence with respect to the fraud penalties factual background as indicated above some of the facts have been stipulated pursuant to rule f and such facts are so found these stipulations with accompanying exhibits are incorporated herein by this reference prior to and during the years at issue petitioner owned and operated the appliance recycling factory arf a sole_proprietorship arf was engaged in the business of buying used appliances refurbishing them and then reselling the refurbished appliances sales of the appliances were made to customers through cash check credit and barter transactions at least - to percent and up to as much as one-third of arf’s gross_receipts typically took the form of cash petitioner actively endeavored to increase the proportion of cash sales by advertising to pay the sales_tax with respect to any purchase for which payment was made in cash the cash received by petitioner through arf was used to pay both business and personal expenses expenditures_for employee wages and purchases from vendors for instance were often made in cash during and petitioner maintained nine bank accounts that were used for both business and personal purposes in a total of dollar_figure was deposited into these accounts including dollar_figure cash in the deposits totaled dollar_figure of which dollar_figure was cash petitioner did not deposit arf’s cash receipts in his bank accounts sales invoices prepared by petitioner’s employees at the time of each appliance sale were forwarded to arf’s bookkeeper nina nippe petitioner instructed ms nippe in preparing arf’s books_and_records to hold back to percent of receipts primarily those in cash from the sales journal petitioner indicated to ms nippe that he wished to get even with the irs for an audit conducted in the late 1970s or early 1980s ms nippe complied with this instruction at times withholding in excess of to percent when cash sales surpassed that ratio --- - the business records so prepared were then sent by petitioner to his return preparer for the years at issue jerry butler mr butler obtained the data used in preparing petitioner’s and returns from the business records supplied by petitioner mr butler was not provided with the original receipts detailing arf’s sales when subsequent to the years in issue mr butler noticed discrepancies in certain of petitioner’s records he confronted ms nippe and was told at that time about the withholding of sales mr butler ceased to represent petitioner and thereafter sent to the accountant who apparently had succeeded him in petitioner’s employ a letter dated date which included the following explanation it was reluctant to do the books since after i filed the last tax_return nina his bookkeeper disclosed to me that she conspired with mr clark to destroy sales slips not report any cash sales and that she therefore prepared sales journals that did not reflect the truthful activities of appliance recycling factory i requested that she reconstruct proper records she stated that with the destroyed records by mr clark his employees and herself that she felt this was not possible i am therefore reluctant to perform any services due to the tax_evasion problems the and tax returns filed by petitioner reflect gross_sales for arf of dollar_figure and dollar_figure respectively net_profit_or_loss from the business is shown as dollar_figure for and dollar_figure for petitioner then reports total taxable_income of dollar_figure in and a loss of dollar_figure in - during the subsequent examination of petitioner’s and returns petitioner’s income was reconstructed using a bank_deposits and cash expenditures analysis through this method it was determined that arf had gross_sales in and of at least dollar_figure and dollar_figure respectively these adjustments resulted in increases of dollar_figure for and dollar_figure for in the income reported by petitioner respondent additionally determined that petitioner failed to include an ending inventory of dollar_figure in calculating his cost_of_goods_sold for and received unreported rental income in the amounts of dollar_figure and dollar_figure respectively for the years at issue with other expense disallowances and computational adjustments it was determined that petitioner underreported his taxable_income by dollar_figure for and by dollar_figure for opinion i income_tax deficiencies dismissal is governed by rule b which provides in relevant part for failure of a petitioner properly to prosecute or to comply with these rules or any order of the court or for other cause which the court deems sufficient the court may dismiss a case at any time and enter a decision against the petitioner the court may for similar reasons decide against any party any issue as to which such party has the burden_of_proof and such decision shall be treated as a dismissal the granting of a dismissal under rule b lies within the discretion of the trial_court and requires us to balance -- - potentially rival considerations 82_tc_413 affd without published opinion 772_f2d_910 9th cir 67_tc_931 affd 565_f2d_954 5th cir the policy of having cases heard on their merits must be weighed against the policy of avoiding harassment to the defending party arising from unjustifiable delay brooks v commissioner supra pincite freedson v commissioner supra pincite in evaluating the propriety of a dismissal in the matter now before us we first address the threshold burden_of_proof issue before turning to the relevant policy concerns with respect to income_tax deficiencies the petitioner generally bears the burden_of_proof rule a furthermore although sec_7491 applicable to court proceedings that arise in connection with examinations commencing after date may place the burden on the commissioner in certain circumstances a prereguisite is that the taxpayer present credible_evidence sec_7491 internal_revenue_service restructuring reform act of publaw_105_206 sec c 112_stat_685 116_tc_438 thus while the record in the instant case does not indicate when the examination of petitioner’s returns began petitioner has failed to present any evidence and so could not gualify for the protections of sec_7491 accordingly petitioner here bears the burden of proving that respondent’s deficiency determinations are in error as regards the two pertinent policy considerations identified above we are equally satisfied that the balance weighs strongly against petitioner in the many months that have passed since his petition was filed petitioner has been uncommunicative uncooperative and has otherwise failed to make any meaningful efforts whatsoever to prepare his case for trial he has acted in contravention of our standing_pretrial_order has refused to engage in informal_discovery has ignored orders directing formal discovery has stipulated no facts has failed to submit a trial memorandum and has appeared before the court on the day of trial completely unprepared to proceed hence while it is true that petitioner will suffer the detriment of not being heard on the merits of his case he has given us no reason to believe that he is inclined to prepare for doing so at any time in the foreseeable future in contrast respondent has already expended significant effort in attempting to bring this matter to resolution we therefore must conclude given the pattern of petitioner’s behavior and the unlikelihood of impending improvement that further delay and the harassment -- caused thereby to respondent cannot be justified we shall grant respondent’s motion to dismiss pursuant to rule b and shall enter a decision against petitioner as to the determined deficiencies for taxable years and il fraud penalties sec_6663 provides for the imposition of a penalty in an amount equal to percent of the portion of the underpayment which is attributable to fraud in addition sec_6663 b specifies that if any portion of the underpayment is attributable to fraud the entire underpayment is treated as attributable thereto except and to the extent that the taxpayer establishes some part is not due to fraud respondent bears the burden of proving the applicability of the civil_fraud penalty by clear_and_convincing evidence sec_7454 rule b to sustain this burden respondent must establish by this level of proof both that there was an underpayment_of_tax for each taxable_year at issue and that at least some portion of such underpayment was due to fraud dilleo v commissioner 96_tc_858 affd 959_f2d_16 2d cir 92_tc_661 a underpayments of tax where allegations of fraud are intertwined with unreported and indirectly reconstructed income the commissioner may satisfy - - the first prong of the above test either by proving a likely taxable source for alleged unreported income or where the taxpayer asserts a nontaxable source by disproving the nontaxable source 355_us_595 348_us_121 dileo v commissioner supra pincite the commissioner may not however simply rely on the taxpayer’s failure to prove error in the deficiency determination dibleo v commissioner supra pincite 53_tc_96 here the evidence clearly establishes cash sales made by arf as a likely source of unreported income furthermore petitioner has at no time alleged nontaxable sources in an amount sufficient to negate the purported unreported income and respondent’s bank_deposits analysis took into account nontaxable transfers and loans in excess of dollar_figure the record thus contains clear_and_convincing proof that petitioner underpaid his income taxes for the and taxable years b fraudulent intent the second prong of the fraud test requires respondent to show that a portion of the foregoing underpayment is attributable to fraud fraud for this purpose is defined as intentional wrongdoing on the part of the taxpayer with the specific purpose of avoiding a tax believed to be owed 398_f2d_1002 3d cir 394_f2d_366 5th cir affg tcmemo_1966_81 252_f2d_56 9th cir stated differently imposition of the civil_fraud penalty is appropriate upon a showing that the taxpayer intended to evade taxes believed to be owing by conduct designed to conceal mislead or otherwise prevent the collection_of_taxes dibleo v commissioner supra pincite brooks v commissioner t c pincite the existence of fraud is a question of fact to be resolved upon consideration of the entire record brooks v commissioner supra pincite 67_tc_181 affd without published opinion 578_f2d_1383 8th cir fraud will never be presumed brooks v commissioner supra pincite 55_tc_85 however because direct proof of a taxpayer’s intent is seldom available fraud may be established by circumstantial evidence 317_us_492 brooks v commissioner supra pincite in this connection courts have developed a nonexclusive list of circumstantial indicia or badges_of_fraud that will support a finding of fraudulent intent in 796_f2d_303 9th cir affg tcmemo_1984_601 the court_of_appeals for the ninth circuit to which appeal of this case would normally lie enumerated the following badges_of_fraud distilled from then- -- - existing case law understatement of income inadequate records failure_to_file tax returns implausible or inconsistent explanations of behavior concealing assets and failure to cooperate with tax authorities the court_of_appeals also identified dealing in cash as an additional fact which would support a finding of fraud id pincite applying these considerations to the case at bar we conclude that petitioner fraudulently intended to underpay tax for each of the years at issue the record unequivocably demonstrates that petitioner understated his income maintained inadequate records failed to cooperate with taxing authorities and engaged in extensive dealings in cash moreover the evidence reveals that petitioner expressly directed the preparation of false business records to conceal a significant percentage of his cash transactions and then himself provided those erroneous records to his return preparer the only logical inference to be drawn from such circumstances is that petitioner knowingly and actively structured his affairs with the specific - purpose of avoiding his federal tax obligations we hold that petitioner is liable for the sec_6663 civil_fraud penalties as determined by respondent to reflect the foregoing an appropriate order will be issued granting respondent’s motion to dismiss and decision will be entered for respondent


t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n department of the treasury inte rnal reve nue s ervi ce washington d c uil person to contact and id number contact telephone number number release date date date i am responding to your inquiry dated date requesting clarification on the requirements of revproc_2009_32 specifically you requested clarification on the date reporting requirements of sec_4 of the revenue_procedure i apologize for the delay in responding to your inquiry revproc_2009_32 has been superseded by revproc_2011_33 i have enclosed a copy for your reference revproc_2011_33 provides the extent to which donors grantors and contributors may rely on the listing of an organization in publication cumulative list of organizations described in sec_170 of the internal_revenue_code or on the irs business_master_file bmf extract for purposes of deducting contributions under sec_170 and for making grants under sec_4942 sec_4945 and sec_4966 section dollar_figure provides with certain exceptions that private_foundations and sponsoring organizations of donor-advised funds may rely on an organization’s foundation status or supporting_organization type set forth in publication or the bmf extract for grant making purposes under sec_4942 sec_4945 and sec_4966 sec_4 provides that a donor grantor or contributor may rely on information from the bmf extract that is obtained from a third party so long as the following requirements are met the third party provides a report to the grantor or contributor that includes a the organization’s name ein foundation status under sec_509 or including supporting_organization type if applicable and whether contributions to such organization are deductible b a statement that the information is from the most current update of the bmf extract and the bmf extract revision date and c the date and time the information was provided to the grantor or contributor and the grantor or contributor retains a copy of the report in hard copy or electronically the bmf extract is located on our website at www irs gov under the heading soi tax stats- exempt_organizations irs master_file data this website page provides the exact date including the month day and year of the most recent update of the extract a third party must include this full date in order for a donor or grantor to rely on a bmf extract obtained from the third party i hope this information is helpful if you have any questions please call identification_number at enclosure mary jo salins acting manager exempt_organizations guidance sincerely