internal_revenue_service number release date index number -------------------------------------- --------------------------------------------- -------------------------------- ---------------------------------------- in re ------------------------------------ ---------------------------------- ---------------------------------------- department of the treasury washington dc person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc intl b02 - plr-124796-02 date october ------------ ---------------------- ---------------------- do ---------------------ty ------------------- legend accountant attorney country a fund fund management grantor_trust husband pfic pfic pfic taxpayers -------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------- wife ------------------------------------------- ---------------------------- ------------------------------------------ ---------------------------- ------------------------------------- ------------------------------------------------ -------------------------------------------- -------------------------------------------- this is in response to a letter dated date supplemented and corrected plr-124796-02 dear ------------------------------ by information submitted on date date date and date requesting consent under sec_1_1295-3 to make retroactive qualified_electing_fund qef elections to treat the stock directly and indirectly owned by taxpayers in each passive_foreign_investment_company pfic listed below as stock in a qef effective as of the first taxable_year taxpayers owned such stock representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts and representations the following facts in connection with their private_letter_ruling request taxpayers have represented the rulings contained in this letter are based upon information and taxpayers are married and file a joint federal_income_tax return as calendar- year cash-basis taxpayers taxpayers are grantors of grantor_trust a u s trust taxpayers are treated as owners of grantor_trust under sec_671 through in grantor_trust acquired an interest in pfic a passive_foreign_investment_company during the years at issue grantor_trust also held an interest in fund a country a limited_partnership fund in fund acquired an interest in two pfics pfic and pfic pfic pfic and pfic are not controlled_foreign_corporations cfcs within the meaning of sec_951 through of the internal_revenue_code code taxpayers were advised by attorney prior to his retirement in regarding various tax matters including the tax consequences of their investments attorney specialized in tax law while representing taxpayers attorney was aware that taxpayers and limited_partnership were investing in foreign_corporations either directly all section references are to the internal_revenue_code_of_1986 or the corresponding treasury regulations thereunder plr-124796-02 or indirectly through investments in foreign limited_partnership funds however attorney failed to examine whether some such foreign_corporations were pfics and as a result attorney failed to advise taxpayers of the possibility of making or the consequences of failing to make a qef election in addition to attorney taxpayers relied on accountant since to prepare their federal_income_tax returns and the federal_income_tax returns for limited_partnership including matters such as the tax consequences of making or failing to make qef elections although accountant was aware that taxpayers invested in various investment funds accountant was unaware that these funds invested in pfics and as a result did not advise taxpayers of the possibility of making or the consequences of failing to make a qef election taxpayers have submitted affidavits executed by attorney and accountant which reflect the above statements concerning their failures to advise taxpayers of the possibility of making or the consequences of failing to make qef elections taxpayers first became aware that they might own stock in pfics in date upon receiving notification from fund management that it was investigating whether the funds in which taxpayers and their family members invested included corporations that are pfics in july of fund management sent taxpayers confirmation that they owned stock in pfics ruling requested taxpayers request the consent of the commissioner of internal revenue to make retroactive qef elections under sec_1_1295-3 to treat pfic pfic and pfic as a qef effective as of the first taxable_year in which they owned stock such pfic law and analysis sec_1295 provides the general_rule that any pfic shall be treated as a qef with respect to the taxpayer provided an election by the taxpayer under sec_1295 applies to such company for the taxable_year and the company complies with requirements that the secretary may prescribe for purposes of determining the ordinary_earnings and net_capital_gain of such company and otherwise carrying out the purposes of subpart b treatment of qualified electing funds plr-124796-02 sec_1_1295-1 provides that a u_s_person that is treated under sec_671 through as the owner of a portion of a domestic_trust that owns an interest in stock of a pfic makes the sec_1295 election with respect to that pfic sec_1295 provides that a taxpayer may make a qef election with respect to a pfic for any taxable_year of the taxpayer sec_1_1295-1 provides that a foreign_corporation with respect to which a sec_1295 election is made will be treated as a qef for its taxable_year ending with or within the shareholder’s election_year and all subsequent taxable years of the foreign_corporation that are included wholly or partly in the shareholder’s holding_period or periods of stock of the foreign_corporation sec_1295 states that an election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return of the tax_imposed_by_chapter_1 for such taxable_year election due_date to the extent provided in regulations an election may be made later than the election due_date where the taxpayer fails to make a timely election because the taxpayer reasonably believed the company was not a pfic retroactive election sec_1_1295-3 provides that a shareholder may request the consent of the commissioner to make a retroactive election if the shareholder satisfies the following requirements the shareholder reasonably relied on a qualified_tax professional granting consent will not prejudice the interests of the united_states government the shareholder requests consent before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies all procedural requirements set forth in sec_1_1295-3 as provided in sec_1_1295-3 a shareholder is deemed to have reasonably relied on a qualified_tax professional only if the shareholder reasonably relied on a qualified_tax professional who failed to identify the foreign_corporation as a pfic or failed to advise the shareholder of the consequences of making or failing to make a qef election the section further states that a shareholder will not be considered to have reasonably relied on a qualified_tax professional if the shareholder knew or reasonably should have known that the foreign_corporation was a pfic and of the availability of a sec_1295 election or knew or reasonably should have known that the qualified_tax professional was not competent to render tax_advice with respect plr-124796-02 to ownership of shares of a foreign_corporation or did not have access to all relevant facts and circumstances in the present case taxpayers relied upon attorney for advice on various tax matters including the tax consequences of foreign investments taxpayers also relied upon accountant for their federal_income_tax return preparation including the consequences of making or failing to make available elections such as a qef election taxpayers were not tax professionals and were unaware that the foreign_corporations in which they invested directly or indirectly were pfics until it was brought to their attention in attorney and accountant were competent to render tax_advice with respect to stock ownership in a foreign_corporation but did not identify the foreign_corporations in which taxpayers invested indirectly as pfics or inform taxpayers of the availability of a qef election taxpayers reasonably relied on a qualified_tax professional within the meaning of treas reg ' f i and the second requirement of sec_1_1295-3 states that the commissioner may grant consent to a taxpayer to make a retroactive election only if granting consent will not prejudice the interests of the united_states government sec_1_1295-3 provides that the interests of the united_states government are prejudiced if granting the request would result in the shareholder having a lower tax_liability taking into account applicable_interest charges in the aggregate for all years affected by the retroactive election other than by a de_minimis amount than the shareholder would have had if the shareholder had made the qef election by the election due_date taking into account the time_value_of_money for purposes of the computation if granting relief would prejudice the interests of the united_states government the commissioner may in his sole discretion grant consent to make a retroactive election provided the shareholder enters into a closing_agreement with the commissioner that requires the shareholder to pay an amount sufficient to eliminate any prejudice to the government as a consequence of the shareholder’s inability to file amended returns for the closed taxable years sec_1_1295-3 in the present case it has been determined that granting relief will not prejudice the interests of the united_states government the third requirement to be met under sec_1_1295-3 is that the request must be made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder taxpayers represent that they made the request for consent to make retroactive qef elections before the issue was raised on audit the final requirement for a retroactive election under sec_1_1295-3 is that the procedural requirements set forth in sec_1_1295-3 must be met the procedural requirements set forth include filing a request for consent to make plr-124796-02 a retroactive election and appropriate user_fee with the office of the associate chief_counsel international treas reg ' f i additionally affidavits signed under penalties of perjury must be submitted by the shareholder and any qualified_tax professional upon whose advice the shareholder relied treas reg ' f ii and iii these affidavits must describe the events that led to the failure to make a qef election by the election due_date the discovery of such failure and the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on such professional taxpayers have submitted affidavits meeting the requirements set forth in sec_1_1295-3 describing the failures of attorney and accountant to inform taxpayers of the need to make qef elections taxpayers have submitted the appropriate user_fee therefore taxpayers have met the procedural requirements of sec_1_1295-3 are granted consent to make retroactive qef elections under sec_1_1295-3 with respect to their direct ownership in pfic effective for their taxable_year and with respect to their indirect ownership in pfic and pfic effective for their taxable_year provided taxpayers comply with rules under sec_1 g regarding the time and manner for making a retroactive qef election the code provides that it may not be used or cited as precedent relevant letter is being sent to taxpayers this ruling is directed only to the taxpayer s requesting it sec_6110 of based on the information submitted and the representations made taxpayers in accordance with the power_of_attorney on file with this office a copy of this a copy of this letter must be attached to any income_tax return to which it is sincerely valerie a mark lippe senior technical reviewer branch office of associate chief_counsel international cc ------------------------------------


a sw 8h - od pate-oct department of the treasury internal_revenue_service washington d c contact person id number of e04 telephone number u w a o m n u q ladies and gentlemen this is in reply to a letter dated june from your legal_representative in which she requested rulings concerning the income_tax consequences of certain transactions arising from a recent corporate_reorganization b was created to specifically act as the parent in the e and f system to provide administrative services to cc the services that were formerly provided to c and d by employees of both will be provided by b administrative services will be transferred to b is provide services to c e and f and to ensure that they operate in a manner consistent with the best interests of the system as b will also interact with outside agencies interested in programs undertaken by c any employees providing shared a whole thus b's role d d e and f d the reorganization is intended to transfer administrative so that b may focus on administration of the system staff to b and the operational entities may dedicate themselves exclusively to the services being provided monitor and guide the activities of to ensure that all components of the resulting system work together ina complementary manner to reduce functional overlaps and maximize the utilization of available_resources in its role as parent b will e and f d c ss oe b was created at the request of many of c's and d's funders c and d were coordinated in all ways because the organizations had similar administation shared facilities and similar though different goals thought it would be best to have an entity ensuring that the operation of were not competing with each other for resources directors of concert and believed that it would be d e and f c creation of d e and f then became in effect subsidiaries of e and f agreed because they had often acted in on in the best interests of d e and f entailed the c b which is the sole member of and that they the boards of the reorganization of the funders e and pf d c d c b the reorganization also entailed the amendment of the amendments are intended to provide b with sufficient e and f's governing documents to provide that b will be the sole member of each entity and to reserve certain powers to b member control and authority to ensure that the system operates as one exempt unit system with c a result of the reorganization the system is subject_to common_control and b has authority to ensure integration of activities of and f b has the authority to act as the parent in the e and f as subsidiaries thus as as cc d d cc d e we have determined that b is tax-exempt under sec_501 a and other than a private_foundation under section of the code in separate correspondence c is an exempt educational_organization described in section and classified as other than a private_foundation under the purpose c sec_509 a of programming to minority inner city youth and emerging and established professional artists to further their careers visibility and professional standing to provide high quality arts education to assist and b a ii of the code is two-fold c d is an exempt post-secondary educational_organization and classified as other than a desribed in sec_501 private_foundation under sec_509 of the code is basic readjustment and occupational skill training to the unemployed disadvantaged and dislocated worker population in southeastern g and b a ii to provide remedial the primary objective of d e is an exempt_organization described in sec_501 c and classified as other than a private_foundation under sec_509 of to undertake fundraising on behalf of contributions to build an endowment for both c and d e solicits potential funders for the code c and d e's purpose is a f is an exempt_organization described in sec_501 c and classified as other than a private_foundation under sec_509 of the code a facility so that there would be economic development and employment opportunities in the area around c and d to create an incubator in f's purpose is b has represented that c d eb and f will continue to operate in accordance with their previously stated exempt purposes that b will operate as represented herein and in its form_1023 application that the reorganization was undertaken to facilitate the long-term viability of permitting one board_of directors to make decisions as best course for the system as directors for c they believe to be respectively e and f will continue to operate in a manner the separate boards of in the best interests of a whole and f by e and f to the d d c e c d b has further represented that it will be reimbursed by c e and f for the costs of administrative services provided to d hand f b does not anticipate receiving excess funding d cc sec_501 of the code provides for the exemption from federal_income_tax of exclusively for educational and charitable purposes an organization organized and operated sec_1 c -1 d of the income_tax regulations provides that the term charitable is used in sec_501 c of the code in its generally accepted legal sense and is therefore not to be construed as limited by the separate enumeration in sec_501 which may fall within the broad outlines of charity as developed by judicial decisions of the other tax-exempt purposes sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations described in seetion c sec_512 of the code defines unrelated_business_taxable_income generally as gross_income received by an exempt_organization from an unrelated_trade_or_business regularly carried on by it less allowable deductions sec_513 a of the code defines an unrelated_trade_or_business in the case of any organization subject_to the tax imposed by sec_511 as any trade_or_business the conduct of which is not substantially related aside from the need of such organization’for income or funds or the use makes of it the profits derived to the exercise or performance by such organization of its exempt_purpose sec_509 of the code provides that a sec_501 ce is described a private_foundation unless it organization shall be in sec_509 through a sec_509 a of the code describes an organization that is organized and operated exclusively to support or benefit one or more specified sec_509 which have a degree of control or supervision over the supporting_organization organizations or sec_1_509_a_-4 c of the regulations provides that an organization is organized exclusively for one or more of the purposes specified in sec_509 a only if its articles of organization i ii iii iv limit the purposes of such organization to one or more of the purposes set forth in sec_509 a a do not expressly empower the organization to engage in activities which are not in furtherance of the purposes referred to of this subparagraph in subdivision i state the specified publicly supported organizations on whose behalf such organization is to be operated within the meaning of paragraph d of this section and do not expressly empower the organization to operate to support or benefit any organization other than the specified publicly supported organizations referred to this subparagraph in subdivision tiii of sec_1_509_a_-4 of the regulations provides in part that a supporting_organization will be regarded as ‘operated exclusively' to support one or more specified publicly supported organizations herein after referred to test' benefit the specified or publicly supported organizations it engages solely in activities which support or as the ‘operational only if sec_509 a b of the code sets forth three different types of relationships one of which must be met section s01 c organization to qualify under the provisions of sec_509 a supporting_organization may be in order for a s- operated supervised or controlled by supervised or controlled in connection with or operated in connection with one or more publicly supported organizations sec_1_509_a_-4 of the regulations provides that an it satisfies a responsiveness test organization is operated in connection with a publicly_supported_organization if and an integral part test the responsiveness test is satisfied if one or more of the trustees of the publicly_supported_organization are also trustees of offices in the integral part test is satisfied if the activities engaged in by the organization for or on behalf of the supported_organization are activities to perform the functions of or to carry out the purposes of the supported_organization and such activities would normally be performed by the supported_organization but for the supporting_organization the supporting_organization or hold important sec_509 c of the code excludes from the definition of private_foundations an organization which is not controlled directly or indirectly by one or more disqualified persons as defined in sec_4946 other than foundation managers and other than one or more organizations described in paragraph or the facts and circumstances of this case indicate that the recent reorganization will not adversely affect the tax-exempt or nonprivate foundation status of e and f will continue to provide services in furtherance of their exempt purposes there will be in the relationships among the entities no changes in funding sources or in that b e or f d d c b c - the facts and circumstances further indicate that the transfer of assets and the provision of services among b d e and f serve to facilitate their exempt_activities and promote the achievement of the exempt purposes of each related_organization therefore these transactions do not adversely affect the exempt status of c b c e or f d moreover since b controls c d by c e and f to b for services rendered do not generate unrelated business trade_or_business income and e may transfer assets to b and each other without generating unrelated_trade_or_business income since the transfer would be merely a matter of accounting d c and f d e and f the payments made -6- to the extent that income is realized as d sharing of assets and services among b not give rise to unrelated_business_income so long as these business activities are substantially related to the exercise and performance of the exempt purposes of b a result of the e and f it will c cc e and f d accordingly based on the facts and circumstances as stated above we rule that the reorganization will not adversely affect the tax- exempt or nonprivate foundation status of b f c d e or any sharing or transfers of funds assets services and or personnel by or among b and c e and f will not jeopardize the tax-exempt or nonprivate foundation status of b or c business income taxable under sec_511 e or f or generate unrelated d d this ruling is based on the understanding that there will be no material changes in facts upon which it is based this ruling is directed only to the organization that sec_6110 requested it provides that it may not be used or cited by others as precedent we are informing your key district_director of this action of the internal_revenue_code please keep a copy of this ruling in your permanent records sincerely yours alert v seacok_ gerald v sack chief exempt_organizations - technical branch


t c memo united_states tax_court frances whitaker harrington n k a francesca elaine bloom petitioner and kirk j harrington intervenor v commissioner of internal revenue respondent docket no filed date francesca elaine bloom pro_se kirk j harrington pro_se timothy b heavner and aaron d gregory for respondent memorandum findings_of_fact and opinion thornton chief_judge the issue for decision is whether for petitioner is entitled to partial relief from joint_and_several_liability under sec_6015 as respondent has determined findings_of_fact the parties have stipulated some facts which we incorporate by this reference petitioner and kirk j harrington intervenor married in he moved out in they divorced in petitioner works for the department of defense and in she began deploying to iraq and afghanistan several times a year throughout their marriage petitioner and intervenor filed joint federal_income_tax returns in petitioner while in the united_states prepared the couple’s joint_return for tax_year after discussing it with intervenor with his approval petitioner electronically filed the joint_return using turbotax software she informed intervenor that the return had been filed and that a refund had been deposited into the couple’s joint bank account 1all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure respondent issued petitioner and intervenor a notice_of_deficiency for tax_year determining that certain income items were not reported on the joint_return neither petitioner nor intervenor contested the notice_of_deficiency and respondent assessed the proposed deficiency along with related penalties and interest on date petitioner submitted a form_8857 request for innocent spouse relief with respect to tax_year on date respondent issued a final_determination granting petitioner partial innocent spouse relief for tax_year under sec_6015 apparently about the same time intervenor also requested innocent spouse relief with respect to tax_year and was also granted partial relief under sec_6015 2although the record does not contain this notice_of_deficiency respondent asserts and the other parties have not disputed that in the notice_of_deficiency respondent determined that intervenor failed to report dollar_figure of interest_income from wachovia bank dollar_figure of social_security income from the social_security administration dollar_figure of miscellaneous income from american bankers insurance co dollar_figure of taxable dividends from first clearing llc and dollar_figure in retirement income from the u s office of personnel management civil service retirement_system respondent determined that petitioner failed to report dollar_figure in interest_income from wachovia bank and dollar_figure of interest_income from usaa federal savings bank 3although the record does not specify when intervenor requested and was granted relief the record does contain an internal_revenue_service tax examiner’s workpaper dated date recommending that intervenor be granted partial relief under sec_6015 on date while residing in virginia petitioner petitioned this court seeking judicial review of respondent’s determination that she was entitled to only partial relief from joint_and_several_liability on date while residing in virginia intervenor filed his notice of intervention contrary to rule b the notice of intervention did not state the grounds for intervention on the day of trial intervenor filed a supplemental notice of intervention stating as the ground of intervention that petitioner had filed the return in question without his knowledge and with incorrect information opinion in this proceeding petitioner no longer disputes respondent’s determination that she is entitled to partial relief under sec_6015 to the contrary in a posttrial status report she requests the court to validate the irs determination intervenor however continues to dispute respondent’s determination that petitioner is entitled to relief for the reasons explained below we reject intervenor’s contentions generally married taxpayers may elect to file a joint federal_income_tax return sec_6013 after doing so each spouse is jointly and severally liable for the entire tax due on their aggregate income sec_6013 an individual may seek relief from joint_and_several_liability under sec_6015 which offers three avenues of possible relief under subsections b c and f respondent has granted petitioner partial relief under sec_6015 which generally provides for proportionate tax relief to divorced or separated taxpayers who elect such relief with respect to a deficiency if the spouses made a joint_return at the time the election was made the spouses were legally_separated divorced or had not been members of the same household at any time during the previou sec_12 months the election for relief was made after a deficiency was asserted but no later than two years after the commissioner began collection activities and the deficiency remains unpaid stergios v commissioner tcmemo_2009_15 sec_1_6015-3 income_tax regs when a requesting spouse meets these requirements the items giving rise to the deficiency are allocated as if the spouses had filed separate returns sec_6015 relief under sec_6015 may be denied where there is evidence showing that the requesting spouse had actual knowledge at the time such individual signed the return of any item giving rise to a deficiency which is not allocable to such individual sec_6015 4relief may also be denied in certain situations involving fraud see sec_6015 d c at trial intervenor contended that petitioner fails requirement because he was living with her when the return was filed and when she filed her form_8857 petitioner disputed this testimony and testified that intervenor had moved out in we found petitioner to be the more credible witness and her testimony is supported by the decree of divorce dated date which states that petitioner and intervenor have lived separate and apart for more than one year namely since date without any cohabitation and without interruption consequently we find that when petitioner made the election for relief on date she and intervenor had not been members of the same household at any time during the previou sec_12 months intervenor also argues that petitioner is ineligible for relief under sec_6015 because she knew of the items giving rise to the deficiency when she signed the return under sec_6015 we look for an actual and clear awareness as opposed to reason to know of the existence of an item which 5because of this finding we need not decide whether petitioner and intervenor were legally_separated at the time of petitioner’s election cf sec_1_6015-3 income_tax regs providing that a determination of whether a requesting spouse is legally_separated for this purpose is to be made in accordance with sec_7703 and the regulations thereunder sec_1_7703-1 income_tax regs referring to a spouse legally_separated under a decree of divorce or separate_maintenance gives rise to the deficiency or portion thereof 115_tc_183 aff’d 282_f3d_326 5th cir if an item_of_income is omitted the requesting spouse must have knowledge of the income which includes knowledge of the receipt of the income sec_1_6015-3 income_tax regs we do not infer actual knowledge from a mere reason to know of the omitted income sec_1_6015-3 income_tax regs petitioner testified that she was deployed in afghanistan for most of and did not know about intervenor’s unreported income she testified that intervenor kept the unreported income in bank accounts of which she lacked knowledge and that she found out about this income only during the course of their divorce by contrast intervenor testified vaguely that petitioner knew he had received the unreported income and that they had used the money to take a trip he did not however support this testimony with any other evidence with respect to this issue as with respect to other issues generally we found petitioner to be the more credible witness on this record we find that petitioner lacked actual and clear awareness of intervenor’s unreported income finally and most fundamentally intervenor contends that petitioner is not entitled to relief because he did not file a joint_return with her he argues that petitioner filed the return without his knowledge or approval whether an income_tax return is a joint or separate_return of a husband and or a wife is a question of fact 27_tc_270 aff’d 251_f2d_44 8th cir see 327_f2d_98 4th cir rev’g on other grounds 39_tc_734 to file jointly both spouses must intend to make a joint_return see 26_tc_405 weber v commissioner tcmemo_1995_125 in evaluating intent this court has considered whether the nonsigning spouse filed a separate_return whether the nonsigning spouse objected to the joint filing and whether prior filing history indicates an intent to file jointly see eg 56_tc_1 heim v commissioner t c pincite 10_tc_859 aff’d per curiam 175_f2d_240 6th cir if an intent to file a joint_return otherwise exists it is not fatal that one spouse did not sign the return 35_tc_747 petitioner testified credibly that on one of intervenor’s regular visits to her home in she discussed with him the preparation and filing of a joint_return for and that he agreed to the joint filing although he disputed this testimony intervenor also testified that he and petitioner filed their tax_return together with everything on it every year which we take to mean that they filed joint returns every year that they were married although intervenor contends that he did not intend to file a joint_return for this contention is hard to square with his testimony that in he filed an amended joint_return a copy of which he offered into evidence moreover intervenor requested and was granted relief under sec_6015 which relief is predicated on the filing of a joint_return on this record we find that intervenor and petitioner filed a joint_return for finding intervenor’s various arguments to be without merit we sustain respondent’s determination that petitioner is entitled to partial relief under sec_6015 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 b03 plr-136392-16 date march legend x ---------------------- ------------ ----------------- y ------------------- date ------------------------ date ------------------ ----- date -------------- state -------------- property ----------------------- year ------- m -------------- n -------- o ------ p ------ plr-136392-16 dear ------ -------- this letter responds to your letter dated date submitted on behalf of x requesting a ruling that the revenue received by x from property under the sharecropping lease arrangement and the rental income received by x from property from its rental lease arrangement were not passive_investment_income under sec_1362 of the internal_revenue_code code facts x was incorporated under state law on date and elected to be an s_corporation effective date x has accumulated_earnings_and_profits of m x is engaged_in_the_business_of_farming and owns n acres in state x has leased the land for sharecropping sharecropping lease arrangement continuously beginning in date beginning in year the land was leased to y pursuant to the sharecropping lease arrangement all taxes assessments or charges levied or assessed on products of the land must be paid_by x and y based in proportion to the percentage of crops to which x and y are entitled x and y each pay one half of the actual cost of fertilizer and soil conditioner x pays the cost of the power and fuel necessary to operate the drainage pumping plants as well as the cost of maintaining the irrigation and drainage canals and irrigation pipe line x is also responsible for paying box rent and the grower’s share of the state inspection fee any processing expenses_incurred with the preparation of crops for sale which are related to x’s share of the crops are paid_by x x also determines the percentage of property to be farmed and the types of crops to be planted further x is at risk for crop yields and marketing in year x signed a new lease agreement rental lease arrangement with y for lease of property under the lease x’s expenses are between o and p of x’s rental income x is responsible for providing and maintaining insurance on all improvements and fixtures owned by x further x pays the costs and expenses associated with the repair maintenance and replacement of the irrigation drainage pumps as well as the insurance water reclamation tax water rights fees water coalition dues and property taxes law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with sec_1362 to be an s_corporation plr-136392-16 sec_1362 provides that an election under sec_1362 terminates whenever the corporation i has accumulated_earnings_and_profits at the close of each of consecutive taxable years and ii has gross_receipts for each of such taxable years more than percent of which are passive_investment_income sec_1362 provides that except as otherwise provided in sec_1362 the term passive_investment_income means gross_receipts derived from rents royalties dividends interest and annuities sec_1_1362-2 of the income_tax regulations provides that rents means amounts received for_the_use_of or the right to use property whether real or personal of the corporation sec_1_1362-2 provides that rents does not include rents derived in the active trade_or_business of renting property rents received by a corporation are derived in the active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including but not limited to the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation conclusion based on the facts submitted and representations made we conclude the revenue received by x under the sharecropping lease arrangement and the rental income received by x under the rental lease arrangement were not passive_investment_income under sec_1362 except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether x is otherwise eligible to be an s_corporation for federal tax purposes further the passive investment rules of sec_1362 are independent of the passive_activity rules of sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 plr-136392-16 these rulings are directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling requests they are subject_to verification on examination sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc dom corp 1-plr-118169-99 date date index number number release date legend company state a business b father mother daughter son year year value w dear we respond to your letter dated date requesting rulings concerning the federal_income_tax consequences of a proposed transaction the information submitted for consideration is summarized below company an accrual_method taxpayer with a july year end is incorporated in state a and is engaged in business b company has outstanding a single class of stock voting common_stock all of which is held by father mother daughter and son mother holds w shares of the company stock some of which were acquired by mother as a gift from father within the ten year period prior to the proposed transaction all of the shares of company stock acquired by daughter and son within the ten year period prior to the proposed transaction were given to them by mother and father mother’s gifts to daughter and son occurred between year and year mother and father made these gifts to encourage daughter and son to increase their commitment to long-term involvement in company to equalize ownership between daughter and son and for estate_planning purposes mother father daughter and son are all officers and directors of company plr-118169-99 mother wishes to completely terminate her interest in company accordingly the following steps are proposed mother will resign her position with the company company will redeem all the stock held by mother which will result in i father daughter and son holding all the company stock directly and ii mother holding all the company stock constructively through father son and daughter under sec_318 of the internal_revenue_code in the redemption mother will receive a fractional interest in a parcel of real_property owned by company property at the same time company will redeem a portion of father’s stock for which father will receive cash and the balance of company’s interest in property the following representations have been made in connection with the proposed transaction a there are no outstanding options or warrants to purchase company stock nor are there any outstanding debentures or other obligations that are convertible into company stock or would be considered company stock b company has no plan or intention to issue redeem or exchange any shares of its stock except for the redemption of the stock held by mother and father described above and except for a possible stock_redemption as described in the next sentence it is possible that company may redeem from father additional shares of his stock in company not to exceed value c no company stock will be issued to mother except for issuances occurring more than ten years after the redemption d mother will execute and file the agreement required by sec_302 of the code with respect to the acquisition of any interest in company within ten years from the date of the redemption e the gifts of company stock from father to mother as described above were made for estate_planning purposes the gifts from mother to daughter and son were made to increase their commitment to long-term involvement in company to equalize ownership between daughter and son and for estate_planning purposes these gifts were not made in order to provide mother with a post-redemption economic_interest in or influence over company f throughout the ten year period following the redemption mother will have no interest in company including an interest as an officer director or employee other than through constructive_ownership under sec_318 of the code plr-118169-99 g no shareholder of company has been or will be obligated to purchase any of the stock to be redeemed h the redemptions and other actions described in steps and above are an isolated event not related to any other past or future transactions i none of the stock to be redeemed is sec_306 stock within the meaning of sec_306 of the code j there are no declared but unpaid dividends or funds set apart for dividends on any of the stock to be redeemed k at the time of the redemption the fair_market_value of the consideration to be received by mother and father respectively will be approximately equal to the fair_market_value of the company stock to be exchanged therefor the redemption price was reached through arms-length bargaining between company and the redeemed shareholders l the price to be paid for the company stock to be redeemed will not result in a loss with respect to those shares of stock based solely on the information and representations submitted we hold as follows the transfers of company stock from father to mother and by mother to daughter and son during the ten year period prior to the proposed transaction did not have as one their principal purposes the avoidance of federal_income_tax within the meaning of sec_302 these transfers therefore do not prevent mother from using the sec_302 waiver of attribution provision provided that i mother files the agreement described in sec_302 in accordance with sec_1_302-4 of the regulations and ii mother satisfies the conditions stated in sec_302 and ii sec_318 will not apply and company’s redemption of all its stock owned by mother will constitute a complete termination of mother’s interest in company within the meaning of sec_302 the amount distributed in the redemption will be treated as a distribution in full payment in exchange for the stock redeemed as provided in sec_302 as provided in sec_1001 mother will realize and recognize gain on the redemption of company stock with the gain measured by the difference between the fair_market_value of the property interest received by mother and the adjusted_basis of the shares of company stock surrendered as determined plr-118169-99 under sec_1011 provided sec_341 relating to collapsible_corporations is not applicable and the stock is a capital_asset in mother’s hands the gain if any will constitute capital_gain subject_to the provisions and limitations of subchapter_p of chapter as provided by sec_267 any loss to mother on the redemption of a share of company stock will be disallowed because mother and company are sec_267 related_persons father daughter and son the remaining shareholders of company will not be treated as having received a constructive_dividend upon the redemption of company stock held by mother rev_rul c b the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination we express no opinion concerning the federal_income_tax treatment of the transactions under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the above rulings in particular we express no opinion about the tax treatment of any redemptions of father’s company stock this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this supplemental letter_ruling was consummated 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 assistant chief_counsel corporate by mark s jennings acting chief branch


internal_revenue_service number release date index number ----------------------- -------------------------- -------------------------------------------- in re ----------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------------ telephone number ---------------------- refer reply to cc intl b06 plr-139307-13 date date ty ------------- legen-d ---------------------------------------------------------- taxpayer accounting firm ---------------------------------- individual ------------------------ company law firm year year date ----------------------------------- ------------------------------------- ------- ------- ---------------------- dear -------------- this responds to a letter dated date submitted by accounting firm requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc for taxpayer’s first taxable_year the rulings contained in this letter are based upon information and representations submitted by taxpayer and accounting firm and accompanied by affidavits and penalty of perjury statements executed by appropriate parties this office has not verified any of the materials submitted in support of the request for rulings it is subject_to verification on examination facts taxpayer is a domestic_corporation wholly owned by individual individual is president of taxpayer taxpayer was formed for the sole purpose of qualifying and operating as plr-139307-13 an interest charge domestic_international_sales_corporation ic-disc taxpayer operates under a commission arrangement with company in year individual accounting firm and law firm discussed the benefits of forming an ic-disc after individual decided to form an ic-disc he directed accounting firm and law firm to coordinate with each other and to complete and file the documents necessary to incorporate taxpayer individual also directed accounting firm and law firm to perform all necessary steps to qualify taxpayer as an ic-disc for federal tax purposes in coordinating with law firm accounting firm agreed it would file form 4876-a however due to a miscommunication between two shareholders of accounting firm performing work on the matter form 4876-a was not filed taxpayer was incorporated on date as a calendar_year taxpayer taxpayer relied on accounting firm and law firm as legal and tax service providers with the experience to perform all required steps to qualify taxpayer as an ic-disc and file the necessary forms believing all the requirements to conduct business and be treated as an ic- disc for its first taxable_year were satisfied taxpayer began acting as an ic-disc as of its date of formation in year accounting firm prepared a form 1120-ic-disc for taxpayer’s first taxable_year at that time accounting firm realized that form 4876-a had not been filed taxpayer has requested a ruling that grants an extension of time of days from the date of the ruling letter to file form 4876-a and that such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year law and analysis sec_992 provides that an election by a corporation to be treated as a disc1 shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate temp sec_1_921-1t provides in part that a corporation electing ic- disc status must file form 4876-a and that a corporation electing to be treated as an ic-disc for its first taxable_year shall make its election within days after the beginning of that year sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rule sec_1 as used in this letter the terms ic-disc and disc have the same meaning plr-139307-13 set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that a regulatory election is an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin for this purpose an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government in the present situation the election described in temp sec_1_921-1t is a regulatory election as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards for relief set forth in sec_301_9100-3 based on the facts and representations submitted with taxpayer’s ruling_request we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file form 4876-a such filing will be treated as a timely election to be treated as an ic- disc for taxpayer’s first taxable_year the granting of an extension in this ruling letter is not a determination that taxpayer is otherwise eligible to make the election or to claim ic-disc status or benefits see sec_301_9100-1 taxpayer should attach a copy of this ruling letter to its federal_income_tax return for the taxable years to which this letter applies this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent 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 plr-139307-13 pursuant to a power_of_attorney on file in this office copies of this ruling letter are being furnished to your authorized representative sincerely _____________________________________ christopher j bello chief branch office of associate chief_counsel international enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-108044-01 date date legend x d dear this letter responds to a letter dated date written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code that x's s_corporation_election will be effective as of the taxable_year beginning d x was incorporated on d the sole shareholder of x decided to elect s_corporation status for x but the form_2553 election by a small_business_corporation was not filed timely facts x requests a ruling that it will be recognized as an s_corporation effective for the taxable_year beginning d under sec_1362 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides when an s election will be effective if an s election is made within the first two and one half months of a corporation's taxable_year then that corporation will be treated as an s_corporation beginning the year in which the election is made if an s election is made after the first two and one half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-108044-01 sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year conclusions based on the facts submitted and the representations made we conclude that x has established reasonable_cause for not making a timely election and is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 containing an effective date of d for the election within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically we express or imply no opinion concerning whether x is an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely yours christine ellison chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court fumitake nishi and sachiyo nishi petitioners v commissioner of internal revenue respondent docket no filed date eric william johnson for petitioners beth a nunnink for respondent memorandum findings_of_fact and opinion kerrigan judge respondent determined deficiencies in petitioners’ federal_income_tax and sec_6662 accuracy-related_penalties for and years in issue unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure after concessions the sole issue for our consideration is whether petitioner wife is entitled to innocent spouse relief for the years in issue pursuant to sec_6015 or f findings_of_fact some of the facts have been stipulated and the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioners resided in minnesota when they timely filed their petition petitioners met in japan and married in their daughters were born in and in japan at all relevant times petitioners were married and living in the same household they filed joint federal tax returns for tax years petitioner husband was born in china and petitioner wife was born in japan while in japan petitioner wife attended a university and later worked for a law firm petitioner husband moved to the united_states in petitioner wife and their daughters moved to the united_states in or during the years in issue petitioner husband worked for the tile shop llc tile shop a publicly traded company that provides home tile and decor through retail locations throughout the united_states while working for the tile shop petitioner husband traveled extensively to china and other countries to source materials petitioner husband’s wages from the tile shop ranged between approximately dollar_figure and dollar_figure per year during the years in issue in date the tile shop discovered that petitioner husband had not disclosed a conflict of interest related to his own business interests in china he benefited from business deals with the tile shop’s vendors through his chinese business interests subsequently his employment with the tile shop ended petitioners maintained joint and separate bank accounts petitioner husband deposited his income from the tile shop into his separate bank account and petitioners’ joint checking and savings accounts he deposited the income from his chinese business interests into both his separate chinese and u s bank accounts and petitioners’ joint checking account for example between september and date dollar_figure was deposited into petitioners’ joint checking account some of which was transferred from petitioner husband’s chinese bank accounts petitioner husband handled the family’s financial matters petitioner wife took care of the family home and made household purchases they did not discuss a monthly budget nor have a budget which they followed for household expenses including expenses for their daughters although petitioner wife did not work outside the home once she moved to the united_states she maintained a separate bank account she used her separate bank account petitioners’ joint checking account and petitioners’ joint credit cards to pay for household expenses and family needs at the end of petitioner wife had six certificates of deposit totaling dollar_figure petitioner wife had access to but did not review all the bank statements that she received and she had difficulty understanding details of financial documents because of the language barrier in a total of dollar_figure was deposited into petitioners’ joint checking account according to bank statements for this account petitioners spent approximately dollar_figure on family_expenses during the years in issue for example in date petitioners purchased a new vehicle for dollar_figure and paid for it with a check drawn from their joint checking account in petitioners jointly purchased their house in minnesota for dollar_figure the mortgage on the property was approximately dollar_figure on date petitioner husband paid dollar_figure to satisfy the balance of the mortgage and petitioner wife was aware of this payment petitioner wife was surprised to learn the reason for petitioner husband’s dismissal from the tile shop she temporarily returned to japan with their daughters and contemplated divorce but she returned to the united_states on date petitioner wife withdrew dollar_figure from petitioners’ joint checking account and had a cashier’s check made out to the tile shop in an effort to return money to the tile shop petitioner husband prepared petitioners’ timely filed joint federal tax returns for the years in issue petitioner wife signed each return petitioners’ federal tax_return was signed on date petitioners submitted an amended federal tax_return for on date which was accepted and processed the amended_return included additional income of dollar_figure attributed to earnings_of foreign_corporations their federal tax_return was filed on date petitioner wife signed the amended federal tax_return and the federal tax_return after learning of the reasons for petitioner husband’s dismissal from the tile shop before trial the parties filed a joint stipulation of settled issues agreeing that petitioners had unreported income of dollar_figure dollar_figure and dollar_figure for respectively and that they are liable for sec_6662 accuracy-related_penalties for the years in issue the unreported income was attributable to petitioner husband’s chinese business dealings 1the parties further agreed that petitioners were entitled to a net_operating_loss_carryback of dollar_figure for which is not reflected in the agreed-upon unreported income amounts opinion generally married taxpayers may elect to file a joint federal_income_tax return sec_6013 after making this election each spouse is jointly and severally liable for the entire tax due for that taxable_year sec_6013 sec_6015 provides a requesting spouse with three alternatives for relief from joint_and_several_liability full or partial relief under subsection b proportionate relief under subsection c or if relief is not available under subsection b or c equitable relief under subsection f except as otherwise provided in sec_6015 the taxpayer bears the burden of proving that he or she is entitled to sec_6015 relief rule a 119_tc_306 aff’d 101_fedappx_34 6th cir petitioner wife is ineligible to elect relief under sec_6015 because petitioners are still married and continue to live in the same household see sec_6015 sec_6015 to be entitled to relief under sec_6015 the requesting spouse must satisfy all of the following requirements a a joint_return has been made for the taxable_year b on such return there is an understatement_of_tax attributable to erroneous items of the nonrequesting spouse c the requesting spouse did not know and had no reason to know of the understatement when the return was signed d taking into account all the facts and circumstances it is inequitable to hold the requesting spouse liable for that year’s deficiency in tax attributable to such understatement and e the requesting spouse timely elects relief under sec_6015 sec_6015 see alt v commissioner t c pincite respondent contends that petitioner wife does not meet the requirements of sec_6015 and d respondent argues that petitioner wife is ineligible for relief under sec_6015 because she should have known that their joint federal tax returns understated her husband’s income sec_6015 requires that in signing the return the individual seeking relief did not know and had no reason to know of the understatement a requesting spouse has knowledge or reason to know of an understatement if he or she actually knew of the understatement or if a reasonable person in similar circumstances when he or she signed the return could be expected to know that the return contained an understatement 121_tc_73 sec_1_6015-2 income_tax regs consequently a requesting spouse has a duty_of inquiry with respect to the federal tax_return filed 114_tc_276 abrogated on other grounds by 132_tc_203 the duty_of inquiry is subjective focusing on the individual seeking relief butler v commissioner t c pincite factors to consider are the requesting spouse’s level of education the requesting spouse’s involvement in the family’s business and financial affairs the presence of expenditures that appear lavish or unusual when compared to the family’s past levels of income standard of living and spending patterns and the culpable spouse’s evasiveness and deceit concerning the couple’s finances id petitioner wife had a duty to inquire given the amount of petitioner husband’s wages in contrast to their spending between september and date dollar_figure was deposited into petitioners’ joint checking account even though petitioner wife testified that she had difficulty understanding financial documents and speaking english she had her own bank account certificates of deposit and authority to write checks for their joint account she further testified that she was capable of understanding bank statements when she opened them during petitioner wife was aware that petitioner husband had paid fully the balance of their mortgage within five years of petitioners’ purchasing their home if she had reviewed the bank statements she would have known that income in addition to her husband’s wages was being deposited and that their spending exceeded his wages petitioners did not discuss a budget and petitioner wife was unaware of any monthly spending limits she used her separate checking account petitioners’ joint checking account and their credit cards to make monthly household and family purchases although petitioners testified that she was frugal in her spending habits a reasonable person in similar circumstances would have inquired how they could afford their yearly household expenses when petitioner wife signed their joint federal tax_return for she had reason to know that petitioner husband had understated his income petitioner wife testified that she did not know about her husband’s chinese business dealings or that he had income from sources other than the tile shop until the end of in date she signed a dollar_figure check to the tile shop more than seven months before she signed petitioners’ joint federal tax_return for she signed their amended federal tax_return after becoming aware of her husband’s chinese business dealings she had knowledge of the unreported income when she signed the federal tax_return and the amended federal tax_return sec_6015 does not protect a spouse who turns a blind eye to facts readily available to her 114_tc_333 we conclude that petitioner wife is not entitled to relief under sec_6015 since she had reason to know of the understatements even if we concluded that petitioner wife did not have knowledge or reason to know of the understatements she would not be eligible for relief under sec_6015 because she does not meet the requirement of sec_6015 the factors that we consider in determining whether it would be inequitable to hold petitioner wife liable for the deficiency in tax attributable to the understatements for purposes of sec_6015 are the same factors that we consider in determining inequity for purposes of sec_6015 see alt v commissioner t c pincite jones v commissioner tcmemo_2010_112 slip op pincite revproc_2013_34 sec_4 2013_43_irb_397 modifying and superseding revproc_2003_61 2003_2_cb_296 lists the following nonexclusive factors that the commissioner takes into account when determining whether to grant equitable relief under sec_6015 marital status economic hardship in the case of understatement knowledge or reason to know of the item giving rise to the understatement legal_obligation significant benefit compliance with tax laws and mental or physical health looking at the facts and circumstances we conclude that it would not be inequitable to deny petitioner wife relief we previously concluded that she had reason to know of the understatements the remaining factors are either neutral or weigh against relief marital status is neutral because petitioners are married and live in the same household legal_obligation is similarly neutral because petitioners are not separated or divorced see id sec_4 d i r b pincite petitioner wife provided no evidence of economic hardship or poor mental or physical health petitioner wife benefited from the understatements of income this factor weighs against relief during the years in issue petitioners lived beyond petitioner husband’s tile shop salary income from his chinese business interests allowed petitioners to pay off the mortgage on their home and purchase a new vehicle with cash during we find that petitioner wife did not meet her burden to show that she is entitled to equitable relief see rule a sec_6015 sec_6015 provides an alternative means of relief for a requesting spouse who does not otherwise qualify under sec_6015 or c sec_6015 porter v commissioner t c pincite sec_6015 permits relief from joint_and_several_liability if it would be inequitable to hold the requesting spouse liable for any unpaid tax or any deficiency under section f the secretary may grant equitable relief to a requesting spouse on the basis of the facts and circumstances the commissioner issued revproc_2013_34 supra to provide guidance for determining whether a taxpayer is entitled to equitable relief from joint_and_several_liability while the court may consider the guidance set forth in rev prov supra we are not bound by it our determination ultimately rests on an evaluation of all the facts and circumstances see 136_tc_432 johnson v commissioner tcmemo_2014_240 at revproc_2013_34 supra provides a three-step analysis for evaluating a request for equitable relief the first step consists of seven threshold conditions that must be met id sec_4 i r b pincite respondent concedes that petitioner wife meets the seven threshold conditions the second step of the analysis provides three conditions that must be met to qualify for a streamlined determination of relief under sec_6015 id sec_4 i r b pincite the first condition is that the requesting spouse is no longer married to the nonrequesting spouse id sec_4 since petitioners are still married petitioner wife does not qualify for a streamlined determination a third step is available if the requesting spouse satisfies the threshold conditions but fails to satisfy the conditions for a streamlined determination a requesting spouse may still be eligible for equitable relief under sec_6015 if taking into account all of the facts and circumstances it would be inequitable to hold the requesting spouse liable for the unpaid tax or deficiency id sec_4 i r b pincite we previously considered the factors that respondent considered when taking into account whether to grant equitable relief in our analysis of sec_6015 and held there that petitioner wife is not entitled to equitable relief for the same reasons petitioner wife is not entitled to equitable relief pursuant to sec_6015 we have considered all arguments made and to the extent not mentioned above we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered under rule


department of the treasury internal_revenue_service washington d c 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 contact person telephone number identification_number number release date se t eo t1 date date uil legend a b c d x y z gg ii dear ------------------ this letter is in response to your request dated date seeking approval of a set- aside of funds in the amount dollar_figuregg under sec_4942 of the internal_revenue_code for the taxable_year ended x facts on y b formed a as a charitable corporation named the c c later changed its name to the a in ii a is a grant-making entity the purpose of which is to distribute grants among charitable organizations designated by b on y the internal_revenue_service issued a determination_letter recognizing a as an organization described in sec_501 of the code and as a private_foundation under sec_509 the specific donees and the amounts distributed to each donee have changed from time to time in accordance with the terms of the corporation’s articles of incorporation and bylaws applicable state law requires private_foundations to distribute income at such times and in such manner as not to subject the private_foundation to tax under sec_4942 of the code you wish to set_aside a grant totaling dollar_figuregg to be paid to z z is recognized as an organization described in sec_501 of the code and is treated as a publicly_supported_organization within the meaning of sec_509 and sec_170 no additions to the set-aside are planned the purpose of the grant is to restore and renovate an historic site now owned by z known as d a wishes to restore the site and is donating funds to z to achieve this goal it is anticipated that the restored site will include a museum and a visitor’s center a’s funds will be used specifically to help finance the building of the museum and visitor’s center at d a has represented that the set-aside of dollar_figuregg for the year ended x will be evidenced by the board_of directors through the entry on the books_and_records of the corporation of the dollar amount of the set-side as a pledge to be paid as a qualifying_distribution to z within the meaning of sec_53_4942_a_-3 of the foundation and similar excise_tax regulations a has represented that the amount of the set-aside for the facilities project as described above will actually be paid for this project within months a believes that due to the extent and cost of repairs and renovations needed for the z project grants from the community at large must form an essential and significant part of the restoration project funding a states that the proposed grant is intended to simulate grants to z from the community at large by providing a sixty month period during which z may receive commitments from members of the community a hopes to give z adequate time to publicize the renovation as well as the financial needs of z to generate the necessary community financial support also because of a’s concern with the preservation of the historical and architectural features of z a believes it is crucial to retain a degree of control_over the renovation process by making the disbursement of the funds dependent upon approval of drawings plans and specifications of the restoration project a believes it can best meet the goal of preserving z ruling requested a set-aside of funds in the amount dollar_figuregg under sec_53 a - b of the regulations is treated as a qualifying_distribution under sec_4942 of the code for the taxable_year ended x law sec_4942 of the code imposes a tax on the undistributed_income_of_a_private_foundation which has not been distributed before the first day of the second or any succeeding taxable_year following such taxable_year if such day falls within the taxable_period sec_4942 of the code defines undistributed_income as the amount by which the distributable_amount for such taxable_year exceeds qualifying distributions made before such time out of such distributable_amount sec_4942 of the code defines the term distributable_amount as an amount equal to the sum of the minimum_investment_return as adjusted reduced by the sum of the taxes imposed on such private_foundation under subtitle a and sec_4940 sec_4942 defines minimum_investment_return for any private_foundation for any taxable_year as five percent of the aggregate fair_market_value of all assets of the foundation other than those which are used directly in carrying on the foundation's exempt_purpose over any acquisition_indebtedness with respect to such assets sec_4942 defines qualifying_distribution as any amount_paid for tax exempt purposes as defined in sec_170 of the code sec_4942 provides that an amount set-aside for an approved purpose may be treated as a qualifying_distribution sec_4942 of the code provides that an amount set-aside for a specific project may be treated as a qualifying_distribution if at the time of the set-aside the foundation establishes to the satisfaction of the secretary that the amount will be paid for the specific project within five years and the project is one which can be better accomplished by such set-aside rather than by immediate payment of funds the suitability test sec_53_4942_a_-3 of the regulations provides that the suitability test is satisfied if the foundation establishes that the specific project is one in which relatively long-term grants or expenditures must be made in order to assure the continuity of particular charitable projects or program-related investments the regulation cites as an example of a suitable project a plan to fund a specific research program that is of such magnitude as to require an accumulation of funds before beginning the research even though not all of the details of the program have been finalized analysis a meets the suitability test described in sec_4942 of the code and sec_53_4942_a_-3 of the regulations a is an exempt_private_foundation and a is setting aside dollar_figuregg for a specific project that accomplishes a’s charitable purpose under sec_170 of the code a has reported that it has provided significant support to various operating charities this set-aside will allow a to set_aside funds for z’s capital campaign so that z will be able to succeed in construction plans for renovating the z project before commencing on this major project the specific project described above for which the set-aside is being made is designed to further and enhance z’s charitable activities the developments and improvements described above can better be accomplished by a set-aside rather than by immediate payment of funds this conclusion derives from the long-term nature and extent of the project as well as the manner in which a intends to fund the project accordingly a satisfies the suitability test of sec_53_4942_a_-3 of the regulations ruling based on the foregoing a set-aside of funds in the amount dollar_figuregg under sec_53 a - b of the regulations is treated as a qualifying_distribution under sec_4942 of the code for the taxable_year ended x this ruling is based on the understanding there will be no material changes in the facts upon which it is based 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 this ruling is directed only to the organization that requested it sec_6110 of the code provides it may not be used or cited by others as precedent 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 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 debra j kawecki manager exempt_organizations technical group sincerely enclosure notice


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 plr-126323-07 date date ------------------------------------ -------------------------------------------- ------------------------ x a -------------------------------------------------- state d1 dear ----- --------------- ------------------ ----------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be classified as an association under sec_301 facts x was formed on d1 as a limited_liability_company under the laws of state x has one member a x intended to elect to be treated as an association for federal tax purposes effective d1 however a form_8832 entity classification election electing to be treated as an association was not timely filed law and analysis classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 provides in part that a business_entity that is not plr-126323-07 under sec_301_7701-3 an eligible_entity with a single owner can elect to be classified as an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner b unless the entity elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that except as provided in sec_301 sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing a form_8832 with the service_center designated on the form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 provides 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 under sec_301_9100-3 a request for relief will be granted when the taxpayer conclusion based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 plr-126323-07 except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed or implied as to whether x is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x s authorized representative sincerely s william p o'shea associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


number release date id office uilc cca_2009062408565137 -------------- from ------------------- sent wednesday date am to ------------------------- cc ----------- subject re year assessment by you are correct that if your partner is a taxable individual or c corp and did not file a return you can assess at any time you are not constrained by the one year minimum period that might otherwise apply i don't know why you think the dissolution of the partnership would negate taxable_income from that entity dissolution by itself is not a loss event


internal_revenue_service number release date index nos cc ita b9 plr-107359-01 dear date this is in reference to a form_1128 application to adopt change or retain a tax_year submitted on behalf of the above- named taxpayer requesting permission to change its accounting_period for federal_income_tax purposes from a taxable_year ending december to a taxable_year ending september effective date the taxpayer has requested that the form_1128 be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations the taxpayer's form_1128 requesting a change in accounting_period to a tax_year ending date was due on or before date the application_for change in accounting_period was filed late because of an error or misunderstanding however the request for an extension to file timely was filed within days of the due_date sec_1_442-1 of the income_tax regulations provides that in order to secure the commissioner's consent to a change in accounting_period the taxpayer must file an application on form_1128 with the commissioner on or before the 15th day of the second calendar month following the close of the short_period sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government based on the facts and information submitted and the representations made it is held that the taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government accordingly the requirements of the regulations for the granting of relief have been satisfied in this case and the taxpayer's late filed form_1128 requesting permission to change to a tax_year ending september effective for the short_period of date to date is considered timely filed pursuant to appendix a of revproc_2001_1 2001_1_irb_1 an additional user_fee is required in order to process the form_1128 the user_fee will be requested in a separate correspondence we will begin processing the taxpayer’s application after the user_fee is received the ruling contained in this letter is based 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 part of an examination process this ruling addresses the granting of sec_301_9100-3 relief only no opinion is expressed regarding the tax treatment of the instant transaction under the provisions of any other sections of the code or regulations that may be applicable thereto or regarding the tax treatment of any conditions existing at the time of or effects resulting from the instant transaction specifically no opinion is expressed as to whether the taxpayer is permitted under the code and applicable regulations to change to the tax_year requested in the subject form_1128 in accordance with the provisions of a power_of_attorney currently on file we are sending copies of this ruling letter to the taxpayer's authorized representatives this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely yours income_tax and accounting associate chief_counsel s heather maloy heather maloy enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court jasbinder singh petitioner v commissioner of internal revenue respondent docket no filed date jasbinder singh pro_se margaret burow for respondent memorandum findings_of_fact and opinion haines judge respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure and a penalty under sec_6662 of dollar_figure for 1unless otherwise indicated section references are to the internal_revenue_code as amended rule references are to the tax_court rules_of_practice and procedure amounts are rounded continued after concessions the issue for decision is whether petitioner is entitled to deduct on schedule c profit or loss from business certain expenses in excess of those respondent conceded findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts the exhibits attached thereto and the stipulation of settled issues are incorporated herein by this reference at the time he filed his petition petitioner resided in modesto california during petitioner owned his own commercial truck and was self-employed as a truck driver petitioner used his truck to transport cargo throughout the san francisco bay area for one client gsc logistics while not making deliveries petitioner parked his truck at a yard owned by gsc logistics he traveled between his residence and the yard using his ford mustang on his form_1040 u s individual_income_tax_return petitioner claimed dollar_figure of schedule c expenses with respect to his truck driving on date respondent issued petitioner a notice_of_deficiency disallowing dollar_figure of those expenses continued to the nearest dollar 2respondent conceded that petitioner is entitled to dollar_figure of schedule c expenses respondent further conceded that petitioner is not liable for a sec_6662 penalty opinion on the basis of documentation petitioner provided respondent conceded that petitioner is entitled to many of the disallowed schedule c expenses petitioner contends that he is entitled to additional expense deductions for fuel and expenses related to his car which he used to travel from his home to his workplace the yard where his truck was parked sec_162 allows a taxpayer to deduct all the ordinary and necessary expenses paid_or_incurred in carrying on any trade_or_business deductions are a matter of legislative grace and the taxpayer bears the burden of proving that he is entitled to any deductions claimed rule a 503_us_79 taxpayers bear the burden of substantiating any deductions claimed 65_tc_87 affd per curiam 540_f2d_821 5th cir taxpayers are required to maintain adequate_records sufficient to enable the commissioner to determine their correct_tax liability sec_6001 43_tc_824 sec_1_6001-1 income_tax regs at trial petitioner did not provide the court any evidence showing his entitlement to the schedule c expense deductions that remain at issue furthermore petitioner may not deduct the expenses_incurred in traveling between his home and his workplace it is well established that expenses_incurred by a taxpayer in commuting between his home and his place of business are personal and nondeductible 326_us_465 73_tc_766 accordingly the court will sustain all of the determinations in the notice_of_deficiency except for those conceded by respondent to reflect the foregoing decision will be entered under rule


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-161886-04 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that two of the following businesses became employers under the railroad retirement act and the railroad unemployment insurance act effective ------------------ and that one business is not an employer under the acts ---------------------------------------------- ----------------------------------------------------------------------------- ---------------------------------------- ---------------------------------------------------------------------------- ----------------------------------------------- ------------------------------------------- ---------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that ------------------------------------------------------------------ -------------------------------------------------------------------------------------------------and -------------- ---------------------------------------------------became employers under the railroad_retirement_tax_act effective ------------------ we also conclude that --------------is not an employer under the act please take the appropriate action regarding these businesses _____________________________ janine cook