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 corp b05 plr-111501-12 date date legend parent ----------------------------------------------------------- -------------------------------------------------------------------- -------------------------- dsub ----------------------------------------------------------- -------------------------------------------------------------------- ------------------------- fsub ------------------------------------------------------------------------------------------------------- ---------------------------- fco ------------------------------------------------------------------------ ------------------------------- fco ------------------------------------------------------------------------ ------------------------------- topco ------------------------------------------------------------------------------------------------------------------ ---------------------------------------- topco ------------------------------------------------------------------------------------------------------------------ -------------------------- trust management --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------------------------------------------------------------- plr-111501-12 business a country x country y -------------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------- ------------ class b voting_stock ----------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------- class b non-voting stock class c stock class e stock ----------------------------------------------------------------- -------------------------------------------------------------- --------------------------------------------------------------------------------- -------------------------------------------------------- date ---------------------- date a b c d e f g h i j --------------------- --------------- --------------- --------------- ------------ ------------ ---------- --- -------------- -------------- ------------------- plr-111501-12 k l m n o p --------- -- --------- -- -- -- dear ---------------------- this letter responds to your date letter requesting that we supplement a private_letter_ruling dated date plr the original ruling and subsequent correspondence the information submitted for the original ruling this supplemental request and additional information submitted in subsequent correspondence is summarized below the material facts and representations of the original ruling and supplemental ruling are as stated below the rulings contained in this letter are 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 rulings verification of the information representations and other data may be required as part of the audit process original facts parent is a widely-held domestic_corporation that is the common parent of an affiliated_group whose includible corporations join in the filing of a u s consolidated_return parent indirectly owns all the outstanding_stock of dsub a domestic_corporation and dsub is a direct shareholder of fsub a foreign_corporation fsub is a country x entity treated as an association under sec_301_7701-3 fsub through its wholly owned subsidiaries engages in business a both within the united_states and internationally fsub has three types of shares outstanding the class b voting class b non-voting and class c stock there are a shares of class b voting and class b non-voting stock issued and outstanding of which dsub owns b fco and fco own in the aggregate c shares of class b voting_stock and d shares of class b non-voting stock the remaining class b non-voting stock is owned by management e shares and trust f shares dsub has g and fco and fco in the aggregate have g of the total voting power in fsub plr-111501-12 fsub has h shares of class c stock issued and outstanding the class c stock is non-voting and is owned by management fsub also has an employee share option plan in place with approximately i outstanding options supplemental facts the original proposed transaction is modified for what are presented to be valid business reasons the dsub fco and fco the incorporators executed step sec_1 and and the incorporators trust and management intend to complete the following steps collectively the supplemental proposed transaction steps comprise the pre-reorganizational steps steps comprise the modified proposed transaction and steps comprise the post-reorganizational steps executed step sec_1 on date the incorporators entered into a subscription agreement subscribing for shares in topco a country y entity pursuant to the subscription agreement the incorporators subscribed for approximately j shares of topco common_stock for a total share capital of approximately dollar_figurek topco is taxed as an association for federal_income_tax purposes pursuant to sec_301_7701-3 on date the incorporators subscribed for l shares in topco topco will have a total share capital of approximately dollar_figurem topco is a country y entity which will be treated as a corporation under sec_301_7701-3 modified transaction step sec_3 dsub will subscribe for additional shares in topco for a nominal amount immediately prior to step dsub may subscribe for additional shares in topco management’s class c stock will be redesignated into class b voting_stock and class e stock the class e stock will be purchased for dollar_figuren and cancelled by fsub dsub will acquire fsub shares held by management and trust for cash steps through are hereinafter referred to collectively as the first reorganization the incorporators will contribute all their shares of fsub class b voting and non- voting_stock to topco in exchange for additional shares of topco common_stock shortly following the contribution in step topco will recapitalize itself by means of a reverse_stock_split plr-111501-12 the outstanding employee share option plan in fsub and its obligations will be assumed by topco with each former fsub stock_option being exercisable into shares of topco stock the employee share option plan in topco will have the identical terms and vesting periods in topco as exist under the fsub option plan fsub will elect to be treated as a disregarded_entity for federal_income_tax purposes under sec_301_7701-2 and sec_301_7701-3 fsub will make such election effective no earlier than the day following the completion of step steps through are hereinafter referred to collectively as the second reorganization the incorporators will contribute all their shares of topco to topco in exchange for additional shares of topco common_stock the outstanding employee share option plan in topco and its obligations will be assumed by topco with each former topco stock_option being exercisable into shares of topco stock the employee share option plan in topco will have the identical terms and vesting periods in topco as exist under the topco option plan topco will elect to be treated as a disregarded_entity for federal_income_tax purposes under sec_301_7701-2 and sec_301_7701-3 topco will make such election effective no earlier than the day following the completion of step most of fsub’s subsidiaries will elect to be treated as disregarded entities for federal tax purposes under sec_301_7701-2 and sec_301_7701-3 the subsidiary ctb transactions such election will be effective no earlier than the day following the completion of step all the outstanding shares of topco will be acquired by a third party for cash the sale shortly following step a portion of the cash received by topco will be used to redeem all the shares held by fco and fco and to cancel topco 2’s outstanding employee share options it is also anticipated that a portion of the proceeds will be distributed to dsub and the balance will be loaned to affiliates of dsub plr-111501-12 supplemental representations taxpayer has made the following representations in connection with the first reorganization a fco fco and dsub will receive solely topco stock in the first reorganization b the fair_market_value of the stock of topco received by each fco fco and dsub will be approximately equal to the fair_market_value of the fsub stock deemed to be surrendered by each in the exchange c immediately following consummation of the first reorganization fco fco and dsub will own all of the outstanding topco stock and except for topco stock issued to fco fco and dsub for a nominal amount will own such stock solely by reason of their ownership of fsub stock immediately prior to the first reorganization d immediately following consummation of the first reorganization topco will possess the same assets and liabilities as those possessed by fsub immediately prior to the first reorganization e the liabilities of fsub to be assumed within the meaning of sec_357 by topco plus the liabilities if any to which the transferred assets are subject were incurred by fsub in the ordinary course of its business and are associated with assets to be transferred f fsub will be eligible to elect to be treated as a disregarded_entity under sec_301_7701-2 and sec_301_7701-3 and will make such election effective no earlier than one day after topco acquires its shares g except for the employee share option plan in fsub at the time of the first reorganization fsub will not have any outstanding warrants options convertible securities or any other type of right pursuant to which any person could acquire shares of fsub after step of the first reorganization is executed any such fsub employee share options will become the equivalent employee share options in topco h immediately after the first reorganization the proportionate interest of each of fco fco and dsub in topco will be the same as the proportionate interest each held in fsub immediately before the first reorganization for purposes of this representation any variation in the proportionate interest of each of fco fco and dsub in topco from the proportionate interest that each held in fsub will be less than one percent plr-111501-12 i the class e stock will have a fair_market_value of dollar_figureo a basis of dollar_figurep and will be repurchased by fsub for dollar_figuren and subsequently cancelled by fsub j at the time of the first reorganization fsub will not be under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 k fsub will not be a controlled_foreign_corporation within the meaning of sec_957 or a passive_foreign_investment_company within the meaning of sec_1297 immediately before the supplemental proposed transaction l immediately before and after the first reorganization topco will not be a passive_foreign_investment_company within the meaning of sec_1297 m fsub will not hold any united_states real_property interests as defined in sec_897 immediately before the first reorganization and topco will not hold any such interests immediately after the first reorganization n at all times prior to acquiring the assets of fsub in the first reorganization i topco will have been engaged in no business activity ii topco will have had no federal_income_tax attributes attributes described in sec_381 and iii topco will have held no assets except for a nominal amount of cash transferred by fco fco and dsub o immediately after the first reorganization topco will hold directly and through fsub as a disregarded_entity all the assets held by fsub immediately prior to the first reorganization except for assets used to pay expenses in connection with the first reorganization the assets used to pay expenses will be less than one percent of the fair_market_value of the net assets of fsub immediately prior to the first reorganization no assets will be distributed and there will be no dissenting shareholders in the first reorganization p none of the compensation received by any member of management was separate consideration for or allocable to any of his or her shares of fsub stock except with respect to class b non-voting stock and class e stock received in respect of shares of class c stock and the compensation paid to any member of management was for services actually rendered and was commensurate with amounts paid to third parties bargaining at arm’s length for similar services q each party will pay its own expenses if any incurred in connection with the first reorganization r dollar_figurek is less than one percent of the net fair_market_value of fsub taxpayer has made the following representations in connection with the second reorganization plr-111501-12 s fco fco and dsub will receive solely topco stock in the second reorganization t the fair_market_value of the stock of topco received by each fco fco and dsub will be approximately equal to the fair_market_value of the topco stock deemed to be surrendered by each in the exchange u immediately following consummation of the second reorganization fco fco and dsub will own all of the outstanding topco stock except for topco stock issued to fco fco and dsub for dollar_figurem and will own such stock solely by reason of their ownership of topco stock immediately prior to the second reorganization v immediately following consummation of the second reorganization topco will possess the same assets and liabilities as those possessed by topco immediately prior to the second reorganization w the liabilities of topco to be assumed within the meaning of sec_357 by topco plus the liabilities if any to which the transferred assets are subject were incurred by topco in the ordinary course of its business and are associated with assets to be transferred x topco will be eligible to elect to be treated as a disregarded_entity under sec_301_7701-2 and sec_301_7701-3 and will make such election effective no earlier than one day after topco acquires its shares y except for the employee share option plan in topco at the time of the second reorganization topco will not have any outstanding warrants options convertible securities or any other type of right pursuant to which any person could acquire shares of topco after step of the second reorganization is executed any such topco employee share options will become the equivalent amount of employee share options in topco z immediately after the second reorganization the proportionate interest of each of fco fco and dsub in topco will be the same as the proportionate interest each held in topco immediately before the second reorganization for purposes of this representation any variation in the proportionate interest of each of fco fco and dsub in topco from the proportionate interest that each held in topco will be less than one percent aa at the time of the second reorganization topco will not be under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 plr-111501-12 bb immediately before and after the second reorganization topco will not be a passive_foreign_investment_company within the meaning of sec_1297 cc topco will not hold any united_states real_property interests as defined in sec_897 immediately before the second reorganization and topco will not hold any such interests immediately after the second reorganization dd at all times prior to acquiring the assets of topco in the second reorganization i topco will have been engaged in no business activity ii topco will have had no federal_income_tax attributes attributes described in sec_381 and iii topco will have held no assets except for a nominal amount of cash transferred by fco fco and dsub ee immediately after the second reorganization topco will hold directly and through topco as a disregarded_entity all the assets held by topco immediately prior to the second reorganization except for assets used to pay expenses in connection with the second reorganization the assets used to pay expenses will be less than one percent of the fair_market_value of the net assets of topco immediately prior to the second reorganization no assets will be distributed and there will be no dissenting shareholders in the second reorganization ff each party will pay its own expenses if any incurred in connection with the second reorganization gg dollar_figurem is less than one percent of the net fair_market_value of topco supplemental rulings based solely on the information and representations set forth herein we rule as follows regarding the first reorganization and regarding the supplemental proposed transaction the first reorganization qualifies as a reorganization within the meaning of sec_368 topco and fsub will each be a party to the reorganization within the meaning of sec_368 no gain_or_loss will be recognized by fsub upon the deemed transfer of all of its assets to topco in exchange for topco stock and the assumption_of_liabilities sec_361 and sec_357 no gain_or_loss will be recognized by topco upon its receipt of the fsub assets in exchange for the topco stock sec_1032 plr-111501-12 topco 1’s basis in the assets acquired from fsub will be the same as fsub’s basis in such assets immediately before the original proposed transaction sec_362 topco 1’s holding_period for the assets acquired from fsub will include the period during which such assets were held by fsub sec_1223 no gain_or_loss will be recognize by fsub on the distribution of topco stock to its shareholders sec_361 no gain_or_loss will be recognized by fsub’s shareholders upon the receipt of the topco stock in exchange for the fsub stock sec_354 fsub shareholders’ basis in each share of topco stock received in the exchange for fsub stock will be equal to the basis of each share of fsub stock treated as exchanged therefore sec_358 and sec_1_358-2 the holding_period for the topco stock in the hands of the fsub shareholders will include the holding_period during which the fsub shareholders held the fsub stock exchanged therefore provided that the fsub stock is held as a capital_asset in the hands of the fsub shareholders on the date of the exchange sec_1223 subject_to the conditions and limitations of sec_381 sec_382 sec_383 and sec_384 and treasury regulations thereunder topco will succeed to and take into account the tax_attributes of fsub described in sec_381 under sec_381 and sec_1_381_a_-1 rulings with respect to the second reorganization the second reorganization qualifies as a reorganization within the meaning of sec_368 topco and topco will each be a party to the reorganization within the meaning of sec_368 no gain_or_loss will be recognized by topco upon the deemed transfer of all of its assets to topco in exchange for topco stock and the assumption_of_liabilities sec_361 and sec_357 no gain_or_loss will be recognized by topco upon its receipt of the topco assets in exchange for the topco stock sec_1032 topco 2’s basis in the assets acquired from topco will be the same as topco 1’s basis in such assets immediately before the second reorganization sec_362 plr-111501-12 topco 2’s holding_period for the assets acquired from topco will include the period during which such assets were held by topco sec_1223 no gain_or_loss will be recognized by topco on the distribution of topco stock to its shareholders sec_361 no gain_or_loss will be recognized by topco 1’s shareholders upon the receipt of the topco stock in exchange for the topco stock sec_354 topco shareholders’ basis in each share of topco stock received in the exchange for topco stock will be equal to the basis of each share of topco stock treated as exchanged therefore sec_358 and sec_1_358-2 the holding_period for the topco stock in the hands of the topco shareholders will include the holding_period during which the topco shareholders held the topco stock exchanged therefore provided that the topco stock is held as a capital_asset in the hands of the topco shareholders on the date of the exchange sec_1223 subject_to the conditions and limitations of sec_381 sec_382 sec_383 and sec_384 and treasury regulations thereunder topco will succeed to and take into account the tax_attributes of topco described in sec_381 under sec_381 and sec_1_381_a_-1 ruling with respect to the overall supplemental proposed transaction the sale will be treated as a sale of topco 1’s assets by topco for federal_income_tax purposes caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item not discussed or referenced in this letter in particular no opinion was requested and no opinion is expressed regarding any distributions or loans from topco described in step this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative plr-111501-12 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely isaac w zimbalist isaac w zimbalist senior technician reviewer branch office of associate chief_counsel corporate


t c memo united_states tax_court virginia w kelly petitioner v commissioner of internal revenue respondent docket no filed date virginia w kelly pro_se christopher r moran for respondent memorandum findings_of_fact and opinion lauber judge with respect to petitioner’s federal_income_tax for the internal_revenue_service irs or respondent determined a deficiency of dollar_figure and a sec_6651 addition_to_tax of dollar_figure before trial the partie sec_1 all statutory references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and continued stipulated the adjustments giving rise to the deficiency the sole issue for decision is whether petitioner is liable for the addition_to_tax for late filing of her return findings_of_fact the parties filed a stipulation of facts and related exhibits that are incorpor- ated by this reference petitioner resided in maryland when she filed the petition on date petitioner timely filed form_4868 application_for automatic_extension of time to file u s individual_income_tax_return by submitting this application petitioner received an extension of time until date to file her return for petitioner was married during but elected to file separately she pre- pared her return using turbotax the turbotax cover sheet instructed her to mail her return to the irs office in kansas city missouri according to the irs transcript of petitioner’s account included in the stipulation of facts the irs did not receive petitioner’s return until date at trial petitioner acknowledged that she had filed her and individual income_tax returns late during petitioner was corresponding continued procedure all monetary amounts are rounded to the nearest dollar with irs offices in various cities--including philadelphia cincinnati and kansas city missouri--with respect to her tax_liabilities she was making periodic_payments on account of multiple tax years she acknowledged that some of these payments may have required mailing to the irs philadelphia office petitioner testified that she filed her return on or before the date due_date the only evidence she submitted of this filing was a u s postal service receipt showing that an unspecified document was delivered to the department of the treasury in philadelphia pennsylvania the delivery date stamped on this receipt which was not entirely legible appeared to be date petitioner stated that she might be able to produce additional evidence of timely mailing if she had the opportunity to review a box of documents that had been packed for a household move at the close of trial the court left the record open for days to afford petitioner time to review her files and provide to counsel for respondent and the court any additional evidence concerning the date on which her return was mailed no additional evidence was submitted before the record closed opinion sec_6651 provides for an addition_to_tax when a taxpayer fails to file a return timely unless the taxpayer proves that the failure was due to reason- able cause and not due to willful neglect for each month or fraction thereof for which such failure continues sec_6651 add sec_5 of the tax required to be shown on such return up to a maximum addition of respondent bears the burden of production for the late-filing addition_to_tax see sec_7491 once respondent meets his burden of production the burden shifts to petitioner to per- suade the court that the respondent’s determination is incorrect see rule a 116_tc_438 the due_date for petitioner’s return as extended was date the irs transcript of her account shows that this return was not filed until date respondent has therefore carried his burden of producing evidence that petitioner’s return was filed late see 127_tc_200 aff’d 521_f3d_1289 10th cir mills v commissioner tcmemo_2007_270 94_tcm_274 petitioner argues that no addition_to_tax is appropriate because she filed her return timely pursuant to the timely mailed timely filed rule_of sec_7502 petitioner produced no credible_evidence however that she mailed her return on or before its due_date the only evidence she produced was a u s postal service receipt showing that an unspecified document was delivered to the department of the treasury in philadelphia pennsylvania apparently on date there is no evidence that the document so mailed was her tax_return and the record supports an inference to the contrary first the turbotax cover sheet instructed petitioner to mail her return not to the irs philadelphia office but to the irs kansas city office second petitioner requested on date an extension of time to file her return it is implausible that she would have requested this extension if she had filed her return one month previously petitioner acknowledged that she was corresponding with the irs philadelphia office on other matters our review of the record convinces us that the document she claims to have mailed to the irs philadelphia office on date was something other than her individual_income_tax_return finding no evidence that petitioner filed her return before the date due_date and finding no evidence that her failure_to_file timely was due to reasonable_cause we sustain the addition_to_tax that respondent determined under sec_6651 to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index numbers -------------------------- -------------------------------- --------------------------- ------------------------- ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc corp b04 plr-138810-11 date date legend distributing controlled sub sub sub acquiring shareholder a --------------------------- ------------------------------------ ------------------------ ---------------- ------------------------------------------------------ ------------------------ -------------------------- ------------------------ ------------------------------- ----------------------------------------------------- ------------------------ ----------------------------------------- -------------------------- ------------------------ --------------------------------------- ------------------------------- ------------------------ -------------------------- plr-138810-11 -------------------------- ---------------------- -------------------------- ----------------------- -------------------------- --------------------- -------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ---------------------- ------------------------------------------------------------------------ ---------------- ---- ---- shareholder b shareholder c date d date e business x business y a b dear -------------- this letter responds to your date request for rulings under sec_355 sec_368 and related provisions with respect to the proposed transaction defined below the information submitted in that request and in subsequent correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process in particular this office has not reviewed any information pertaining to and has made no determination regarding whether the proposed transaction i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more plr-138810-11 persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 summary of facts distributing is a closely held subchapter_s_corporation that is engaged through wholly owned qualified subchapter_s subsidiaries each a qsub and wholly owned limited_liability companies in business x and business y distributing has one class of common_stock outstanding which is owned a percent by shareholder a a percent by shareholder b and b percent by shareholder c distributing wholly owns among other entities sub sub and sub sub is a qsub that directly conducts business x and business y sub is a qsub that directly conducts business y sub is a qsub that was formed on date d for purposes of the proposed transaction financial information submitted by distributing indicates that business x and business y each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years on date e the shareholders of distributing formed acquiring and acquiring made an election under sec_1362 to be taxed as a subchapter_s_corporation acquiring has one class of common_stock outstanding which is owned a percent by shareholder a a percent by shareholder b and b percent by shareholder c proposed transaction for what are represented to be valid business reasons distributing has proposed the following transaction to separate business y from business x the proposed transaction i ii iii distributing will form controlled and elect to treat controlled as a qsub pursuant to sec_1361 sub will transfer all of its assets and operations related to business y to distributing and distributing will contribute such assets to sub distributing will then transfer all of the stock of sub and sub to controlled and distribute pro_rata all the controlled stock to the shareholders of distributing the distribution pursuant to sec_1 b i the distribution will cause a termination of controlled’s qsub election with controlled being treated as a new corporation acquiring all of its assets and assuming all of its liabilities from distributing immediately before the distribution in exchange for the stock of controlled the contribution plr-138810-11 iv v immediately after the distribution the shareholders of distributing will contribute all of their controlled stock to acquiring the acquisition immediately after the acquisition acquiring will liquidate controlled under applicable state law the liquidation and will elect to treat both sub and sub as subchapter_s subsidiaries pursuant to sec_1361 representations contribution and distribution the taxpayer makes the following representations regarding the contribution and the distribution the indebtedness owed by controlled to distributing after the distribution will not a constitute stock_or_securities b no part of the consideration to be distributed by distributing in the distribution will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation the five years of financial information submitted on behalf of distributing is c representative of the corporation’s present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted d neither business x nor control of an entity conducting this business will have been acquired during the five-year period ending on the date of the distribution in a transaction in which gain_or_loss was recognized or treated as recognized under proposed sec_1_355-3 in whole or in part throughout the five-year period ending on the date of the distribution distributing has been the principal_owner of the goodwill and significant assets of business x and will continue to be the principal_owner following the distribution following the transaction distributing will continue the active_conduct of its e business independently and with its separate employees the five years of financial information submitted on behalf of controlled is f representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted plr-138810-11 g neither business y nor control of an entity conducting this business will have been acquired during the five-year period ending on the date of the distribution in a transaction in which gain_or_loss was recognized or treated as recognized under proposed sec_1_355-3 in whole or in part throughout the five-year period ending on the date of the distribution distributing will have been the principal_owner of the goodwill and significant assets of business y and controlled or its successor will be the principal_owner following the distribution following the transaction controlled or its successor will continue the active h conduct of its business independently and with its separate employees the distribution is being carried out for the following corporate business i purposes i to allow business y to separately borrow from third party lenders and independently market its business and ii to market its business to customers of business x the distribution is motivated in whole or substantial part by one or more of these corporate business purposes the transaction is not being used principally as a device for the distribution of the j earnings_and_profits of distributing or controlled or both see sec_355 for purposes of sec_355 immediately after the distribution no person k determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution for purposes of sec_355 immediately after the distribution no person l determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock_or_securities that were acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution m the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation plr-138810-11 immediately after the transaction taking into account sec_355 either i no n person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in the stock of distributing or controlled who did not hold such an interest immediately before the transaction or ii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 the total adjusted bases and the fair_market_value of the assets transferred to o controlled by distributing will equal or exceed the sum of the liabilities assumed as determined under sec_357 by controlled plus any liabilities to which the transferred assets are subject p the liabilities assumed if any as determined under sec_357 by controlled were incurred in the ordinary course of business and are associated with the assets being transferred the total fair_market_value of the assets transferred by distributing to controlled q in the contribution will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by controlled in connection with the exchange ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the exchange and iii the amount of cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the exchange the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately_after_the_exchange r no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution other than intercompany loans or obligations that have arisen or will arise between the parties in the ordinary course of business s payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the transaction are investment companies as defined in t sec_368 and iv distributing and controlled each will pay its own expenses if any incurred in u connection with the distribution distributing is a subchapter_s_corporation within the meaning of sec_1361 v there is no plan or intention to revoke or otherwise terminate the s_corporation_election of distributing plr-138810-11 no property deemed transferred between distributing and controlled has or will w claim investment_credit under sec_46 acquisition and liquidation the taxpayer makes the following representations regarding the acquisition and the liquidation the fair_market_value of the acquiring stock and other consideration received by x each shareholder of controlled will be approximately equal to the fair_market_value of the controlled stock surrendered in the exchange at least percent of the proprietary interest in controlled will be exchanged for y stock of acquiring and will be preserved within the meaning of sec_1_368-1 acquiring will acquire at least percent of the fair_market_value of the net assets z and at least percent of the fair_market_value of the gross assets held by controlled immediately prior to the proposed transaction for purposes of this representation amounts paid_by controlled to dissenters amounts paid_by controlled to shareholders who receive cash or other_property amounts used by controlled to pay its reorganization expenses and all redemptions and distributions except for regular normal dividends made by controlled immediately preceding the transfer will be included as assets of controlled immediately prior to the proposed transaction aa after the proposed transaction the shareholders of controlled will be in control of acquiring within the meaning of sec_368 bb neither acquiring nor any person related to acquiring within the meaning of sec_1_368-1 has any plan or intention to reacquire any stock of acquiring issued in the proposed transaction acquiring has no plan or intention to sell or otherwise dispose_of any of the cc assets of controlled acquired in the proposed transaction except for dispositions made in the ordinary course of business dd the liabilities of controlled assumed as determined under sec_357 by acquiring and the liabilities if any to which the transferred assets are subject were incurred by controlled in the ordinary course of its business and are associated with the assets transferred ee following the proposed transaction acquiring will continue the historic_business of controlled or use a significant portion of controlled's historic_business_assets in a business plr-138810-11 ff at the time of the proposed transaction acquiring will not have outstanding any warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in acquiring that if exercised or converted would affect the acquisition or retention of control as defined in sec_368 gg acquiring controlled and the shareholders of controlled will each pay their respective expenses if any incurred in connection with the proposed transaction hh there is no intercorporate indebtedness existing between acquiring and controlled that was issued acquired or will be settled at a discount no two parties to the proposed transaction are investment companies as ii defined in sec_368 and iv the fair_market_value of the assets of controlled transferred to acquiring will jj equal or exceed the sum of the liabilities of controlled assumed as determined under sec_357 by acquiring plus the amount of liabilities if any to which the transferred assets are subject kk controlled is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 acquiring is a subchapter_s_corporation within the meaning of sec_1361 there ll is no plan or intention to revoke or otherwise terminate the s_corporation_election of acquiring rulings contribution and distribution based solely on the information submitted and the representations set forth above we rule as follows on the contribution and the distribution the contribution followed by the distribution will be a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 distributing will recognize no gain_or_loss on the contribution sec_357 and a controlled will recognize no gain_or_loss on the contribution sec_1032 plr-138810-11 controlled’s basis in each of the assets received in the contribution will be the same as the basis of the asset in the hands of distributing immediately before the contribution sec_362 controlled’s holding_period in each of the assets received in the contribution will include the period during which distributing held such asset sec_1223 distributing will recognize no gain_or_loss on the distribution sec_361 distributing’s shareholders will recognize no gain_or_loss and no amount will be includible in their income on the receipt of controlled stock in the distribution sec_355 the aggregate basis of the controlled stock and the distributing stock in the hands of distributing’s shareholders immediately after the distribution will be the same as the aggregate basis of the distributing stock held by the distributing shareholders immediately before the distribution allocated between the stock of distributing and controlled in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 b and c the holding_period of the controlled stock received by each distributing shareholder will include the holding_period of the distributing stock held by each shareholder provided the distributing stock was held as a capital_asset on the date of the distribution sec_1223 as provided in sec_312 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_1_312-10 the accumulated_adjustments_account of distributing will be allocated between distributing and controlled in a manner that is similar to the manner in which earnings_and_profits of distributing will be allocated under sec_312 in accordance with sec_1 d controlled’s momentary ownership of the stock of sub and sub as part of the reorganization under sec_368 will not prevent acquiring from electing to treat sub and sub as qsubs of acquiring before the expiration of the five year period described in sec_1361 and sec_1_1361-5 provided that a immediately following the termination of their status as qsubs sub and sub are each otherwise eligible to have a qsub election made for it and b the elections are made effective immediately following the termination of controlled’s qsub election plr-138810-11 acquisition and liquidation based solely on the information submitted and the representations set forth above we rule as follows on the acquisition and the liquidation the acquisition and liquidation will be treated for federal_income_tax purposes as the transfer by controlled of substantially_all of its assets to acquiring solely in exchange for acquiring stock and the assumption by acquiring of controlled’s liabilities rev_rul c b the transfer by controlled of substantially_all of its assets to acquiring solely in exchange for acquiring stock and the assumption by acquiring of the liabilities of controlled will constitute a reorganization within the meaning sec_368 for purposes of this ruling substantially_all means at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets of controlled acquiring and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by controlled on the transfer of all of its assets to acquiring in exchange for acquiring stock and the assumption by acquiring of controlled’s liabilities as described above sec_361 and sec_357 no gain_or_loss will be recognized by controlled on the distribution of the acquiring stock to its shareholders sec_361 no gain_or_loss will be recognized by acquiring on its receipt of the assets of controlled in exchange for acquiring stock sec_1032 the basis of controlled’s assets in the hands of acquiring will be the same as the basis of such assets in the hands of controlled immediately before their transfer sec_362 the holding_period of controlled's assets in the hands of acquiring will include the period during which such assets were held by controlled sec_1223 no gain_or_loss will be recognized by shareholder a shareholder b and shareholder c on their receipt of the acquiring stock in exchange for their controlled stock as described above sec_354 the basis of the shares of the acquiring stock received by shareholder a shareholder b and shareholder c will be the same as their bases in the controlled stock surrendered in exchange therefor sec_358 plr-138810-11 the holding_period of the acquiring stock received by shareholder a shareholder b and shareholder c will include the holding_period of the controlled stock surrendered in exchange therefor provided that the controlled stock is held as a capital_asset on the date of the exchange sec_1223 caveats no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code and regulations or on the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular this office has not reviewed any information pertaining to and has made no determination regarding i sec_1_355-2 whether the distribution satisfies the business_purpose requirement of ii whether the distribution is used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both see sec_355 and sec_1_355-2 iii whether the distribution and an acquisition or acquisitions are part of a plan or series of related transactions under sec_355 iv whether distributing or acquiring otherwise meets the requirements of a subchapter_s_corporation under sec_1361 and v whether controlled sub sub or sub otherwise meets the requirements of a qsub under sec_1361 procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling plr-138810-11 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 _________________________ richard k passales senior counsel branch office of associate chief_counsel corporate


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b01-plr-155167-01 date date legend x date state dear this written_determination is in response to your request on behalf of x dated date for a ruling granting x relief under sec_1362 of the internal_revenue_code facts x was incorporated under state law on date the sole shareholder of x intended that x elect to be treated as an s_corporation effective date however the election to be treated as an s_corporation was not timely filed law and analysis sec_1362 of the code provides that a small_business_corporation can elect to be treated as an s_corporation sec_1362 of the code provides guidance on when the s election becomes 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 for the year in which the election was made if the corporation makes an election after the first two and one-half months of a corporation’s taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year sec_1362 of the code provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and the secretary determined reasonable_cause existed for the failure to timely make the election then the secretary can treat such an election as being timely made for that taxable_year and effective as of the first day of that taxable_year x did not file a timely election to be treated as a s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election therefore x is entitled to relief under section b conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective date an original form_2553 along with a copy of this letter must be forwarded to the relevant service_center within days from the date of this letter except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this ruling will be furnished to the taxpayer sincerely david r haglund senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c jan uilc number release date memorandum for director internal_revenue_service center kansas city mo attn entity control from subject chief branch office of the associate chief_counsel employee_benefits and exempt_organizations cc ebeo - railroad retirement act tax status attached for your information and appropriate action is a copy of a letter from the railroad retirement board concerning the status under the railroad retirement act and the railroad unemployment insurance act of we have reviewed the opinion of the railroad retirement board and based solely upon the information submitted concur in the conclusion that is not an employer under the railroad retirement act and the railroad unemployment insurance act harry beker cc


s significant index nos department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division aug ep mb tame taxpayer this letter constitutes notice that the conditional waiver of the minimum_funding_standard for the above-named plan for the plan_year ending december i which was granted in our ruling letter dated october jj has been modified by changing the deadline by which an agreement must be reached with the pension_benefit_guaranty_corporation pbgc on securing repayment of the waived amount from january to december according to information submitted with the request a tentative agreement on security was being negotiated with the pbgc before the january im deadline however final agreement was not reached until december hi _ _and to your to the manager ep compliance unit in if you require further assistance in this matter please contact we have sent a copy of this letter to the manager ep classification in authorized representative pursuant to a power_of_attorney on file in this office this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent carol d gold director employee_plans sincerely yours


department of the treasury internal_revenue_service washington d c uil ze gt date jun contact person id number telephone number employer_identification_number d a t w d n u o n o o s this is in response to a letter from your authorized representative requesting a ruling on your behalf that you meet the requirements of revproc_95_48 1995_2_cb_418 to qualify as an affiliate of a governmental_unit and therefore not be required to file form_990 return of organization exempt from federal_income_tax a was created by a state statute and is exempt from federal_income_tax under sec_501 of the internal_revenue_code and is classified as a nonprivate foundation under sec_509 federal_income_tax under sec_501 of the code and is classified as a nonprivate foundation under sec_509 a operates b a hospital which is exempt from a was created under a state statute which authorizes the creation of public trusts for the use and benefit of municipalities in c for public purposes and functions you have stated that a must assume full responsibility for providing medical and hospital care to residents of the municipality which is its primary mission its primary source of revenue is from providing services to patients d is responsible for appointing the board_of trustees of a which is responsible for managing controlling and administering b you have requested the following ruling a satisfies the requirements of being an affiliate of a governmental_unit of revproc_95_48 1995_2_cb_418 and therefore is not required to file form_990 sec_501 of the code provides an exemption from federal_income_tax for organizations described in sec_501 including organizations that are organized and operated exclusively for charitable educational or scientific purposes the promotion of health is a charitable purpose within the meaning of sec_501 sec_6033 of the code generally requires the filing of annual information returns by exempt_organizations sec_6033 of the code provides certain mandatory exceptions to filing annual information returns sec_6033a b of the code provides discretionary exceptions from filing such returns where the secretary determines that such filing is not necessary to the efficient administration of the tax laws revproc_95_48 provides an exception from filing for governmental units or affiliates of governmental units that are exempt from federal_income_tax under sec_501 section dollar_figure of revproc_95_48 provides that an organization will be treated as an affiliate of a governmental_unit if it is described in sec_501 and either a it has a ruling from the service that its exempt_purpose income is excluded under sec_115 it is entitled to receive deductible contributions under sec_170 because the contributions are the for_the_use_of a governmental_unit or it is a wholly owned instrumentality of a state or political_subdivision for employment_tax purposes or b it meets a facts_and_circumstances_test sec_4 b of revproc_95_48 provides the following criteria to be used to determine whether an organization meets the facts_and_circumstances_test as an affiliate of a governmental_unit the organization is either operated supervised or controlled within the meaning of sec_1_509_a_-4 of the regulations by governmental units or by an organization’s governing body that is elected by the public at large the organization possesses two or more affiliation factors listed under section dollar_figure of the revenue_procedure and the organization's filing of form_990 is not otherwise necessary to the efficient administration of the internal revenue laws section dollar_figure of revproc_95_48 describes among the affiliation factors the following a the organization was created by one or more governmental units organizations that are affiliates of governmental units or public officials acting in their official capacity b the organization is subject_to financial audit by the governmental_unit to which it reports or the governmental_unit or affiliate of a governmental_unit exercises control_over or oversees some or all of the organization’s expenditures sec_1_509_a_-4 of the income_tax regulations provides in part that the terms operated by supervised by and controlled by as used in sec_509 presupposes a substantial degree of direction over the policies programs and activities of a supporting_organization by one or more publicly supported organizations the relationship described under any one of these terms is comparable to that of a parent and subsidiary where the subsidiary is under the direction of and accountable or responsible to the parent organization this relationship is established by the fact that a majority of the officers directors or trustees of the supporting_organization are appointed or elected by the governing body officers acting in their official capacity or the membership of one or more publicly supported organizations you have stated that a does not have a letter that meets the criteria of sec_4 a of the revenue_procedure and therefore it must meet the facts_and_circumstances_test of sec_4 b a is organized and operated primarily for charitable purposes to establish operate furnish and regulate health care facilities for the treatment of those persons needing surgical or medical_care and has been issued a determination_letter that it is exempt from federal_income_tax under sec_501 of the code a is operated supervised or controlled by a governmental_unit within the meaning of sec_1 a - g i of the regulations since a’s board_of trustees are appointed by d which must also approve the issuance of any obligations creating a lien or encumbrance on the real_property owned by a audited for each fiscal_year which is presented to various governmental entities and c has control_over the termination of a and upon the disposition of its assets in addition a was created by a statute of c must be accordingly based on all the facts and circumstances described above we rule a satisfies the requirements of being an affiliate of a governmental_unit of revproc_95_48 and therefore is not required to file form_990 this ruling is based on the understanding that there will be no material changes in the facts upon which they it is based this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent 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 please keep a copy of this ruling in your permanent records sincerely michael seto manager exempt_organizations technical group


internal_revenue_service number info release date uil ------------------------------ ---------------------------------------- ------------------------ ------------------------- - department of the treasury washington dc person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi genin-107708-05 date date dear ------------------------------ this letter responds to your letter dated date requesting late s_corporation_election information the window period for automatic late s_corporation relief for the taxable_year is open pursuant to sec_4 of revproc_2004_43 copy enclosed the election form_2553 copy enclosed must be filed within months of the original due_date and state at the top of the document filed pursuant to revproc_2003_43 attached to the election form must be a statement establishing either reasonable_cause for the failure_to_file the election under subchapter_s timely the following additional documents must be attached to the election form an entity seeking relief for a late s_corporation_election must file a completed form_2553 signed by an officer of the corporation authorized to sign an all persons who were shareholders at any time during the period that began on the first day of the taxable_year for which the election is to be effective and ends on the election is made and for all subsequent years and a dated declaration signed by an officer of the corporation authorized to sign which states under penalties of perjury i declare that to the best of my knowledge and belief the facts presented in support of this election are true correct and complete please send the material to the following address via certified mail internal_revenue_service csc entity control cincinnati oh genin-107708-05 if you have any additional questions please contact our office at sincerely s dianna k miosi dianna k miosi chief branch office of associate chief_counsel passthroughs special industries enclosures revproc_2003_43 form_2553


internal_revenue_service number release date index numbers --------------------------------------------- ------------------------------- ------------------------------------------------- ----------------------------------------------- ------------------------------------------ department of the treasury washington dc person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-147742-07 date date legend x y --------------------------------------------------------------------------------------------------- ------------------------- --------------------------------------------------------------------------------------------------- ------------------------- state ------------- country -------- date -------------------------- year1 ------- year2 ------- dear ----------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under 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_taxable_as_a_corporation under sec_301_7701-3 effective date facts plr-147742-07 x was formed on date as a state limited_liability_company on date x was a wholly owned subsidiary of y a corporation formed under the laws of country between year1 and year2 x and y consulted repeatedly with legal and financial advisors regarding the business structure of x and y during each consultation x was advised of the necessity for x to make an election to be treated as an association_taxable_as_a_corporation under sec_301_7701-3 x was also advised regarding the adverse tax consequences of not making the necessary election because of x’s delay in implementing the advice a form_8832 entity classification election electing to be treated as an association_taxable_as_a_corporation was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that unless an entity elects otherwise a domestic eligible_entity is disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides 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 form_8832 with the service_center designated on 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 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register plr-147742-07 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 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have not acted reasonably and in good_faith if the taxpayer was informed in all material respects of the required election and related tax consequences but chose not to file the election conclusion based on the facts submitted and the representations made we do not believe that either x or y acted reasonably and in good_faith as required under sec_301_9100-3 specifically we believe that x and y were informed in all material respects of the required election and related tax consequences but chose not to file the election we therefore conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have not been satisfied as a result x is denied an extension of time to file form_8832 to elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective date 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 plr-147742-07 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


t c memo united_states tax_court adan sucilla petitioner v commissioner of internal revenue respondent docket no filed date adan sucilla pro_se john m wall for respondent memorandum findings_of_fact and opinion haines judge respondent determined deficiencies in petitioner’s federal_income_tax for and of dollar_figure and dollar_figure respectively and accuracy-related_penalties under sec_6662 a of dollar_figure and dollar_figure respectively the 1unless otherwise indicated all section references are to the internal_revenue_code as amended and in effect for the continued deficiencies were the result of the disallowance of expense deductions claimed on petitioner’s schedules c profit or loss from business attached to his and federal_income_tax returns the issues for decision after concession sec_2 are whether petitioner is entitled to various schedule c deductions we must further decide whether petitioner is liable for the accuracy- related penalties under sec_6662 findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts together with the attached exhibits is incorporated herein by this reference at the time petitioner filed his petition he resided in fresno californa throughout and petitioner operated sucilla farm labor contractor a sole_proprietorship providing farm labor services in the fresno california area petitioner timely filed form sec_1040 u s individual_income_tax_return for taxable years and attached to the respective returns were schedules c pertaining to petitioner’s farm labor business petitioner reported gross_income of dollar_figure and total expense sec_1 continued taxable years at issue and all rule references are to the tax_court rules_of_practice and procedure amounts are rounded to the nearest dollar 2in a stipulation of settled issues petitioner concedes that he received and failed to report dollar_figure of cancellation_of_indebtedness_income for taxable_year of dollar_figure on his schedule c on his schedule c petitioner reported gross_income of dollar_figure and total expenses of dollar_figure petitioner did not keep separate books for his business he relied on bank statements subcontractor checks and receipts for his expenses he did however hire a certified_public_accountant to prepare his and federal_income_tax returns the internal_revenue_service agent who examined the returns found that all business income was reported accurately but not all expenses deducted could be substantiated because petitioner had either lost or misplaced a number of his receipts for out of a total of dollar_figure in expenses dollar_figure was not substantiated for out of a total of dollar_figure in expenses dollar_figure was not substantiated but the auditing agent allowed deductions totaling dollar_figure and dollar_figure for and respectively for previously unclaimed but allowable expenses on date respondent sent a notice_of_deficiency for petitioner’s and income_tax returns in his notice_of_deficiency respondent disallowed schedule c expense deductions totaling dollar_figure respondent also disallowed 3these disallowed deductions related to insurance expenses office expenses rent or lease for vehicles machinery and equipment expenses repairs and maintenance_expenses supplies expenses taxes and licenses expenses continued schedule c expense deductions totaling dollar_figure petitioner filed a timely petition with this court opinion i business deductions deductions are a matter of legislative grace and the taxpayer must prove he or she is entitled to the deductions claimed rule a 292_us_435 sec_162 provides that there shall be allowed as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business the regulations specify that ordinary and necessary business_expenses include the ordinary and necessary expenditures directly connected with or pertaining to the taxpayer’s trade_or_business sec_1_162-1 income_tax regs taxpayers are required to maintain records sufficient to establish the amounts of allowable deductions and to enable the commissioner to determine the correct_tax liability sec_6001 112_tc_183 in addition to satisfying the criteria for deductibility under sec_162 certain categories of expenses must also continued meals and entertainment_expenses utility expenses and other expenses 4these disallowed deductions related to car and truck expenses legal and professional expenses rent or lease for vehicles machinery and equipment expenses repairs and maintenance_expenses and other expenses satisfy the strict substantiation requirements of sec_274 in order for a deduction to be allowed the expenses to which sec_274 applies include among other things meals and entertainment_expenses and expenses for passenger automobiles see sec_274 280f d if the trial record provides sufficient evidence that the taxpayer has incurred a deductible expense but the taxpayer is unable to substantiate adequately the precise amount of the deduction to which he or she is otherwise entitled the court may estimate the amount of the deductible expense and allow the deduction to that extent cohan_rule 39_f2d_540 2d cir 85_tc_731 50_tc_823 affd per curiam 412_f2d_201 2d cir see also sec_1_274-5t temporary income_tax regs fed reg date in these instances the court is permitted to make as close an approximation of the allowable expense as it can bearing heavily against the taxpayer whose inexactitude is of his or her own making cohan v commissioner supra pincite however in order for the court to estimate the amount of an expense the court must have some basis upon which an estimate may be made vanicek v commissioner supra pincite without such a basis any allowance would amount to unguided largesse 245_f2d_559 5th cir sec_274 overrides the cohan_rule and thus specifically precludes the court from allowing a deduction for travel_expenses entertainment_expenses gifts and expenses with respect to sec_280f listed_property including passenger automobiles unless the taxpayer substantiates by adequate_records or by sufficient evidence corroborating the taxpayer’s own statement the amount of the expense or other item the time and place of the travel entertainment or use or date and description of the gift the business_purpose of the expense or other item and in the case of entertainment or gifts the business relationship to the taxpayer of the recipients or persons entertained other than those deductions respondent conceded petitioner failed to provide receipts logs books or any other kind of documentation to substantiate the deductions claimed on his and federal_income_tax returns without more information regarding the claimed deductions we sustain respondent’s determinations with regard to petitioner’s and federal_income_tax returns ii sec_6662 penalty sec_6662 and b imposes a 20-percent accuracy- related penalty upon any underpayment_of_tax resulting from a substantial_understatement_of_income_tax an understatement is substantial if it exceeds the greater of percent of the tax required to be shown on the return or dollar_figure sec_6662 the commissioner bears the burden of production with respect to penalties sec_7491 116_tc_438 petitioner accurately reported his income on his and federal_income_tax returns however petitioner was unable to substantiate various deductions claimed thus respondent calculated that petitioner understated his tax_liability by dollar_figure in and dollar_figure in petitioner had reported taxes of dollar_figure and dollar_figure on his and returns respectively the amount of each understatement was substantial because each exceeded the greater of percent of the tax required to be shown on the return for the taxable_year or dollar_figure consequently respondent has satisfied his burden of production the accuracy-related_penalty is not imposed however with respect to any portion of the underpayment for which the taxpayer can establish that he acted with reasonable_cause and in good_faith sec_6664 the decision as to whether the taxpayer acted with reasonable_cause and in good_faith depends upon all the pertinent facts and circumstances sec_1 b income_tax regs circumstances indicating that a taxpayer acted with reasonable_cause and in good_faith include an honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances including the experience knowledge and education of the taxpayer id petitioner asserts that he acted with reasonable_cause and in good_faith pointing out that he accurately reported his gross business income he provided bank statements subcontractor checks and receipts to substantiate the deductions claimed to the best of his ability expense deductions previously unclaimed were allowed and he hired a certified_public_accountant to prepare his federal_income_tax returns for and given the circumstances we find petitioner acted with reasonable_cause and in good_faith although we would encourage him to keep better business records in the future accordingly we hold that petitioner is not liable for the accuracy-related_penalties under sec_6662 in reaching our holdings we have considered all arguments made and to the extent not mentioned we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered under rule


internal_revenue_service number info release date date cc psi 1-genin-155238-01 uilc dear we are responding to your correspondence requesting relief in order to establish as the effective taxable_year for your s_corporation status the information submitted explains that you missed filing form_2553 in a timely manner instead the internal_revenue_service approved the election for an effective date of date your corporation is ineligible for automatic late s_corporation relief under revproc_98_55 because your election was filed past the window period and failed to include a reasonable_cause explanation attached to the form_2553 although we are unable to respond to your request as submitted this letter provides useful information about correcting your situation announcement copy enclosed provides guidance on seeking relief for late s_corporation elections generally to request relief for a late or invalid s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a ruling are set out in revproc_2002_1 copy enclosed in addition a proper user_fee must be submitted along with your request the fee for a ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million for the last 12-month taxable_period qualify for a reduced user_fee in the amount of dollar_figure if your business qualifies for the reduced fee your request must include a statement certifying gross_income otherwise you will be billed the higher fee please format your ruling_request as shown in appendix b of revproc_2002_1 if you decide to submit a ruling_request please provide documents supporting your intention to be an s_corporation and include the proper user_fee please refer your package to our office by adding the following to the address attn cc pa t p o box ben franklin station washington dc direct to cc psi b1 room if you have computer web access you may wish to visit www irs gov smallbiz for specialized tax information products and forms relating to small businesses please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2002_1


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number release date cc psi br4 tl-n-4351-00 uilc internal_revenue_service national_office field_service_advice memorandum for g michelle ferreira district_counsel cc wr nca sf from paul f kugler associate chief_counsel passthroughs special industries cc psi subject sec_2011 state_death_tax_credit for california estate_tax this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent disclosure statement field_service_advice is chief_counsel_advice and is open to public inspection pursuant to the provisions of sec_6110 the provisions of sec_6110 require the service to remove taxpayer identifying information and provide the taxpayer with notice of intention to disclose before it is made available for public inspection sec_6110 and i sec_6110 also authorizes the service to delete information from field_service_advice that is protected from disclosure under u s c sec_552 b and c before the document is provided to the taxpayer with notice of intention to disclose only the national_office function issuing the field_service_advice is authorized to make such deletions and to make the redacted document available for public inspection accordingly the examination appeals or counsel recipient of this document may not provide a copy of this unredacted document to the taxpayer or their representative the recipient of this document may share this unredacted document only with those persons whose official tax_administration duties with respect to the case and the issues discussed in the document require inspection or disclosure of the field_service_advice legend decedent estate tl-n-4351-00 date issue to what extent should the credit_for_state_death_taxes under sec_2011 of the internal_revenue_code be allowed where estate approximately two years prior to the decision in hoffman v connell cal app 4th cal rptr 2d paid the entire california estate_tax due and claimed a credit under sec_2011 for that amount on the federal estate_tax_return conclusion the entire sec_2011 credit claimed should be allowed where the estate approximately two years prior to the decision in hoffman v connell paid the entire california estate_tax determined to be due under state law accordingly a statutory_notice_of_deficiency should not be issued in this case however if the estate receives a refund of california estate_tax then in accordance with sec_2016 the credit allowable under sec_2011 should be redetermined to reflect the refund facts decedent a resident of california died on date as reported on a timely filed federal estate_tax_return the decedent’s gross_estate included under sec_2044 the value of a_trust subject_to a qualified_terminable_interest_property qtip_election in computing the federal estate_tax the executor claimed a credit for the amount of the california estate_tax paid california imposes a pick-up_tax equal to the maximum federal state_death_tax_credit allowable under sec_2011 approximately years after the decedent’s executor filed both the federal and state estate_tax returns a california appeals court in hoffman v connell supra concluded that qtip property subject_to inclusion in the federal gross_estate under sec_2044 is not subject_to california estate_tax as a result of the hoffman v connell decision where the federal taxable_estate includes qtip property the california pick-up estate_tax will be less than the federal state_death_tax_credit allowable under sec_2011 the examiner proposes to disallow a portion of the sec_2011 credit on the basis that in view of hoffman v connell the estate overpaid the state estate_tax liability and is entitled to a refund the estate has not filed a claim_for_refund of california estate_tax based on the hoffman v connell decision law and analysis under sec_2011 each estate is allowed as a credit subject_to certain limitations an amount equal to any estate inheritance legacy or succession taxes actually paid tl-n-4351-00 to any state under sec_2011 the allowable credit cannot exceed an amount determined using a table contained in that section sec_2016 provides as follows if any_tax claimed as a credit under sec_2011 is recovered from any state the executor or any other person or persons recovering such amount shall give notice of such recovery to the secretary at such time and in such manner as may be required by the secretary and the secretary shall despite the provisions of sec_6501 redetermine the tax under this chapter and the amount if any of the tax due on such redetermination shall be paid_by the executor or such person or persons as the case may be on notice_and_demand in revrul_56_230 1956_1_cb_661 a state imposed a pick-up estate_tax on intangible_property situated outside the state the tax contravened several supreme court decisions holding that a state had no power to tax the transfer of intangible_property situated outside its jurisdiction the revenue_ruling concludes that the service will disallow the credit to the extent attributable to the tax paid_by the estate that the state has no power to impose accordingly the allowable credit is limited to the proportion of the full federal credit allowable to the estate attributable to the part of the gross_estate situated in the state section of the california revenue and taxation code imposes a pick up state estate_tax equal to the federal sec_2011 state_death_tax_credit as follows imposition of estate_tax equal to federal tax_credit limitation notwithstanding the provisions of section whenever a federal estate_tax is payable to the united_states there is hereby imposed a california estate_tax equal to the portion if any of the maximum allowable_amount of the credit_for_state_death_taxes allowable under the applicable federal estate_tax law which is attributable to property located in the state of california however in no event shall the estate_tax hereby imposed result in a total death_tax liability to the state of california and the united_states in excess of the death_tax liability to the united_states which would result if this section were not in effect in hoffman supra the court concluded that qtip property subject_to inclusion in the federal gross_estate under sec_2044 was not subject_to california estate_tax the court reasoned that since the tax imposed under of the california revenue and taxation code is calculated based on property located in california the definition of property controls since the term property is defined by the revenue and taxation code to mean the real or personal_property or interest therein of a decedent two requirements are inherent in the definition tl-n-4351-00 first to be taxable the property must have been the decedent’s property ie he or she must have owned it second the property must be located in california the court concluded that the decedent could not be said to have owned the property held in the qtip_trust since the decedent’s only interest in the trust was a life income_interest accordingly the qtip property was not includible for california estate_tax purposes and the state liability was determined without regard to the value of the qtip property in the instant case the estate’s payment of the california estate_tax liability preceded hoffman v connell thus the amount_paid by the estate which reflected the inclusion of the qtip_trust in the california tax_base was consistent with the california estate_tax statute as it had been interpreted with no judicial authority to the contrary by the state taxing authority at the time payment was made under these circumstances no portion of the credit should be disallowed at this time however under sec_2016 if any_tax claimed as a credit under sec_2011 is refunded by the state then the estate’s executor or any other person who receives the refund is required to give notice of the refund to the secretary and any additional estate_tax due as a result of the refund because of the corresponding decrease in the allowable credit can be assessed at any time this provision will protect the service if the estate should ultimately receive a refund from the state see 29_tc_217 acq 1958_2_cb_8 concluding that under the predecessor to sec_2016 the statute of limitation is not a bar to collecting additional federal_estate_taxes as a result of a refund of state estate or inheritance taxes the situation presented here should be contrasted with that presented in revrul_56_230 where under prevailing law at the time of payment the property involved was not subject_to tax by the state to which the tax was paid_by george masnik chief branch associate chief_counsel passthroughs special industries