internal_revenue_service number release date index number ------------------------------------------------- ------------------------- --------------------------- in re -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- ------------------------- ----------------- telephone number ---------------------- refer reply to cc psi b04 plr-136860-14 date february legend decedent attorney dear ------------ -------------------------------------------- ---------------- this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to file a form_8939 allocation of increase in basis for property_acquired_from_a_decedent to make the sec_1022 election and to allocate basis provided by sec_1022 of the internal_revenue_code code to eligible_property transferred as a result of decedent’s death the facts and representations submitted are summarized as follows decedent died in the personal representative of decedent’s estate retained attorney to prepare the necessary tax filings for the estate attorney failed to prepare the form_8939 before the filing deadline of date consequently the executor failed to make a sec_1022 election for decedent’s estate law and analysis sec_1022 provides that property_acquired_from_a_decedent who died after date is treated as transferred by gift and the basis of the person acquiring the property from such a decedent is the lesser_of the adjusted_basis of the decedent or the fair_market_value of the property at the date of the decedent's death sec_1022 provides in general that the basis_of_property under sec_1022 is increased by basis increase that is allocated to the property plr-136860-14 sec_1022 provides in general that basis increase is the portion of the aggregate basis increase that is allocated to the property sec_1022 and c provide that the aggregate basis increase is dollar_figure and that the aggregate basis increase is increased by-- i the sum of the amount of any capital_loss_carryover under sec_1212 and the amount of any net_operating_loss_carryover under sec_172 that would but for the decedent's death be carried from the decedent's last taxable_year to a later taxable_year of the decedent plus ii the sum of the amount of any losses that would have been allowable under sec_165 if the property acquired from the decedent had been sold at fair_market_value immediately before the decedent's death sec_1022 provides that in the case of property that is qualified spousal property the basis of such property under sec_1022 as increased under sec_1022 is increased by spousal property basis increase allocated to the property sec_1022 provides in general that spousal property basis increase is the portion of the aggregate spousal property basis increase which is allocated to the property sec_1022 provides that the aggregate spousal property basis increase is dollar_figure sec_1022 provides in general that the basis_of_property acquired from a decedent may be increased under sec_1022 or c only if the property was owned by the decedent at the time of death sec_1022 describes property that is considered to be owned by the decedent at the time of death sec_1022 provides that the basis adjustments under sec_1022 and c shall not increase the basis of any interest in property above its fair_market_value in the hands of the decedent as of the date of the decedent's death sec_1022 provides in general that the executor is to allocate the basis adjustments under sec_1022 and c on the return required by sec_6018 and that any allocation made may be changed only as provided by the secretary sec_1022 describes property that is considered to be acquired from the decedent for purposes of sec_1022 subtitle a of title v of the economic_growth_and_tax_relief_reconciliation_act_of_2001 p l stat enacted sec_2210 which made chapter the estate_tax inapplicable to the estate of any decedent who died in and chapter the generation skipping transfer gst tax inapplicable to generation-skipping transfers made in on date tax relief unemployment insurance reauthorization and job creation act of truirjca p l stat became law and sec_301 of truirjca retroactively reinstated the estate and plr-136860-14 gst taxes however sec_301 of truirjca allows the executor of the estate of a decedent who died in to elect to apply the code as though sec_301 of truirjca did not apply with respect to chapter and for property acquired or passing from a decedent within the meaning of sec_1014 thus sec_301 of truirjca allows the executor of the estate of a decedent who died in to elect not to have the provisions of chapter apply to the decedent’s estate but rather to have the provisions of sec_1022 apply the sec_1022 election notice_2011_66 2011_35_irb_184 section i a provides that the executor of the estate of a decedent who died in makes the sec_1022 election by filing a form_8939 on or before date notice_2011_76 2011_40_irb_479 extended the due_date of the form_8939 and thus the election from date to date notice_2011_66 section i d provides that the internal_revenue_service will not grant extensions of time to file a form_8939 and will not accept a form_8939 filed after the due_date except in four limited circumstances provided in section i d under this section of notice_2011_66 an executor may apply for relief under sec_301_9100-3 sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore the personal_representatives of decedent’s estate are granted an extension of time of days from the date of this letter to make the sec_1022 election on a form_8939 and allocate additional basis to eligible_property as provided by sec_1022 a copy of this letter should be attached to the form_8939 in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives plr-136860-14 except as expressly provided herein we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries by _________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date number release date conex-118168-17 uil the honorable nanette diaz barragán member u s house of representative sec_302 west 5th street suite san pedro ca dear representative barragán i apologize for the delay in responding to your letter on behalf of your constituents -------------------------------------------- they asked whether they must pay federal_income_tax on per_diem and inconvenience payments they received from ------------------------------ related to the remediation of toxic contamination of their home in the ------------------------- ------------------- in ----------- we’re reviewing the facts and circumstances of the per_diem and inconvenience payments ------------ made to residents of the ---------------------------------to determine their appropriate tax treatment once we have a resolution we will share this information with the residents of the --------------------------------- thank you for your interest in this issue if you have additional questions please contact me or ---------------------at -------------------- sincerely michael j montemurro branch chief office of associate chief_counsel


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b09-plr-123671-02 date date in re legend decedent date trust daughter agreement state court state dear this is in response to your letter dated date in which you requested a ruling concerning the generation-skipping_transfer_tax gst and gift_tax consequences of the proposed judicial construction of a_trust agreement that is exempt from the application of generation-skipping_transfer_tax imposed under sec_2601 the facts and representations submitted are summarized as follows decedent died on date at the time of his death decedent held a limited_power_of_appointment over the corpus of a_trust created by his deceased spouse’s will article of decedent’s will exercised that limited_power_of_appointment by appointing the trust assets to three separate trusts one for each of decedent’s three daughters and their respective descendants trust is the separate trust established for daughter pursuant to article paragraph b of decedent’s will the trustees shall distribute the income of trust at least quarterly to daughter her children or her grandchildren in such amounts and such proportions as the disinterested trustees in their sole plr-123671-02 discretion determine paragraph c provides for the distribution of trust principal as the disinterested trustees deem necessary or advisable for the health and maintenance of daughter her children or her grandchildren pursuant to article paragraph d at the time set for final distribution of trust the principal and undistributed_earnings of trust are to be distributed to the then living grandchildren of daughter as daughter appoints in her will and in the absence of such appointment then equally to the then living grandchildren of daughter if there are no then living grandchildren then to decedent’s deceased wife’s descendants by right of representation article of decedent’s will defines the term descendants as lawful blood descendants in the first second or any other degree of the ancestor designated and does not include any adopted_child of any descendant daughter is currently living and has six living children and nine living grandchildren two of daughter’s grandchildren were adopted and lived while a minor as a regular member_of_the_household of the adopting parent daughter and other interested parties of trust represent that there is an ambiguity because it is unclear whether the adopted grandchildren will be considered grandchildren and therefore beneficiaries of trust decedent’s will defines the term descendants to exclude an adopted_child of any descendant but the term grandchildren is not defined and article appears limited to defining the term descendants daughter trust’s trustee and all interested parties of trust wish to have the ambiguity over the status of adopted grandchildren as beneficiaries clarified all interested parties have entered into agreement to document their understanding that the exclusion of an adopted_child from the definition of the term descendant does not apply to the term grandchildren and that daughter’s adopted grandchildren are beneficiaries of trust the trustees of trust filed a petition for construction of trust agreement and approval of family agreement with state court for approval of agreement subsequently state court issued an order approving agreement and stating that agreement is consistent with the construction of ambiguous trust agreements under state law it has been represented that no additions actual or constructive have been made to trust after date the trustees of trust have requested the following rulings that the proposed judicial construction of trust with a family settlement among the interested parties agreeing to such construction will not result in any party making a taxable gift or transfer under sec_2501 that the proposed judicial construction of trust will not affect the exempt status of trust for purposes of the generation-skipping_transfer_tax under sec_2601 plr-123671-02 ruling - the gift_tax consequences of the beneficiaries’ consent to the judicial construction sec_2501 imposes a tax for each calendar_year on the transfer of property by gift during such calender year by any individual sec_2511 provides that subject_to certain limitations the gift_tax applies whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is real or personal tangible or intangible sec_2512 provides that if a gift is made in property the value thereof at the date of the gift will be considered the amount_of_the_gift sec_2512 provides in part that where property is transferred for less than adequate_and_full_consideration in money or money’s worth then the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift in 387_us_456 the supreme court considered whether a state trial court's characterization of property rights conclusively binds a federal court or agency in a federal estate_tax controversy the court concluded that the decision of a trial_court as to an underlying issue of state law should not be controlling when applied to a federal statute rather the highest court of the state is the best authority on the underlying substantive rule_of state law to be applied in the federal matter if there is a decision by that court then the federal authority must apply what it finds to be state law after giving proper regard to the state trial court's determination and to relevant rulings of other courts of the state in this respect the federal_agency may be said in effect to be sitting as a state court in this case the judicial construction clarifies the terms and beneficiaries of a previous transfer in accordance with decedent’s intent state court’s construction of trust is consistent with applicable state law that would be applied by the highest court of the state therefore we conclude that the beneficiaries’ consent to the construction would not be a transfer for gift_tax purposes and does not constitute a taxable gift pursuant to sec_2501 ruling - the exempt status of trust for gst purposes sec_2601 imposes a tax on every generation-skipping_transfer which is defined under sec_2611 as a taxable_distribution a taxable_termination or a direct_skip section b a of the tax_reform_act_of_1986 the act and sec_26 b i of the generation-skipping_transfer_tax regulations provide that the generation-skipping_transfer_tax shall not apply to any generation-skipping_transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added plr-123671-02 sec_26_2601-1 provides that any trust in existence on date will be considered an irrevocable_trust except as provided in sec_26 b ii b or c which relate to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 in the present case trust is considered to have been irrevocable on date because neither sec_2038 nor sec_2042 applies sec_26_2601-1 states that if an addition is made after date to a_trust which was irrevocable on date a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the gst tax provisions if an addition is made the trust is thereafter deemed to consist of two portions a portion not subject_to the gst tax and a portion subject_to the gst tax sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a judicial construction of a governing instrument to resolve an ambiguity in the terms of the instrument or to correct a scrivener's error will not cause an exempt trust to lose its exempt status provided the judicial action involves a bona_fide issue and the construction is consistent with applicable state law that would be applied by the highest court of the state in an action for construction of a will the court’s objective is to ascertain the intention of the testator through the consideration of the instrument as a whole and when necessary or appropriate the circumstances under which the will was executed in re estate of smith ariz p 2d app an ambiguity is said to exist in an instrument when the written language is fairly susceptible to two or more constructions a patent ambiguity is an uncertainty which appears on the face of a will smith ariz pincite p 2d pincite based on the information submitted and representations made we conclude that the terms of trust present a bona_fide issue regarding whether the adopted grandchildren of daughter are considered grandchildren and therefore beneficiaries of trust we further conclude that state court’s construction of trust is consistent with applicable state law that would be applied by the highest court of the state accordingly based on the facts submitted and the representations made the state court’s order construing trust will not affect the exempt status of trust for purposes of the generation-skipping_transfer_tax and will not result in a transfer of property that will subject trust or distributions thereunder to the generation-skipping_transfer_tax imposed under sec_2601 plr-123671-02 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 the appropriate party while this office had not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled above no opinion is expressed as to the federal tax consequences of the facts described above under the cited provisions or any other provisions of the code or regulations 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely melissa c liquerman branch chief branch office of associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes


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-109369-16 date date internal_revenue_service number release date index number ------------------------ ------------------ ------------------------------------- legend ----------------------------- x ---------------------------------------------- ----------------------------------------- state ---------------------- d1 ---------------------- dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-1 of the procedure and administration regulations to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes and relief to file a late s_corporation_election under sec_1362 of the internal_revenue_code the information submitted states that x was formed in state as a single-member limited_liability_company x's default status was as a disregarded_entity for federal tax purposes x intended to elect to be treated as an association_taxable_as_a_corporation and to elect to be treated as an s_corporation for federal tax purposes with both elections effective d1 however the service does not have record of timely receiving form_8832 entity classification election or form_2553 election by a small_business_corporation plr-109369-16 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 elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that 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 an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301 b provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards that the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however 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 filed plr-109369-16 sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year based solely on the information 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 a form_8832 with the appropriate service_center to elect to be treated 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 in addition based solely on the facts submitted and the representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a complete form_2553 effective d1 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for d1 this ruling is contingent on x filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief in this letter a copy of this letter should be attached to any such returns 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 requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes plr-109369-16 cc


internal_revenue_service number release date index number ------------------------ ------------------------ --------------------------------- ------------------------------ in re ----------------------------- ------------------------------- -------------------------------- legend taxpayer ------------------------------ legend taxpayer ------------------------------ ---------------------- 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 b8 plr-154316-03 date may x ------------ dear -------------- this responds to your request for a ruling that provides guidance for taxpayer regarding the proper method under sec_6041 of the internal_revenue_code of reporting income to the players of the hereinafter described on-line game-playing tournaments sponsored by a website the site operated by taxpayer you indicate that the site is located on the internet and sponsors on-line tournaments for various games such as checkers golf 9-ball pool and mah-jongg the site also sponsors tournaments for word games games of strategy and arcade-style games aside from an introductory period for new players the site does not provide games for general entertainment purposes after the introductory period a player must enroll on the site and provide the site with a credit card in order to establish an account the player makes withdrawals from the account in order to pay the required entry fees for participation in the tournaments winnings from a tournament are credited to the player’s account taxpayer receives a payment for each tournament that is computed as a percentage of the entry fees for that tournament taxpayer also receives revenues from other sources such as on-line advertisement the tournaments are arranged into five categories ------------------ these tournaments designate the maximum number of players accepted into the tournament as well as pre- established winnings these tournaments are also time limited that is if the tournament does not fill before it is closed the leader of the tournament is awarded the full prize ---------------- these tournaments do not have a limited number of players but will terminate at a specified date and time minimum prizes are pre-established the number of players competing and plr-154316-03 the size of potential prizes can increase over the period of competition if the tournament does not fill before it is closed the leader of the tournament is awarded the stated minimum prize ------------------ these are competitions between two individual players who challenge each other in an agreed upon game upon closure of the tournament the winner is declared and a predetermined prize is awarded ------------------------------------ these tournaments operate in the same manner as a ----------------tournament except that taxpayer furnishes a prize usually in the form of personal_property such as a television set x ------------------ players compete against their own past performances those performances are established based on historical game play scores of the player here again prizes are predetermined for all its tournaments taxpayer will pay the specified prizes whether in cash or in_kind to the winning players as established at the outset of the tournament and such prizes are payable to the winners regardless of the number of players who enter the tournament taxpayer states that players competing in each tournament are categorized by skill proficiency in each game thus allowing taxpayer to limit participants in a particular tournament to players of similar skill also taxpayer states that it has developed various mathematical formulas to ensure that all of its games are structured to eliminate the element of chance other than the element of random chance inherent in the game itself so that individuals who win the tournaments are those whose skills and game-playing strategies are superior to other players taxpayer suggests that it provides identical game circumstances because in --------------------- tournaments all players will receive the same first hand subsequent hands will be of similar difficulty a determination based on a proprietary game rating analysis software in ---------------- tournaments players will receive hands of similar difficulty again based on a proprietary game rating analysis software taxpayer recognizes that there are situations it is required to report to the service amounts it paid to players during a year to comply with the reporting requirements taxpayer discusses three possible methods it could use when applying information reporting requirements to the tournaments the methods are as follows gross method under this method taxpayer totals up the gross amounts credited to a player’s account during a year and if the total is dollar_figure or more taxpayer will report this amount on a form 1099-misc plr-154316-03 net_method with this method taxpayer totals up the gross amounts credited to a player’s account during a year and subtracts the entry fee from each tournament the player received some kind of prize assuming this net amount is dollar_figure or more taxpayer will report this on a form 1099-misc cumulative net_method under this method taxpayer totals up the gross amounts credited to a player’s account during a year and subtracts all entry fees paid during the year regardless of whether the player received a prize from that tournament assuming this net amount is dollar_figure or more taxpayer will report this on a form 1099-misc taxpayer agrees that information reporting under sec_6041 is required for prizes it pays to winning players assuming it pays dollar_figure or more in income to a player during a year taxpayer requests a ruling that the proper method of computing income from tournament play for information reporting purposes is the cumulative net_method taxpayer argues it should be able to deduct all entry fees from income paid_by a player during a year under the cumulative net_method under this method taxpayer subtracts all entry fees the player pays during a year from the total amount it paid to the player and will report this net amount to the service if it exceeds dollar_figure taxpayer argues that the cumulative method best reflects deductions the various players would be entitled to pursuant to sec_162 sec_165 and or and accordingly best reflects the income paid to a player in the case under consideration inasmuch as different information returns are required based on whether the payments are made in a wagering or a non-wagering transaction it must first be determined whether the game-playing activities in the tournaments on the site operated by taxpayer constitute wagering or non-wagering activity based on the description of the tournament play if the activities are to be classified as wagering they must fall within the definition of either a lottery or a wagering pool however these terms are not defined in the code or regulations associated with federal withholding or reporting requirements thus it is appropriate to look to dictionaries court decisions and other regulatory provisions to ascertain the ordinary meaning of the terms wagering pool the dictionary does not define a wagering pool however pool is defined as all the money bet by a number of persons on the result of a particular event with the aggregate to be paid to the winner or divided among several winners according to conditions established in advance webster’s third new international dictionary similarly black’s law dictionary defines pool as follows in various methods of gambling a pool is a sum of money made up of the stakes contributed by various persons the whole of which is then wagered as a stake on the event of a race game or other contest and the winnings if any are divided among the contributors to the pool pro_rata or it is a sum similarly made up by the contributions of several persons each of whom then makes his guess or prediction as to the event of plr-154316-03 future contest or hazard the successful better taking the entire pool such pools are distinct from the practice of bookmaking black’s law dictionary 6th ed 523_f2d_1360 9th cir notes that in common usage the term pool connotes a particular gambling practice an arrangement whereby all bets constitute a common fund to be taken by the winner or winners state v duci p 2d ariz notes that pool selling is generally defined as the receiving from several persons of wagers on the same event the total sum of which is to be given the winners subject ordinarily to a deduction of a commission by the seller of the pool in connection with the tax on certain wagers imposed by sec_4401 of the code thus these authorities suggest that a wagering pool is an arrangement to pool sec_44_4421-1 of the wagering tax regulations provides that a wagering pool conducted for profit includes any scheme or method for the distribution of prizes to one or more winning bettors based upon the outcome of a sports event or contest or a combination or series of such events or contests provided that such wagering pool is managed and conducted for the purpose of making a profit under sec_44_4421-1 a contest includes any type of contest involving speed skill endurance popularity politics strength appearances etc such as a general or primary_election the outcome of a nominating convention a dance marathon a log-rolling wood-chopping weight- lifting corn-husking beauty contest etc bets into a common fund which are wagered on a sports event or contest with the successful bettor or bettors receiving the pool proceeds subject_to the pool sellers commission that contrasts with a situation where monies are received as entrance fees in order to compete for a preestablished prize offered by a third party that must be awarded in any case viewed under these criteria we find that although the tournaments offered on the site involve fees paid to enter a contest operated by taxpayer who anticipates a profit from the endeavor there does not appear to be an aggregation of the entrance fees into a common pool all of which subject_to commissions is to be distributed by taxpayer to the winner s here the minimum winnings or prizes of property are predetermined and must be awarded irrespective of the number of participants or the total of the entrance fees collected thus the tournaments do not fall within a common usage definition of a wagering pool lottery webster’s dictionary defines lottery as a scheme for the distribution of prizes by lot or chance esp a scheme by which prizes are distributed among those persons who have paid for a chance to win them usu as determined by the numbers on tickets as drawn at random as from a lottery wheel webster’s third new international dictionary black’s law dictionary defines lottery as a chance for a prize for a price a scheme for the distribution of a prize or prizes by lot or chance the number and value of which is determined by the operator of the lottery black’s law dictionary 6th ed plr-154316-03 u s postal service v amada 200_f3d_647 9th cir notes that where there is no applicable statutory definition of the term lottery the appropriate definition to apply is the common_law lottery definition consistently used by the courts and described by the supreme court as the traditional tests of chance prize and consideration internal citations omitted sec_44_4421-1 provides that lottery includes the numbers game policy and similar types of wagering in general a lottery includes any scheme or method for the distribution of prizes among persons who have paid or promised a consideration for a chance to win such prizes usually as determined by the number or symbols on tickets drawn from a lottery wheel or other receptacle or by the outcome of an event the term also includes enterprises commonly known as policy or numbers and similar types of wagering where the player selects a number or a combination of numbers and pays or agrees to pay a certain amount in consideration of which the operator of the lottery policy or numbers game agrees to pay a prize or fixed sum of money if the selected number or combination of numbers appear or are published in a manner understood by the parties also see revrul_57_521 1957_2_cb_779 which holds that a puzzle contest participants paid to enter is neither a wagering pool nor a lottery for purposes of sec_4401 the ruling indicates that as a general_rule contesting for a prize offered by another in a contest of mental or physical skill of the contestant which the one offering the prize must award in any event is not gaming and the fact that each contestant is required to pay an entrance fee does not make the payment a bet or gaming transaction unless the entrance fees alone comprise the prize to be won by the successful contestant thus these authorities suggest that in general terms a lottery is a scheme to distribute prizes to participants who pay to win the prize by chance taxpayer argues that because it does not allow players of dissimilar skills to play in the same tournament and it uses its game rating analysis software play the element of chance has been minimalized in its tournament play and as such the tournaments lack a key requirement for them to be considered as lotteries based on these representations we believe that the tournament games lack the essential element of chance and cannot be classified as a lottery with respect to taxpayer’s reporting requirements sec_6041 generally requires that all persons engaged in a trade_or_business report on a return all payments of dollar_figure or more to another person made in the course of such trade_or_business of rent salaries wages premiums annuities compensations remunerations emoluments or other fixed or determinable gains profits and income sec_1_6041-1 of the income_tax regulations provides that the returns required under sec_6041 are forms and sec_1_6041-1 provides that amounts paid as prizes_and_awards that are required to be included in gross_income under sec_74 and sec_1_74-1 when paid in the course of a trade_or_business are required to be reported in returns of information under plr-154316-03 sec_6041 in taxpayer’s situation prizes are made possible by a player having paid the entry fee to that tournament therefore when the player wins a prize by successfully competing in one of taxpayer’s sponsored tournaments the entry fee to that tournament is a return_of_capital see for example revrul_55_638 1955_2_cb_35 which holds that proceeds from a sweepstakes ticket acquired by gift before it became a winning ticket is includible in the gross_income of the donee to the extent the proceeds from the sweepstakes exceeds the price paid for the ticket therefore the amount of the prize includible in gross_income is the prize amount net of the fee accordingly only such net amounts are considered income for purposes of sec_6041 entry fees for tournaments where a player does not receive a prize however are not a return_of_capital and cannot be subtracted by taxpayer when determining the income paid to a player although it is possible that individual players may be entitled to deduct on their respective returns entry fees they paid to taxpayer the code requires the individual players to report all of their income and take all applicable deductions on their individual tax returns there is no authority allowing taxpayer to effectively take a deduction on behalf of a player by reporting the net amount to the service on a form_1099 however no opinion is expressed as to whether a deduction is available or the character of the deduction taxpayer requests that this ruling be applicable on a prospective basis only based on the above taxpayer should use the net_method in determining which players it paid dollar_figure or more during a year the proper form taxpayer should use is a form 1099-misc consideration of sec_7805 relief under sec_7805 in support of its request taxpayer argues that in the absence of published guidance on this issue it relied to its detriment on the right to use any reasonable method of reporting detriment on a published position of the irs or on a letter_ruling or technical_advice_memorandum issued with respect to that taxpayer there is no prior letter_ruling or technical_advice_memorandum to taxpayer taxpayer relied on its own interpretation of the law a taxpayer's erroneous interpretation of the law is not a basis for relief under sec_7805 relief under sec_7805 usually is granted only if a taxpayer relied to its plr-154316-03 this ruling is directed only to the taxpayer who requested it sec_6110 provides that this document may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries by frank boland chief branch enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal revenue servic washington d c tax exempt and ce eon es may j uniform issue list t-cp ra t3 attention legend company a bank b_trust m trust n state p dear l h this is reply to your request for a ruling submitted by your authorized representative dated date that certain borrowings under a line of credit by funds organized under trust m and trust n for the purpose of facilitating redemptions do not give rise to unrelated debt financed income or create any acquisition_indebtedness within the meaning of sec_514 of the internal_revenue_code the code the request was supplemented by correspondence dated date trust m is a group trust described in revrul_81_100 1981_1_cb_326 established by company a under state p law pursuant to a plan and declaration of trust dated islahalaieial and amended and restated as of as amended the trust m declaration of trust page trust n was established exclusively to pool the assets of i employee stock bonus pension profit-sharing or other employee benefit plans that meet the requirements of sec_401 a of the code and are exempt from tax under sec_501 of the code and ii governmental pension plans the assets of which may be invested in a group trust as provided in sec_401 of the code there are currently organized under the trust m declaration of trust along with funas that may be organized in the future under the trust m declaration of trust the trust m funds each fund is invested and administered as a single investment portfolio separate portfolios company a serves as the trustee to trust m trust n and the funds in its capacity as trustee the trustee although the trustee is authorized by the trust m declaration of trust and the trust n declaration of trust to invest on behalf of the funds in a broad range of assets the funds’ portfolios generally consist of u s and non-u s stocks securities and other investment_assets collectively securities the beneficial interests of each fund are divided into and represented by units of participation units each unit of a fund is of equal value to every other unit of the fund and represents an undivided proportionate interest in ail assets and liabilities of the fund under the trust m declaration of trust the trustee is required to value the assets of each fund as of such dates as the trustee may designate but not less frequently than once during each period of three months the valuation_date it has been the business practice of the trustee however to designate valuation dates not less frequently than the close of business each month and the trustee expects to continue this practice in addition with respect to certain funds it has been the business practice of the trustee to designate each business_day as a valuation_date and the trustee expects to continue this practice a participant in a fund a participant has the right to redeem all or a portion of its units on thirty days' notice to the trustee prior to a valuation_date which notice period may be waived by the trustee at its discretion it has been the business practice of the trustee to waive this notice requirement and instead require only ten business days of notice for those funds that have monthly valuation dates and the trustee expects to continue this practice although funds with daily valuation dates have only recently been established the trustee expects to require only one business_day of notice for those funds generally each fund is permitted to maintain cash reserves of up to of its assets the cash reserves and redemptions are usually funded out of the cash reserves cash inflows and funds raised through sales of securities when securities are sold to finance a redemption there is generally a lag between the date that the securities are sold and the date that a fund receives payment in connection with the sale overall market practices determine the length of this settlement period sales of domestic securities generally require a settlement period of three days after the date the trade is executed sales of non-u s securities generally have settlement periods longer than three days with respect to each fund occasionally the cash required to meet redemptions may exceed the aggregate cash inflows plus the cash reserves less any funds needed to satisfy prior commitments to acquire securities resulting in a shortfall in addition in order to cover the net outflows a fund may be required to liquidate the securities in its portfolio quickly in order to satisfy its immediate cash needs depending on overall market conditions such page large volume sales could result in a lower price than sales conducted in a more orderly manner to the detriment of all participants in the fund in order to finance redemptions and to avoid the necessity for large volume sales to eliminate shortfalls a line of credit the line of credit has been established with bank b under the line of credit subject_to certain other limitations each eligible fund will be able to borrow up to the lesser_of of the total assets in the fund for certain biotechnology high yield emerging markets equities and emerging markets debt funds or dollar_figure million various diversification requirements will apply that may also limit the ability of certain funds to draw upon the line of credit there will be no joint_and_several_liability among the funds thus if one fund were to borrow under the line of credit bank b would have recourse only to that fund and would not be able to look to the assets of any other fund when seeking repayment on a borrowing the line of credit will be used exclusively to finance redemptions of units and not for the purpose of making additional investments the line of credit will be available to a fund only to bridge the period between the date on which the fund distributes cash in redemption of units and the settlement_date for securities sold to fund the redemption it is anticipated that the line of credit will be used infrequently and that borrowings will be outstanding only long enough to permit the orderly disposition of securities normally not exceeding days except in the case of international markets where settlement periods may be longer under the line of credit a loan cannot be outstanding for more than days a fund will borrow only when its cash needs to fund redemptions exceed its cash inflows plus cash reserves less any funds needed to satisfy prior commitments to acquire securities moreover it is anticipated that the average daily outstanding balance under the line of credit will be de_minimis as compared with the average daily asset value of any borrowing fund the terms of the line of credit established including the interest rate and any fees were negotiated on an arm's length basis based on the foregoing you request a ruling that borrowings by a fund under the line of credit for the purpose of facilitating redemptions of units do not give rise to unrelated debt financed income nor create any acquisition_indebtedness within the meaning of sec_514 of the code for trust m sec_511 of the code imposes a tax upon the unrelated_business_taxable_income as defined in sec_512 of organizations exempt from federal_income_tax under sec_501 sec_512 defines unrelated_business_taxable_income as the gross_income derived by an exempt_organization from any unrelated_trade_or_business regularly carried on by the organization less the allowable deductions directly connected therewith in the case of a_trust described in sec_401 which is exempt from tax under sec_501 the term unrelated_trade_or_business is defined in sec_513 of the code as any trade_or_business that the trust regularly carries on sec_514 of the code provides generally that income earned by a tax-exempt_organization on its debt-financed_property less allowable deductions shall be treated for purposes of sec_512 as income derived from unrelated_trade_or_business sec_514 defines the term debt-financed_property to mean any property which is held to produce income and with respect to which there is an acquisition_indebtedness at any time page during the taxable_year debt-financed_property does not include property to the extent the use of such property is substantially related to the exercise or performance by the organization of its tax-exempt purpose or function see sec_51 b a sec_514 defines the term acquisition_indebtedness to mean with respect to any debt- financed property the unpaid amount of the indebtedness incurred by the organization in acquiring or improving such property the indebtedness incurred before the acquisition or improvement of such property if such indebtedness would not have been incurred but for such acquisition and the indebtedness incurred after the acquisition or improvement of such property if such indebtedness would not have been incurred but for such acquisition or improvement and the incurrence of such indebtedness was reasonably foreseeable at the time of such acquisition or improvement under sec_514 acquisition_indebtedness does not include indebtedness the incurrence of which is inherent in the performance or exercise of the organization's exempt_purpose or function revrul_78_88 1978_1_cb_163 concerns the applicability of sec_512 and sec_514 to a securities_lending program engaged in by an exempt_organization there the organization which was exempt under sec_501 transferred for temporary periods securities from its investment portfolios to a brokerage house in order to permit the brokerage house to cover short_sales in exchange as additional compensation_for the securities loaned the organization received cash equal to the value of the securities as collateral which it had the right to invest and to retain the income therefrom but which it was required to repay on the return of the securities the ruling holds that the lending program does not give rise to unrelated_business_income because congress did not intend for ordinary and routine investment activities of a sec_501 a organization in connection with its securities portfolio to be treated as the conduct_of_a_trade_or_business for the purposes of sec_513 further it holds that the organization would not have debt-financed_income under sec_514 as a result of the lending program because the organization had not incurred indebtedness for the purpose of making additional investments although it had clearly incurred debt because it had the interim right to invest and retain the income from the cash received as collateral and the ultimate obligation to repay such cash in this case a fund will borrow under the line of credit in order to raise case needed to fund redemptions in the event that net outflows exceed net inflows plus cash reserves less any funds needed to satisfy prior commitments to acquire securities the transitory indebtedness incurred in connection with scheduled program investments qualifies within the holding of revrul_78_88 as one of the ordinary and routine investment activities in connection with an exempt organization's securities portfolio the fund's temporary payment obligations are not debts incurred for the purpose of making and carrying additional investments to which debt-financed_property provisions apply they are incurred solely for convenience and will be outstanding only long enough to bridge the period between the redemption date and the settlement_date and do not constitute acquisition_indebtedness within the meaning of sec_514 accordingly we conclude that borrowings by a fund under the line of credit for the purpose of facilitating redemptions of units do not give rise to unrelated debt financed income nor create any acquisition_indebtedness within the meaning of sec_514 of the cade for trust m this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that this ruling may not be used or cited by others as precedent page if you have any questions conceming this ruling please contact at not a toll free number id a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours lowy uf oor frances v sloan manager technical branch group tax_exempt_and_government_entities_division cc


t c memo united_states tax_court michael balice petitioner v commissioner of internal revenue respondent docket no 15016-04l filed date michael balice pro_se kathleen k raup for respondent memorandum opinion chiechi judge this case is before the court on respondent’s motion for summary_judgment respondent’s motion we shall grant respondent’s motion background the record establishes and or the parties do not dispute the following petitioner resided in metuchen new jersey at the time he filed the petition in this case petitioner and marion balice ms balice jointly filed a federal_income_tax tax_return for the taxable_year return in the return petitioner and ms balice reported inter alia total income of dollar_figure taxable_income of dollar_figure total_tax of dollar_figure and tax withheld of dollar_figure and claimed an overpayment_of_tax of dollar_figure and a refund of tax of dollar_figure on date respondent issued to petitioner and ms balice a notice_of_deficiency notice with respect to their taxable_year which they received in that notice respondent determined a deficiency in and an accuracy-related_penalty under sec_6662 a on the tax of ms balice and petitioner for that year in the respective amounts of dollar_figure and dollar_figure petitioner2 did not file a petition in the court with respect to the notice relating to his taxable_year on date respondent assessed petitioner’s tax as well as an accuracy-related_penalty under sec_6662 and interest as provided by law for his taxable_year we 1all section references are to the internal_revenue_code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure 2this case involves only petitioner and not ms balice for convenience we shall hereinafter refer only to petitioner and not to petitioner and ms balice shall refer to any such unpaid assessed amounts as well as interest as provided by law accrued after date as petitioner’s unpaid liability for respondent issued to petitioner the notice_and_demand for payment required by sec_6303 with respect to petitioner’s unpaid liability for on date respondent issued to petitioner a notice_of_federal_tax_lien filing and your right to a hearing notice of tax_lien with respect to his taxable_year on date in response to the notice of tax_lien petitioner filed a request for a collection_due_process_hearing petitioner’s request for an appeals_office hearing and requested a hearing with respondent’s appeals_office appeals_office petitioner’s request for an appeals_office hearing contained statements contentions arguments and requests that the court finds to be frivolous and or groundless by letter dated date an appeals officer with respondent’s appeals_office appeals officer informed petitioner 3petitioner did not use form request for a collection_due_process_hearing 4petitioner’s request for an appeals_office hearing contained statements contentions arguments and requests that are similar to the statements contentions arguments and requests contained in the respective appeals_office hearing requests filed under sec_6320 and or sec_6330 with the internal_revenue_service by certain other taxpayers who commenced proceedings in the court see eg guerrier v commissioner tcmemo_2002_3 that he had scheduled a telephonic appeals_office hearing with petitioner on date pincite a m with respect to the notice of tax_lien scheduled appeals_office hearing on date the day before the scheduled appeals_office hearing petitioner and petitioner’s authorized representative telephoned the appeals officer date telephone call on date the appeals_office issued to petitioner a notice_of_determination concerning collection action s under section and or notice_of_determination the notice stated in pertinent part based on the available facts compliance followed the applicable procedures and the issuance of the notice_of_federal_tax_lien was proper and appropriate an attachment to the notice_of_determination stated in pertinent part summary and recommendation collection due process--lien you submitted a timely request for a collection_due_process_hearing under sec_6320 in response to a notice_of_federal_tax_lien filing against a individual income_tax_liability for the year ending letter notice_of_federal_tax_lien filing was issued by the compliance division of the cherry hill new jersey field_office on date form request for a collection_due_process_hearing was received by compliance on date summary of issues you have raised no specific issues other than frivolous and groundless arguments brief background your liability is the result of an audit deficiency as a result of an audit it was determined that an additional tax was due to omitted income related to what was determined to be an abusive trust your account was subsequently assigned to compliance for collection of the unpaid tax attempts were made by compliance to resolve your liability as one of its subsequent case actions compliance filed a notice_of_federal_tax_lien you responded by submitting a request for a collection_due_process_hearing compliance forwarded your case file along with all supporting documentation to the newark new jersey office of appeals for consideration where your hearing request was assigned to a settlement officer who had no previous involvement with your account requirement of law and administrative procedures law sec_6321 provides for a statutory lien when a taxpayer neglects or refuses to pay a tax_liability after notice_and_demand a review of your account transcript indicates that notice_and_demand for payment was made on the amount due for the year ending and the obligation remained unpaid sec_6320 provides that the internal_revenue_service will notify a taxpayer of the filing of a notice of lien and of the right to a hearing before the internal_revenue_service office of appeals with respect to the filing of a notice_of_federal_tax_lien such notification was given to you by compliance by the issuance of letter by certified mail return receipt requested on date in accordance with sec_6330 you were given the opportunity to raise any relevant issue relating to the unpaid tax or the notice_of_federal_tax_lien at a telephone held on date a review of your account transcript indicates that the assessment was made on the applicable collection_due_process_notice period in accordance with sec_6201 relevant issues presented by the taxpayer you have raised no specific issues other than frivolous and groundless arguments on date a telephone conference was held with your representative yourself and the settlement office in attendance at that conference your representative continued to raise frivolous arguments and was advised that those arguments would not be considered within the context of the collection_due_process_hearing in addition in accordance with sec_6330 you are prohibited from disputing the underlying liability within the context of a collection_due_process_hearing because you had a prior opportunity to do so which you did not avail yourself of upon the completion of your audit a statutory_notice_of_deficiency was issued which remained unanswered at the same conference you stated that you would like to file an amended income_tax return and was advised to file such return through the philadelphia service_center or through the office of appeals a date of date was established to submit the return as of the date of this letter you have not submitted any information to assist in resolving your account does the proposed collection action balance the need for the efficient collection_of_taxes with the taxpayer’s legitimate concern that the collection action be no more intrusive than necessary the proposed lien action balanced the need for the efficient collection_of_taxes and is no more intrusive than necessary based on a review of the case activity records and case transcripts the proposed lien action was necessary in order to protect the government’s interest notice_and_demand was given and the liability remained unpaid determination based on the facts of the case the collection action taken was proper and appropriate compliance followed the applicable law and administrative procedures it is recommended that your account be reassigned to the compliance for further collection action reproduced literally in response to the notice_of_determination petitioner filed a petition with the court the petition contained statements contentions arguments and requests that the court finds to be frivolous and or groundless discussion the court may grant summary_judgment where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir although not altogether clear petitioner may be taking the position that the court should deny respondent’s motion because there is a genuine issue of material fact viz whether the date telephone call constituted petitioner’s appeals_office hearing under sec_6320 petitioner contends that it did not and that the court should remand this case to the appeal sec_5the frivolous and or groundless statements contentions arguments and requests in petitioner’s petition are similar to the frivolous and or groundless statements contentions arguments and requests in the respective petitions filed with the court by certain other taxpayers see eg copeland v commissioner tcmemo_2003_46 office for a hearing under that section respondent disagrees on both points we need not resolve the issue of whether the date telephone call constituted an appeals_office hearing under sec_6320 we conclude that that issue is not material to our determining whether to grant respondent’s motion throughout the period starting at least as early as petitioner’s filing with respondent petitioner’s request for an appeals_office hearing and ending with his filing with the court petitioner’s response to respondent’s motion petitioner’s response petitioner has made statements contentions arguments and requests that the court finds to be frivolous and or groundless we conclude that it is not necessary and will not be productive to remand this case to the appeals_office for a hearing under sec_6320 see 117_tc_183 and it is not necessary or appropriate to reject respondent’s determination to proceed with the collection action as determined in the notice_of_determination with respect to petitioner’s unpaid liability for see id we conclude that there are no genuine issues of material fact regarding the questions raised in respondent’s motion petitioner did not file a petition with the court with respect to the notice_of_deficiency that respondent issued to him relating to his taxable_year where as is the case here the validity of the underlying tax_liability is not properly placed at issue the court will review the determination of the commissioner of the internal revenue for abuse_of_discretion 114_tc_604 114_tc_176 based upon our examination of the entire record before us we find that respondent did not abuse respondent’s discretion in determining to proceed with the collection action as determined in the notice_of_determination with respect to petitioner’s taxable_year although respondent does not ask the court to impose a penalty on petitioner under sec_6673 we now consider sua sponte whether the court should impose a penalty on petitioner under that section sec_6673 authorizes the court to require a taxpayer to pay a penalty to the united_states in an amount not to exceed dollar_figure whenever it appears that a taxpayer instituted or maintained a proceeding in the court primarily for delay or that a taxpayer’s position in such a proceeding is frivolous or groundless although we shall not impose a penalty under sec_6673 on petitioner in the instant case we caution him that he may be subject_to such a penalty if in the future he institutes or maintains a proceeding in this court primarily for delay and or his position in any such proceeding is frivolous or groundless see 82_tc_403 72_tc_1126 we have considered all of petitioner’s statements contentions arguments and requests that are not discussed herein and to the extent we have not found them to be frivolous and or groundless we find them to be without merit and or irrelevant on the record before us we shall grant respondent’s motion to reflect the foregoing an order granting respondent’s motion and decision for respondent will be entered 6we shall however address one of petitioner’s arguments in petitioner’s response petitioner argues in petitioner’s response that the appeals officer did not provide him with the summary record of assessment with respect to petitioner’s unpaid liability for respondent is not required to provide petitioner with the summary record of assessment see 3_f3d_1297 9th cir 118_tc_365 n affd 329_f3d_1224 11th cir while not altogether clear petitioner may also be arguing that respondent’s collection action with respect to petitioner’s taxable_year may not be valid because he did not receive certain documentation to which he is entitled under sec_6203 and sec_301_6203-1 proced admin regs on the record before us we reject any such argument on date respondent issued to petitioner a notice of tax_lien the third page of the notice of tax_lien set forth inter alia petitioner’s name the date of assessment the character of the liability assessed the taxable_period and the total of the amounts assessed we conclude that petitioner received the documentation to which he is entitled under sec_6203 and sec_301_6203-1 proced admin regs see roberts v commissioner supra


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date view contact person identification_number telephone number g0- by legend dear sir or madam this is in reference to your letter requesting advance approval of your grant procedures under sec_4945 of the internal_revenue_code the information submitted indicates that grants will be administered and supervised by b b is exempt from federal_income_tax under sec_501 of the internal_revenue_code and has been classified as other than a private_foundation under sec_509 and sec_170 your scholarship program is called c under the terms of an agreement you will make annual contributions to b to fund scholarships for the children of the employees of a company b will prepare and furnish application forms receive all applications determine the recipients and amount to be awarded notify the recipients of the award confirm enrolment in an educational_institution make payment of the award and supervise and investigate the use of the grant funds by the recipients in their educational programs recipients are determined solely by b utilizing selection criteria whereby each candidate is evaluated based on the following scholastic aptitude as measured by performance on the scholastic aptitude test scholastic performance measured by rank in class counselor appraisal and interests activities and leadership contributions in addition financial need is taken into consideration the scholarships will not be used as a means of inducement to recruit employees for the company nor will a grant be terminated if the employee leaves the company scholarships will only be awarded to students that plan to enroll in an institution that meets the requirements of sec_170 of the code the recipient will not be restricted in his her course of study b will supply statistical information on applications received and grants made which will enable you to maintain the records required by revproc_76_47 1976_2_cb_670 you will ensure compliance with the percentage tests under section dollar_figure of revproc_76_47 in the aggregate with respect to your other scholarship programs available to the same individuals sec_4945 of the code provides for the imposition of taxes on each taxable_expenditure of a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 sec_4945 of the code provides that sec_4945 shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if it is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_institution described in sec_170ii revproc_76_47 1976_2_cb_670 sets forth guidelines for a private_foundation conducting an employer related grant program to obtain advance approval of its procedures for conducting such a program under sec_4945 of the code sections dollar_figure through dollar_figure set forth seven conditions which a private_foundation must meet in order to obtain advance approval of its procedures under sec_4945 of the code section dollar_figure provides that a private_foundation which makes scholarship awards to children of employees of a company or to the employees themselves will meet this test if it limits these grants to of all eligible applicants or of all those shown to eligible in any given year renewals of grants awarded in prior years will not be considered in determining the number of grants awarded in a current_year based upon the information submitted and assuming your program will be conducted as proposed with a view to providing objectivity and nondiscrimination in the awarding of scholarship grants we rule that your grants to b for the awarding of scholarship grants comply with the requirements of sec_4945 of the code expenditures made in accordance with these procedures will not constitute taxable_expenditures within the meaning of sec_4945 of the code and as such are eligible for the exclusion from income provided for in sec_117 of the code to the extent that such grants are actually used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this ruling is conditioned on the understanding that there will be no material changes in the facts upon which it is based it is further conditioned on the understanding that no grants will be awarded to your organization’s creators officers directors trustees or members of the selection committee or for a purpose inconsistent with the purposes described in sec_170 of the code the approval of your grant-making procedures is a one time approval of your system of standards and procedures for selecting recipients of grants that meet the requirements of sec_4945 of the code thus approval will apply to succeeding grant programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request - we are informing the te_ge office of this action please keep a copy of this ruling with your organization's permanent records this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely bee vet v bak gerald v sack manager exempt_organizations technical group


internal_revenue_service number release date index number ------------------------------------------- -------------------------------------------- ------------------------------- ------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ----------------- telephone number -------------------- refer reply to cc psi b01 plr-152371-09 date date legend x -------------------------------------------------- -------------------------------------------- state d1 d2 --------- --------------------------- ---------------------- dear -------------- this letter responds to a letter dated -------------------------- and subsequent correspondence written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts according to the information submitted x was incorporated under state law on d1 x’s shareholders intended for x to be an s_corporation as of d2 however x’s form_2553 election by a small_business_corporation was not timely filed x requests a ruling that it will be recognized as an s_corporation effective d2 law and analysis plr-152371-09 sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year at any time during the preceding_taxable_year or at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a a small_business_corporation makes an election under sec_1362 for any taxable_year and b such election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then such election shall be treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply x did not file a timely election to be treated as an s_corporation under sec_1362 effective d2 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 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 d2 within days from the date of this letter x must submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether x otherwise qualifies as an s_corporation for federal tax purposes in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative plr-152371-09 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 sincerely s david r haglund chief branch office of the associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes cc


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 2-plr-118088-98 date date x b date year dear this letter responds to your date ruling_request submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on date of year b x’s president and sole shareholder represents that b intended for x to elect to be an s_corporation from the date of incorporation in furtherance of this objective x’s accountant prepared and sent a form_2553 election by a small_business_corporation to b with instructions to execute and timely mail the form for the s election to be effective for year b believes that the form_2553 was mailed but has no proof of the mailing believing that form_2553 had been filed x filed a form_1120s u s income_tax return for an s_corporation and b included the income of x on b’s form_1040 u s individual_income_tax_return the service_center informed x that it could not process x’s form_1120s because the service center’s records showed that x was a c_corporation sec_1362 of the code provides that if-- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause mr jeffrey bernstein for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x’s year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x sincerely yours h grace kim assistant to the chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ----------------- telephone number --------------------- refer reply to cc psi b01 plr-116224-11 september internal_revenue_service number release date index number ------------------------- ------------- ----------------------------- ---------------------------------- ------------------------------- ------------------------------ legend legend x ---------------------------------------------------- ------------------------------ trust a ------------------------------------------------- ----------------------------------------------------- trust b ---------------------------------------------------- ----------------------------------------------- trust c ---------------------------------------------------- ---------------------------------------------- trust d ---------------------------------------------------- ------------------------------------------------ trust e ---------------------------------------------------- ----------------------------------------------- trust f ---------------------------------------------------- ---------------------------------------------- state date ------------- -------------------------- plr-116224-11 date date ---------------------- ---------------------- dear ------------- this responds to a letter dated date submitted on behalf of x by x's authorized representative requesting inadvertent s_corporation_election termination relief under sec_1362 in addition your letter seeks relief allowing trust a_trust b_trust c trust d trust e and trust f to file late elections to be treated as electing small_business trusts esbts facts according to the information submitted x was incorporated under the laws of state on date x elected to be an s_corporation effective date and intended to have trust a a shareholder of x file an esbt election to be effective date however there is no record of the esbt election being filed on date all shares of x stock were transferred from trust a to trust b_trust c trust d trust e and trust f however the trustees of trust b_trust c trust d trust e and trust f failed to make esbt elections for the trusts trust b_trust c trust d trust e and trust f are represented as being eligible to be esbts as of date and trust a is represented as having been eligible to be an esbt from date until date x represents that the failure_to_file the esbt elections and the consequent termination of x's election to be an s_corporation was inadvertent unintended and not the result of tax_avoidance or retroactive tax planning x and each person who is or was a shareholder of x agree to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that for purposes of subchapter_s a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual plr-116224-11 sec_1361 provides that for the purposes of sec_1362 an esbt is a permitted shareholder of a small_business_corporation sec_1361 defines an esbt sec_1361 provides that except as provided in sec_1362 the term electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1362 provides in part that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 f agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination the corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the representations made and the information submitted we conclude that x’s s_corporation_election made on date may have been invalid because of a failure_to_file an esbt election for trust a effective as of date and that such failure was inadvertent within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as an s_corporation beginning date and continuing thereafter unless x’s s_corporation_election is otherwise terminated this ruling is contingent upon the filing of an election to treat trust a as an esbt effective date and the filing of elections to treat trust b_trust c trust d trust e and trust f as esbts effective date with the appropriate service_center a copy of this plr-116224-11 letter must be attached to the elections further x and all of its shareholders must file amended returns to the extent necessary to treat x as an s_corporation for the period beginning date trust a as an esbt from date until date and trust b_trust c trust d trust e and trust f as esbts as of date and thereafter accordingly in determining their respective income_tax all the shareholders of x must include their pro-rata share of the separately_stated items of income loss deduction or credit and nonseparately computed items of income and loss of x as provided in sec_1366 make adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 within days from the date of this letter except as specifically ruled upon above we express or imply no opinion as to the federal tax consequences of the facts of the facts described above under any other provision of the code in particular we express or imply no opinion concerning whether x is otherwise eligible to be an s_corporation or whether trust a_trust b_trust c trust d trust e and trust f are eligible to be esbts under sec_1361 this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representative sincerely faith p colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for ' purposes


internal_revenue_service number release date index number ------------------------------------------------------------ -------------------- --------------------- ------------------------- ----------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------------------------------- telephone number -------------------- refer reply to cc psi b04 plr-141549-15 date date legend decedent spouse date date dear ----- ---------- ----------------------------------------------- ------------------------------ ---------------- ---------------- this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code a portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are summarized as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 to provide for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election plr-141549-15 spouse served as personal representative of decedent’s estate spouse represents that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of the decedent’s death and that during his lifetime decedent made no taxable_gifts as personal representative spouse requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-141549-15 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i 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 taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means 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 sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 plr-141549-15 2014_7_irb_513 sec_2 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date as personal representative spouse represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives except as expressly provided herein we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return plr-141549-15 pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries by lorraine e gardner lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc