internal_revenue_service number release date index number ----------------------- --------------------------------- --------------------------------------- re --------------- legend 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 b04 plr-133678-17 date date ------------------------------------------------------- ----------------------- --------------------- ----------------------- ---------------------- ---------------------------- ------------------ ---------------------------------------- -------------------- --------------------- ------------------------------------------------------- ------------------------ -------------- ----------- ----------------------------------------------------------- grantor spouse child child father mother individual trustee representative representative trust date state state committee ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------- ---------------------------------------------- ------------------------------------- dear --------------- this letter responds to your authorized representative’s letter dated date requesting rulings under sec_671 sec_2501 sec_2514 and sec_2041 of the internal_revenue_code the facts submitted and representations made are as follows on date grantor created an irrevocable_trust trust for the benefit of himself his wife spouse his descendants his parents father and mother and individual collectively referred to as plr-133678-17 beneficiaries grantor is the only donor and all property contributed to trust will be grantor’s separate_property under state law the trustee trustee is a_trust company with its headquarter in state trust is governed by the laws of state currently grantor and spouse have two minor children child and child during grantor’s lifetime at any time or times trustee pursuant to an appointment of the committee or grantor while the committee is in existence shall distribute to the beneficiaries such amounts of net_income or principal of trust as the committee or grantor determines any appointment determination or action by the committee requires either i the unanimous written consent of the then serving members of the committee other than grantor unanimous member power or ii the written consent of grantor and a majority of the other then serving members of the committee grantor’s consent power in addition grantor in a non-fiduciary capacity may appoint such amounts of principal to one or more persons in the group consisting of grantor’s descendants father mother and individual as grantor deems advisable to provide for such person’s health support and education grantor’s sole power such power may not be exercised to discharge or satisfy grantor’s legal obligations any net_income not distributed shall be accumulated and added to the principal of trust if at any time a committee member fails or ceases to serve then the position of such committee member shall remain vacant subject_to exception for the appointment of representatives with legal authority to act on behalf of another committee member the trust agreement provides that if there is no committee the trustee other than a beneficiary-trustee may pay any one or more of the beneficiaries such amount or amounts of the net_income and principal for any purpose even to the extent of all or none at any time and from time to time as the trustee determines in his discretion and only with grantor’s written consent and in making such determinations the trustee may consider or ignore in the trustee’s discretion the beneficiaries’ other financial resources of any kind initially committee consists of grantor representative representative father and mother representative sec_1 and act on behalf of child and child respectively until each child reaches majority age as each of the minor children child and child reaches majority age that child will become a member of the committee replacing his representative trust provides that at any time members of the committee may by unanimous vote add one or more members to the committee other than spouse provided that such members are beneficiaries of trust the trust agreement as amended states that committee shall be deemed not to exist at any time there are fewer than two members other than grantor the committee shall also be dissolved and cease to exist upon grantor’s death upon grantor’s death the trustee shall distribute such amounts of trust property as grantor appoint to or in favor of any one person or more persons or entities other plr-133678-17 than grantor grantor’s estate the creditors of grantor or the creditors of grantor’s estate as grantor may appoint by will grantor’s testamentary power such power may not be exercised to discharge or satisfy grantor’s legal obligations upon grantor’s death the trustee shall divide the then remaining trust property into as many separate shares of equal value as necessary to dispose_of the property any balance which is not distributed pursuant to grantor’s testamentary power shall be distributed as follows one such equal share to father if he is then living one such equal share to mother if she is then living one such equal share to individual if he is then living and seven such equal shares to grantor’s then living descendants by right of representation to be held in further trust for such descendants if none of the remainder beneficiaries is living upon grantor’s death any balance which is not distributed pursuant to grantor’s testamentary power shall be distributed in equal shares in further trust for the benefit of individuals named in trust trust also provides that a person or corporate fiduciary shall not serve as a fiduciary of a_trust created under trust if such service would cause the trust to fail to be a u_s_person as defined in sec_7701 you have requested the following rulings as long as the committee is serving no portion of the items of income deductions and credits against tax of the trust shall be included in computing under sec_671 the taxable_income deductions and credits of grantor or of any member of the committee the contribution of property to trust by grantor will not be a completed_gift subject_to federal gift_tax any distribution_of_property by the committee from trust to grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee any distribution_of_property by the committee from trust to any beneficiary of trust other than grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee no member of the committee upon his or her death will include in his or her estate any property held in trust because such member is deemed to have a general_power_of_appointment within the meaning of sec_2041 and sec_2514 over property held in trust ruling plr-133678-17 sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_672 provides for purposes of subpart e the term adverse_party means any person having a substantial_beneficial_interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust sec_673 provides that the grantor shall be treated as the owner of any portion of a_trust in which the grantor has a reversionary_interest in either the corpus or the income therefrom if as of the inception of that portion of the trust the value of such interest exceeds five percent of the value of such portion sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to the powers described in sec_674 regardless of by whom held sec_674 provides that sec_674 shall not apply to a power exercisable only by will other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to a power to distribute corpus to or for a beneficiary provided that the power is limited by a reasonably_definite_standard under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant on its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust plr-133678-17 sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both sec_677 provides in general that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor's spouse held or accumulated for future distribution to the grantor or the grantor's spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor's spouse sec_678 provides that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would within the principles of inclusive subject a grantor of a_trust to treatment as the owner thereof sec_679 provides that a united_states_person who directly or indirectly transfers property to a foreign_trust shall be treated as the owner for his taxable_year of the portion of such trust attributable to such property if for such year there is a united_states_beneficiary of any portion of such trust based on the facts submitted and representations made we conclude that an examination of trust reveals none of the circumstances that would cause grantor to be treated as the owner of any portion of trust under sec_673 sec_674 sec_676 sec_677 or sec_679 as long as trust is a domestic_trust and the committee remains in existence and serving because none of the members of committee have a power exercisable by himself to vest trust income or corpus in himself none shall be treated as the owner of trust under sec_678 we further conclude that an examination of trust reveals none of the circumstances that would cause administrative controls to be considered exercisable primarily for the benefit of grantor under sec_675 thus the circumstances attendant on the operation of trust will determine whether grantor will be treated as the owner of any portion of trust under sec_675 this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office with responsibility for such examination ruling sec_2 and plr-133678-17 sec_2501 provides that a tax is imposed for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete as to any property or part thereof or interest therein of which the donor has so parted with dominion and control as to leave in the donor no power to change its disposition whether for his own benefit or for the benefit of another but if upon a transfer of property whether in trust or otherwise the donor reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the facts in the particular case accordingly in every case of a transfer of property subject_to a reserved power the terms of the power must be examined and its scope determined sec_25_2511-2 provides an example where the donor transfers property to another in trust to pay the income to the donor or accumulate it in the discretion of the trustee and the donor retains a testamentary power to appoint the remainder among the donor's descendants the regulation concludes that no portion of the transfer is a completed_gift however if the donor had not retained a testamentary_power_of_appointment but instead provided that the remainder should go to x or his heirs the entire transfer would be a completed_gift sec_25_2511-2 provides that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title in himself or herself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by the donor in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom a trustee as such is not a person having an adverse_interest in the disposition of the trust property or its income sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that if a donor transfers property to himself as trustee or to himself and some other person not possessing a substantial adverse plr-133678-17 interest as trustees and retains no beneficial_interest in the trust property and no power over it except fiduciary powers the exercise or nonexercise of which is limited by a fixed_or_ascertainable_standard to change the beneficiaries of the transferred property the donor has made a completed_gift and the entire value of the transferred property is subject_to the gift_tax sec_25_2511-2 does not define substantial adverse_interest sec_25_2514-3 provides in part that a taker in default of appointment under a power has an interest that is adverse to an exercise of the power sec_25_2514-3 also provides that a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in 308_us_39 the taxpayer created a_trust for the benefit of named beneficiaries and reserved the power_to_revoke the trust in whole or in part and to designate new beneficiaries other than himself six years later in the taxpayer relinquished the power_to_revoke the trust but retained the right to change the beneficiaries in the taxpayer relinquished the right to change the beneficiaries the court stated that the taxpayer’s gift is not complete for purposes of the gift_tax when the donor has reserved the power to determine those others who would ultimately receive the property accordingly the court held that the taxpayer's gift was complete in when he relinquished his right to change the beneficiaries of the trust a’s retention of a power to change the beneficial interests in a_trust causes the transfer to the trust to be incomplete for gift_tax purposes even though the power may be defeated by the actions of third parties 37_tc_897 see also 51_tc_352 in this case grantor retained the grantor’s consent power over the net_income and principal of trust under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom the committee members are not takers in default for purposes of sec_25_2514-3 they are merely co-holders of the power under sec_25_2514-3 a co-holder of a power is only considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in this case the committee ceases to exist upon the death of grantor accordingly the committee members do not have interests adverse to grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 therefore grantor is considered as possessing the power to distribute net_income and principal to any beneficiary himself because he retained the grantor’s consent power if the committee ceases to exist the trustee has the power to distribute net_income to a beneficiary however the trustee’s power is not a condition_precedent to plr-133678-17 each grantor’s consent power each grantor’s consent power over income is presently exercisable and not subject_to a condition_precedent thus the trustee’s power to distribute net_income does not cause the transfer of property to be complete with respect to the income_interest in trust for federal gift_tax purposes therefore each grantor is considered as possessing the power to distribute income to any beneficiary himself or herself because he or she retained the grantor’s consent power grantor also retained the grantor’s sole power over the principal of trust under sec_25_2511-2 a gift is incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard in this case the grantor’s sole power gives grantor the power to change the interests of the beneficiaries even though grantor's power is limited by an ascertainable_standard ie health education and support grantor's power is not a fiduciary power accordingly the retention of the grantor’s consent power and the grantor’s sole power causes the transfer of property to trust to be incomplete for federal gift_tax purposes if the committee ceases to exist the trustee in its fiduciary capacity also has the power to distribute principal to one or more beneficiaries the powers of the trustee are not conditions precedent to the grantor’s powers grantor’s sole power over principal is presently exercisable and not subject_to a condition_precedent accordingly grantor retains dominion and control_over the principal of trust until the trustee exercises his or her power to appoint principal see 37_tc_897 thus the trustee’s powers to distribute principal do not cause the transfer of property to be complete with respect to the remainder in trust for federal gift_tax purposes accordingly the retention of grantor’s consent power and grantor’s sole power causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes further grantor retained the grantor’s testamentary power to appoint the property in trust to any persons other than to the grantor’s estate grantor’s creditors or the creditors of grantor’s estate under sec_25_2511-2 the retention of a testamentary power to appoint the remainder of a_trust is considered a retention of dominion and control_over the remainder accordingly the retention of this power causes the transfer of property to trust to be incomplete with respect to the remainder for federal tax purposes finally the committee members possess the unanimous member power over net_income and principal this power is not a condition_precedent to grantor’s powers grantor’s powers over the net_income and principal are presently exercisable and not subject_to a condition_precedent grantor retains dominion and control_over the net_income and principal of trust until the committee members exercise their unanimous member power accordingly the unanimous member power does not cause the plr-133678-17 transfer of property to be complete with respect to the income_interest for federal gift_tax purposes see 37_tc_897 51_tc_352 accordingly based on the facts submitted and the representations made we conclude that the contribution of property to trust by grantor is not a completed_gift subject_to federal gift_tax any distribution from trust to grantor is merely a return of grantor’s property therefore we conclude that any distribution_of_property from trust by the committee to grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee further upon the death of grantor the fair_market_value of the property in trust is includible in his gross_estate for federal estate_tax purposes ruling sec_4 and sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power possessor the possessor's estate the possessor's creditors or the creditors of the possessor's estate sec_25_2514-1 provides that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the possessor or his creditors or the possessor's estate or the creditors of the estate or expressly not exercisable in favor or the possessor or his creditors or the possessor’s estate or the creditors of his estate sec_2514 provides that in the case of a power_of_appointment created after date if the power is exercisable by the possessor only in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2514 provides that in the case of a power_of_appointment created after date if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the possessor such power shall not be deemed a general_power_of_appointment for purposes of sec_2514 a person who after the death of the possessor may be possessed of a power_of_appointment with respect to the property subject_to the possessor's power which he may exercise in his own favor shall be deemed as having an interest in the plr-133678-17 property and such interest shall be deemed adverse to such exercise of the possessor’s power sec_25_2514-3 provides in part that a co-holder of a power has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y's death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive under sec_2041 the term general_power_of_appointment is defined in relevant part to mean a power which is exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_2041 provides however that in the case of a power_of_appointment created after date if the power is not exercisable by the decedent except in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2041 provides however that in the case of a power_of_appointment created after date if the power is not exercisable by the decedent except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the decedent -- such power shall not be deemed a general_power_of_appointment for purposes of sec_2041 a person who after the death of the decedent may be possessed of a power_of_appointment with respect to the property subject_to the decedent's power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the decedent's power sec_20_2041-3 of the estate_tax regulations provides in part that a co-holder of a power_of_appointment has no adverse_interest merely because of his joint plr-133678-17 possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the decedent's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y's death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y the power held by the committee members under the grantor’s consent power is a power that is exercisable only in conjunction with the creator grantor accordingly under sec_2514 and sec_2041 the committee members do not possess general powers of appointment by virtue of possessing this power further the power held by the committee members under the unanimous member power is not a general_power_of_appointment for purposes of sec_2514 and sec_2041 as in the examples in sec_25_2514-3 and sec_20_2041-3 the committee members have substantial adverse interests in the property subject_to this power accordingly any distribution made from trust to a beneficiary other than to grantor pursuant to the exercise of these powers the grantor's consent power and the unanimous member power are not gifts by the committee members instead such distributions are gifts by grantor based on the facts submitted and representations made we conclude that any distribution_of_property by the committee from trust to any beneficiary of trust other than grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee accordingly any distribution_of_property from trust to a beneficiary other than to grantor will be completed gifts by grantor finally we conclude that the powers held by the committee are not general powers of appointment for purposes of sec_2041 and accordingly no member of the committee upon his or her death will include in his or her estate any property held in trust because such member is deemed to have a general_power_of_appointment within the meaning of sec_2041 over property held in trust except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion on the trust provisions permitting trustee to distribute income or principal to trustees of other trusts decanting plr-133678-17 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 lorraine e gardner lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter


internal_revenue_service number release date index number -------------------------- -------------------------------------- --------------------- ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-152087-10 date date legend company ----------------------------------------------------------- -------------------------- state ------------- trust1 ----------------------------------------------------------- -------------------------------------- trust2 ----------------------------------------------------------- -------------------------------------- date1 date2 date3 date4 date5 date6 dear -------------- --------------------------- --------------------------- --------------------------- ---------------------- -------------------- ------------------- this letter responds to a letter dated date submitted on behalf of company by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code plr-152087-10 facts company incorporated in state on date1 and elected to be an s_corporation effective date2 trust1 and trust2 were formed and received all the shares of company on date2 trust1 and trust2 collectively trusts each made an election to be treated as an electing_small_business_trust esbt but due to inadvertence the esbt elections included an effective date of date3 and erroneously stated that trusts acquired company’s stock on date4 the esbt election for trust2 also listed an erroneous potential_current_beneficiary trusts did not otherwise qualify as eligible shareholders of an s_corporation as of date2 as a result company’s s_corporation_election was not effective as of date2 on date5 the trustee of trust2 died as of date5 trust2 became a foreign_trust because of the appointment of a foreign trustee on date6 trust2 replaced its foreign trustee with a united_states trustee that would make trust2 a domestic_trust and eligible to be an esbt company represents that it intended to make its s_corporation_election effective as of date2 and that the failure_to_file correct esbt elections was inadvertent and not motivated by tax_avoidance or retroactive tax planning company further represents that there was no intent to terminate company’s s_corporation_election and that appointment of a foreign trustee was inadvertent and not motivated by tax_avoidance or retroactive tax planning for all relevant taxable years company and company’s shareholders’ filed their federal_income_tax returns consistent with company qualifying as an s_corporation and trusts have filed consistent with trusts having valid esbt elections in effect since date2 in addition company and company’s shareholders agree to make any adjustments consistent with the treatment of company as an s_corporation as may be required by the secretary with respect to the period specified by sec_1362 law 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 in part that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not 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 sec_1361 provides that certain trusts such as esbts are permitted as shareholders of an s_corporation plr-152087-10 sec_1361 provides in part that sec_1361 shall not apply to any foreign_trust sec_1361 provides that for purposes of sec_1361 except as provided in sec_1361 the term electing_small_business_trust means any trust if - i the trust does not have as a beneficiary any person other than an individual an estate an organization described in sec_170 or or an organization described in sec_170 that holds a contingent_interest in the trust and is not a potential_current_beneficiary ii no interest in the trust was acquired by purchase and iii an election under sec_1361 applies to the trust 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 will be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that the termination shall be effective on and after the date of cessation sec_1362 provides in part that if an election under sec_1362 by any corporation 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 to obtain shareholder consents or was terminated under sec_1362 or or sec_1361 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 a so that the corporation for which the election was made or the termination occurred is a small_business_corporation or b to acquire the required shareholder consents and the corporation for which the election was made or the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 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 such corporation shall be treated as an s_corporation during the period specified by the secretary sec_1_1362-4 of the income_tax regulations provides that the commissioner may require any adjustments that are appropriate in general the adjustments required should be consistent with the treatment of the corporation as an s plr-152087-10 corporation or qsub during the period specified by the commissioner in the case of stock held by an ineligible shareholder that causes an inadvertent termination or invalid election for an s_corporation under sec_1362 the commissioner may require the ineligible shareholder to be treated as a shareholder of the s_corporation during the period the ineligible shareholder actually held stock in the corporation moreover the commissioner may require protective adjustments that prevent the loss of any revenue due to the holding of stock by an ineligible shareholder for example a nonresident_alien conclusion based solely on the representations made and the information submitted we conclude that company’s s_corporation_election was ineffective as of date2 due to the failure_to_file proper and timely esbt elections for trusts we conclude that the ineffectiveness of company’s s_corporation_election was inadvertent within the meaning of sec_1362 in addition assuming company’s s_corporation_election had been properly in effect it would have terminated on date5 because of trust2 becoming a foreign_trust and an ineligible shareholder of an s_corporation we conclude that such a termination would have been inadvertent within the meaning of sec_1362 accordingly under sec_1362 company will be treated as an s_corporation from date2 and thereafter provided that company’s s_corporation_election is otherwise valid and is not otherwise terminated under sec_1362 this ruling is contingent on company and its shareholders treating company as having been an s_corporation for the period beginning date2 and thereafter this ruling is also contingent on the trustees of trusts filing valid esbt elections effective date2 with the appropriate service_center within days of the date of this letter provided that the esbt elections are made from date2 and thereafter trusts will be treated as esbts effective date2 a copy of this letter should be attached to the elections in addition this ruling is contingent on trusts and their beneficiaries treating trusts as esbts from date2 and thereafter if these conditions are not met then this ruling is null and void except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether company is otherwise eligible to be an s_corporation for federal tax purposes or whether the trusts are otherwise eligible to be esbts this ruling letter is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-152087-10 under a power_of_attorney on file with this office we are sending a copy of this letter to company’s authorized representative sincerely s james a quinn senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------------------------- -------------------------- --------------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- telephone number -------------------- refer reply to cc tege eb ec plr-100468-15 date date ------ ---------------------- --- year date x company a -------------------------------------- date date ------------------------ ------------------------ dear ---------------------------------- this is in response to a request for a private_letter_ruling dated date submitted on your behalf by your authorized representative requesting a ruling under sec_83 of the internal_revenue_code code specifically you request a ruling that an election made under sec_83 of the code was timely filed notwithstanding your failure to attach a copy of the election to your year tax_return the facts as represented are as follows on date you purchased x units in company a for whom you provided services on date you executed an election pursuant to sec_83 of the internal_revenue_code the election met the content requirements of sec_1_83-2 of the income_tax regulations regulations this election was filed by with the internal_revenue_service on date within days of the date of transfer when your tax_return was prepared for year you failed to attach a copy of your election as a result a copy of your election was not submitted with your year tax_return as required by sec_1 c of the regulations plr-100468-15 sec_83 of the code provides rules for the taxation of property transferred to an individual in_connection_with_the_performance_of_services sec_83 of the code provides that if in_connection_with_the_performance_of_services property is transferred to any person other than the person for whom such services are performed the fair_market_value of the property less the amount_paid for the property shall be included in the gross_income of the recipient in the first taxable_year in which the recipient’s interest in the property is not subject_to a substantial_risk_of_forfeiture sec_83 of the code provides that any person who performs services in connection with which property is transferred may elect to include in gross_income for the taxable_year of the transfer the excess of the fair_market_value of the property over the amount_paid for it sec_83 of the code provides that an election made pursuant to sec_83 shall be made in the manner prescribed by the secretary and shall be made not later than days after the date of the transfer sec_1_83-2 of the regulations provides that a sec_83 election is made by filing one copy of a written_statement with the internal revenue office with whom the taxpayer files his return in addition one copy of such statement shall be submitted with the income_tax return for the year of transfer sec_1_83-2 of the regulations provides that the person who performed the services shall also submit a copy of the statement to the person for whom the services are performed sec_1_83-2 of the regulations provides that the statement shall be signed by the person making the election and shall indicate that it is being made under sec_83 of the code and shall contain the following information the name address and taxpayer_identification_number of the taxpayer a description of each property with respect to which the election is being made the date or dates on which the property is transferred and the taxable_year for which such election was made the nature of the restriction or restrictions to which the property is subject the fair_market_value at the time of transfer of each property with respect to which the election is being made the amount if any paid for such property and with respect to elections made after date a statement to the effect that copies have been furnished to other persons as provided in sec_1_83-2 of the regulations based on the representations made and after consideration of the provisions of sec_83 of the code and of the regulations we have determined that you fulfilled the requirements for a valid election under sec_83 when your statement was mailed to the internal revenue office on date failure to submit a copy of the statement with your year tax_return did not affect the validity of the election we therefore conclude that to the extent that your receipt of company a stock on date constituted a transfer of property under sec_83 of the code your election under sec_83 with respect to that stock remains in effect plr-100468-15 we ask that you now forward a copy of the statement to the internal revenue office with which you file your tax returns to be associated with your year tax_return except as expressly provided herein no opinion is expressed or implied as to the federal tax consequences of the facts described above under any other provision of the code 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 a copy of this letter must be attached to any income_tax return to which it is relevant this ruling is based on the information and representations submitted by your authorized representative and accompanied by a penalty of perjury statement executed by you 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely yours s ________________________ thomas d scholz senior counsel executive compensation branch office of associate chief_counsel tax exempt and government entities cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uniform issue list contact person identification_number telephone number employer_identification_number legend l l u dear this is in response to your request for rulings that endowment investment agreements will not generate unrelated_business_taxable_income under sec_512 of the internal_revenue_code the code and that redemption of endowment units by charitable_remainder trusts will be treated as long or short term capital_gain or loss under sec_1222 of the code depending upon the applicable holding_period m is exempt under sec_501 of the code as an organization described in sec_501 and has been classified as an educational_organization under sec_509 and sec_170 m is the trustee of a number of charitable_remainder trusts collectively the trusts and as trustee m is the legal owner of the trusts’ assets in addition m has a remainder_interest in each of the trusts you are one such charitable_remainder_trust in which m is trustee and remainder beneficiary as a result of the relationship with the trusts as both trustee and beneficiary m has a substantial interest in the value of each trust moreover the donors to the trusts have funded the trusts with the intention that m benefit substantially from the remainder value of the trusts and that the trusts’ assets will be managed to achieve the greatest possible return on investment m's endowment is invested in a diversified portfolio of public domestic and international equity and fixed income securities real assets private equity and hedged strategies m proposes to create a contractual obligation pursuant to which it would issue a contract right to each of the trusts to receive a proportionate share or unit of m’s endowment in exchange for the investment of the trusts’ assets in m’s endowment the contract right would entitle the trusts to receive periodic_payments based on the units owned by each of the trusts m determines a payout rate on the endowment each year based in part on the endowment’s investment performance m calculates the market_value of each endowment unit on a monthly basis the market_value of each endowment unit initially equals the total value of the endowment investments divided by the number of outstanding units and is subsequently adjusted in accordance with the market_value of the endowment each trust is entitled to an amount equal to the payout rate multiplied by the number of units it holds m seeks to enable the trusts to be invested in the same manner as m’s endowment a_trust would acquire a unit in the endowment which would give the trusts a contractual right against m but no interest whatsoever in the underlying investment_assets of the endowment the contract between m and the trusts would provide that the price of the units would equal their value at the time of acquisition the units would have the same value that m uses for internal accounting purposes the contract would provide that each trust would receive payments on the units held by it based on the payout rate m establishes for the endowment with payouts made quarterly a_trust could choose either to reinvest all or part of the payout or redeem additional units depending on its cash requirements the trusts will treat payouts as ordinary_income regardless of the character of the underlying income of the endowment whether capital_gain ordinary_income or return_of_capital under the contract the trusts would not have any ownership_interest in the underlying assets of the endowment the trusts would have no power or right of any kind to control direct supervise recommend or review m’s business activities operations or decisions with respect to the endowment they would not have the right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of units m is neither a partner nor an agent of the trusts the trusts would never be liable for any cost expense or payment incurred by m or for which m endowment or the underlying endowment assets and m would indemnify and hold the trusts harmless from and against any liability arising out of any_action or inaction by m with respect to the endowment or the underlying endowment assets is liable or responsible relating to the you have requested the following rulings the issuance of endowment units by m to you the making or receipt of payments with respect to the endowment units and the holding or redemption of the endowment units will not generate unrelated_business_taxable_income to you the redemption of endowment units by you will be treated as long or short term capital_gain or loss under sec_1222 depending upon the holding_period of the endowment units section dollar_figure of revproc_2011_4 provides that the service will not issue letter rulings pertaining to unrelated_business_income_tax issues arising when charitable_lead_trust assets are invested with charitable organizations the ruling issued by this letter relates only to your participation as a charitable_remainder_trust in m’s endowment law sec_664 of the code provides that a charitable_remainder_trust shall for any taxable_year not be subject_to tax unless such trust for such year has unrelated_business_income within the meaning of sec_512 of the code determined as if part iil of subchapter_f applied to such trust sec_511 of the code in part imposes a tax on the unrelated_business_taxable_income of organizations described in sec_501 sec_512 of the code defines the term unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions which are directly connected with the carrying on of such trade_or_business both computed with the modifications provided in sec_512 sec_512 of the code sets forth so-called modifications which are excluded from the computation of unrelated_business_taxable_income these modifications include dividends interest royalties rent from real_property and gain from the sale of property sec_513 of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_purpose or function sec_513 of the code provides that the term trade_or_business includes any activity which is carried on for the production_of_income from the sale_of_goods or the performance of services sec_1_513-1 of the income_tax regulations provides that gross_income of an exempt_organization subject_to the tax imposed by sec_511 of the code is includible in the computation of unrelated_business_taxable_income if it is income from a trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the production of funds to the organization's performance of its exempt functions sec_1_513-1 of the regulations provides that for purposes of sec_513 of the code the term trade_or_business has the same meaning it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services sec_1_513-1 of the regulations provides that in determining whether trade_or_business from which a particular amount of gross_income derives is regularly carried on within the meaning of sec_512 of the code regard must be had to the frequency and continuity with which the activities productive of the income are conducted and the manner in which they are pursued for example specific business activities of an exempt_organization will ordinarily be deemed to be regularly carried on if they manifest a frequency and continuity and are pursued in a manner generally similar to comparable commercial activities of non-exempt organizations sec_1_513-1 of the regulations provides that in general gross_income derives from unrelated_trade_or_business within the meaning of sec_513 of the code if the conduct of the trade_or_business which produces the income is not substantially related other than through the production of funds to the purposes for which exemption is granted the presence of this requirement necessitates an examination of the relationship between the business activities which generate the particular income in question -- the activities that is of producing or distributing the goods or performing the services involved -- and the accomplishment of the organization's exempt purposes sec_1_513-1 of the regulations provides that trade_or_business is related to exempt purposes in the relevant sense only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes and is substantially related for purposes of sec_513 of the code only if the causal relationship is a substantial one thus for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes where the production or distribution of the goods or the performance of the services does not contribute importantly to the accomplishment of the exempt purposes of an organization the income from the sale of the goods or the performance of the services does not derive from the conduct of related trade_or_business whether activities productive of gross_income contribute importantly to the accomplishment of any purpose for which an organization is granted exemption depends in each case upon the facts and circumstances involved as noted previously organizations described in sec_501 of the code are subject_to tax on their unrelated_business_income under sec_511 income to be subject_to the unrelated_business_income_tax three requirements must be met the income must be from a trade_or_business the trade_or_business must be regularly carried on and the conduct of the trade_or_business must not be substantially related to the organization's exempt_purpose or function see sec_1_513-1 of the regulations in order for such an organization's sec_1222 of the code provides that capital_gain or loss is generated upon a sale_or_exchange of a capital_asset sec_1234a of the code provides that gain_or_loss attributable to the cancellation lapse expiration or other termination of a right or obligation with respect to property which is or on acquisition would be a capital_asset in the hands of the taxpayer shall be treated as gain_or_loss from the sale of a capital_asset sec_1221 of the code defines the term capital_asset as property held by the taxpayer regardless of whether it is connected with the taxpayer's trade_or_business unless the property meets one of eight listed exceptions inventory property of a character which is subject_to the allowance for depreciation provided in sec_167 or real_property used in a trade_or_business certain intangible_property accounts_receivable acquired in the ordinary course of a trade_or_business certain publications of the united_states government certain commodities financial derivatives certain hedging_transactions and supplies of a type regularly consumed by the taxpayer in the ordinary course of a trade_or_business of the taxpayer although sec_1221 appears to give broad meaning to the term capital_asset the supreme court has found it evident that not everything which can be called property in the ordinary sense and which is outside the statutory exclusions of sec_1221 qualifies as a capital_asset rather the term ‘capital asset’ is to be construed narrowly in accordance with the purpose of congress to afford capital-gains treatment only in situations typically involving the realization of appreciation in value accrued over a substantial period of time 364_us_130 citing 287_us_103 accordingly the court has held that certain interests that are concededly property in the ordinary sense are not capital assets on this basis capital_gain treatment has been denied for transactions involving payments in return for interests carved out of or related to an interest retained by the taxpayer see eg 356_us_260 court denied capital_gain treatment on the disposition of certain mineral payments carved out of established oil_and_gas interests 313_us_28 court denied capital_gain treatment on the disposition of a term of years carved out from a fee simple the court also has denied capital_gain treatment for transactions on the basis that the payments at issue were a substitute_for_ordinary_income in hort for example the taxpayer inherited a building and one of the tenants canceled its lease paying the taxpayer a cancellation fee the court held that the cancellation fee was ordinary_income because the cancellation of the lease involved nothing more than relinquishment of the right to future rental payments in return for a present substitute payment and possession of the leased premises id pincite the court bolstered this substitute-for-ordinary-income doctrine in p g lake stating the lump sum consideration seems essentially a substitute for what would otherwise be received at a future time as ordinary_income p g lake u s pincite consistent with the substitute-for-ordinary-income doctrine the courts have denied capital_gain treatment for transactions involving interests related to compensation_for past or future personal services see eg 455_f2d_1146 cir lump sum representing unpaid commissions due under an employment contract elliot v united_states 431_f2d_1149 cir lump sum paid for the surrender of right to future sales commissions 303_f2d_687 9th cir payment for interest in films to be produced by taxpayer similarly courts have denied capital_gain treatment for interests relating to income already earned or about to be earned see eg 381_us_54 earned original_issue_discount 437_f3d_399 3d cir lump sum payment for annual installments of lottery prize rnodes estate v commissioner 131_f2d_50 6th cir right to dividend that was already declared on the other hand as the courts have noted simply because the property transferred will produce ordinary_income and such income is a major factor in determining the value of the property does not necessarily mean that the amount received for the property is essentially a lump-sum substitute_for_ordinary_income 46_tc_559 in guggenheim the court focused on whether the taxpayer transferred substantial investment risks in the sale of undivided interests in a stallion in that case the court noted that if the value of the stallion subsequently increased the taxpayer would not share in that increase with regard to the interests transferred instead the new owners received all the benefits of an increase in value of the stallion and all the burdens of a decrease in value thus the court found that the taxpayer had transferred substantial investment risks and was entitled to capital_gain treatment on the sale of the interests in united_states v dresser industries inc f 2d 5th cir the court distinguished between proceeds from the present sale of the future right to earn income which is capital_gain and the present sale of the future right to earned_income which is ordinary_income id pincite in that case the court found that the sale of an income-producing asset was not merely the sale of the right to income already earned instead the taxpayer had an asset that would produce income in the future thus the court held that the taxpayer's sale of the asset generated capital_gain id similarly in commissioner v ferrer f 2d 2d cir the court held that the taxpayer's surrender of a lease of a play constituted the sale_or_exchange of a capital_asset despite the fact that receipts from the play would have been ordinary_income ferrer pincite in its rejection of the government's argument against capital_gain treatment the court noted that there was no equivalence between amounts paid for the surrender of the lease and the income that would have been realized by its retention id pincite analysis m proposes to enter into a contractual relationship with certain trusts that are charitable_remainder trusts in which it has an interest as a beneficiary and serves as trustee of the trusts under such a contractual relationship you would receive payments on the units held by it based on the payout rate m establishes for its endowment with payouts made quarterly you would acquire units from m’s endowment which would give you a contractual right against m but no interest whatsoever in the underlying investment_assets of the endowment the contract between you and m would provide that the price of the units would equal their value at the time of acquisition the units would have the same value that m uses for internal accounting purposes consequently you could choose either to reinvest all or part of the payout or redeem a portion of the units depending on your cash requirements thus under the contractual relationship with m you would have a right to the payout declared by m plus the right to redeem the units at the value that m uses for internal accounting purposes as stated above under the contract you would not have any ownership_interest in the underlying assets of the endowment or any contract rights with respect to any other trusts you would have no power or right of any kind to control direct supervise recommend or review m’s business activities operations or decisions with respect to the endowment you would not have any right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of the units m is neither a partner nor an agent of you you would never be liable for any cost expense or payment incurred by m or for which m is liable or responsible relating to the endowment or the underlying endowment assets and m would indemnify and hold you harmless from and against any liability arising out of any_action or inaction by m with respect to the endowment or the underlying endowment assets you do not have a position of ownership in the underlying assets of m’s endowment because the contractual relationship between m and you is not in the nature of a partnership or agency the income earned by you from the payout m establishes for the units reflects ordinary_income and does not take on the character of the income of the underlying assets or debt-financed or unrelated_business_taxable_income m would pay any_tax owed on unrelated_business_taxable_income earned by the endowment portfolio with no deduction taken for any payments made to you with respect to the proper characterization under sec_1221 of the unit the bundle of contract rights represented by each unit is property and may be treated as a capital_asset for purposes of sec_1221 in the present case none of the listed exceptions in sec_1221 applies the most important characteristic of the unit is that significant investment risks are associated with and included in each unit with respect to each unit there is an opportunity for appreciation as well as a risk of loss each unit represents a substantial investment by you and each unit has an ascertainable basis the value of each unit is directly tied to the endowment's investment performance poor performance will detract from the value of a unit while performance above the payout rate set by m will increase the value of each unit the opportunity for appreciation risk of loss and basis in each unit are characteristics similar to other contract rights that are treated as capital assets for example other financial derivatives mutual_fund shares or corporate stock further the benefits and burdens associated with each unit are similar to those associated with the property held to be capital assets in guggenheim dresser and ferrer in addition although you will receive ordinary_income in the form of the quarterly payouts that are based in part upon the number of units owned by you consideration received upon a redemption of a unit is not a substitute for what would otherwise be received as an ordinary_income payout whether due and payable or about to be due and payable to you under the terms of the contract rather the amount_paid for a unit upon a redemption is equal to the value of the unit on the date of redemption unit value on any given date is equal to overall asset value of the endowment divided by the number of units outstanding in addition the unit is not an interest related to compensation_for past or future personal services instead the unit is an asset that will produce income in the future finally the unit does not represent a carve-out of a larger estate retained by you the appreciation of each unit is attributable to m’s overall endowment property appreciation much of which in turn is attributable to increases in the value of capital assets in m’s endowment the contract provides specifically that you do not have any ownership_interest in or rights to m’s endowment accordingly we conclude that the unit is a capital_asset for purposes of sec_1221 furthermore sec_1234a will apply to treat gain_or_loss from the cancellation lapse expiration or other termination of the unit as gain_or_loss from the sale of a capital_asset thus in general the redemption of the unit by you will generate short-term or long-term_capital_gain or loss to you depending on the holding_period of the unit in view of the foregoing we rule as follows the issuance of endowment units from m to you the making or receipt of payments with respect to the endowment units and the holding or redemption of the endowment units will not generate unrelated_business_taxable_income to you the redemption of endowment units by you will be treated as long or short term capital_gain or loss under sec_1222 depending upon the holding_period of the endowment units this ruling letter is based on the understanding that there will be no material changes in the facts upon which it is based we express no opinion as to the tax consequences of the proposed transaction under any other section of the code pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives a copy of this letter should be kept in your permanent records this ruling letter is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if there are any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely director exempt_organizations enclosure notice


department of the treasury internal_revenue_service washington d c ae be gh i i commissioner tax_exempt_and_government_entities_division feb uniform issue list se tt ee ech t4 legend taxpayer a plan b bank c amount amount dear this is in response to your request dated date in which you request a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he received a distribution equal to amount from plan b taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to his medical_condition during the 60-day period taxpayer a further represents that amount has not been used for any other purpose taxpayer a participated in plan b an undiagnosed illness on date taxpayer a received a distribution of amount from plan b on date amount was deposited into a non-ira account with bank c during the 60-day rollover period taxpayer a was unable to work and underwent numerous medical tests and in august of taxpayer a became ill with treatments in an attempt to diagnose his condition it was not until after the 60-day period had expired that taxpayer a began responding to treatment and his condition improved for him to return to work in date the request for relief is accompanied by taxpayer a's significant medical history during the 60-day period based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_402 of the code with respect to the distribution of amount sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible retirement pian and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 of the code states that such rollover must be accomplished within days following the day on which the distributee received the property an individual_retirement_account ira constitutes one form of eligible_retirement_plan sec_402 of the code provides that an eligible_rollover_distribution shall not include any distribution to the extent such distribution is required under sec_401 sec_402 of the code provides in relevant part that the secretary may waive the 60-day requirement under sec_402 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 and sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with his assertion that the failure to complete a timely rollover of the distribution of amount from plan b was due to his medical_condition therefore pursuant to sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from plan b taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute no more than amount into an eligible retirement pian or rollover ira provided ail other requirements of sec_402 of the code except the 60-day requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_402 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter 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 if you wish to inquire about this ruling please contact address all correspondence to se t ep ra t1 at please sincerely yours a a da percy ye carlton a watkins manager employee_plans technical group enclosures notice of intention to disclose deleted copy of this letter


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-151985-05 date date ------------------- ---------------------- ---------------------------- legend legend x --------------------------------------------------- country d dear --------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-151985-05 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 except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii 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 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-151985-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc


internal_revenue_service number release date index number ------------------------------------------------------- ----------------------------------------------- ---------------------------------- ---------------------------------------- -------------------------------- department of the treasury washington dc person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b05 plr-150705-06 - date date legend taxpayer ------------------------------------------------------ chief bin numbers ----------------------------------------------- ---------------------------------- ----------------------------------------- ------------------------- ------------------------------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------------------------------------------------------------- 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plr-150705-06 dear ---- --------- this letter responds to a letter dated date and subsequent correspondence from taxpayer’s authorized representative requesting an extension of time to elect under sec_42 of the internal_revenue_code to identify specific buildings as part of a single multiple-building project pursuant to ' of the procedure and administration regulations based upon taxpayer’s facts and representations as submitted taxpayer did not make a proper election under sec_42 to identify specific buildings as part of a single multiple-building project the specific buildings taxpayer intended to treat as part of a single multiple-building project have the following building identification numbers bin numbers sec_42 defines the term qualified_low-income_housing_project as any project for residential_rental_property if the project meets the requirements of sec_42 or b whichever is elected by the taxpayer the project meets the requirements of sec_42 if percent or more of the residential units in such project are both rent-restricted and occupied by individuals whose income i sec_50 percent or less of area_median_gross_income the project meets the requirements of sec_42 if percent or more of the residential units in such project are both rent- restricted and occupied by individuals whose income is percent or less of area_median_gross_income sec_42 provides that for purposes of sec_42 a project will be treated as consisting of only building unless before the close of the first calendar_year in the project_period as defined in sec_42 each building which is or will be part of such project is identified in such form and manner as the secretary may provide sec_301_9100-7t of the temporary procedure and administration regulations provides that for elections under the tax_reform_act_of_1986 the election under sec_42 must be made for the taxable_year in which the project is placed_in_service and shall be made in the certification required to be filed pursuant to sec_42 sec_301_9100-7t provides that the election under sec_42 is irrevocable sec_42 provides in part that following the close of the first taxable_year in the credit_period with respect to any qualified_low-income_building the taxpayer shall certify to the secretary at such time and in such form and in such manner as the secretary prescribes the election made under sec_42 with respect to the qualified low- income housing project of which such building is a part plr-150705-06 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 defines the term regulatory election as including 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 under ' c the commissioner has discretion to grant a reasonable extension of time under the rules set forth in and for a taxpayer to make a regulatory or statutory election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of ' requests for relief under ' a will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government in the instant case based solely on the facts submitted and the representations made by the taxpayer we conclude that the requirements of and have been met accordingly taxpayer is granted an extension of time to identify each of the buildings having the bin numbers as a single multiple-building project under sec_42 by filing within days from the date of this letter for all open taxable years through amended forms that include the intended elections note amended forms are not required to be filed for taxable years after attached to the amended forms must be the statement required by the instructions for line 8b of form_8609 for multiple-building projects the amended forms for taxable years prior to are to be filed with the service_center where taxpayer files its return the amended forms for taxable_year are to be filed at the following address in addition a copy of this letter along with copies of the amended forms internal_revenue_service p o box attn lihc unit dp south philadelphia pa including the attached statement should be sent to chief a copy of this letter is enclosed for this purpose plr-150705-06 no opinion is expressed or implied regarding the application of any other provisions of the code or regulations specifically we express no opinion on whether taxpayer’s low-income_housing project otherwise qualifies for the low-income_housing_credit under ' this ruling is directed only at the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file a copy of this letter is being sent to taxpayer s authorized representative sincerely william p o’shea associate chief_counsel passthroughs and 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 -------------------- id no ------------- telephone number --------------------- refer reply to cc corp b03 plr-108561-05 date july ----------------------------------------------- ---------------------------------------------------- funds trust1 ------------------------------------------------------------------------------------------------- funds trust2 ----------------------------------------------------------------------------------------------- acquiring fund ----------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -------- -------------------------------------------------------------------------------------- target fund --------------------------------------------------------------------------------------- state x state y date dear ----------- we respond to your request dated date for rulings regarding the federal_income_tax consequences of a proposed transaction the proposed transaction was consummated on date the information in that request and in the subsequent correspondence of date date date date and date is substantially set forth below ----------------------------------------- -------------------------- ----------------- -------------- plr-108561-05 acquiring fund is a series of funds trust1 a state y statutory trust and will elect to be treated as a regulated_investment_company a ric under sec_851 through of the internal_revenue_code on its initial tax_return due after the reorganization as defined below acquiring fund is registered with the sec under the investment_company act of the act as a diversified open-end management investment_company as a series_fund under sec_851 acquiring fund is treated as a separate corporation and separate taxpayer for federal_income_tax purposes prior to date target fund was a series of funds trust2 a state x corporation and elected to be treated as a ric under sec_851 through of the internal_revenue_code target fund is registered with the sec under the act as a diversified open-end management investment_company as a series_fund under sec_851 target fund was treated as a separate corporation and separate taxpayer for federal_income_tax purposes pursuant to a plan_of_reorganization which closed on date acquiring fund and target fund undertook the following transactions the reorganization target fund transferred substantially_all of its assets and liabilities to acquiring fund in exchange for shares of acquiring fund having equivalent value to the net assets transferred i ii iii target fund distributed pro_rata the shares of the same or a comparable class of acquiring fund received in step i to the shareholders of record of target fund in redemption of all shares of target fund and target fund liquidated and dissolved in accordance with the laws of state x and terminated its registration under the act the following representations have been made in connection with the reorganization a b the fair_market_value of the acquiring fund stock received by each target fund shareholder was approximately equal to the fair_market_value of the target fund stock surrendered in the exchange acquiring fund acquired at least of the fair_market_value of the net assets and at least of the fair_market_value of the gross assets held by target fund immediately prior to the transaction for purposes of this representation amounts paid_by target fund to dissenters amounts used by target fund to pay target fund’s reorganization expenses amounts paid_by target fund to shareholders who received cash or other_property and all redemptions and distributions except redemptions in the ordinary course of target fund’s business as an open-end investment_company pursuant to sec_22 of the act and regular normal dividends made plr-108561-05 by target fund immediately preceding the transfer are included as assets of target fund held immediately prior to the reorganization acquiring fund has no plan or intention to reacquire any of its stock issued in the reorganization except in the ordinary course of its business as an open-end investment_company pursuant to sec_22 of the act target fund distributed the stock securities and other_property it received in the transaction and its other properties in pursuance of the plan_of_reorganization the liabilities of target fund assumed as determined under sec_357 by acquiring fund were incurred in the ordinary course of its business and were associated with the assets transferred acquiring fund target fund and the shareholders of target fund paid their respective expenses if any incurred in connection with the reorganization c d e f g there was no intercorporate indebtedness existing between acquiring fund and target fund that was issued acquired or settled at a discount h i j the fair_market_value of the assets of target fund transferred to acquiring fund equaled or exceeded the sum of the liabilities assumed as determined under sec_357 by acquiring fund target fund was not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 acquiring fund is in the same line_of_business as the target fund preceding the reorganization for purposes of sec_1_368-1 following the reorganization acquiring fund will continue such line_of_business and has no plan or intention to change such line_of_business neither acquiring fund nor target fund entered into such line_of_business as part of the plan_of_reorganization on the date of the reorganization at least of target fund’s portfolio assets met the investment objectives strategies policies risks and restrictions of acquiring fund target fund did not alter its portfolio in connection with the reorganization on the date of the reorganization acquiring fund had no plan or intention to change any of its investment objectives strategies policies risks and restrictions after the reorganization k to the best of the knowledge of acquiring fund’s management as of the record_date for target fund shareholders entitled to vote on the reorganization there was no plan or intention by the target fund plr-108561-05 shareholders to sell exchange or otherwise dispose_of a number of target fund shares or acquiring fund shares received in the reorganization in connection with the reorganization that would reduce the target fund shareholders’ ownership of target fund shares or equivalent acquiring fund shares to a number of shares that was less than percent of the number of target fund shares as of the record_date l acquiring fund which was formed for the purpose of engaging in the reorganization will elect to be taxed as a ric within the meaning of sec_851 on its initial tax_return due after the reorganization target fund elected to be taxed as a ric under sec_851 target fund and acquiring fund for all their taxable periods including the last short taxable_period ending on the date of the reorganization for target fund qualified for the special tax treatment afforded to rics under the code after the reorganization acquiring fund intends to continue to so qualify m there is no plan or intention for acquiring fund or any person related as defined in sec_1_368-1 to acquiring fund to acquire during the five- year period beginning on the date of the reorganization with consideration other than acquiring fund stock acquiring fund stock furnished in exchange for a proprietary interest in target fund in the reorganization either directly or through any transaction agreement or arrangement with any other person other than redemptions by acquiring fund in the ordinary course of its business as an open-end investment_company pursuant to sec_22 of the act n during the five-year period ending at the effective date of the reorganization a neither acquiring fund nor any person related as defined in sec_1_368-1 to acquiring fund acquired target fund shares with consideration other than acquiring fund shares other than target fund shares acquired by acquiring fund in the ordinary course of business b neither target fund nor any person related as defined in sec_1_368-1 without regard to sec_1_368-1 to target fund acquired target fund shares with consideration other than acquiring fund shares or target fund shares and c no distribution was made with respect to target fund stock other than normal regular dividend distributions made pursuant to the historic dividend paying practice of target fund either directly or through any transaction agreement or arrangement with any other person except for i distributions described in sec_852 and sec_4982 as required for target fund’s tax treatment as a ric and ii redemptions by target fund of its stock in the ordinary course of its business as an open-end investment_company pursuant to sec_22 of the act plr-108561-05 based solely on the information submitted and the representations set forth above we hold as follows the reorganization will qualify as a reorganization within the meaning of sec_368 acquiring fund and target fund are each a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss is recognized by target fund upon the transfer of all of its assets to acquiring fund in exchange for acquiring fund stock and the assumption by acquiring fund of target fund liabilities sec_361 and sec_357 no gain_or_loss is recognized by target fund on the distribution of acquiring fund stock to its shareholders sec_361 no gain_or_loss is recognized by acquiring fund upon the receipt of the assets of target fund in exchange for acquiring fund stock sec_1032 the basis of the assets of target fund in the hands of acquiring fund will be the same as the basis of those assets in the hands of target fund immediately prior to the transfer sec_362 the holding_period of the assets of target fund in the hands of acquiring fund includes the period during which those assets were held by target fund sec_1223 the basis of the shares of acquiring fund received by the target fund shareholders will be the same as the basis of the target fund stock surrendered in exchange therefor sec_358 the holding_period of acquiring fund stock received by the target fund shareholders includes the period during which the target fund shareholders held the target fund stock surrendered in exchange therefor provided the target fund stock was held as a capital_asset on the date of the transaction sec_1223 no gain_or_loss is recognized by the target fund shareholders on the receipt of acquiring fund stock solely in exchange for their target fund stock sec_354 pursuant to sec_381 and sec_1_381_a_-1 acquiring fund will succeed to and take into account the items of target fund described in sec_381 subject_to the provisions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder pursuant to sec_1_381_b_-1 the plr-108561-05 tax_year of target fund ended on the effective date of the reorganization 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 code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant 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 sincerely ____________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc