department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date ocr - contact person identification_number telephone number t eo b3 employer_identification_number sin legend x i i t i dear sir or madam we are responding to a letter dated date and previous correspondence submitted on behalf of x by its authorized representative requesting a ruling concerning the federal tax consequences of the proposed transaction described below x is a nonprofit association that was organized to own and operate a cemetery x is exempt from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 x’s operation currently includes the following the erection maintenance and operation of community and private mausoleums and columbariums the sale manufacture and installation of burial vaults tombs and crypts only for burials at the cemetery maintenance of tool shops work shops and other incidental buildings and equipment necessary to the operation of the cemetery the sale installation and maintenance of memorials the sale planting and maintenance of flowers plants shrubbery trees and landscaping sales are made only for burials at the cemetery and the sale of caskets that are used solely for the purpose of burying bodies in the cemetery x proposes to form a new separate for-profit subsidiary that will operate a pet cemetery and mortuary x will transfer a small piece of land less than one acre and dollar_figure to y in return for ail of y’s outstanding_stock x will also lease portions of a building it owns to y at fair rental value as determined by an independent_appraiser y’s board_of directors will be comprised of five individuals three of whom must not be employees officers or directors of x x's chief_executive_officer ceo will also be y’s ceo y will keep its own books_and_records and will have at least one employee who is not employed by x other individuals who are employed on a part-time basis by x may also be employed by y y will separately compensate these individuals on an arm's length basis for services performed for y x anticipates that it will receive dividends from y sec_501 of the code provides for the exemption from federal_income_tax of cemetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit and any corporation chartered solely for the purpose of the disposal of bodies by burial or cremation which is not permitted by its charter to engage in any business not necessarily incidental to that purpose and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_13_-1 of the income_tax regulations provides that a nonprofit cemetery_company may be entitled to exemption if it is owned by and operated exclusively for the benefit of its lot owners who hold such lots for bona_fide burial purposes not for the purpose of resale the regulations state that the fact that a mutual cemetery_company limits its membership to a particular class of individuals such as members_of_a_family will not affect its status under sec_501 of the code revrul_73_454 1973_2_cb_185 holds that a cemetery that owns operates and maintains a cemetery for pets does not qualify for recognition of exemption under sec_501 of the code revrul_64_109 part c b holds that a cemetery may not consistent with sec_501 of the code engage in activities not necessarily incidental to its burial purposes the ruling concludes that because operating a mortuary is not necessary to procuring selling holding and using land solely as a burial ground an organization engaging in such a business does not meet the requirements for recognition of exemption under sec_501 sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations exempt under sec_501 sec_512 of the code defines unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business as defined in sec_513 regularly carried on by it less allowable deductions directly connected with the carrying on of such trade_or_business subject_to the modifications provided in sec_512 sec_512 of the code excludes dividends from the computation of unrelated_business_taxable_income under sec_512 for federal_income_tax purposes a parent_corporation and its subsidiaries are separate taxable entities so long as the purposes for which the subsidiary is incorporated are the equivalent of business activities or the subsidiary subsequently carries on business activities 319_us_436 431_f2d_227 cir that is where a corporation is organized with a bona_fide intention that it will have some real and substantial business function its existence may not generally be disregarded for tax purposes britt f 2d pincite however where the parent_corporation so controls the affairs of the subsidiary that it is merely an instrumentality of the parent the corporate entity of the subsidiary may be disregarded 483_f2d_1098 cir in general a parent_corporation and its subsidiary are separate taxable entities so long as the purposes for which the subsidiary is formed or carried on are for a business_purpose hence the ownership of a subsidiary by an organization exempt under sec_501 does not require attribution of the subsidiary’s activities to the parent for federal_income_tax purposes unless the subsidiary lacks a business_purpose and the subsidiary is an arm or agent of the parent see moline properties inc and britt supra the issue in this case is whether y's activities are attributable to x if the activities of y are attributed to x its exemption from federal_income_tax under sec_501 of the code may be jeopardized because x will be considered as not operating for an exempt_purpose see rev ruls and supra as discussed above attribution occurs where the subsidiary does not have a business_purpose and is merely an arm agent or integral part of the parent the information submitted in this case indicates that y a for-profit organization was formed for a real and substantial business_purpose ie operating a pet cemetery and mortuary thus the threshold question of whether y will have a business_purpose must be answered affirmatively whether x is involved in or in control of the day-to-day operations of y must also be considered the information and representations provided indicate that x does not control or is so involved in the day-to-day management or affairs of y that y constitutes an agent of x for example y' will have its own board_of directors and will keep its own books_and_records a majority of y’s board members are not x’s employees or officers and do not serve on its board_of directors although y's ceo is also x's ceo x represents that y's employees rather than the ceo run y’s day-to-day operations x represents that it has no authority to approve y's budget or request periodic reports from it x also represents that any transactions between x and y will be conducted on the basis of fair_market_value based on all the available information we conclude that y is not an arm agent or integral part of x and y’s activities are not attributable to x in accordance with sec_512 of the code dividends are excluded from the computation of unrelated_business_taxable_income hence the dividends x may receive from will not be subject_to the tax on unrelated_business_income we note that sec_512 which sets forth special rules for certain amounts received by exempt controlling organizations from their controlled organizations does not apply to dividends based on the facts and information submitted and representations made we rule as follows a the transfer of cash and land from x to y x's ownership of all of the stock of y y's lease of building space to y and y’s general operation of a pet cemetery and mortuary business will not jeopardize x’s tax-exempt status under sec_501 of the code dividends x receives from y will not constitute unrelated_business_taxable_income under sections of the code we have not been asked and we express no opinion on whether amounts if any that in return for providing any administrative services constitute might be received by x from y unrelated_business_taxable_income under sec_512 of the code furthermore we have not been asked and we express no opinion on whether payments if any of interest or rent by y to x which would otherwise be excluded from the computation of unrelated_business_taxable_income pursuant to sec_512 and respectively would be subject_to tax by reason of sec_512 except as we have specifically ruled above we express no opinion as to the federal_income_tax consequences of the transactions described above under any other provision of the code this ruling is based on the understanding that there will be no material changes in the facts upon which it is based any such change should be reported to the ohio tax exempt and governmental entities te_ge customer service office the mailing address is internal_revenue_service te_ge customer service p o box cincinnati oh the telephone number there is a toll free number pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative you should keep a copy of this letter in your permanent records this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely signed robert c harper ur robert c harper jr manager exempt_organizations technical group


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date contact person identification_number date date contact number u i l no third party contacts employer_identification_number form required to be filed tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code sec_501 as an organization described in code sec_501 we made this determination for the following reason s you are not a religious_organization described in sec_501 because you advocate and engage in activities that are illegal and contrary to public policies you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you agree with our deletions you do not need to take any further action if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your or the irs customer service number for businesses the irs customer service number for people with hearing impairments is sincerely holly o paz director rulings and agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c i no third party contacts contact person identification_number contact number fax number employer_identification_number tax_exempt_and_government_entities_division date date u i l e eqen o a o i o i - - a o o o i d n u o w t o w n n u n b b n b n d d u b dear we have considered your letter of application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 of the code based on the information provided we have concluded that you do not qualify for exemption under sec_501 the basis for our conclusion is set forth below you were created on date1 under the provisions of a document called declaration of trust of the x on date your trustees issued an amended and restated declaration of trust of x the trust instrument subscribes to the laws of state the preamble of the trust instrument states that you were formed as a religious trust you exist to preserve and advance the religious doctrines and goals of y you indicate that p is the doctrine and law found in your holy books which are the guiding tenets by which you operate membership in your organization is limited to members of y and is granted and revoked by your board_of trustees in this regard you state that the privilege to be a member in the organization is intended to be limited to persons who share the same religious beliefs your membership admission policy is also intended to limit residents in your facilities to persons who subscribe to the doctrine beliefs and practices of the organization you require consecration or unconditional dedication to you by accepted members of their properties time talents money and materials your members consecrate their real_property to you by deeds of conveyance your members live in the facilities of your community and they work in the businesses you operate you represent that you maintain a common treasury in which profits generated by your businesses are deposited and from which the expenses of the organization are paid your trust instrument provides that each year members must include in their gross_income their pro_rata share of your taxable_income whether distributed or not in you reported income of dollar_figurex received from business and dollar_figurexx from consecration and a loan receipt of dollar_figurexxx you reported total expenses of dollar_figurexxxx for payment primarily of expenses classified as farm expenses health care members’ living provisions and expenses transportation and utilities excluding payment of property taxes of dollar_figurexxx from above loan receipt from one individual you operate eighteen companies most of which engage in components of the housing construction industry some engage in other businesses that include software development mobile technology equipment service and repair animal husbandry furniture manufacturing and sales and clothing four other companies manage your agriculture concerns utility needs member labor and the medical needs of members all operated businesses except one are formed as limited_liability companies llcs the other one is formed as a_trust and solely to manage your established businesses the llcs are all treated as disregarded entities with you as the sole member you are governed by three trustees who are also your officers and religious leaders are also officers and religious leaders of q which you described as a separate church entity that is authorized to function regionally by y all three all your officers religious eaders and members are members of y y follows the beliefs and practices that were the original beliefs and practices of z church established and set forth by founder when z church departed from many of these beliefs practices and teachings of founder some members separated from z church and established y you believe that y is the continuation of z church established by founder and has authority of the true successor to the divine authority of founder these beliefs and practices include polygamy or plurality of wives you stated that you have a religious belief known as ‘celestial marriage’ which includes a plurality of wives you describe celestial marriage as a private religious relationship between consenting parties of legal_age which is not recognized as a marriage by state authorities you said that you do not allow your members to seek multiple marriage certificates from state authorities thus you do not believe that your religious practice constitutes bigamy or multiple ‘state recognized’ marriages as defined under applicable state law a news article from examiner com on date reported that a court in your state found a leader of y with three wives under celestial marriages guilty of bigamy we asked that you comment on this article but you did not respond applicable law sec_501 of the code provides that an organization described in subsection c or d or sec_401 shall be exempt from federal_income_tax unless such exemption is denied under sec_502 or sec_503 sec_501 of the code provides that the following organizations are referred to in subsection a religious or apostolic associations or corporations if such associations or corporations have a common treasury or community treasury even if such associations or corporations engage in business for the common benefit of the members but only if the members thereof include at the time of filing their returns in their gross_income their entire pro_rata shares whether distributed or not of the taxable_income of the association or corporation for such year any amount so included in the gross_income of a member shall be treated as a dividend received revrul_75_384 1975_2_cb_204 holds that an organization formed to promote world peace that planned and sponsored protest demonstrations at which members were urged to commit acts of civil disobedience did not qualify as tax exempt revrul_71_447 1971_2_cb_230 states that under common_law the term charity encompasses all three major categories of religious educational and charitable purposes all charitable trusts educational or otherwise including religious trusts are subject_to the requirement that the purpose of the trust may not be illegal or contrary to public policy citing restatement second trusts sec comment c a_trust for a purpose the accomplishment of which is contrary to public policy although not forbidden by law is invalid restatement second of trusts section states that a charitable_trust cannot be created for a purpose which is illegal the first comment illustrates the rule indicating that where the trust estate is to be used for a criminal purpose the trust is invalid thus a_trust for the promotion of polygamy is invalid revrul_58_66 1958_1_cb_60 provides that the marital status of individuals as determined under state law is recognized in the administration of the federal_income_tax laws therefore if applicable state law recognizes common-law marriages the status of individuals living in such relationship that the state would treat them as husband and wife is for federal_income_tax purposes that of husband and wife sec_2 a of state family code provides as proof of informal marriage when in a judicial administrative or other proceeding a man and a woman agreed to be married and after the agreement they lived together in this state as husband and wife and represented to others that they were married sec_25 a of state penal code provides that an individual commits an offense of bigamy if --- he is legally married and he a purports to marry or does marry a person other than his spouse in this state under circumstances that would but for the actor's prior marriage constitute a marriage or lives with a person other than his spouse in this state under the appearance b of being married sec_25 b of state penal code defines the term under the appearance of being married to mean holding out that the parties are married with cohabitation and intent to be married by either party in 98_us_145 the supreme court held it is a law in the united_states that plural marriage shall not be allowed and indicated that such law is within the legislative power of congress is constitutional and valid after resolving the constitutionality and validity of the anti-polygamy law the court stated --- this being so the only question which remains is whether those who make polygamy a part of their religion are excepted from the operation of the statute those who do not make polygamy a part of their religious belief may be found guilty and punished while those who do must be acquitted and go free this would be introducing a new element into criminal_law laws are made for the government of actions and while they cannot interfere with mere religious belief and opinions they may with practices if they are then in 585_fsupp_1126 d utah the court indicated that the landmark decision in the area of freedom of religion in connection with polygamy is reynolds v united_states supra in which the supreme court confirmed a conviction even though the defendant believed that the practice of polygamy was his religious duty and of divine origin and he had received permission from the authorities of his church to enter into the polygamist marriages also the court indicated that a long line of decisions beginning with reynolds supra had either expressly approved statutes forbidding the practice of plural marriage or approved them in other contexts as subsisting authority in the area of the free exercise clause of the first amendment see eg 103_us_304 26_led_481 116_us_55 6_sct_278 29_led_561 118_us_346 6_sct_1059 30_led_207 133_us_333 10_sct_299 33_led_637 136_us_1 10_sct_792 34_led_478 state v hendrickson utah p 303_us_444 58_sct_666 82_led_949 310_us_296 60_sct_900 84_led_1213 state v barlow utah p 2d appeal dismissed for want of substantial federal question 324_us_829 65_sct_916 89_led_1396 reh'g denied 324_us_891 65_sct_1026 89_led_1438 146_f2d_730 10th cir state v musser utah p 2d 329_us_14 67_sct_13 91_led_12 in re state in interest of black utah 2d p 2d 366_us_599 81s ct 6_led_563 406_us_205 92_sct_1526 32_led_15 413_us_49 93_sct_2628 37_led_446 567_f2d_955 10th cir 613_f2d_233 10th cir 455_us_252 102_sct_1051 71_led_127 461_us_574 103_sct_2017 76_led_157 id further at no time has reynolds supra been overturned by the supreme court id 394_fsupp2d_1329 indicated that the court in potter v murray city supra analyzed the continuing validity of reynolds v united_states supra by stating that reynolds continued to be cited with approval by the supreme court in subsequent decisions including potter as clear evidence that it was still the law of the land on the illegality of polygamy in reaching its decision the court indicated that entitlement to tax in 461_us_574 the supreme court upheld the service's revocation of the tax exempt status of two schools because of their racially discriminatory policies exemption depends on meeting certain common_law standards of charity -- namely that an institution seeking tax-exempt status must serve a public purpose and not be contrary to established public policy public policy it may not be seen as providing a public benefit and cannot qualify as charitable and therefore not exempt moreover the court agreed that irs was correct in its position that it would be wholly incompatible with the concepts underlying tax exemption to grant tax-exempt status to an organization with purposes or policies contrary to established public policy whatever may be the rationale of such organization in that case a private school’s racial discrimination in education was held contrary to public policy if an organization engages in activities in direct contravention of in 87_tc_1233 discussed the legislative_history and purpose of sec_501 to provide tax relief by eliminating the corporate level of taxation and leaving a single tier of individual tax the tax_court quoted an opinion of the ninth circuit that the only requirements for the exemption are that there be a common treasury that the members of the organization include pro_rata shares of organization income when reporting taxable_income and implicitly that the organization have a religious or apostolic character 707_f2d_1024 9th cir analysis you have applied for exemption under sec_501 of the code as an organization described in sec_501 which applies to a religious or apostolic organization to be described in sec_501 an organization must be created and operated for religious or apostolic purposes and must have a common treasury and if it engages in business for the common benefit of the members the members must include in their individual tax returns their pro-rata share whether distributed or not of the taxable_income of the association or corporation the requirement that the organization be religious or apostolic is implicit created by the title of sec_501 and supported by legislative_history see kleinsasser v u s supra you require members to consecrate or unconditionally dedicate to you their property time talents money and materials members live in the facilities of your community and they work in the businesses you operate you maintain a common treasury that includes the assets consecrated by your members and the income generated by your businesses from which the expenses of the community and member benefits are paid your trust document provides that your members must include in their gross_income their entire pro_rata share of your taxable_income thus you meet certain requirements of sec_501 we next consider the requirement that the organization be religious or apostolic your trust instrument indicates that you were formed as religious trust in preserving and advancing the religious doctrines and goals of y which among other things advocates the practice of polygamy or plurality of wives your members are limited to members of y you and your members follow the belief and practice of polygamy in the administration of federal_income_tax laws the marital status of individuals is determined under state law pursuant to revrul_58_66 your state civil law provides that proof of informal or what is also known as common-law marriage in any proceeding is shown when a man and a woman agreed to be married then lived together as husband and wife in the state and represented themselves as such to others see state family code sec_2 a your state criminal_law provides that an individual commits bigamy if he is legally married and purports to marry or does marry another person other than his spouse or lives with a person other than his spouse in the state under the appearance of being married your state defines the term the appearance of being married as holding out that the parties are married with cohabitation and intent to be married by either party see state1 penal code sec_25 a and b thus for federal_income_tax purposes we must consider polygamous marriage as bigamy and therefore illegal in your state moreover the legality of polygamy has been litigated in federal and state courts for one hundred and thirty years federal and state courts have consistently held that polygamy is contrary to federal public policy and that even the constitutional protection for freedom of religion does not prevent a state from proscribing it you affirm the practice polygamy or plurality of wives through celestial marriage which you indicate is your religious belief on plurality of wives the celestial marriage proceedings appear to create informal or common-law marriages as defined by your state law the religious ceremony shows intent to marry and the parties thereafter live together and hold themselves out to the community as married when undertaken with multiple partners the proceedings and subsequent actions appear to constitute bigamy and violate your state penal code see state penal code sec_25 a a a b and b thus you are promoting illegal acts under your state laws you claim however that because you tell your members not to obtain multiple marriage certificates they do not violate your state bigamy law it appears that the absence of state- issued certificate for your proceedings does not affect their recognition as informal or common- law marriages under your state laws and persons who are party to such marriages commit bigamy under your state laws also a state court recently confirmed that a man who had been married by your ceremony of celestial marriage to multiple wives and lived with them was guilty of bigamy under the law of state the practice of polygamy is also contrary to federal policy reynolds v united_states supra that the law ruling polygamy illegal was constitutional and valid further the court held that persons who practice polygamy as part of their religious belief cannot be relieved of the consequences of committing a crime proscribed by the law subsequent court decisions have unanimously followed and applied reynolds although there is no longer a federal statute forbidding polygamy see potter v murray city other court cases cited therein and bronson v swensen in the supreme court held in the common_law of trusts specifies that a charitable_trust cannot be created for an illegal purpose see restatement second of trusts section in fact restatement specifically identifies promotion of polygamy as an illegal purpose in comments to that section because you advocate and engage in activities that contravene state laws and state and federal public policy you cannot be a valid religious trust because you are not a valid religious trust you cannot be recognized as a religious or apostolic association under d of the code notwithstanding that you have a common treasury and engage in business for the common benefit of members you also fail to meet the common_law standards for charitable organizations although sec_501 does not require explicit proof of charitable purposes as does sec_501 courts have found an implicit requirement see kleinsasser v u s supra similar to the organization described in bob jones university v united_states you also fail to meet the common_law standards of charity that an institution seeking tax-exempt status must serve a public purpose and not be contrary to established public policy see also revrul_75_384 and revrul_71_447 accordingly we conclude that you are not exempt from federal_income_tax under sec_501 as an organization described in sec_501 you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter this letter supersedes our letter dated date sincerely holly o paz director rulings and agreements


t c summary opinion united_states tax_court craig bryant redding petitioner v commissioner of internal revenue respondent docket no 21794-05s filed date craig bryant redding pro_se peggy j gartenbaum sheila olaksen and georgia graham specially recognized for respondent goeke judge this case was heard pursuant to the provisions of section in effect at the time the petition 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a dollar_figure deficiency in petitioner’s federal_income_tax for the taxable_year the issues for decision are whether for petitioner is entitled to dependency_exemptions for two of his fiance’s daughters head_of_household filing_status and an earned_income_credit eic background at the time he filed his petition petitioner resided in the bronx new york with his fiance tawana n edwards-jackson ms jackson and her four children from a previous marriage petitioner and ms jackson have never been married and petitioner had not as of the date of trial adopted any of ms jackson’s children while living with ms jackson in petitioner paid percent of the rent for months and percent of the babysitting costs for two of ms jackson’s children for months petitioner also contributed money for other living_expenses such as food and cable bills but did not keep records of these payments in return for petitioner’s contributions ms jackson agreed to release her claim to dependency_exemptions for two of her children and allow petitioner to claim the exemptions on his federal_income_tax return petitioner listed ms jackson’s apartment as his residence claimed dependency_exemptions and the eic for two of ms jackson’s children and filed using head_of_household filing_status in date respondent issued the notice_of_deficiency to petitioner with respect to petitioner’s claimed dependency_exemptions eic and head_of_household filing_status petitioner timely petitioned this court for redetermination discussion i dependency_exemption sec_151 provides an exemption in computing taxable_income for each of a taxpayer’s dependents to qualify as a dependent under sec_152 an individual must receive over one-half of his or her support from the taxpayer for the calendar_year in which the applicable tax_year begins sec_152 it is the taxpayer’s burden to establish that he or she furnished over one-half of the support for the individual for whom the taxpayer claims the exemption during the taxable_year 315_f2d_495 8th cir affg tcmemo_1962_148 33_tc_935 a taxpayer claiming a deduction must substantiate the claim by maintaining records necessary to establish he or she is entitled to the deduction sec_6001 sec_1_6001-1 e income_tax regs petitioner furnished only one-half of the rent and babysitting costs for a total of months of and cannot substantiate any further contribution to the children’s support accordingly petitioner failed to carry his burden of proving that he provided more than one-half of the support for ms jackson’s children for and is thus ineligible to claim dependency_exemptions for them under sec_151 ii head_of_household status for a taxpayer to use head_of_household filing_status sec_2 requires him or her to maintain a home as the principal_place_of_abode for his or her unmarried son stepson daughter or stepdaughter or any other dependent for whom the taxpayer is entitled to a deduction under sec_151 ms jackson’s children were not petitioner’s sons stepsons daughters or stepdaughters during the calendar_year nor were they petitioner’s dependents pursuant to sec_151 because petitioner did not furnish over one-half the cost of maintaining the household during that time thus petitioner is not entitled to use head_of_household filing_status for iii earned_income_credit sec_32 allows an eligible_individual to claim an eic against his or her income for the taxable_year the amount of the credit is calculated as a percentage of the taxpayer’s earned_income adjusted each year for inflation to be an eligible_individual under sec_32 a taxpayer must either have a qualifying_child as defined in sec_32 or have attained age but not attained age not be claimed as a dependent by another taxpayer within the calendar_year and maintain his or her principal_place_of_abode within the united_states for more than one-half of the taxable_year sec_32 and ii sec_32 defines qualifying_child as inter alia one who is below the age of shares his or her principal_place_of_abode with the taxpayer for more than one-half of the taxable_year and satisfies the following relationship_test b relationship_test -- i in general --an individual bears a relationship to the taxpayer described in this subparagraph if such individual is-- i a son daughter stepson or stepdaughter or a descendant of any such individual ii a brother sister stepbrother or stepsister or a descendant of any such individual who the taxpayer cares for as the taxpayers own child or iii an eligible_foster_child of the taxpayer petitioner’s affiliation with ms jackson’s children does not satisfy the relationship_test under sec_32 thus petitioner is not entitled to claim an eic for having qualifying children pursuant to sec_32 petitioner may however be eligible for an eic if he attained age but not attained age is not claimed as a dependent by another taxpayer and maintained his principal_place_of_abode within the united_states for more than one-half of the taxable_year sec_32 for the taxable_year individuals without a qualifying_child whose earned_income was below dollar_figure were eligible for the eic revproc_2003_85 sec_3 2003_2_cb_1184 petitioner’s earned_income for the taxable_year was dollar_figure the instructions for the form_1040 u s individual_income_tax_return suggest that petitioner qualifies for a portion of that year’s eic as an individual without a qualifying_child accordingly we sustain respondent’s determinations with respect to the dependency_exemptions and the use of head_of_household filing_status however with regard to the eic petitioner may be entitled to claim a portion of the credit as an individual without a qualifying_child whose earned_income is less than dollar_figure to reflect the foregoing decision will be entered under rule


t c summary opinion united_states tax_court malek cithol kotjok petitioner v commissioner of internal revenue respondent docket no 15006-10s filed date malek cithol kotjok pro_se tammra s mitchell for respondent summary opinion wells judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed 1unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended and rule references are to the tax_court rules_of_practice and procedure pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a deficiency with respect to petitioner’s tax_year of dollar_figure the issues we must decide are whether petitioner is entitled to dependency_exemption deductions for his minor children whether petitioner is entitled to the child_tax_credit whether petitioner is entitled to the additional_child_tax_credit whether petitioner is entitled to head_of_household filing_status and whether petitioner is entitled to the earned_income_tax_credit background some of the facts and certain exhibits have been stipulated the parties’ stipulations of facts are incorporated in this opinion by reference and are found accordingly at the time he filed his petition petitioner was a resident of georgia petitioner his wife and their children immigrated to the united_states as refugees from southern sudan now south sudan during petitioner and his wife mary a rizig ms rizig had marital problems and are now separated during ms rizig was granted a permanent protective_order by a georgia court pursuant to the protective_order petitioner is not permitted visitation with the 2petitioner’s native language is dinka at trial the court provided an interpreter because petitioner stated that he was insufficiently fluent in english to proceed without assistance from an interpreter couple’s children unless the visit is arranged through ms rizig’s religious_organization or sister nora ryan ms rizig has since moved to virginia taking her children with her those children including dmck and nmck lived with her throughout on her tax_return ms rizig claimed dmck and nmck as dependents additionally she claimed head_of_household filing_status the child_tax_credit the additional_child_tax_credit and the earned_income_tax_credit on his tax_return petitioner also claimed dmck and nmck as dependents the child_tax_credit the additional_child_tax_credit the earned_income_tax_credit and head_of_household filing_status although they no longer live with him petitioner still receives occasional visits from dmck and nmck he speaks with them on the telephone and he provides them with financial support respondent issued a notice_of_deficiency to petitioner and petitioner timely filed his petition with this court discussion as a general_rule the commissioner’s determinations set forth in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of proving otherwise rule a 290_us_111 if the taxpayer satisfies certain substantiation and recordkeeping requirements the burden_of_proof regarding factual matters may shift to the commissioner see sec_7491 petitioner has not contended and we do not conclude that the burden_of_proof should shift to respondent see sec_7491 and b a taxpayer may claim a dependency_exemption deduction with respect to an individual who is either a qualifying_child or a qualifying_relative sec_151 sec_152 in general to be a taxpayer’s qualifying_child an individual must a bear a qualifying relationship to the taxpayer b have the same principal_place_of_abode as the taxpayer for more than one-half of the taxable_year c meet certain age requirements and d not have provided more than half of his or her own support for the year sec_152 petitioner acknowledged that both dmck and nmck lived with ms rizig during all of because neither dmck nor nmck had the same principal_place_of_abode as petitioner for more than half of neither is petitioner’s qualifying_child under sec_152 3additionally if more than one parent claims the same qualifying_child sec_152 provides that such child will be treated as the qualifying_child of i the parent with whom the child resided for the longest period of time during the taxable_year or ii if the child resides with both parents for the same amount of time during such taxable_year the parent with the highest adjusted_gross_income because both petitioner and ms rizig claimed dmck and nmck as dependents and because dmck and nmck lived with ms rizig throughout each was a qualifying_child with respect to ms rizig but not with respect to petitioner in the case of divorced or qualified separated parents special rules determine which parent may claim a dependency_exemption deduction for a child sec_152 allows the noncustodial_parent a dependency_exemption deduction if the custodial_parent signs a written declaration releasing her claim to the exemption and the noncustodial_parent attaches the declaration to his federal_income_tax return neither of those requirements was met accordingly neither dmck nor nmck is petitioner’s qualifying_child pursuant to sec_152 consequently we conclude that petitioner is not entitled to dependency_exemption deductions for dmck and nmck sec_24 authorizes a tax_credit with respect to each qualifying_child of the taxpayer the child_tax_credit provided by sec_24 may not exceed the taxpayer’s regular_tax_liability sec_24 where a taxpayer is eligible for the child_tax_credit but the taxpayer’s regular_tax_liability is less than the amount of the child_tax_credit potentially available under sec_24 sec_24 makes a portion of the credit known as the additional_child_tax_credit refundable the term qualifying_child means a qualifying_child of the taxpayer as defined in sec_152 who has not attained age sec_24 because neither dmck nor nmck was a qualifying_child of petitioner during we conclude that he is not entitled to the child_tax_credit or additional_child_tax_credit pursuant to sec_24 sec_1 provides a special tax_rate for an individual who qualifies as a head_of_household as pertinent here sec_2 provides that an unmarried individual shall be considered a head of a household if that individual maintains as his home a household which constitutes for more than one-half of such taxable_year the principal_place_of_abode of i a qualifying_child of the individual as defined in sec_152 because neither dmck nor nmck was a qualifying_child of petitioner during we conclude that he is not entitled to claim head_of_household filing_status sec_32 permits an eligible_individual to receive an earned_income_credit against the individual’s tax_liability as pertinent here the term eligible_individual includes any individual who has a qualifying_child for the taxable_year sec_32 in general the term qualifying_child means a qualifying_child of the taxpayer as defined in sec_152 determined without 4an eligible_individual may also include an individual who does not have a qualifying_child see sec_32 however an earned_income_tax_credit is available to such an individual only if the individual’s adjusted_gross_income is less than dollar_figure see revproc_2007_66 sec_3 2007_2_cb_970 because petitioner’s adjusted_gross_income during exceeded that amount petitioner is not entitled to the earned_income_tax_credit for that year without a qualifying_child regard to sec_152 regarding the amount of support and sec_152 regarding special rules for divorced parents sec_32 because petitioner had no qualifying_child during his tax_year we conclude that he is not entitled to the earned_income_tax_credit in reaching these holdings we have considered all the parties’ arguments and to the extent not addressed herein we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number --------------------- --------------------------------------- ---------------------------- --------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number -------------------- refer reply to cc intl b01 plr-141197-08 date date ty ------- ty ------- taxpayer ---------------------------------------------- partnership ------------------------------------------------------------------------------- year ------- accounting firm ------------------- accounting firm ------------------------- date --------------------- date -------------- dear --------------------- this letter is in response to your correspondence of date where taxpayer requests a ruling for an extension of time under sec_301_9100-1 and sec_301 to file a waiver of period of limitations under sec_1_884-2 taxpayer was a foreign_corporation engaged in a trade_or_business in the united_states indirectly through an investment in a domestic limited_liability_company partnership partnership was engaged in rental real_estate activity in the united_states partnership disposed of its united_states rental real_estate in year partnership then made a liquidating_distribution to taxpayer after the distribution taxpayer had no further trade_or_business or assets in the united_states taxpayer had no further income that was effectively connected with the conduct_of_a_trade_or_business in the united_states taxpayer relied on accounting firm to timely file taxpayer’s year 1120f accounting firm prepared taxpayer’s u s tax returns for the tax years prior to year and all prior years’ tax returns were filed on time within the extended periods however due to an internal policy change accounting firm could not handle taxpayer’s year u s tax filings taxpayer was not notified about the internal policy change on a timely basis and accounting firm did not file taxpayer’s year f by the due_date and did not file a request for extension of said due_date taxpayer then engaged plr-141197-08 accounting firm to prepare the year form_1120 f and said return was filed on date accounting firm calculated and included the branch_profits_tax on taxpayer’s year 1120f and did not inform taxpayer about the possibility of claiming an exemption on branch_profits_tax by filing a waiver of period of limitation under sec_1_881-2 taxpayer approached another tax professional firm in date to review the year form 1120f this firm informed taxpayer that the branch_profits_tax paid in year could have been exempt if a waiver of period of limitation under sec_1_884-2 had been filed on or before the due_date for the year tax_return the firm informed taxpayer of the possibility of filing a request for a letter_ruling granting extensions of time under sec_301_9100-1 and sec_301_9100-3 to file a waiver of period of limitations under sec_1 a ii as a result taxpayer filed its request for a letter_ruling taxpayer requests a ruling for an extension of time under sec_301_9100-1 and sec_301 to file a waiver of period of limitations under sec_1_884-2 if granted taxpayer requests and extension of time be allowed until days from the date of this letter_ruling to make the above election under sec_1_884-2 sec_1_884-2 provides that the waiver referred to in sec_1 2t a i d must be filed on or before the date including extensions prescribed for filing the foreign corporation’s income_tax return for the year of complete termination sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the standards set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides standards for extensions of time for making regulatory elections when the deadline for making the election is other than a due_date prescribed by statute sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 states that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer - plr-141197-08 i requests relief before the failure to make the regulatory election is discovered by the service ii inadvertently failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election the affidavit presented shows that taxpayer acted reasonably and in good_faith having reasonably relied upon accounting firm and accounting firm qualified_tax accounting firms who both failed to make or to advise the taxpayer to make the election furthermore the affidavits show that after exercising due diligence taxpayer was unaware of the necessity for the election under sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer - i seeks to alter a return position for which an accuracy related penalty has been or could be imposed under sec_6662 at the taxpayer requests relief taking into account sec_1_6664-2 and the new position requires a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief taxpayer is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time relief is requested taxpayer was not informed of all material respects of the election and its tax consequences furthermore taxpayer is not using hindsight in requesting relief taxpayer has represented that specific facts have not changed since the original deadline that made the election advantageous sec_301_9100-3 provides in part that the interests of the government plr-141197-08 are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides in part that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under these criteria the interests of the government are not prejudiced in this case the taxpayer has represented that granting relief would not result in a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money furthermore the taxable_year in which the regulatory election should have been made and any taxable years that would have been affected had it been timely made are not closed by the period of assessment accordingly the consent of the commissioner is hereby granted for an extension of time to file the forms necessary to make the election pursuant to sec_301_9100-1 and-3 for the taxpayer under sec_1_884-2 the taxpayer has an extension of days from date of this ruling in which to make this election 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 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed as to whether taxpayer is eligible for an exemption for branch_profits_tax under sec_1_884-2t if a waiver of period of limitation under sec_1_881-2 is filed this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative plr-141197-08 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely elizabeth u karzon chief branch international cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-104150-03 date date h w trust trustee state court d1 d2 d3 dear this letter responds to your letter dated date and subsequent correspondence submitted on behalf of trustee requesting rulings concerning the termination of trust the information submitted states that h and w established trust under the laws of state on d1 trust was intended to qualify as a charitable_remainder_unitrust crut under sec_664 of the internal_revenue_code under the trust instrument h and w receive annual unitrust distributions equal to seven percent of the net fair_market_value of trust assets for their concurrent and consecutive lifetimes upon the death of h or w the entire unitrust_amount is to be paid to the survivor h and w have signed an affidavit under penalties of perjury that they are aware of no medical_condition expected plr-104150-03 - - to result in a shorter-than-average longevity trustee is the current trustee of trust paragraph of the trust instrument provides that the trustee can add remove or change the percentage allocations of the charitable_remainder beneficiaries on d2 pursuant to paragraph12 of the trust instrument trustee designated trustee as the sole charitable_remainder beneficiary trustee is recognized as exempt from federal_income_tax under sec_501 and is not a private_foundation under sec_509 pursuant to sec_509 and sec_170 h w and trustee have agreed that trust should be terminated trustee filed a petition for the early termination of trust in court under the petition trustee is authorized to terminate trust upon the termination of trust trustee is to distribute to h and w the actuarial value of their unitrust_interest to be determined using the discount rate in effect under sec_7520 on the date of termination and using the methodology under sec_1_664-4 of the income_tax regulations for valuing interests in a crut any distribution of trust assets in_kind will be made pro_rata between h and w the balance of the trust estate will be distributed to trustee as the charitable_remainder beneficiary on d3 court granted the petition subject_to trustee’s receipt of a favorable letter_ruling sec_507 provides a tax imposed under sec_507 on the termination of an entity’s status as a private_foundation under sec_509 where the termination is pursuant to sec_507 or sec_507 sec_507 provides for a termination of private_foundation_status after the entity’s voluntary notice to the internal_revenue_service for such termination and its payment of the termination_tax under sec_507 sec_507 provides for involuntary termination of private_foundation_status that can be initiated by the internal_revenue_service sec_507 and sec_507 each describe a method for termination of private_foundation_status under sec_509 that is not subject_to tax under sec_507 revrul_2003_13 2003_4_irb_305 date indicates that under sec_1_507-1 a transfer of all of the assets of a private_foundation entity does not result in the termination of the transferor’s private_foundation_status under sec_509 unless the distribution is under sec_507 or the foundation voluntarily elects to terminate under sec_507 or an involuntary termination under sec_509 applies sec_4941 imposes excise_tax on any act of self-dealing between a private_foundation and any of its disqualified persons defined in sec_4946 under sec_4941 an act of self-dealing includes any transfer to or use by or for the benefit of a disqualified_person of any of the assets or income of the private_foundation sec_53_4946-1 of the foundation and similar excise_taxes regulations provides that an exempt_organization under sec_501 is not a disqualified_person under plr-104150-03 - - sec_4946 for purposes of self-dealing under sec_4941 sec_4947 describes split-interest_trusts as those that are not exempt from federal_income_tax under sec_501 not all of the unexpired interests in which are devoted to purposes in sec_107 and which have amounts in trust for which a deduction was allowed under sec_170 sec_545 sec_556 sec_642 sec_2055 sec_2106 or sec_2522 sec_4947 provides in pertinent part that sec_507 and sec_4941 shall apply as if such split- interest trusts were private_foundations under sec_509 sec_4947 provides in pertinent part that the provisions of sec_4947 do not apply with respect to the amounts payable under the terms of such split-interest trust to its income beneficiaries sec_53_4947-1 and sec_53_4947-1 example indicate in pertinent part that the payments of the income by a charitable_remainder_unitrust to its individual income beneficiaries do not result in any_tax on self-dealing under sec_4947 sec_53_4947-1 provides that the provisions of sec_507 shall not apply to a_trust described in sec_4947 by reason of any payment to a beneficiary that is directed by the terms of the governing instrument and is not discretionary with the trustee or in the case of a discretionary payment by reason of or following the expiration of the last remaining charitable interest in the trust sec_53_4947-1 example indicates that a sec_4947 trust’s payments to its charitable_organization remainder beneficiary upon the trust’s termination will not result in a termination of the trust’s private_foundation_status within the meaning of sec_507 trust under sec_4947 will complete its payments to its income and remainder beneficiaries in an early manner meaning that the trust will pay both the income beneficiaries and the charitable_remainder beneficiary the lump sums computed under the code as the present equivalent of the otherwise future periodic_payments owed to those life and remainder beneficiaries sec_4941 applies to trust which is treated for certain purposes as a private_foundation pursuant to sec_4947 and also applies to disqualified persons with respect to trust under the facts above we find that the proposed early termination of the charitable_remainder_unitrust will not result in any act of self-dealing under sec_4941 sec_507 applies to trust which is treated for certain purposes as a private_foundation pursuant to sec_4947 similar to sec_53_4947-1 example trust's final lump sum payment to its charitable_remainder beneficiary organization will not be considered any termination within the meaning of sec_507 of trust's private_foundation_status under sec_509 without any termination under sec_507 no termination_tax under sec_507 applies to trust sec_1015 provides that if property is acquired by a transfer in trust other plr-104150-03 - - than by a transfer in trust by a gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on the transfer sec_1_1015-2 provides that the principles stated in sec_1_1015-1 apply in determining the basis_of_property where more than one person acquires an interest in property by transfer in trust sec_1_1015-1 provides that property acquired by gift has a uniform basis and that the proportionate parts of that basis represented by the interests of the life_tenant and remainder_interest holder are determined under rules provided in sec_1_1014-5 sec_1001 however provides that in determining gain_or_loss from the sale or disposition of a term_interest_in_property that portion of the adjusted_basis of the interest which is determined pursuant to sec_1015 to the extent that the adjusted_basis is a portion of the entire adjusted_basis of the property shall be disregarded under sec_1001 a term_interest_in_property includes an income_interest in a_trust sec_1001 provides that sec_1001 does not apply to a sale_or_other_disposition which is a part of a transaction in which the entire_interest in property is transferred to any person or persons see also sec_1_1001-1 sec_1222 provides that the term long-term_capital_gain means gain from the sale_or_exchange of a capital_asset held for more than one year sec_1221 defines the term capital_asset as property held by the taxpayer with certain listed exceptions not applicable here sec_1223 provides that in determining the period for which a taxpayer has held property however acquired there shall be included the period for which the property was held by any other person if the property has the same basis in the taxpayer's hands as it would have in the hands of that other person revrul_72_243 1972_1_cb_233 provides that the proceeds received by the life_tenant of a_trust in consideration for the transfer of the life tenant's entire_interest in the trust to the holder of the remainder_interest are treated as an amount_realized from the sale_or_exchange of a capital_asset under sec_1222 the right to income_for_life from a_trust estate is a right in the estate itself see 157_f2d_235 2d cir cert_denied 330_us_826 although the proposed transaction takes the form of a distribution of the present values of the respective interests of h and w and the remainder_interest holder in substance it is a sale of h and w's interest to the remainder_interest holder the amount received by h and w as a result of the termination of trust is an amount received from the sale_or_exchange of a capital_asset revrul_72_243 because h and w’s' basis in the life_estate is a portion of the entire basis of the property under sec_1015 and because the disposition of h and w's interest is not part of a transaction plr-104150-03 - - in which the entire_interest in trust is transferred to a third party h and w's adjusted_basis in their interest is disregarded sec_1001 the h and w's holding_period in the life interest exceeds one year accordingly under sec_1222 the entire amount_realized by h and w as a result of the early termination of trust will be long-term_capital_gain after applying the relevant law to the information provided and the representations made we conclude as follows the early termination of trust and the early distribution of its assets to h w and trustee as the charitable_remainder beneficiary will not result in tax under sec_507 on trust the early termination of trust and the early distribution of its assets to h w and trustee as the charitable_remainder beneficiary will not result in tax under sec_4941 on trust or its disqualified persons the entire amount_realized by h and w as a result of the early termination of trust will be long-term_capital_gain except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to trustee and trust’s other authorized representative sincerely yours j thomas hines chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


id office uilc cca-824151-09 ---------------- number release date from ------------------- sent monday date pm to ------------------------ cc --------------------------------------- subject re façade easement brief date --------- - here is the revised version thanks for letting us help with this ------------------ facade easement contributions the purpose of this brief is to review the basic requirements with respect to the charitable_contribution of a façade easement a façade easement preserves an historical structure by restricting changes to the structure this assures the owner of the historic_structure that its façade will be maintained protected and preserved forever the pension_protection_act of ppa added several new requirements with respect to a façade easement contribution the ppa is effective for charitable_contributions made after date this brief explains the current requirements of the internal_revenue_code as amended by the ppa for the charitable_contribution of a façade easement some of the requirements do not apply to a building that is individually listed in the national register of historic places façade easement requirements to be deductible as a charitable_contribution a façade easement must be on a certified_historic_structure under sec_170 a certified_historic_structure is any building structure or land area which is listed in the national register or any building which is located in a registered_historic_district and is certified by the secretary of interior as being of historic significance to the district a façade easement can be on a structure that is used for either business or non-business purposes including a personal_residence a structure must be a certified_historic_structure at the time of the contribution or on the due_date including extensions for filing the donor’s income_tax return for the taxable_year of the contribution the easement must include restrictions preserving the entire exterior of the building including front sides rear and height and prohibiting any change to the exterior of the building inconsistent with its historical character the public must have visual access to the façade upon which the easement is placed if the façade is not visible from a public way the terms of the easement must permit regular viewing of the façade by the general_public the contribution of a façade easement must be to a qualified_organization this will generally be an organization that is an eligible donee under sec_170 that has a conservation_purpose and the resources and commitment to enforce the easement the easement is normally conveyed to the donee organization by a deed which is then recorded in appropriate state or county records the deed must preserve the façade in perpetuity in addition the donor and donee must enter into a written_agreement certifying under penalties of perjury that the recipient organization is a qualified_organization with a purpose of environmental protection land conservation open space preservation or historic preservation and has the resources to manage and enforce the restriction and a commitment to do so if a contribution of an interest_in_real_property is subject_to a mortgage no deduction is allowed unless the mortgage holder subordinates its rights in the property to the right of the donee to enforce the façade easement in perpetuity valuation the donor of a façade easement may be entitled to claim a charitable_contribution_deduction equal to the fair_market_value of the easement the value of the easement is normally determined by the before and after method this approach appraises the underlying property before the grant of the easement and after the grant of the easement with the difference being the value of the easement the fair_market_value of an easement should not be determined by applying a percentage reduction to the value of the underlying property before the easement the irs does not accept this percentage reduction as a method of valuing an easement it is possible that the grant of an easement will have no significant effect on the value of the property particularly if the easement is not more restrictive than local ordinances already in effect substantiation no deduction is allowed unless the donor properly substantiates the charitable_contribution a deduction can be disallowed if any one of the following requirements is not met for a contribution of a façade easement made in a tax_year beginning after date the following must be attached to the donor’s income_tax return a qualified_appraisal of the façade easement prepared by a qualified_appraiser no matter what the amount of the claimed deduction a fully-completed form_8283 the appraisal_summary photographs of the entire exterior of the building and a description of all restrictions on the development of the building qualified_appraisal and qualified_appraiser the internal_revenue_code and treasury regulations provide specific requirements for a qualified_appraisal and a qualified_appraiser in addition in notice_2006_96 2006_2_cb_902 the irs provided transitional guidance for the period ending on the date regulations implementing the ppa are finalized a brief summary of the ppa requirements follows however the donor of a façade easement should be aware of the detailed requirements related to a qualified_appraisal and qualified_appraiser as set forth in sec_170 of the internal_revenue_code and sec_1_170a-13 of the treasury regulations a qualified_appraisal must comply with all the requirements of sec_1_170a-13 and must be conducted by a qualified_appraiser in accordance with generally accepted appraisal standards it will be treated as meeting generally accepted appraisal standards if for example it is consistent with the substance and principles of the uniform standards of professional appraisal practice a qualified_appraisal must be made not earlier than days prior to the date of contribution of the appraised property and received by the donor before the due_date including extensions of the return on which a deduction is first claimed under sec_170 a qualified_appraiser is an individual who regularly performs appraisals for compensation and who has earned an appraisal designation from a professional appraiser organization or has met minimum education and experience requirements as set forth in regulations notice_2006_96 provides that until regulations are promulgated an individual will be treated as meeting the appraisal designation requirement if the individual’s appraisal designation is awarded on the basis of demonstrated competency in valuing the type of property for which the appraisal is performed for an appraisal of real_property the appraiser will be treated as having met minimum education and experience requirements if the appraiser is licensed or certified for the type of property being appraised in the state in which the appraised property is located under sec_170 for each specific appraisal an individual will not be treated as a qualified_appraiser unless the individual demonstrates verifiable education and experience in valuing the type of property subject_to the appraisal and has not been prohibited from practicing before the irs at any time during the 3-year period ending on the date of the appraisal notice_2006_96 provides that an individual will be treated as meeting the verifiable education and experience requirement if the appraiser makes a declaration in the appraisal that because of the appraiser’s background experience education and membership in professional associations the appraiser is qualified to appraise the type of property being appraised form_8283 a fully-completed form_8283 is the appraisal_summary and must be attached to the tax_return for the year the property is contributed and a deduction is first claimed for a contribution for which a deduction of more than dollar_figure is claimed the form requires signatures of the donee and the qualified_appraiser in addition to other important information relevant to the charitable_contribution of the façade easement see sec_1 170a- c contemporaneous written acknowledgment for any charitable_contribution of dollar_figure or more no deduction is allowed unless the taxpayer obtains a contemporaneous written acknowledgment as required by sec_170 this acknowledgment must contain the amount of cash and a description of any property contributed whether the donee organization provided any goods or services in consideration for any property contributed and if so a description and good_faith estimate of the value of any such goods or services the donor must obtain the acknowledgment on or before the earlier of the date on which the taxpayer files a return for the year the contribution was made or the due_date including extensions for filing the return filing fee for a charitable_contribution of a façade easement made on or after date if the claimed deduction is more than dollar_figure no deduction is allowed unless the taxpayer includes with the return a dollar_figure filing fee see form 8283-v payment voucher for filing fee and the instructions at http www irs gov pub irs-pdf f8283v pdf rehabilitation tax_credit and charitable_contributions when a façade easement is conveyed during the same year that a qualified_rehabilitated_building is placed_in_service the taxpayer will not be entitled to claim the portion of the rehabilitation tax_credit attributable to the façade easement if a taxpayer claims a rehabilitation tax_credit with respect to property and subsequently makes a qualified_conservation_contribution ie a façade easement with respect to the property the charitable_contribution is considered a partial_disposition of the property this event will trigger recapture of all or part of the credit if the contribution is made within the recapture_period years from the placed_in_service_date please refer to revrul_89_90 1989_2_cb_3 and rome i ltd e c systems inc v comm t c for further information on the tax effect of combining the rehabilitation tax_credit with a façade easement donation penalties a charitable_contribution_deduction may be disallowed and penalties imposed on the donor if substantiation or other requirements are not met or if the façade easement is overvalued in addition under sec_6695a added by the ppa if the claimed value of property based on an appraisal results in a substantial or gross_valuation_misstatement a penalty is imposed on any person who prepared the appraisal and who knew or reasonably should have known the appraisal would be used in connection with a tax_return or claim_for_refund the appraiser must make a written declaration that he or she is aware of this penalty provision


internal_revenue_service department of the treasury number release date index number legend washington dc person to contact telephone number refer reply to cc te_ge eb hw-plr-107143-00 date date state city statute dear this letter responds to your letter of date requesting a ruling regarding the proper federal_income_tax treatment of your service-connected disability retirement benefits you retired as a city firefighter with a work-related injury the city retirement board approved your application_for disability retirement it approved a disability of fifty per cent of your annual salary at the time of your disability retirement the statute provides any fire or police participant totally and permanently disabled during the performance of essential duties pertaining to his employment by the city irrespective of the duration of his employment shall be retired for disability provided proof of total disability is submitted to the retirement board substantiated by reports of examinations the city guarantees that no pension payable to a fire or police participant employed by the fire or police department on account of total and permanent disability sustained during the performance of essential duties pertaining to employment by the city as provided herein shall be less than one-half the annual rate of regular compensation received by the disabled_employee at the time of disability sec_61 of the internal_revenue_code provides that except as otherwise provided by law gross_income means all income from whatever source derived including compensation_for services plr-107143-00 sec_104 of the code provides that gross_income does not include amounts received under workmen’s compensation acts as compensation_for personal injuries or sickness sec_1_104-1 of the income_tax regulations states that sec_104 of the code excludes from gross_income amounts received by an employee under a workmen’s compensation act or under a statute in the nature of a workmen’s compensation act that provides compensation to the employee for personal_injury_or_sickness incurred in the course of employment sec_104 also applies to compensation which is paid under a workmen’s compensation act to the survivor or survivors of a deceased employee sec_104 does not apply to a retirement pension or annuity to the extent it is determined by reference to the employee's age or length of service or the employee's prior contributions even though the employee's retirement is occasioned by an occupational injury or sickness sec_104 also does not apply to amounts which are received as compensation_for a non-occupational injury or sickness nor to amounts received as compensation_for an occupational injury or sickness to the extent that they are in excess of the amount provided in the applicable workmen's_compensation_act or acts the statute limits payment of disability benefits to participants who become physically incapacitated by reason of injuries received or sickness caused by the discharge of duties the benefits payable under the statute are not determined by reference to the employee’s age length of service or prior contributions the statute is therefore a statute in the nature of workmen’s compensation acts accordingly we conclude that service-connected disability retirement benefits paid to you under the statute is excludable from your gross_income under sec_104 of the code except as specifically ruled upon above no opinion is expressed or implied with respect to the application of any other provisions of the code or the regulations to the benefits described 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 harry beker chief health welfare branch office of division counsel associate chief_counsel tax exempt government entities cc


internal_revenue_service p o box cincinnati oh date date number release date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil x scholarship program y school name dear you asked for advance approval of your scholarship grant procedures under sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 description of your request your letter indicates that you will operate an educational scholarship program called x the purpose of x is to provide scholarships to aid students with disabilities in attending y an educational institutional described in sec_170 you will coordinate with school administrators to solicit current and prospective students who may be eligible for letter catalog number 58263t the program as well as develop and incorporate formal announcement materials as necessary while continuing to work directly with school administrators to engage in word of mouth solicitation you may expand x to include other qualified educational institutions you will base the amount of the individual scholarships on the recipient's need and the number of scholarships will be variable this will annually be determined at your discretion and the amount of funds available for distribution which may be permissibly distributed while maintaining your status as a private_operating_foundation in determining eligibility you will evaluate a documents rel vant to determining financial need b letters of recommendation from schools teachers counselors and parents guardians c proof of enrollment in the school college university etc d copies of tuition bills c copies or other proof of any other grants or loans awarded f copies of grade transcripts or evaluations of the individual's academic progress and g letters from the individual explaining in his her words why he she is deserving of the scholarship if available you will also consider information relevant to a student's developmental disabilities when determining eligibility of developmentally disabled students the following individuals shall not be eligible to apply for or receive a scholarship from you a any employee of yours as well as any family_member of such an individual b any executive officer or director of yours as well as any family_member of such an individual and c any otherwise disqualified_person with respect to you as defined by sec_4946 of the code as well as any family_member of such an individual the scholarship recipients will be selected by a selection committee consisting of your trustees your trustees may select additional committee members who they deem as qualified based on their experience with or are interested in the education field or that they are a manager director officer or serve in a similar capacity for other organizations in which they have to make the similar decisions all scholarships awarded by you are expected to be paid to the accredited educational_institution in which the recipient is enrolled and only in the event that the institution agrees to supervise the use of the scholarship the conditions placed upon the scholarships shall be that the recipient must be enrolled in an education institution and the scholarship must be used to cover the cost of the student's tuition fees books room and board research fees and other expenses associated with the completion of the recipient's degree any unused funds shall be transferred by the educational_institution back to you you will require an annual report from each educational_institution for the purpose of confirming the recipient's enrollment and academic performance you represent that you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes and take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees' assurances that future diversions will not occur and letter catalog number 58263t that grantees will take extraordinary precautions to prevent future diversion from occurring you represent that you will maintain the following all records relating to individual grants including information obtained to evaluate grantees identify a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you undertook the supervision and investigation of grants described above basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 a ii other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 letter catalog number 58263t you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely jeffrey i cooper director exempt_organizations rulings and agreements letter catalog number 58263t


t c memo united_states tax_court william b mcdermott and donna mcdermott petitioners v commissioner of internal revenue respondent docket no filed date william b mcdermott and donna mcdermott pro sese stephen s ash for respondent memorandum findings_of_fact and opinion laro judge petitioners petitioned the court to redetermine a dollar_figure deficiency in their federal_income_tax and a dollar_figure accuracy-related_penalty under sec_6662 following respondent’s concession as to of the bank_deposits determined by him in the notice_of_deficiency to be income and our granting of petitioners’ motion to dismiss much of this case for lack of jurisdiction we decide whether petitioners underreported their gross_income by dollar_figure ie the total amount of the remaining deposits we hold they did not section references are to the applicable versions of the internal_revenue_code rule references are to the tax_court rules_of_practice and procedure and dollar amounts are rounded findings_of_fact some facts were stipulated the parties’ stipulation of facts and the exhibits submitted therewith are incorporated herein by this reference petitioners are husband and wife and they resided in phoenix arizona when their petition was filed they have at least two children melissa and joshua petitioners filed a joint federal_income_tax return on or about date they reported on that return that their gross_income consisted of dollar_figure of business income and dollar_figure of dividend income and they reported and paid dollar_figure in federal_income_tax with respect thereto they reported on their specifically petitioners had moved to dismiss the portion of this case that concerned partnership items which respondent conceded were included erroneously in the notice_of_deficiency see 87_tc_783 partnership items must be readjusted in a unified partnership level proceeding brought under the tax equity and fiscal responsibility act of publaw_97_248 96_stat_648 and cannot be considered in a proceeding brought under sec_6213 to redetermine a deficiency on the basis of this holding we also hold that petitioners are not liable for the accuracy-related_penalty determined by respondent as it relates to the bank_deposits return that the business income consisted of dollar_figure received by william mcdermott mr mcdermott and dollar_figure received by donna mcdermott ms mcdermott during mr mcdermott was an independent_contractor who bought and sold educational textbooks as the manager of omega resources llc omega he generally works for omega throughout the united_states and it reimburses him for his out-of-pocket traveling expenses ms mcdermott also worked for omega during that year as an independent_contractor she has an undergraduate degree in teaching and a master’s degree in the healing arts the study of alternative medicine and she worked for omega counseling individuals on their personal problems during petitioners had a regular checking account at first interstate bank fib two valuechecking accounts at bank one and a securities account at prudential securities when respondent audited petitioners’ return respondent performed a bank account analysis on these four accounts and determined in the notice_of_deficiency that the following deposits into the fib and bank one accounts were includable in petitioners’ gross_income date of deposit amount jan dollar_figure apr may may may may july big_number july big_number july aug big_number aug big_number aug big_number oct nov nov nov nov nov dec big_number dec big_number dec big_number dec dec big_number petitioners had not included any of these deposits in their gross_income during this proceeding respondent conceded error as to of the deposits determined to be includable in petitioners’ gross_income respondent now asserts that only the following six deposits are so includable the july deposit of dollar_figure the july deposit of dollar_figure the august deposit of dollar_figure the december deposit of dollar_figure the december deposit of dollar_figure and the december deposit of dollar_figure the dollar_figure was a deposit made in cash or by check the dollar_figure was a deposit made in cash the dollar_figure and the first dollar_figure were deposits made by wire transfer from the lorain ohio bank account of ms mcdermott’s mother the second dollar_figure was a deposit made by check the third dollar_figure was a deposit made by check the drawer of which was a bank located in the bahamas mr mcdermott has a brother who lives in canada every year the brother visits petitioners for the christmas holidays the brother generally gives petitioners money around that time to buy christmas presents for their family mr mcdermott’s father was a native of canada and he lived there in during that year he suffered from diabetes and had heart problems which required significant care his wife died in date and he stayed with petitioners for a long time over christmas he gave dollar_figure to petitioners before his stay to buy christmas presents for the extended family and to buy household and medical items eg medical_supplies a chair and a bed covering and linens related to his stay at least part of that money came from an offshore bank account that mr mcdermott’s father maintained in the bahamas before marrying mr mcdermott ms mcdermott was a widow with two children beginning with the birth of the first child ms mcdermott’s mother has given money to ms mcdermott to help her raise her children her mother also gives money to her around christmastime to buy presents for the family during ms mcdermott’s mother wired dollar_figure and dollar_figure from her bank account in lorain ohio to petitioners’ bank account of those amounts dollar_figure was a christmas gift and dollar_figure was to be mr mcdermott’s father died on date applied towards petitioners’ daughter’s college tuition for the fall semester opinion respondent argues that his use of the bank_deposits method is a prima facie case that requires that petitioners prove that the six deposits are not unreported income respondent asserts that the revenue_agent who conducted the audit determined based on his experience that petitioners’ income in was diverted to an offshore bank account and that the funds were moved to the mcdermott’s sic parents’ account in canada and then came back as alleged gifts respondent asserts that the funds given to petitioners by ms mcdermott’s mother also were determined to be unreported income because of the involvement of mr mcdermott’s father with offshore accounts petitioners argue that each of the six deposits has a nontaxable source petitioners assert that the dollar_figure deposit was a payment to mr mcdermott from omega consisting of dollar_figure for a petty cash expense dollar_figure as partial reimbursement for out-of-pocket expenses and dollar_figure as an advance contract payment that mr mcdermott included in the dollar_figure that he recognized as income for they assert that the first dollar_figure deposit was wired to them from ms mcdermott’s mother as a christmas gift they assert that the other two dollar_figure deposits were given to them by mr mcdermott’s father to pay for his extended stay at their home over the christmas holiday and to buy christmas presents for them and members of the extended family they assert that the dollar_figure was wired to them from ms mcdermott’s mother to apply towards their daughter’s college tuition for the fall semester they assert that the dollar_figure deposit came from a nontaxable source we need not decide which party bears the burden_of_proof in this case in that we can and do decide this case on the basis of the record petitioners generally support their assertions as to the tax status of the deposits by their respective testimony and the introduction of certain documentary_evidence on the basis of the record at hand we are persuaded that none of the six deposits are includable in petitioners’ gross_income we have considered all of the parties’ arguments and reject those arguments not discussed herein as meritless decision will be entered under rule sec_7491 does not apply to this case because the examination of petitioners’ tax_return commenced before date the effective date of that section internal_revenue_service restructuring and reform act of publaw_105_206 sec a 112_stat_726