internal_revenue_service index no 468a department of the treasury washington dc person to contact telephone number refer reply to cc dom p si plr-106975-98 date ocr re revised schedule of ruling amounts taxpayer parent plant location commission a commission b district fund law dear soo - this letter responds to the request of taxpayer dated date and supplemental information for a revised schedule of ruling amounts in accordance with sec_1_468a-3 i iii of the income_tax regulations taxpayer is requesting a review of the prior schedule of ruling amounts since pursuant to the law included in taxpayer’s rate base for ratemaking purposes has been revised ruling amounts on march pursuant to sec_1_468a-3 the estimated date on which the plant will no longer be taxpayer was previously granted a revised schedule of information was submitted we understand the facts as presented by taxpayer to be as follows its parent taxpayer files a consolidated federal_income_tax return with taxpayer as one of the owners of the plant has a interest as a tenant in common the plant is situated in location and its operating license is schedule to expire on jurisdiction of commission a taxpayer is under the audit and commission b plr-106375-98 for a total of these percentages may vary slightly from year to year decommission the plant using the prompt removal dismantling method director of district ruling amounts applies only to commission a this request for a revised schedule of taxpayer is under the audit jurisdiction of the district taxpayer proposes to in response to commission a approved a allowing the yaxpayer to in - the plant will be there was commission a in commission a included in the taxpayer's cost of service decommissioning costs for the plant in the annual amount of decommissioning costs included in taxpayer's cost of service commission a used an estimated cost of in determining the amount of as a base cost for decommissioning the plant based on a private decommissioning study decommissioning taxpayer’s share of the plant escalated at percent annually through decommissioning cost of results in an estimated future this base cost for the funding_period extends from and the level_funding limitation period extends from the estimated_useful_life of the plant is and the estimated period for which the fund will be in effect is qualifying percentage is of return expected to be earned by commission a’s jurisdictional portion of the assets of the fund is into account the energy policy act of the assumed after-tax rate therefore the which takes act sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund limits the amount_paid into the fund for any_tax year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer’s cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year however sec_468a sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax plr-106975-98 year is defined under sec_468a secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is bears to the estimated_useful_life of the plant further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate as the amount which the this term is in effect sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year within the tax_year months after the close of sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code defined under sec_1_468a-1 b has a qualifying interest in a nuclear power plant defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant an eligible_taxpayer as a taxpayer that is as sec_1_468a-2 of the regulations provides that the to a maximum amount of cash payments made nuclear decommissioning fund during any_tax year shall not exceed the lesser_of the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or the ruling_amount applicable to the nuclear decommissioning fund for such tax_year or deemed made sec_1_468a-3 of the regulations provides that in a ruling specifying annual payments that general a schedule of ruling amounts for a nuclear decommissioning fund is over the tax years remaining in the funding_period as date the schedule first applies will result ina projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to than fund the amount of decommissioning costs allocable to the and in no event more of the sec_1_468a-3 bases the schedule of ruling amounts on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer’s income under sec_88 regulations thereunder each schedule of ruling amounts shall be of the code and the plr-106975-98 i based on the public_utility commission’s reasonable assumptions concerning amounts collected for decommissioning cost of decommissioning the nuclear power plant and the frequency of contributions to the nuclear decommissioning fund for a tax_year the after-tax rate of return to be earned by the the total estimated iii ii sec_1_468a-3 of the regulations permits the internal_revenue_service to provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the under sec_1_468a-3 ruling_amount specified in a schedule of ruling amounts for any_tax year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier tax_year limitation period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the tax_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer’s rate base for ratemaking purposes the level_funding sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to decommissioning fund is the taxpayer’s share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage a nuclear sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer’s share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer’s qualifying interest in the plant sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the s ‘this separate determination shall be based on the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant 468a-3 reasonable assumptions and determinations used by the relevant public_utility commission and shall take into account only that portion of the total estimated cost of decommissioning that is properly allocable to the ratepayer whose rates are established or approved by the public_utility commission the ruling amounts for any_tax year is sec_1_468a-3 the sum of the ruling amounts for such tax_year determined under the separate schedules of ruling amounts under section according to sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 iii of the regulations provides that a a taxpayer is required to request a revised schedule of ruling any public amounts for a nuclear decommissioning fund if utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates increases the proposed period over which the decommissioning costs of the nuclear power plant will be included in cost of service for ratemaking purposes adjusts the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes or reduces the amount of decommissioning costs to be included in cost of service the taxpayer’s most recent request for for any_tax year and a schedule of ruling amounts did not provide notice to the service of such action by any public_utility commission b we have examined the representations and data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations of the facts we reach the following conclusions based solely on these representation sec_1 taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations plr-106975-98 commissions a and b have previously determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations the taxpayer as one of the owners of the plant has previously calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations the taxpayer subject_to the jurisdiction of two public_utility commissions for ratemaking purposes has previously calculated its share of the total decommissioning costs allocable to commission a 468a-3 of the regulations as required by section of the regulations the taxpayer has previously proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commission a and will result in fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund a projected or to the fund during any_tax year the maximum amount of cash payments made deemed made is restricted to the lesser amount of the decommissioning costs applicable to such fund set or the ruling applicable to this fund forth under sec_1 468a- regulations b of the as the qualifying percentage under sec_1_468a-3 of the regulations is calculated to be based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code plr-106975-98 approved schedule of ruling amounts tax years commissions a and b year a b total approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued events described in sec_1_468a-3 regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the when no such rates reflecting such action became effective event occurs the taxpayer must file a request for a revised schedule of ruling amounts _on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received iii of the if any of the the approved schedule of ruling amounts is relevant only to payments allocable to any funds those payments made to the fund other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated earlier payments made to such fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested sec_6110 of the code provides it may not be used it or cited as precedent the ruling amounts for commission b were approved ina prior schedule of ruling amounts continued only through these ruling amounts plr-106975-98 vs pursuant to a copy of the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives the regulations a copy of this letter must be attached with the required election statement to the taxpayer’s federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund pursuant to sec_1_468a-7 of sincerely yours choke b-reuuay rt2 charles b ramsey chief branch office of assistant chief_counsel passthroughs and special industries


t c summary opinion united_states tax_court ibrahim b keita petitioner v commissioner of internal revenue respondent docket no 9596-06s filed date ibrahim b keita pro_se michele e craythorn for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition 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 unless otherwise indicated subsequent 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 respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure after concessions the issues for decision are whether petitioner is entitled to certain deductions claimed on schedule c profit or loss from business and whether petitioner is entitled to certain deductions claimed on schedule a itemized_deductions background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time the petition was filed petitioner resided in santa rosa california petitioner was employed as a psychiatric technician during tax_year earning wage income he also worked as a licensed vocational nurse for which he received income that he reported on his schedule c on his federal_income_tax return petitioner reported wages totaling dollar_figure a schedule c business loss of dollar_figure and schedule a itemized_deductions of dollar_figure respondent issued petitioner conceded that he received a state_income_tax refund in the amount of dollar_figure and that he received dollar_figure in wages from maxim healthcare services inc during tax_year petitioner also conceded that he is not entitled to his claimed itemized_deduction of dollar_figure for legal fees related to defense of a tax_lien at trial respondent conceded that petitioner is entitled to a dollar_figure deduction for tax preparation fees petitioner a notice_of_deficiency in date disallowing dollar_figure of petitioner’s claimed schedule c deductions consisting of dollar_figure for business use of petitioner’s home and dollar_figure in other expenses for computers monitors and a fax machine the notice_of_deficiency also disallowed dollar_figure of petitioner’s itemized_deductions consisting of dollar_figure in unreimbursed employee vehicle expenses and dollar_figure in attorney’s and tax preparation fees reduced by percent of petitioner’s adjusted_gross_income discussion in general the commissioner’s determinations set forth in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of proving that these determinations are in error rule a 290_us_111 pursuant to sec_7491 the burden_of_proof as to factual matters shifts to the commissioner under certain circumstances petitioner has neither alleged that sec_7491 applies nor established his compliance with the requirements of sec_7491 and b to substantiate items maintain records and cooperate fully with respondent’s reasonable requests petitioner therefore bears the burden_of_proof deductions are a matter of legislative grace and the taxpayer bears the burden of proving that he is entitled to any deduction claimed 503_us_79 292_us_435 the taxpayer is required to maintain records sufficient to enable the commissioner to determine his correct_tax liability sec_6001 116_tc_438 sec_1_6001-1 income_tax regs such records must substantiate both the amount and purpose of the claimed deductions higbee v commissioner supra i schedule c deductions petitioner claimed a dollar_figure schedule c business loss for that resulted from his deducting dollar_figure in business_expenses and reporting dollar_figure in income the notice_of_deficiency disallowed dollar_figure the entire amount claimed for business use of the home and dollar_figure in other expenses claimed for computers monitors and a fax machine a business use of home sec_162 allows a taxpayer to deduct all ordinary and necessary expenses paid_or_incurred in carrying_on_a_trade_or_business the taxpayer is generally precluded from deducting expenses_incurred in connection with the business use of the residence see sec_280a as an exception to the general_rule sec_280a permits the deduction of expenses allocable to a portion of the dwelling_unit which was used exclusively and regularly as a principal_place_of_business as the place for meeting with customers clients or patients in the normal course of business or in the case of an unattached separate structure in connection with the business the deduction cannot exceed the gross_income derived from the business use of the residence over the sum of certain deductions allocable to such income sec_280a tobin v commissioner tcmemo_1999_ cunningham v commissioner tcmemo_1996_141 affd without published opinion 110_f3d_59 4th cir in order for a taxpayer to establish use on a regular basis the business use must be more than occasional or incidental irwin v commissioner tcmemo_1996_490 affd without published opinion 131_f3d_146 9th cir hefti v commissioner tcmemo_1993_128 a taxpayer exclusively uses a portion of his dwelling_unit in a trade_or_business if the portion in question is not used for other than business purposes irwin v commissioner supra hefti v commissioner supra the use of a portion of a dwelling_unit both for personal purposes and for the carrying on of a trade_or_business does not meet the exclusive use test see sengpiehl v commissioner tcmemo_1998_23 hefti v commissioner supra whether a taxpayer’s home_office is his principal_place_of_business is dependent on the amount of time spent at each location and the relative importance of the activities performed at each location see 506_us_168 petitioner contends that he is entitled to a deduction for business use of his home because he used his garage as a home_office for scheduling purposes sending and receiving faxes keeping mileage records and meeting with clients at times although petitioner testified that he maintained his home_office for those reasons the record does not indicate that petitioner met with clients or patients in his garage nor does the record establish that the garage was an unattached separate structure therefore the claimed deductions for business use of petitioner’s home can be sustained only if he used the garage on a regular basis as the principal_place_of_business for a trade_or_business although petitioner may have done some work related to his business in his home_office his principal_place_of_business as a licensed vocational nurse was not in his home_office petitioner testified that when he was working as a licensed vocational nurse out of his home he received his schedule by fax at his home_office he called the places at which he was going to work and then he went to the actual jobs at various hospitals in the community at the hospitals petitioner worked as a nurse where he sometimes supervised certified nursing assistants dispensed medications and gave wound treatments based on the record we find that petitioner’s primary place of business as a licensed vocational nurse was not in his home where he received his work schedule but at the hospitals in which he provided licensed vocational nursing services to the extent that petitioner used his home for administrative activities he has not established that the work at home was for the convenience of his employer based on the foregoing we hold that petitioner’s use of his garage for scheduling and faxing does not fulfill the business use exception of sec_280a and petitioner is therefore not entitled to a deduction for business use of his home b computers monitors and fax machine at trial petitioner tried to establish that he was entitled to deduct dollar_figure as schedule c business_expenses on his tax_return for computers monitors and a fax machine because petitioner’s computer and peripheral equipment do not fall within the home_office exception to sec_274 under sec_280f they are listed_property under sec_280f and their deductibility is subject_to the strict substantiation requirements of sec_274 when a taxpayer establishes that he has incurred a deductible expense but is unable to substantiate the exact listed_property does not include any computer_or_peripheral_equipment used exclusively at a regular business establishment sec_280f any portion of a dwelling_unit shall be treated as a regular business establishment if and only if the requirements of sec_280a are met with respect to such portion sec_280f for the reasons discussed above petitioner’s use of his garage does not satisfy the requirements of sec_280a and therefore the computers monitors and fax machine are listed_property amount we are generally permitted to estimate the deductible amount 39_f2d_540 2d cir to apply the cohan_rule the court must have a reasonable basis upon which an estimate can be made 85_tc_731 without such a basis any allowance would amount to unguided largesse 245_f2d_559 5th cir however the strict rules of substantiation that apply to certain business deductions described in sec_274 supersede the rule in cohan v commissioner supra pincite 50_tc_823 affd per curiam 412_f2d_201 2d cir keating v commissioner tcmemo_1995_101 jeffers v commissioner tcmemo_1986_285 sec_1_274-5t temporary income_tax regs fed reg date petitioner did not provide any receipts or any other evidence to establish when the computers monitors and fax machine were purchased or the cost of the items petitioner testified that the amount he claimed on his schedule c for the computers and peripheral equipment was a little over-inflated and that one of the computers was not even purchased in the tax_year in issue there is insufficient evidence to establish that these items were purchased during the year in issue or to substantiate the cost accordingly petitioner is not entitled to a deduction for his computers monitors and fax machine ii schedule a deductions on schedule a of his return petitioner claimed itemized_deductions of dollar_figure respondent disallowed dollar_figure of this amount which consisted of claimed unreimbursed employee_expenses of dollar_figure and attorney’s and tax preparation fees of dollar_figure reduced by percent of petitioner’s adjusted_gross_income a unreimbursed employee_expenses petitioner claimed a deduction of dollar_figure for his vehicle expenses on schedule a he completed form 2106-ez unreimbursed employee business_expenses and claimed that he drove big_number miles for business petitioner provided mileage logs totaling big_number miles petitioner contends he worked as a licensed vocational nurse and contracted with several agencies to work at various jobs at hospitals in the community petitioner argues that he is entitled to a deduction for the mileage because he was traveling from his home_office to the various contracting jobs so he was traveling from one job to another pursuant to sec_162 expenses relating to the use of an automobile that a taxpayer pays or incurs while commuting between the taxpayer’s residence and the taxpayer’s place of business or employment are not deductible because such expenses are personal and not business_expenses see 413_us_838 326_us_465 sec_1_162-2 sec_1_262-1 income_tax regs automobile mileage deductions are also subject_to the strict substantiation requirements of sec_274 transportation_expenses between a home_office and another place of business however may be deductible if the home_office is the taxpayer’s principal_place_of_business 113_tc_106 73_tc_766 gosling v commissioner tcmemo_1999_148 where a taxpayer shows that his automobile expenses satisfy the requirements of sec_162 but fails to establish that his records satisfy the heightened substantiation requirements of sec_274 the expenses will not be allowed to substantiate such expenses the taxpayer must provide the following adequate_records or sufficient evidence to corroborate his own testimony the amount of the expenditures the mileage for each business use of the automobile and the total mileage for all use of the automobile during the taxable_period the date of the business use and the business_purpose for_the_use_of the automobile sec_1_274-5t temporary income_tax regs fed reg date for the reasons discussed supra petitioner’s residence was not his principal_place_of_business even if petitioner had established that his use of the vehicle satisfied the requirements of sec_162 the logs he provided listing the business miles he drove do not meet the substantiation requirements of sec_274 because petitioner did not provide the total mileage for all use of the automobile during the taxable_period therefore petitioner’s transportation_expenses do not meet the trade_or_business requirement of sec_162 or the substantiation requirements of sec_274 so he is not entitled to deduct his transportation_expenses as schedule a unreimbursed employee_expenses b tax preparation fees a taxpayer may be allowed a deduction for ordinary and necessary expenses paid_or_incurred during the taxable_year in connection with the determination collection_or_refund_of_any_tax sec_212 petitioner claimed a deduction for tax preparation fees of dollar_figure as a miscellaneous deduction on schedule a at trial respondent conceded that petitioner was allowed dollar_figure of the claimed deduction so we do not further address this amount petitioner claims that he purchased turbo tax software for dollar_figure to prepare his return for tax_year after his taxes were not prepared satisfactorily by a professional tax preparer petitioner admitted at trial that he did not know how much turbo tax cost and that the dollar_figure was an estimate petitioner presented no evidence to support the claimed deduction for the purchase of tax preparation software as discussed supra when a taxpayer establishes that he has incurred a deductible expense but is unable to substantiate the exact amount the cohan doctrine permits the court to estimate the deductible amount cohan v commissioner f 2d pincite- the court must however have a reasonable basis upon which an estimate can be made vanicek v commissioner t c pincite because the record contains no evidence upon which we could base an estimate we conclude that petitioner is not entitled to the remaining dollar_figure deduction claimed for tax preparation fees and respondent’s determination with regard to this amount is sustained to reflect the foregoing and the concessions made by the parties decision will be entered under rule


department of the treasury oq g oe internal_revenue_service washington d c wv 4d tax_exempt_and_government_entities_division oct significant index number werke rakehkeekkkkhkker herkekeeeeeeeekekereeeeeereeeerer here eeekeeeerereeeeeeer rrarrahhaeeaareerankkeahkek hear eeerarerereerereeree in re request for waiver of the minimum_funding_standard for wakkaahhkkerehhrakanrkerkerrrerkakghr cire eee enaene e n wee aehkah company kekkkw rnr plan rrna hkaharaereee arerr reerawhe dear wreak this letter constitutes notice that a waiver of the minimum_funding_standard for the plan for the plan_year ending date has been approved subject_to the following conditions within days of the date of the final favorable waiver letter the company will provide collateral acceptable to the pension_benefit_guaranty_corporation pbgc for the full amount of the plan_year waiver starting with the quarterly contribution due on date the company makes the required quarterly contributions to the plan in a timely fashion while the plan is subject_to a waiver of the minimum_funding_standard for this purpose the total amount of each quarterly contribution will be determined in accordance with sec_430 and sec_430 of the code and can be comprised of several installments made prior to the respective due_date of the quarterly contribution until full amortization of the waived amount the company will provide verification of each quarterly contribution to pbgc within five business days of the payment the company makes contributions to the plan in amounts sufficient to meet the minimum_funding requirements for the plan for the plan years ending date through and provide verification of each quarterly contribution to pbgc within five business days of the payment under sec_412 of the code the company is restricted from amending the plan to increase benefits and or plan liabilities while any portion of the waived_funding_deficiency remains unamortized with only certain exception as defined in sec_412 the company will copy pbgc on any correspondence with the irs regarding notification or application_for such an exception the company provides proof of payment of all contributions described above ina timely manner to the service and to the pbgc using the fax numbers or addresses below irs - ep classification whekkereeakehanhrekaak rekkearerkearunaakkakkkkkake rereekeeerekeeeereeer rerrereeereereereeeeeeee fax co werk akers pension_benefit_guaranty_corporation kakkkkkk hrekckkrakhrerenhkenakner ree eeeerereekrereeee fax s werkkekrekeakkhkkae if any one of these conditions is not satisfied the waiver is retroactively null and void this conditional waiver has been granted in accordance with sec_412 of the internal_revenue_code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the amount for which this conditional waiver has been granted is the contribution that would otherwise be required to reduce the balance in the funding_standard_account to zero as of date the company is a global provider of digital power control systems to address a business downturn the company divested itself of various business operations but retained most of its pension obligations the company has no other significant debt and it expects to return to profitability once the economy improves and has demonstrated that it is able to fund the plan on an ongoing basis assuming the waiver is granted your attention is called to sec_412 of the code and sec_304 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived_funding_deficiency remains unamortized please note that any amendment to a profit sharing plan or any other retirement plans covering employees covered by this plan maintained by the company to increase the liabilities of those plans would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan by the company covering employees covered by this plan would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan_year ending date the date of this letter should be entered on schedule b actuarial information for this reason we suggest that you furnish a copy of this letter to the enrolled_actuary who is responsible for the completion of the schedule b we have sent a copy of this letter to the manager ep classification in baltimore maryland and to the manager ep compliance unit in chicago illinois if you require further assistance in this matter please contact at - kekkan sincerely yours mw th wp william hulteng manager employee_plans technical cc hmhkkekrehkehaakearmkewerkerkhekek manager ep classification baltimore maryland manager ep compliance unit chicago illinois


t c summary opinion united_states tax_court marie suze bien-aime petitioner v commissioner of internal revenue respondent docket no 3456-04s filed date marie suze bien-aime pro_se miriam c dillard for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that the petition was filed unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined deficiencies in petitioner's federal income taxes and accuracy-related_penalties as follows year deficiency penalty sec_6662 dollar_figure big_number dollar_figure dollar_figure after a concession the issues remaining for decision are whether petitioner received unreported income during and is entitled to deductions on schedule a itemized_deductions in excess of those allowed by respondent for and and is liable for accuracy-related_penalties for and background the stipulation of facts and the exhibits received into evidence are incorporated herein by reference petitioner resided in coral springs florida at the time the petition was filed a petitioner's tax_return for petitioner paid a return preparer to complete her form_1040 u s individual_income_tax_return on the return petitioner reported dollar_figure in wages and dollar_figure of federal tax 1respondent concedes that petitioner reported dollar_figure of nonemployee compensation from sunrider international and the corresponding self-employment_tax withheld petitioner reported no other income for petitioner signed the return without reviewing it when it was presented to her by her preparer petitioner described him as a professional on her schedule a petitioner reported dollar_figure of medical and dental expenses dollar_figure of real_estate_taxes dollar_figure of mortgage interest dollar_figure of charitable_contributions and dollar_figure of miscellaneous business_expenses petitioner's income respondent received forms w-2 wage and tax statement from third-party payors reporting that petitioner received the following wages during vendor amount vitas healthcare harrison group sunshine companies ii memorial healthcare system holy cross long term care total dollar_figure big_number big_number big_number big_number big_number respondent also received information from third-party payors reporting additional payments to petitioner fidelity investments issued two forms 1099-b proceeds from broker and barter_exchange transactions reporting dollar_figure in stock proceeds paid to petitioner sunrider international issued a form misc miscellaneous income reporting nonemployee compensation of dollar_figure first union national bank and washington mutual bank each issued a form 1099-int interest_income reporting interest_income of dollar_figure and dollar_figure respectively fiserv securities issued a form 1099-div dividends and distributions reporting dollar_figure of capital_gain dividends and dollar_figure of ordinary dividends petitioner's deductions respondent received a form_1098 mortgage interest statement issued by market street mortgage for reporting that petitioner paid dollar_figure in mortgage interest respondent allowed petitioner a mortgage interest_deduction for this higher amount respondent also allowed petitioner's reported deduction for real_estate_taxes petitioner's remaining deductions were disallowed due to lack of substantiation accuracy-related_penalty respondent determined that petitioner is liable for an accuracy-related_penalty under sec_6662 for b petitioner' sec_2001 tax_return for petitioner again retained the same preparer on her form_1040 she reported dollar_figure in wages and dollar_figure of income from capital_gains petitioner also reported dollar_figure of federal tax withheld she reported no other income for petitioner did not review the return before signing and mailing it on her schedule a petitioner reported dollar_figure of medical and dental expenses dollar_figure of real_estate_taxes dollar_figure of mortgage interest dollar_figure of charitable_contributions and dollar_figure of miscellaneous business_expenses petitioner's income respondent received forms w-2 from third-party payors reporting that petitioner received the following wages during vendor amount kindred nursing centers vitas healthcare memorial healthcare system holy cross long term care total dollar_figure big_number big_number big_number respondent also received information from third-party payors reporting additional payments to petitioner washington mutual bank issued a form 1099-int reporting interest_income of dollar_figure fiserv securities issued both a form 1099-div reporting dollar_figure of capital_gain dividends and form 1099-b reporting dollar_figure of stock proceeds petitioner's deductions respondent received forms issued by market street mortgage and alliance mortgage for reporting that petitioner paid dollar_figure and dollar_figure respectively in mortgage interest respondent allowed petitioner a mortgage interest_deduction for this higher amount respondent also allowed petitioner's reported deduction for real_estate_taxes petitioner's remaining deductions were disallowed due to lack of substantiation accuracy-related_penalty respondent determined that petitioner is liable for an accuracy-related_penalty under sec_6662 for discussion generally the commissioner's determinations of unreported income in a notice_of_deficiency are presumed correct and the taxpayer has the burden of proving that those determinations are erroneous see rule a 290_us_111 in certain circumstances however sec_7491 places the burden_of_proof on the commissioner petitioner has not alleged or shown that sec_7491 is applicable in this case petitioner did not call any witnesses or otherwise introduce any evidence to show error in respondent's determinations of her proper income_tax_liability petitioner in fact made no argument that respondent's adjustments are incorrect she feels she was misled by her return preparer the court finds that petitioner has failed to meet her burden and subject_to a concession by respondent sustains respondent's determination with respect to the and unreported income petitioner has not provided any evidence to substantiate an allowance of itemized_deductions in excess of those allowed by respondent respondent's determination is sustained under sec_7491 the commissioner has the burden of production in any court_proceeding with respect to the liability of any individual for any penalty or addition_to_tax 116_tc_438 in order to meet his burden of production the commissioner must come forward with sufficient evidence indicating that it is appropriate to impose the addition_to_tax for failure_to_file in the particular case id pincite once the commissioner meets his burden of production the taxpayer must come forward with evidence sufficient to persuade a court that the commissioner's determination is incorrect id pincite respondent determined petitioner is liable for an accuracy-related_penalty pursuant to sec_6662 for each of the years in issue sec_6662 imposes a penalty of percent of the portion of the underpayment which is attributable to inter alia negligence or disregard of rules or regulations sec_6662 negligence is the 'lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances ' 85_tc_934 quoting marcello v commissioner 380_f2d_499 5th cir it includes any failure by the taxpayer to keep adequate books_and_records or to substantiate items properly sec_1_6662-3 income_tax regs the term disregard includes any careless reckless or intentional disregard sec_6662 no penalty shall be imposed if it is shown that there was reasonable_cause for the underpayment and the taxpayer acted in good_faith with respect to the underpayment sec_6664 the determination of whether a taxpayer acted with reasonable_cause and in good_faith is made on a case-by-case basis taking into account all pertinent facts and circumstances the most important factor is the extent of the taxpayer's effort to assess the taxpayer's proper tax_liability the evidence in the record shows that petitioner failed to report substantial amounts of income for her and tax years petitioner made no effort to review the returns before signing them and blamed her return preparer for the omissions taxpayers have a duty to read a return and to make sure all items are included 70_tc_465 citing 21_tc_678 affd 651_f2d_1233 6th cir petitioner's failure to carefully review her return was not reasonable see guenther v commissioner tcmemo_1995_280 on the basis of the record the court concludes that petitioner is liable for the accuracy-related_penalty under sec_6662 for and reviewed and adopted as the report of the small_tax_case division to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court estate of timothy j tehan deceased timothy r tehan executor commissioner of internal revenue respondent petitioner v docket no filed date michael f callahan for petitioner william j gregg and ann welhaf for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined a deficiency of dollar_figure in federal estate_tax estate_tax with respect to the estate estate of timothy j tehan decedent the issues remaining for decision are is certain property includible in decedent’s gross_estate under sec_2036 we hold that it is is the estate entitled to deduct under sec_2053 claimed personal representative’s commissions in excess of the amount allowed by respondent we hold that it is to the extent stated herein findings_of_fact most of the facts have been stipulated and are so found at the time the petition was filed timothy r tehan mr tehan the son of decedent and the personal representative of the estate resided in bethesda maryland decedent had eight children including mr tehan dece- dent’s other children are ann m sanner patrick g tehan eileen t tehan daniel j tehan erin m boccia maureen r tehan and william t tehan on date decedent purchased condominium unit number 610n decedent’s residence pincite connecticut avenue chevy chase montgomery county maryland the purchase_price of that condominium was dollar_figure on date decedent while residing in decedent’s residence executed a declaration of trust under which he placed dollar_figure and certain life_insurance policies into an irrevocable 1unless otherwise indicated all section references are to the internal_revenue_code in effect on the date of decedent’s death all rule references are to the tax_court rules of prac- tice and procedure trust known as the timothy j tehan irrevocable_trust on date in anticipation of the three deeds discussed below that decedent executed with respect to decedent’s residence decedent and decedent’s children executed an agreement date agreement concerning that residence which was the only agreement with respect to decedent’s use and occupancy of decedent’s residence into which decedent and decedent’s children entered the date agreement provided in pertinent part this agreement made this ___ day of _______ by and between timothy j tehan and timothy r tehan ann m sanner patrick g tehan eileen t tehan daniel j tehan erin m boccia maureen r tehan and william t tehan collectively the owners now therefore in consideration of the mutual promises covenants and agreements herein contained the parties agree as follows occupancy of property and payment of ex- penses timothy j tehan shall have the sole and exclusive right to the use and occupancy of the prop- erty for such period of time as he desires while he is occupying the property timothy j tehan shall not pay any rent but shall be solely responsible for the payment of any mortgage secured against the property the monthly condominium assessment the annual real_estate_taxes and insurance premiums for the property and all costs or expenses in connection with the main- tenance and repair of the property at such time as timothy j tehan ceases to occupy the property such costs and expenses shall be divided between the owners of the property in accordance with their percentage 2as we found above decedent and decedent’s children exe- cuted the agreement on date interest in the property restrictions on transfer of interest except as otherwise provided herein no owner shall sell hypothecate pledge assign or otherwise transfer with or without consideration any part of his her interest in the property to any other person without first offering his her interest first to timothy j tehan and secondly to the other owners in accordance with the provisions of this paragraph a the owner desiring to sell encumber or otherwise dispose_of his her interest in the property the selling owner shall submit a written offer to sell his or her interest to timothy j tehan setting forth the price and terms and conditions under which he she is willing to sell his her interest for a period of ninety days after receipt of such offer timothy j tehan shall have the right to accept said offer and to purchase the interest of the selling owner in the event timothy j tehan does not accept the offer then the other owners shall have the option in proportion to their ownership_interest to purchase said interest by notifying the selling owner within thirty days after the expiration of timothy j tehan’s option if the owners accept the offer they shall at the same time fix a closing date not more than sixty days after the date of acceptance the purchase_price shall be payable in cash on the closing date unless the offer provides otherwise if timothy j tehan and the owners all fail to accept the offer then the selling owner shall be free for a period of thirty days thereafter to solicit offers from any bona_fide prospective pur- chasers if the selling owner receives a bona_fide offer to purchase his her interest at a price and on terms acceptable to the selling owner he she shall send a written copy of said offer to timothy j tehan and the other owners and for a period of ninety days after receipt of the offer timothy j tehan and the other owners shall have the option to purchase the interest of the selling owner at the same price and on the same terms and conditions as set forth in the offer of the bona_fide prospective purchaser if timothy j tehan or the other owners do not exercise the said option the selling owner shall be free to sell his her interest to the bona_fide prospective purchaser pro- vided i the purchase_price and terms and conditions of sale shall not be different than set forth in the bona_fide offer previously sent to timothy j tehan and the other owners ii if the sale is not consummated within thirty days after the option of timothy j tehan and the other owners expire the interest shall once again be subject_to the restrictions herein and any transferee of the selling owner’s interest shall automatically be bound by the terms of this agreement and shall be required to join in execute acknowledge and deliver a copy of this agreement and he she shall thereupon become an owner sale of property at such time as timothy j tehan ceases to occupy the property the property shall be sold and the net_proceeds of sale shall be allocated and distributed among the owners in proportion to their percentage of ownership_interest reproduced liter- ally on or about date decedent executed a deed first deed which was recorded that deed provided in perti- nent part witnesseth that for no consideration the grantor decedent does hereby grant and convey unto each of the grantees decedent’s children in fee simple and as tenants in common an undivided interest in and to that piece or parcel of improved land dece- dent’s residence on or about date decedent executed a second deed second deed which was recorded that deed provided in perti- nent part witnesseth that for no consideration the grantor decedent does hereby grant and convey unto each of the grantees decedent’s children in fee simple and as tenants in common an undivided interest in and to that piece or parcel of improved land dece- dent’s residence the grantor does furthermore confirm that as of the date of execution of this instrument ownership of the property hereinabove described is vested in the following entities as tenants in common with their percentage interest opposite each name name timothy j tehan timothy r tehan ann m sanner patrick g tehan eileen t tehan daniel j tehan erin m boccia maureen r tehan william t tehan percentage interest on or about date decedent executed a third deed third deed that deed provided in pertinent part witnesseth that for no consideration the grantor decedent does hereby grant and convey unto each of the grantees decedent’s children in fee simple and as tenants in common an undivided interest in and to that piece or parcel of improved land dece- dent’s residence the grantor does furthermore confirm that as of the date of execution of this instrument ownership of the property hereinabove described is vested in the following entities as tenants in common with their percentage interest opposite each name 3the record does not disclose whether the third deed was recorded name timothy r tehan ann m sanner patrick g tehan eileen t tehan daniel j tehan erin m boccia maureen r tehan william t tehan percentage interest at all times after decedent and decedent’s children executed the first deed on date until decedent died on date decedent continued to treat decedent’s residence as his own thus pursuant to the terms of the date agree- ment until he died decedent continued to use and occupy decedent’s residence and pay all of the monthly expenses with respect to that residence monthly expenses which totaled about dollar_figure excluding utility expenses and between dollar_figure and dollar_figure including utility expense sec_4 and which included condominium fees real_property_taxes on decedent’s residence homeowner’s insur- ance and expenses of maintaining that residence at no time 4decedent’s children would not have required decedent to vacate decedent’s residence if he had failed to pay the monthly expenses 5the record does not disclose the amount s of monthly condominium fees with respect to decedent’s residence that decedent paid during the period date to the date of decedent’s death however the record establishes that during the period date the date on which decedent purchased decedent’s residence until the date of his death such condomin- ium fees ranged from dollar_figure to dollar_figure 6there was no mortgage loan with respect to decedent’s continued did decedent need permission from his children in order to have guests at decedent’s residence or to redecorate it at no time during decedent’s life did any of decedent’s children use or occupy decedent’s residence or pay any of the monthly expenses with respect to that residence none of decedent’s children attempted to sell his or her purported interest in decedent’s residence before decedent died after decedent died decedent’s children sold that residence on date decedent executed a last will and testament decedent’s will decedent’s will provided in perti- nent part item i i direct my personal representative hereinafter named to pay the expenses of my last illness and funeral as soon after my death as may be practicable in such amount as he may deem proper and without regard to any limitation in the applicable local law as to the amount of such expenses item ii i direct that all inheritance estate legacy or other taxes which may be imposed with respect to my estate whether or not passing under this will shall be paid out of my residuary_estate item iii all the rest residue and remainder of my estate of whatsoever kind and wheresoever situate i give continued residence thus decedent made no mortgage loan payments with respect to that residence during the period date until the date of his death devise and bequeath absolutely and in fee simple unto my children timothy r tehan ann m sanner patrick g tehan eileen t tehan daniel j tehan erin m boccia maureen r tehan and william t tehan in equal shares per stirpes item iv my personal representative shall have the powers and duties accorded to personal_representatives under the estates and trusts article of the annotated code of maryland section and any amendments thereto in addition and not by way of limitation of any such powers my personal representative is authorized and empowered at any time and from time to time in his absolute discretion to hold and retain all or any portion of property received from my estate or from any other source without regard to any law or will of court concerning diversification risk or non-produc- tivity to invest and reinvest or leave tempo- rarily uninvested any funds or any other_property of any kind or nature without regard to any law or rule_of court prescribing investment obligation of fiducia- ries to sell exchange partition or otherwise to deal with property real or personal at public or private sale for such purposes and upon such terms as my personal representative may deem appropriate to borrow money and to secure payment of any amount so borrowed by mortgage of any real or personal_property to divide and distribute any property hereunder in_kind or in money or in part kind and part money item v i do hereby nominate constitute and appoint my son timothy r tehan personal representative of this my last will and testament if my said son shall fail to qualify or cease to act i appoint my son patrick g tehan as personal representative in his place and stead i direct that my personal representative not be required to file a bond or enter other security in any jurisdiction for the faithful performance of his du- ties on date decedent died while a resident and domicil- iary of maryland after decedent’s death pursuant to the provisions of decedent’s will the circuit_court for montgomery county maryland sitting as the orphans’ court orphans’ court appointed mr tehan as the personal representative of decedent’s estate on the date of decedent’s death the fair rental value of decedent’s residence was between dollar_figure and dollar_figure per month on the same date the fair_market_value of that residence was dollar_figure on or about date mr tehan filed form_706 united_states estate and generation-skipping_transfer_tax return estate_tax_return on behalf of the estate the estate_tax_return listed as part of decedent’s gross_estate inter alia the following types of assets and the following date-of-death values for such types of assets assets schedule a--real estate schedule b--stocks and bonds schedule c--mortgages notes and cash schedule d--insurance on the decedent’s life schedule e--jointly owned property schedule f--other miscellaneous property schedule g--transfers during decedent’s life schedule h--powers of appointment schedule i--annuities value dollar_figure big_number big_number big_number big_number big_number big_number decedent’s estate_tax_return claimed deductions of dollar_figure in schedule j funeral_expenses and expenses_incurred in administer- ing property_subject_to_claims which included dollar_figure of execu- tor’s commissions and dollar_figure of attorney’s fees decedent’s estate_tax_return did not claim any deductions in schedule l expenses_incurred in administering property not subject_to claims on a date not disclosed by the record between may and date mr tehan in his capacity as the personal representa- tive of the estate and his attorney filed with the orphans’ court a document entitled consent petition for allowance of personal representative’s commissions and attorneys’ fees consent petition all of the beneficiaries of the estate consented to the granting of the consent petition in the consent petition the personal representative and his attorney requested the orphans’ court to allow personal representative commissions of dollar_figure and attorney’s fees of dollar_figure in the consent petition the personal representative and his attorney claimed inter alia as follows aggregate commissions and attorney ’s fees in excess of the amount authorized by of the estates and trusts article of maryland is sic requested due to the extraordinary amount of time diligence and expertise required of the personal repre- sentative in administering the substantially larger but non-commissionable non-probate assets of the estate of approximately dollar_figure million as opposed to the relatively modest amount of probate assets specifi- cally the personal representative estimates that of the more than hours of time expended in administer- ing his father’s estate over the last months ap- proximately of this time was expended attending to issues arising from or related to the non- commissionable portion of the taxable_estate on date the orphans’ court issued an order date order approving inter alia the dollar_figure of personal representative’s commissions that mr tehan requested in the consent petition pursuant to that order on date the estate issued a dollar_figure check to mr tehan mr tehan deposited that check into his personal savings account on novem- ber three days before the trial was held in this case in the notice_of_deficiency notice that respondent issued with respect to decedent’s estate respondent determined inter alia to include in decedent’s gross_estate under sec_2036 decedent’s residence that respondent determined had a value of dollar_figure on the date of decedent’s death in the notice respondent also determined inter alia to disallow as deductions dollar_figure of the dollar_figure claimed as personal repre- sentative’s commissions and dollar_figure of the dollar_figure claimed as attorney’s fees 7in the date order the orphans’ court also ap- proved the dollar_figure of attorney’s fees requested in the consent petition 8in the stipulation for trial respondent stipulated that the date-of-death value of decedent’s residence was dollar_figure 9in the stipulation for trial the estate conceded inter alia respondent’s determinations to increase decedent’s taxable_estate by the amounts of dollar_figure and dollar_figure respectively for a note receivable and a state_income_tax refund as a result of those concessions on brief respondent concedes that the amount of personal representative’s commissions that respondent deter- mined in the notice to allow as a deduction under sec_2053 continued opinion we first address sec_7491 the parties agree that sec_7491 is applicable in the instant case the parties disagree however over whether the burden_of_proof has shifted to respondent under sec_7491 with respect to the issue presented under sec_2036dollar_figure we need not and shall not address that disagreement that is because resolution of the issue presented under sec_2036 does not depend on who has the burden_of_proof sec_2036 the only dispute between the parties under sec_2036 is whether decedent retained for his life the continued should be increased from dollar_figure to dollar_figure at trial the estate conceded respondent’s determination in the notice to disallow dollar_figure of the dollar_figure of attorney’s fees that the estate claimed as a deduction under sec_2053 10petitioner does not claim that the burden_of_proof has shifted to respondent under sec_7491 with respect to the issue presented under sec_2053 sec_2036 provides sec_2036 transfers with retained_life_estate a general_rule --the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise under which he has retained for his life or for any period not ascer- tainable without reference to his death or for any continued possession or enjoyment of decedent’s residence within the meaning of that section it is the estate’s position that he did not it is respondent’s position that he did in support of the estate’s position under sec_2036 the estate argues here the decedent made three transfers the transfers were for less than full consideration in fact they were gratuitous gifts to his children however they were not transfers under which he re- tained for his life the right to possession or enjoy- ment of the property transferred or the income from the property the deeds were absolute transfers of fee interests in the property without reservation the decedent did not retain under the transfer the right to possession or enjoyment of the condominium for his life until the third conveyance date the decedent was a tenant in common with his grantees as a co-tenant he had the non-exclusive right to use and enjoy the property as did all the other co-tenants see gener- ally am jur 2d-tenancy and joint_ownership sec_32 sec_41 sec_42 the decedent acquired the right to exclusive possession of the condominium by contract the parties’ agreement regarding use and payment of expenses hereinafter the agreement generally all co- tenants are obligated to contribute to the expenses and upkeep of the property and a tenant who pays more than his pro-rata share is entitled to contribution from the other tenants kline v kline a2d md app md app cert den a2d md however here the parties entered into an agree- ment that provided for the decedent’s exclusive use and occupancy of the condominium in return for payment of continued period which does not in fact end before his death-- the possession or enjoyment of or the right to the income from the property all of the expenses of the condominium the grantees gave up their right to use and occupancy in return for the decedent’s agreement to pay all of the expenses and not look to them for contribution the agreement was intended to cover only the period of time between the first conveyance and the last conveyance in guynn v united_states f 2d ustc par big_number 4th cir the decedent an eighty year old woman conveyed a residence to her daughter but remained in the residence without an express agreement that entitled her to do so paid no rent to the grantee and paid for improvements and certain ex- penses the decedent’s grantee her daughter testi- fied that the decedent’s remaining in the property was not discussed because it was understood by all involved that she would stay in the property until her death the fourth circuit held that the property was included in the estate based on an implied agreement for a retained_life_estate in 55_tc_666 the decedent and wife conveyed farm prop- erty to their four children simultaneously leasing the property back for a share of the crops that was found to be fair market rental the property was not in- cluded in the taxable_estate even though for four years the decedent did not actually pay the rent the court found that the outright transfer of the property to the children and the lease back were bona_fide transac- tions the forbearance from collecting rent was due to circumstances that arose later and were not contem- plated by the parties at the time of the transaction the difference between barlow and guynn is that in barlow as in this case the decedent really trans- ferred the entire fee without retaining a life_estate barlow like the decedent here was contractually obligated to pay for his continuing use of the prop- erty no life_estate having been reserved under the transfer guynn simply remained in possession without paying any quid pro quo because the parties so agreed she retained a life_estate so sec_2036 applied there was no discussion or paperwork because none was needed reproduced literally in support of respondent’s position under sec_2036 respondent argues a decedent’s gross_estate includes property inter- ests with a retained_life_estate sec_2036 inclusion is required where the decedent retained possession or enjoyment or right to income from property transferred for less than full consideration i r c a here the decedent retained the necessary possession or enjoyment of his personal residence-unit 610n such that its value should be included in the decedent’s gross_estate even though the decedent and his eight children exe- cuted a series of conveyances transferring legal_title to unit 610n no consideration was paid_by the dece- dent’s children for the conveyance the decedent paid all of the expenses for unit 610n before during and after the series of conveyances the decedent did not pay any rent for the occupancy of unit 610n before during and after the series of conveyances his possession or enjoyment of unit 610n was undisturbed during and after the series of transfers he did not need the approval of his children to have guests or redecorate unit 610n it was uncontroverted at trial that even if the decedent had not paid expenses to maintain unit 610n during and after the series of transfers his children would not have sought to evict him from unit 610n finally as legal_title of the decedent’s eight children in unit 610n increased progressively to then and finally the decedent still paid all of the expenses to maintain unit 610n without reflecting any change in ownership when all is said and done the decedent retained complete possession or enjoyment over unit 610n before during and after the series of transfers as such code sec_2036 mandates that the value of unit 610n be included in the decedent’s gross_estate sec_2036 applies if there exists at the time of the transfer of property an agreement either express or implied that the transferor will retain possession or enjoyment of the property transferred even if the transferor has no legally enforceable right to do so 437_f2d_1148 4th cir 73_tc_82 66_tc_1080 55_tc_666 in the case of real_property the terms ‘possession’ and ‘enjoyment’ in sec_2036 have been interpreted to mean ‘the lifetime use of the property ’ 3_f3d_591 2d cir quoting 408_us_125 affg 98_tc_594 in the present case there was an express agreement namely the date agreement which was executed on the same date on which the first deed was executed under which decedent continued during his lifetime to use and occupy ie possess and enjoy decedent’s residence pay all of the monthly expenses with respect to that residence and other- wise treat that residence as his own at no time did decedent need permission from his children in order to have guests at decedent’s residence or to redecorate it at no time during decedent’s life did any of decedent’s children use or occupy decedent’s residence or pay any of the monthly expenses with 12decedent’s children would not have required decedent to vacate decedent’s residence if he had failed to pay the monthly expenses respect to that residence none of decedent’s children attempted to sell his or her purported interest in decedent’s residence before decedent dieddollar_figure this court and other courts have found that facts such as those which we have found in the instant case surrounding the transfer of property by a decedent demonstrate that the decedent retained possession and enjoyment of the property transferred within the meaning of sec_2036 see eg estate of maxwell v commissioner supra pincite guynn v united_states supra estate of rapelje v commissioner supra pincite estate of honigman v commissioner supra pincite 57_tc_643 the estate’s reliance on estate of barlow v commissioner supra is misplaced in estate of barlow the decedent involved there and his wife gratuitously transferred a farm to their children and under a contemporaneously executed lease retained the possession and enjoyment of that farm in return for the payment by them of a fair customary rental id pincite in the instant case the date agreement was not a lease agreement and decedent did not agree under that agreement 13after decedent died decedent’s children sold that resi- dence to pay any rent let alone fair rental value for his posses- sion and enjoyment of decedent’s residencedollar_figure based upon our examination of the entire record before us we find that decedent retained a life_estate in decedent’s residence during the period date until the date of his death on that record we further find that decedent re- tained possession and enjoyment of decedent’s residence within the meaning of sec_2036 on the record before us we find that the value of decedent’s residence is includible in decedent’s gross_estate under that sectiondollar_figure sec_2053 the estate has the burden of establishing its entitlement to deduct under sec_2053 the claimed personal representative’s 14indeed the date agreement provides that decedent shall not pay any rent while occupying decedent’s residence 15despite the purported decrease in decedent’s ownership_interest in decedent’s residence under the first deed the second deed and the third deed decedent paid all of the monthly expenses with respect to that residence 16for the first time on brief the estate advances an alter- native argument that if inclusion of decedent’s residence in the taxable_estate were to be based upon the decedent’s remaining in the property for six weeks when he had no contractual right to do so it should be limited to the interest conveyed in on the record before us we reject the estate’s alterna- tive argument in finding that decedent retained possession and enjoyment of decedent’s residence within the meaning of sec_2036 we have not relied only on decedent’s remaining in that residence during the period starting on the date on which the third deed was executed until the date of his death commissionsdollar_figure it is the estate’s position that it is entitled to deduct under sec_2053 personal representative’s commissions of dollar_figure it is respondent’s position that the estate is entitled to deduct under sec_2053 personal representative’s commis- sions of dollar_figure in support of its position under sec_2053 the estate argues that under sec_20_2053-3 estate_tax regs the date order of the orphans’ court which allowed dollar_figure 17see supra note 18the amount of personal representative’s commissions claim- ed by the estate that remains in dispute is dollar_figure see supra note sec_20_2053-3 estate_tax regs entitled executor’s commissions provides in pertinent part the executor may deduct his commissions in such an amount as has actually been paid if the amount of the commissions has not been fixed by decree of the proper court the deduction will be allowed to the extent that all three of the following conditions are satisfied i the district_director is reasonably satisfied that the commissions claimed will be paid ii the amount claimed as a deduction is within the amount allowable by the laws of the jurisdiction in which the estate is being administered and iii it is in accordance with the usually ac- cepted practice in the jurisdiction to allow such an amount in estates of similar size and character of personal representative’s commissions is dispositive of the issue presented under sec_2053 according to the estate sec_20_2053-3 estate_tax regs appears to provide by negative implication that a state court order is dispositive of the issue of the deductibility of personal representative’s commissions it provides that the executor may deduct has commissions in such amount as has actually been paid if the amount of the decree has not been fixed by order of the proper court the deduction will be allowed to the extent that all three of the following conditions are satisfied id the further requirements are applicable only to cases where personal representative’s commissions are not approved by court order reproduced literally in support of respondent’s position under sec_2053 respondent argues that under section of md code ann est trusts md code ann est trusts sec the aggregate amount of personal representative’s 20the date order of the orphans’ court also allowed dollar_figure of attorney’s fees 21sec md code ann est trusts provides in pertinent part a general --an attorney is entitled to reason- able compensation_for legal services rendered by him to the estate and or the personal representative b petition --upon the filing of a petition in reasonable detail by the personal representative or the attorney the court may allow a counsel fee to an attorney employed by the personal representative for legal services the compensation shall be fair and reasonable in the light of all the circumstances to be considered in fixing the fee of an attorney c considered with commissions --if the court shall allow a counsel fee to one or more attorneys it shall take into consideration in making its determina- continued commissions and attorney’s fees allowable as a deduction is limited to the amount determined under section b of md code ann est trusts md code ann est trusts sec b quoted and discussed below consequently according to respondent the estate is entitled to deduct under sec_2053 only dollar_figure of personal representative’s commis- sions in determining the taxable_estate sec_2053 relating to expenses_incurred in administering property that is included in the gross_estate and subject_to claims allows a deduction from the value of the gross_estate of such amounts for administration_expenses as are allowable by the laws of the jurisdiction under which the estate is being administered sec_20_2053-3 estate_tax regs provides in pertinent part a in general the amounts deductible from a dece- dent’s gross_estate as administration_expenses of the first category see paragraphs a and c of sec_20_2053-1 are limited to such expenses as are actually and necessarily incurred in the administration of the decedent’s estate that is in the collection of as- sets payment of debts and distribution_of_property to the persons entitled to it expenditures not essential to the proper settlement of the estate but incurred for the individual benefit of the heirs legatees or devisees may not be taken as deductions continued tion what would be a fair and reasonable total charge for the cost of administering the estate under this article and it shall not allow aggregate compensation in excess of that figure administration_expenses include executor’s commis- sions attorney’s fees and miscellaneous expenses sec_2053 allows deductions of amounts representing expenses_incurred in administering property that is included in the gross_estate and not subject_to claims to the same extent such expenses would be allowable as deductions under sec_2053 if such property were subject_to claims and such amounts are paid before the expiration of the period of limita- tion for assessment provided in sec_6501 sec_20_2053-8 estate_tax regs provides in pertinent part usually these expenses expenses in administering property not subject_to claims are incurred in connec- tion with the administration of a_trust established by a decedent during his lifetime they may also be incurred in connection with the collection of other assets or the transfer or clearance of title to other_property included in a decedent’s gross_estate for estate_tax purposes but not included in his probate_estate b these expenses may be allowed as deductions only to the extent that they would be allowed as deduc- tions under the first category of deductions set forth in sec_20_2053-1 estate_tax regs if the property were subject_to claims see sec_20_2053-3 the only expenses in administering property not subject_to claims which are allowed as deductions are those occa- sioned by the decedent’s death and incurred in settling the decedent’s interest in the property or vesting good title to the property in the beneficiaries expenses not coming within the description in the preceding sentence but incurred on behalf of the transferees are not deductible c the principles set forth in paragraphs b c and d of sec_20_2053-3 relating to the allowance of executor’s commissions attorney’s fees and miscel- laneous administration_expenses of the first category of deductions set forth in sec_20_2053-1 estate_tax regs are applied in determining the extent to which trustee’s commissions attorney’s and accountant’s fees and miscellaneous administration_expenses are allowed in connection with the administra- tion of property not subject_to claims sec_20_2053-1 estate_tax regs relating to the effect of a local court decree on expenses claimed under sec_2053 and b provides in pertinent part effect of court decree the decision of a local court as to the amount and allowability under local law of a claim or administration expense will ordinarily be accepted if the court passes upon the facts upon which deductibility depends if the decree was rendered by consent it will be accepted provided the consent was a bona_fide recognition of the validity of the claim and not a mere cloak for a gift and was accepted by the court as satisfactory evidence upon the merits it will be presumed that the consent was of this character and was so accepted if given by all parties having an interest adverse to the claimant the decree will not be accepted if it is at variance with the law of the state as for example an allow- ance made to an executor in excess of that prescribed by statute in determining the deductibility of expenses under sec_2053 the deductions claimed must be allowable not only by the state law under which the estate is administered but also by federal_law see 294_f3d_352 2d cir affg tcmemo_1999_396 923_f2d_335 4th cir affg tcmemo_1989_470 75_tc_355 we reject the estate’s argument that the date order of the orphans’ court is dispositive of the issue of the deduct- ibility of personal representative’s commissions the exercise of the discretion of the orphans’ court of maryland to determine the amount of commissions allowable to a personal representative is limited by maryland statutes to the amounts prescribed in such statutes am jewish joint distrib comm v eisenberg a 2d md cearfoss v snyder a 2d md section b md code ann est trusts prescribes the computation of the compensation allowable to the personal representative of an estate as follows b computation of compensation --unless the will provides a larger measure of compensation upon peti- tion filed in reasonable detail by the personal repre- sentative the court may allow the commissions it considers appropriate the commissions may not exceed those computed in accordance with the table in this subsection if the property subject_to the commission may administration is not exceed not over dollar_figure over dollar_figure dollar_figure plu sec_3_6 of the excess over dollar_figure thus under md code ann est trusts sec b the maximum compensation to which the personal representative of an estate is entitled in order to compensate such representative for all of the ordinary work of administering an estate subject_to administration see lehman v kairys a 2d md talbert v reeves a 2d md is determined by reference to the amount of property subject_to administration ie probate property the parties agree that the value of decedent’s probate property as of the date of his death was dollar_figure under md code ann est trusts sec b the maximum amount of commissions allowable to mr tehan the estate’s personal representative was dollar_figure calculated as follows x dollar_figure x dollar_figure total dollar_figure big_number big_number the date order of the orphans’ court allowed the estate’s personal representative commissions of dollar_figure that amount exceeds the maximum amount of commissions allowable under md code ann est trusts sec b we are not required to accept the date order of the orphans’ court allowing dollar_figure of personal representative’s commissions sec b estate_tax regs on the record before us we find that the estate is not entitled to deduct personal representative’s commissions in excess of dollar_figure the maximum amount of such commissions allow- 22respondent agrees that the maximum amount of commissions allowable under md code ann est trusts sec b to mr tehan the personal representative of the estate was dollar_figure 23the value of decedent’s probate property reduced by dollar_figure is dollar_figure able under md code ann est trusts sec b dollar_figure re- spondent appears to acknowledge that if attorney’s fees of dollar_figure had not been allowed under md code ann est trusts sec the estate would have been entitled to deduct under sec_2053 that maximum amount of commissions however as we understand respondent’s position md code ann est trusts sec c requires that the amount of commissions allowable to a personal representative under md code ann est trusts sec b be reduced by the amount of attorney’s fees allowed consequently respondent maintains that the estate is entitled to deduct under sec_2053 only dollar_figure of personal representative’s commissions ie dollar_figure maximum amount of commissions allowable under md code ann est trusts sec b minus dollar_figure attorney’s fees allowed under md code ann est trusts sec we reject respondent’s interpretation of md code ann est trusts sec c that section provides that if a mary- land court determines to allow attorney’s fees in making that determination it shall take into consideration what would be a fair and reasonable total charge for the cost of administer- ing the estate and it shall not allow aggregate compensa- 24on the instant record we find that the estate has failed to persuade us that the personal representative performed any extraordinary work of administering decedent’s probate_estate or nonprobate estate tion in excess of that figure see wolfe v turner a 2d md wright v nuttle a 2d md section c md code ann est trusts does not limit as respondent appears to argue the aggregate amount of the commissions allowable to an estate’s personal representative and the fees allowable to an estate’s attorney to the maximum compensation allowable to such personal representative under md code ann est trusts sec b respondent determined to allow the estate a deduction under sec_2053 of dollar_figure for attorney’s fees respondent does not argue and the record does not establish that the aggregate amount of the commissions allowable to the estate’s personal representative under md code ann est trusts sec b ie dollar_figure and the fees allowable to the estate’s attorney under md code ann est trusts sec which respondent allowed the estate to deduct under sec_2053 ie dollar_figure is not a fair and reasonable total charge for the cost of administering the estate of decedent under md code ann est trusts sec c dollar_figure 25in respondent’s reply brief respondent contends for the first time that petitioner did not demonstrate that the attor- ney’s fees paid_by the estate were for other than routine work of the estate’s personal representative we reject respondent’s contention respondent allowed the estate to deduct under sec_2053 dollar_figure of attorney’s fees implicit in respondent’s deter- mination to allow such a deduction is respondent’s acknowledgment that such attorney’s fees are allowable by both maryland law and continued based upon our examination of the entire record before us we find that the estate is entitled to deduct under sec_2053 personal representative’s commissions of dollar_figure we have considered all of the contentions and arguments of the parties that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing and the concessions of the parties decision will be entered under rule continued federal_law to be allowable by maryland law the dollar_figure of attorney’s fees necessarily was for work other than the routine or ordinary work of an executor or administrator in administering an estate see riddleberger v goeller a 2d md colley v britton a 2d md


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh date date number release date legend u scholarship program v scholarship program k educational_institution l educational_institution m state x amount y amount dear we have considered your request for advance approval of your grant-making program under sec_4945 of the internal_revenue_code dated date our records indicate that you were recognized as exempt from federal_income_tax under sec_501 of the code and that you are classified as a private_operating_foundation as defined in sec_509 your letter indicates that you will operate grant-making programs called u and v is for graduating high school students who plan to attend one of the the purpose of u campuses of the k system the scholarship will be for four years the scholarship is for x total one eighth of which is to be awarded per semester for up to eight consecutive fall spring semesters the scholarship will be given to one graduating high school student from each of more than public and two charter high schools in m eligibility is open to all public high school graduates within m recipients are selected by their high schools by a selection committee apponted by the principal of each high school selection criteria include the student’s community involvement leadership skills character and integrity and a grade point average of or higher preference is given to family members of state and local_government agencies u is paid directly to the institution the recipient will be attending in order to continue to receive the scholarship for the maximum of eight consecutive academic semesters the recipient must be in good academic standing family members of directors and employees of your organization and its sponsoring_organization are not eligible to receive u specific criteria the selection committee at each-high school must follow are the applicant is a senior at a m conventional public high school who has been accepted to one of the constituent k system campuses he or she is a united_states citizen and resident of m he or she best exemplifies the corporation’s membership philosophy of people helping people and has demonstrated leadership excellent character integrity and community involvement he or she has demonstrated scholastic achievement with a or better grade point average and may be deserving of financial aid the recipient uses the scholarship only to pay for full-time_student tuition and other university -approved undergraduate educational expenses the recipient agrees to continue as a full-time_student in good standing at the same university for up to eight consecutive fall spring semesters scholarships are not transferable without the prior approval of the corporation the recipient is not a director employee or family_member of an employee of your organization or its sponsor the decision made by each selection committee is final each year you provide the high school superintendents and principals with the criteria for u the criteria are to be given to the selection committee once the selection committee has made a decision a written_statement is to be sent to you to verify the name of the recipient a student information form is completed on the recipient and sent to you to process and record the data a certificate is mailed to the school for a public presentation in which a local representative from your sponsoring_organization will attend and may make a presentation to the recipient a press release is also provided for the local media you provide the university with a check for payment to the financial aid office and verify the recipient is enrolled as a fulltime student the purpose of v is for students attending l the scholarship will be for two years the scholarship is for y total one quarter of which is to be awarded per semester for up to four consecutive fall spring semesters there are scholarships given each year for v each l receives two scholarships per year which are available for its own students a selection committee chosen by each l considers criteria including a student’s community involvement leadership skills character and integrity and a grade point average of or higher preference is given to family members of state and local_government agencies v is given directly to the institution the recipient will be attending family members of directors and employees of your organization and its sponsoring_organization are not eligible to receive v specific criteria the selection committee at each l must follow are s m d a the scholarship recipient is an applicant or full-time_student who is a high school graduate or has completed the general education development ged program and is enrolled in an associate degree program at l he or she is a united_states citizen and a resident of m and is eligible for state tuition under m state law the applicant exemplifies the philosophy of people helping people and has demonstrated leadership excellent character integrity and community involvement he or she demonstrates financial need he or she demonstrates scholastic achievement the scholarship is used to pay tuition books fees course supplies and transportation at the recipient agrees to continue at the l where enrolled at the time of the scholarship award for the duration of the scholarship not to exceed four consecutive fall spring semesters or upon completion of a diploma program l he or she is not a director employee or family_member of an employee of your organization or its sponsor with respect to either u or v if a recipient leaves school or withdraws scholarship funding ceases no funds can be paid to a recipient as a partial refund or cash_out sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a teaching or other similar capacity skill or talent of the grantee literary artistic musical scientific sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i ii its grant procedure includes an objective and nondiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are excludable from the gross_income of the recipients subject_to the limitations provided by sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110g of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours robert choi director exempt_organizations rulings and agreements