t c memo united_states tax_court jason george demar petitioner v commissioner of internal revenue respondent docket no filed date jason george demar pro_se samuel m warren and robert d heitmeyer for respondent memorandum opinion buch judge the parties submitted this case fully stipulated under rule the issues remaining for consideration all turn on a single question 1unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code code in effect for the year in issue whether mr demar may claim his son td2 as a dependent for because mr demar did not attach form_8332 release revocation of release of claim to exemption for child by custodial_parent or a similar written declaration to his original federal_income_tax return he may not claim his son as a dependent for background mr demar is divorced and has one son td with his ex-wife amanda renee demar td was born in in mr and ms demar agreed to custody and child_support terms in a consent judgment of divorce in the judgment they established td’s primary residence with ms demar they also agreed that mr demar was entitled to claim td as a dependent for even-numbered years for odd-numbered years mr demar was entitled to claim td only if he stayed current with his child_support_obligations and ms demar’s annual gross_income was less than dollar_figure if these conditions were met ms demar agreed to execute form_8332 or a similar written declaration mr demar timely filed form 1040a u s individual_income_tax_return for listing his earned_income and adjusted_gross_income as dollar_figure each he also claimed td as a dependent on that return elected head_of_household status 2the court refers to minors by their initials see rule a and claimed a dependency_exemption deduction the child_tax_credit and the earned_income_tax_credit he claimed head_of_household filing_status on the basis of having claimed a dependent mr demar did not include form_8332 or a similar written declaration with hi sec_2015 return his ex-wife claimed td on her return and failed to timely execute form_8332 or a similar written declaration on date the commissioner issued mr demar a notice_of_deficiency for hi sec_2015 return in the notice the commissioner determined that td was not mr demar’s dependent disallowed the dependency_exemption deduction child_tax_credit and earned_income_tax_credit adjusted his filing_status from head_of_household to single and adjusted the standard_deduction accordingly after mr demar received the notice_of_deficiency ms demar executed form_8332 for while residing in michigan mr demar timely filed a petition challenging the commissioner’s determinations the parties jointly moved under rule to submit this case fully stipulated the parties agreed that the case may be submitted on the basis of the 3the commissioner also increased mr demar’s income by dollar_figure for cancellation of indebtedness mr demar agreed to that adjustment pleadings and the facts recited in their stipulation of facts mr demar did not file a brief discussion the commissioner’s determinations in a notice_of_deficiency are generally presumed correct and the taxpayer bears the burden of proving an error rule a 290_us_111 the submission of this case under rule does not alter the burden_of_proof see rule b in this case the standard_deduction dependency_exemption deduction child_tax_credit earned_income_tax_credit and head_of_household filing_status are all affected by whether td qualified as mr demar’s dependent for see sec_63 sec_151 c a c a b mr demar was not entitled to claim td as a dependent for because he did not satisfy the requirements established under sec_152 for a noncustodial_parent to claim a qualifying_child as a dependent under sec_152 the custodial_parent must sign a written declaration stating that he or she will not claim the child as a dependent and the noncustodial_parent must attach that declaration to his or her return sec_152 the necessary written declaration is commonly made on form_8332 the parties do not dispute that ms demar was the custodial_parent and mr demar was the noncustodial_parent mr demar did not receive form_8332 or a similar written declaration from ms demar that she was releasing her rights to claim td until after mr demar had already filed hi sec_2015 return mr demar argues he was entitled to claim td as a dependent for because he and ms demar fulfilled the conditions in their judgment of divorce but mr demar did not attach form_8332 or a similar written declaration to his return as explicitly required by the code we need not reach the question of whether sec_152 leaves room for a noncustodial_parent to submit form_8332 or a similar written declaration at some point after filing his or her original return the current regulations do not explicitly allow or prohibit form_8332 or a similar written declaration to be submitted during examination or with an amended_return sec_1_152-4 income_tax regs a proposed regulation explicitly permits a noncustodial_parent to submit form_8332 or a similar written declaration during examination or with an amended_return sec_1 e i proposed income_tax regs fed reg date but that regulation requires that the custodial_parent either did not claim the dependency_exemption or filed an 4a custodial_parent is the parent having custody for the greater portion of the calendar_year sec_152 amended_return removing the claim to the dependency_exemption id we have no such facts in the record conclusion because mr demar may not claim td as his dependent for he is not entitled to the dependency_exemption deduction the child_tax_credit the earned_income_tax_credit and head_of_household filing_status for being ineligible for head_of_household filing_status mr demar should properly have filed as single for it also follows that we must uphold the commissioner’s adjustments to mr demar’s standard_deduction to reflect the foregoing decision will be entered for respondent


department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c o f f i c e o f t h e c h i e f c o u n s e l date number release date conex-106135-11 uil 36a the honorable jerry f costello u s house of representatives washington dc attention ----------------------- dear mr costello i am responding to your inquiry dated date about the effect of the making work pay mwp credit which is no longer available for pm senior taxpayers the mwp credit enacted by the american_recovery_and_reinvestment_act_of_2009 provided taxpayers with a refundable tax_credit of up to dollar_figure for working individuals and up to dollar_figure for married taxpayers filing jointly for tax years and we issued revised withholding tables for and that reflected reduced withholding resulting from the mwp credit most eligible workers received the benefit of the mwp credit without any_action on their part as employers typically handled the credit through automated withholding changes this meant that workers did not need to fill out a new form_w-4 employee's withholding allowance certificate however for some workers such as employees with multiple jobs or married couples in high tax brackets the changes from the mwp credit required them to submit a revised form w- to ensure that employers withheld enough tax pension recipients did not qualify for the mwp credit unless they received other earned_income however because the revised and withholding tables which reflected the mwp credit could result in underwithholding for pension recipients we provided pension_plan administrators with an optional adjustment procedure available on date see notice 1036-p this procedure reflected that pension income is not earned_income for purposes of the mwp credit the tables also included the optional adjustment procedure for pension_plan administrators the optional procedure conex-106135-11 automatically adjusted withholding on pension payments and pension recipients did not need to take action if used the optional procedure avoided underwithholding on pension payments however not all plan administrators made the optional adjustment as a result of the changes to withholding some taxpayers may receive a smaller refund for while others may owe money with their return in addition some taxpayers including pension recipients could initially incur a penalty if the underpayment is more than we can attribute to the change in the withholding tables however if an individual has an underpayment we will waive all or part of the penalty if we determine that the adjustments we made to the withholding tables for and caused the underpayment to request a waiver of the penalty taxpayers must follow the instructions for form_2210 underpayment_of_estimated_tax_by_individuals estates and trusts further the tax relief unemployment insurance reauthorization and job creation act of tax relief act enacted on date included several changes affecting workers’ take-home pay and retirees’ net pension checks for the tax relief act did not extend the mwp credit that had been available for tax years and the tax relief act extended for two years the income_tax rates that were to expire at the end of that extension prevented a large increase in federal_income_tax withholding the tax relief act also provided a reduced_rate of social_security_tax for all employees from percent to percent for tax_year withholding for medicare at dollar_figure percent did not change the withholding tables for reflect the expiration of the mwp credit the expiration of the mwp credit will result in increased withholding for most taxpayers for most employees the net effect of the expiration of the mwp credit and the reduced_rate of employee social_security_tax will result in less total_tax withheld from their checks however the social_security_tax reduction does not affect pension payments pensioners whose plan administrators did not use the optional adjustment procedure for withholding in or in are likely to see an increase in withholding for their pension payments once pension_plan administrators make the changes this increase in withholding may vary per payment depending on filing_status the amount of the payment and the frequency of the payment accordingly the retirement check payments for some pensioners may be lower depending on the method that their plan administrators used to calculate withholding in and we encourage employees and pension recipients to review their withholding every year they can use the irs withholding calculator on www irs gov if necessary they can fill out a new form_w-4 or form w-4p withholding_certificate for pension or annuity payments and give it to their employer or pension_plan administrator conex-106135-11 i hope this information is helpful if you need further information please contact me or - --------------------at -------------------- in addition information about the mwp credit and the changes in withholding is available at www irs gov sincerely ligeia m donis acting chief employment_tax branch division counsel associate chief_counsel tax exempt government entities


o f f i c e o f c h i e f c o u n s e l number release date department of the treasury internal_revenue_service washington d c date cc it a 2ajpfalzgraf tl-n-1909-01 uilc memorandum for deputy area_counsel sbse from subject attn david a breen chief branch cc it a significant service_center advice holding_period on gains from proceeds of insurance_company demutualization this responds to your request for significant advice dated date in connection with a question posed by the centralized quality review site issue sec_1 how to determine the holding_period for the interests of taxpayers who are former policyholders and annuitants of mutual life_insurance_companies who received stock in a stock_life_insurance_company or cash upon the demutualization of the mutual_life_insurance_company whether taxpayers who received cash are entitled to long-term_capital_gain treatment conclusions if the demutualization transaction by which taxpayer received stock in a stock_life_insurance_company in exchange for his equity interests in a mutual_life_insurance_company qualifies as a tax-free reorganization under sec_368 of the internal_revenue_code then taxpayer’s holding_period for the stock runs from the date the taxpayer first held an equity_interest in the mutual_life_insurance_company as a policyholder or annuitant sec_1223 of the code if the demutualization transaction by which taxpayer received stock in a stock_life_insurance_company in exchange for his equity interests in a mutual_life_insurance_company does not qualify as a tax-free reorganization under sec_368 then taxpayer’s holding_period for the stock runs from the date the taxpayer received the stock tl-n-1909-01 the holding_period for the interests of a taxpayer who received cash in exchange for his equity interests in a mutual_life_insurance_company upon demutualization runs from the date that taxpayer first held an equity_interest in the mutual_life_insurance_company as a policyholder or annuitant if the taxpayer who received cash held an equity_interest in a mutual_life_insurance_company as a policyholder or annuitant for more than one year then taxpayer is entitled to long-term_capital_gain treatment facts service_center representatives scrs answer calls and emails from taxpayers from across the country the centralized quality review site that oversees questions received and answers given has noticed that scrs receive many questions regarding the holding_period for the interests of taxpayers who are former policyholders and annuitants of mutual life_insurance_companies mutual company or companies that have been demutualized that is mutual companies have gone through a conversion from a mutual company to a stock_life_insurance_company stock company which in most cases qualifies as a reorganization within the meaning of sec_368 as a result of demutualization these taxpayers received either stock in the stock company or cash in exchange for their equity interests in the mutual company all of the proprietary interests in the mutual companies were owned by taxpayers taxpayers had a zero basis in their respective equity interests in the mutual companies discussion sec_354 provides that no gain_or_loss shall be recognized on the exchange of stock_or_securities in a corporation a_party_to_a_reorganization for stock_or_securities in the company resulting from the reorganization sec_358 provides that in the case of an exchange to which sec_354 among other sections applies the basis of the property permitted to be received without the recognition of gain_or_loss shall be the same as that of the property exchanged with certain adjustments revrul_71_233 1971_1_cb_113 holds that a merger of a mutual_life_insurance_company into a newly organized stock_life_insurance_company under state law pursuant to which policyholders exchange their proprietary interests in the mutual company for stock is a reorganization within the meaning of sec_368 the ruling also holds that pursuant to sec_354 no gain_or_loss will be recognized by taxpayers upon the exchange of their interests in the mutual life_insurance tl-n-1909-01 company for stock and pursuant to sec_358 taxpayers have the same basis in their stock as they had in their interests in the mutual_life_insurance_company sec_1223 provides that in determining the period for which a taxpayer has held property received in an exchange there shall be included the period for which he held the property exchanged if under chapter of the code the property has for the purpose of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in his hands as the property exchanged and the property exchanged at the time of such exchange was a capital_asset as defined in sec_1221 or property described in sec_1231 sec_1221 defines the term capital_asset as property held by the taxpayer regardless of whether it is connected with the taxpayer's trade_or_business unless the property meets one of eight listed exceptions none of the exceptions are relevant here sec_1231 applies to property of a character which is subject_to the allowance for depreciation provided in sec_167 or real_property used in a trade_or_business that does not fall within certain exceptions generally equivalent to the exceptions in sec_1221 sec_1222 provides that long-term_capital_gain is gain from the sale_or_exchange of a capital_asset held for more than one year a taxpayers receiving stock if the demutualization transaction by which taxpayer received stock in a stock company in exchange for his equity interests in a mutual company qualifies as a tax-free reorganization under sec_368 then pursuant to sec_354 no gain_or_loss will be recognized by taxpayer on the exchange revrul_71_233 in addition pursuant to sec_358 taxpayer has the same basis in his stock as he had in his equity_interest in the mutual company here zero id taxpayer’s equity_interest in the mutual company is a capital assets within the meaning of sec_1221 accordingly pursuant to sec_1223 the holding_period for the stock received by taxpayer in exchange for his equity interests in the mutual company upon demutualization runs from the time that taxpayer first acquired an equity_interest in the mutual company as a policyholder or annuitant if the demutualization transaction by which taxpayer received stock in a stock company in exchange for his equity interests in a mutual company does not qualify as a tax-free reorganization under sec_368 then sec_354 sec_358 and sec_1223 do not apply in such a case taxpayer’s holding_period for the stock runs from the date the taxpayer received the stock tl-n-1909-01 many mutual companies have received a letter_ruling from the service stating that their demutualization transactions qualify as reorganizations within the meaning of sec_368 however prohibitions on disclosures by the service prevent us from informing former policyholders and annuitants whether the demutualization of the mutual company in which they held an equity_interest is a reorganization within the meaning of sec_368 accordingly taxpayers must obtain this information from the mutual company b taxpayers receiving cash taxpayers received cash in exchange for their equity interests in the mutual company as stated above a taxpayer’s equity_interest in a mutual company is a capital_asset taxpayer’s holding_period for his equity_interest in a mutual company runs from the date that taxpayer first acquired an equity_interest in the mutual company as a policyholder or annuitant accordingly if taxpayer held an equity_interest in the mutual company as a policyholder or annuitant for more than one year then taxpayer would be entitled to long-term_capital_gain treatment if you have any additional questions please call amy pfalzgraf pincite0


t c memo united_states tax_court ohio periodical distributors inc f k a scott krauss news agency inc ronald e scherer trust and linda s hayner trust persons other than the tax_matters_person petitioners v commissioner of internal revenue respondent docket no filed date daniel m davidson for petitioners james e kagy for respondent memorandum opinion raum judge the commissioner determined adjustments in the s corporation's income in the amounts of dollar_figure dollar_figure dollar_figure and dollar_figure for its taxable years and respectively at issue is whether an election made by the corporation under sec_4581 resulting in the exclusion_from_gross_income of the amount of the corporation's income attributable to returns from qualified sales of magazines and paperbacks requires the making of a corresponding adjustment to cost_of_goods_sold pursuant to sec_1_458-1 income_tax regs more specifically at issue is the validity of sec_1_458-1 income_tax regs which if valid would without dispute require a decision against petitioner ohio periodical distributors inc ohio periodical or the corporation has been operating as an s_corporation in ohio since at all times relevant the corporation prepared its federal_income_tax returns using the accrual_method of accounting it was a wholesale_distributor of magazines and paperback books its customers were bookstores and other businesses engaged in the retail_sale of such merchandise to the public at all times relevant in accordance with industry practice ohio periodical sold more copies of paperbacks and magazines to its customers than it expected the customers to resell the corporation nevertheless billed its customers for the full number of copies thus sold to them however in accordance with industry practice the customers had the legal right to receive unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue full credit from the corporation for the magazines and paperbacks that they were unable to resell on its federal_income_tax return ohio periodical made a proper election to use the provisions of sec_458 the election was effective for the tax_year and every tax_year thereafter for each of the years in issue the corporation made sales and had returns of those sales items during the merchandise_return_period defined in sec_458 such sales were sec_458 magazines paperbacks and records returned after the close of the taxable_year a exclusion_from_gross_income --a taxpayer who is on an accrual_method of accounting may elect not to include in the gross_income for the taxable_year the income attributable to the qualified_sale of any magazine paperback or record which is returned to the taxpayer before the close of the merchandise_return_period sec_458 reads merchandise_return_period -- a except as provided in subparagraph b the term merchandise_return_period means with respect to any taxable year-- i in the case of magazines the period of months and days first occurring after the close of taxable_year or ii in the case of paperbacks and records the period of months and days first occurring after the close of the taxable_year b the taxpayer may select a shorter period than the applicable_period set forth in subparagraph a qualified sales under sec_458 because the corporation had a legal_obligation to adjust the price if the item was not resold and the price was adjusted because of failure to resell on its federal_income_tax returns for each of the years in issue ohio periodical pursuant to sec_458 excluded from gross_income the amount of the qualified returns the corporation did not however make a corresponding adjustment to cost_of_goods_sold pursuant to sec_1_458-1 income_tax regs in the commissioner issued a notice of final s_corporation administrative adjustment for the corporation's sec_458 reads qualified_sale --a sale of a magazine paperback or record is a qualified_sale if-- a at the time of sale the taxpayer has a legal_obligation to adjust the sales_price of such magazine paperback or record if it is not resold and b the sales_price of such magazine paperback or record is adjusted by the taxpayer because of a failure to resell it sec_458 reads amount excluded --the amount excluded under this section with respect to any qualified_sale shall be the lesser of-- a the amount covered by the legal_obligation described in paragraph a or b the amount of the adjustment agreed to by the taxpayer before the close of the merchandise_return_period taxable_year at about the same time the commissioner also issued notices of final s_corporation administrative adjustment for the corporation's and taxable years the ronald e scherer trust the scherer trust was the tax_matters_person of the corporation for purposes of sec_6231 and a notice person of the corporation for purposes of sec_6226 and sec_6231 the linda s hayner trust the hayner trust was also a notice person of the corporation the scherer trust as tax_matters_person failed to file a petition_for_readjustment of subchapter_s items within the period specified in sec_6226 however the scherer trust and the hayner trust as notice persons timely filed a petition_for_readjustment of subchapter_s items under sec_6226 the parties have reached an agreement on all issues save the treatment of adjustments to closing_inventory and to cost_of_goods_sold pursuant to sec_1_458-1 income_tax regs petitioners contend that sec_1_458-1 income_tax regs is invalid however the parties have stipulated that if this court determines that the regulation is valid the adjustments made by the commissioner are proper and should be allowed in their entirety sec_458 provides that an accrual basis taxpayer may elect not to include in gross_income for the taxable_year the income attributable to the qualified_sale of any magazine paperback or record which is returned to the taxpayer before the close of the merchandise_return_period sec_458 defines the amount excluded from gross_income as the lesser_of the amount covered by the legal_obligation described in paragraph a or the amount of the adjustment agreed to by the taxpayer before the close of the merchandise_return_period the legal_obligation of paragraph a is the obligation of the taxpayer to adjust the sales_price of the magazine paperback or record if it is not resold sec_1_458-1 income_tax regs contains the formula for determining excludable gross_income it states if a taxpayer makes adjustments to gross_receipts for a taxable_year under the method_of_accounting described in sec_458 the taxpayer in determining excludable gross_income is also required to make appropriate correlative adjustments to purchases or closing_inventory and to cost_of_goods_sold for the same taxable_year adjustments are appropriate for example where the taxpayer holds the merchandise returned for resale or where the taxpayer is entitled to receive a price adjustment from the person or entity that sold the merchandise to the taxpayer cost_of_goods_sold must be properly adjusted in accordance with the provisions of sec_1_61-3 which provides in pertinent part that gross_income derived from a manufacturing or merchandising business equals total sales less cost_of_goods_sold id the identical issue of the validity of sec_1_458-1 income_tax regs was raised in hachette usa inc v commissioner t c petitioners' counsel in this case was also counsel in hachette petitioners' briefs in both cases presented identical arguments in fact the pages of brief in this case that address the validity of the regulation are the same verbatim as the corresponding argument in the brief submitted in hachette petitioners contend that sec_458 provides an explicit formula for determining the adjustment to income the amount of the credit against sales_price which the taxpayer must grant to the purchaser they assert that the language of sec_458 is unambiguous and that the formula contained in sec_1_458-1 income_tax regs transforms the amount excluded based on credit given for returned items into an amount equal to the distributor's gross_profit on those items in response to these arguments this court in hachette held the regulation valid id at slip op pincite after examining the legislative_history the court determined that the regulation is consistent with generally_accepted_accounting_principles and with sec_446 and sec_471 id at slip op pincite the court also held that there is no evidence that congress intended that a taxpayer who did not bear any costs could forgo the correlative cost adjustments id at slip op pincite because distributors were reimbursed by publishers they should not get the benefit of the deduction without bearing the risk id in view of the identity of issues and the detailed analysis by this court in hachette it is unnecessary to go over the same ground again we follow hachette decision will be entered for respondent


tcmemo_1997_424 united_states tax_court kj's fund raisers inc petitioner v commissioner of internal revenue respondent docket no 10279-96x filed date stephen s ankuda for petitioner ronald b weinstock for respondent memorandum opinion raum judge the commissioner determined that petitioner did not meet the sec_501 requirements for qualification as an exempt_organization with the consequence unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue and all rule references are to the tax_court rules_of_practice and procedure that it is not exempt from income_tax under sec_501 specifically the commissioner determined that petitioner failed to establish that it operated exclusively for exempt purposes under sec_501 this case is before us on a petition for declaratory_judgment pursuant to sec_7428 the parties filed a joint stipulation as to the completeness and correctness of the administrative record and submitted this case for determination under rule kristine hurd and james gould are the sole owners of kj's place a lounge where alcoholic beverages are served the term kj is obviously derived from the first initials of the first names of the owners kristine and james in kristine and james created petitioner kj's fund raisers inc they had petitioner incorporated as a vermont non-profit corporation on date they also had petitioner file a form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code on date petitioner's business is selling lucky or other break-open or lottery or rip tickets the lottery tickets are sold exclusively at kj's place no other locations were considered the tickets are sold during regular business hours by the owners and employees of kj's place petitioner was organized purportedly to raise funds for distribution to charitable causes petitioner expects the majority of its funds to come from the sale of lottery tickets and does not plan to solicit public donations but will accept any donations offered there is no evidence in the record that any such donations were ever offered or received when petitioner was organized hurd and gould were both officers and directors she was president he was vice president secretary and treasurer the third member of the board_of directors was karen gould a relative of james gould in date petitioner replaced its board_of directors of the three new members two were related to hurd or gould the board has been altered since then the current board has two members unrelated to hurd or gould the third is kristine hurd's sister in a letter to the irs petitioner indicated that it would further revise its board so that none of the members were related to the officers of kj's place however that change has never been implemented in petitioner paid hurd and gould compensation of dollar_figure each for bookkeeping accounting and managerial_services petitioner also paid dollar_figure in rent to kj's place the measure of compensation was determined by hurd and gould on date changes in vermont's gambling laws took effect in accordance with these changes petitioner stopped paying rent to kj's place and stopped paying wages to hurd and gould currently there are no business dealings between petitioner's directors and the owners of kj's place and petitioner's books are kept separate from the accounts of kj's place from the proceeds of the sales of the lottery tickets petitioner has made grants to a variety of organizations some of these grants have been memorialized in local newspapers of six clippings sent to the irs by petitioner two have a photo of hurd or gould in front of kj's place handing out a check on behalf of petitioner one clipping notes that kj's fund raisers is a new corporation located at kj's place another shows a director of petitioner presenting a check and identifies the proceeds as arising from rip-ticket sales at kj's place in its preliminary adverse determination_letter issued on date the irs indicated that the identity of the lounge owners and the officers of petitioner put hurd and gould in a position to control petitioner petitioner responded as follows with respect to control of the organizations it may appear that all of kj's fundraisers inc fundraising activities can be controlled by the owners of the lounge due to the relationship between officers and directors of each it is our opinion however that kj's fund raisers inc would fold without the original founders of the organization as officers and local charities would go unfunded therefore we do not view the appointment of the present officers as a function of control but more as a function of going concern the irs issued its final adverse determination_letter on date it stated you have failed to establish that you are operated exclusively for exempt purposes under sec_501 you have failed to establish that your operation will not result in more than incidental private benefit furthermore for the period prior to date you have failed to establish that your net_earnings will not inure to the benefit of private individuals petitioner seeks a declaratory ruling that as of date petitioner is exempt from taxation under sec_501 sec_501 provides that an organization described in subsection c shall be exempt from taxation under this subtitle subsection c includes corporations organized and operated exclusively for charitable purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 income_tax regs requires that for an entity to have exempt status it must be both organized and operated exclusively for one or more of the purposes specified in sec_501 respondent has conceded that petitioner meets the organizational_test petitioner must demonstrate that it operates exclusively for exempt purposes sec_1_501_c_3_-1 income_tax regs provides an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose an organization is not operated exclusively for exempt purposes unless it serves a public rather than a private interest sec_1_501_c_3_-1 income_tax regs to meet this requirement the organization must demonstrate that it is not operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests id under the operational_test the organization's purpose rather than the nature of its activities determines whether the organization is entitled to tax-exempt status 70_tc_352 even an organization engaged in only one activity may have multiple purposes for that activity 79_tc_793 a single nonexempt purpose if substantial in nature will disqualify an organization from qualification under sec_501 326_us_279 determining the purpose of the organization is a factual question which concerns both the actual as well as the stated purposes for the existence of the organization and the activities it engages in to accomplish those purposes 71_tc_661 petitioner's case is factually similar to 82_tc_196 in that case the taxpayer was a nonprofit corporation formed to raise money for college scholarships it planned to raise money through the operation of bingo_games held at the pastime lounge a lounge owned by two members of the board_of directors the other board members consisted of an accountant and director of the lounge and two bingo players the board was self-perpetuating with the existing directors selecting future directors id pincite the owners of the pastime lounge ran the bingo_games during regular business hours employees of the pastime lounge solicited orders for food and drink from the bingo players however the accounts of the pastime lounge were kept separate and distinct from those of the taxpayer id pincite this court held that the taxpayer had a nonexempt purpose which was substantial in nature ie to promote business at the pastime lounge through the medium of the bingo_games id pincite the court based this conclusion in part on the identity of the taxpayer's board_of directors with the owners and associates of the pastime lounge since the owners controlled the board and appointed its future directors the court reasoned the taxpayer's activities could be used to the advantage of the lounge id pincite the taxpayer argued that the separate_accounts and the fact that the lounge received nothing from the taxpayer for wages or rent demonstrated that it was operated exclusively for an exempt_purpose the court held otherwise a realistic look at the operations of these two entities however shows that the activities of the taxpayer and the pastime lounge were so interrelated as to be functionally inseparable separate accountings of receipts and disbursements does not change that fact since the record in this case does not show that the taxpayer was operated exclusively for exempt purposes but rather indicates that it benefited private interests exemption was properly denied fn ref omitted id the manner in which petitioner is operated benefits private interests kj's place and its owners like p l l scholarship fund v commissioner supra petitioner's lottery tickets are sold at a single location kj's place as in p l l scholarship fund v commissioner supra the lottery tickets are sold during kj's place's regular business hours their sale overseen by the owners of kj's place hurd and gould while in kj's place lottery ticket purchasers are solicited for beverages as in p l l scholarship fund v commissioner supra the accounts of petitioner and kj's place are kept separate and apart despite these similarities petitioner contends that two factors distinguish it from p l l scholarship fund v commissioner supra first the board_of directors is responsible for running petitioner and the majority of the board members are not related to the owners of kj's place second kj's place has allegedly lost money as patrons prefer to purchase lottery tickets rather than beverages petitioner stresses that the board_of directors independent of hurd and gould controls the distribution of proceeds raised by the sale of the lottery tickets while the board does decide which charities will receive funds it is clear from the record that kristine hurd and james gould control sales of the lottery tickets as they relate to kj's place it is also clear that their control is realistically independent of the board in a protest letter to the irs dated date petitioner concedes that the officers of kj's place appear able to control petitioner but defend it as necessary it is our opinion however that kj's fundraisers inc would fold without the original founders of the organization as officers and local charities would go unfunded emphasis added before date hurd and gould received wages and kj's place received rent from petitioner although those practices ceased and are not in issue here the current board_of directors is composed of at least the majority of the same members who allowed those amounts to be paid this strongly suggests that hurd and gould are free to set policy for their own benefit without objection from the board nothing in the record since date indicates otherwise petitioner also contends that kj's place actually lost money since patrons preferred to buy lottery tickets rather than use their money to purchase beverages thus petitioner argues there was no actual benefit while all facts must be accepted as true for purposes of a declaratory_judgment rule conjectural statements such as the one above are entitled to no such consideration petitioner has presented no evidence that kj's place lost money more important kj's place has benefitted from the publicity surrounding donations given by petitioner in four of six newspaper articles or picture captions in evidence kj's place is pictured or mentioned along with hurd or gould who are identified as the owners of kj's place rather than officers of petitioner petitioner argues that the clippings are not paid advertising and do not indicate the receipt of an actual benefit by kj's place we find however that the publicity which kj's place would not have received but for petitioner's exclusive association with the lounge is a significant benefit moreover the record discloses that there were other clubs or lounges in the area where comparable gambling took place it is thus a fair inference that one of the real purposes of establishing petitioner in the first place was to induce customers with a proclivity for this type of gambling not to desert kj's place in favor of other clubs or lounges as a result of petitioner's formation kj's place far from losing revenue may indeed have prevented at least a portion of its business from being taken elsewhere petitioner engaged in the exempt activity of raising money for charitable purposes petitioner also operated for the substantial private benefit of kj's place and its owners a substantial nonexempt purpose thus characterizes its operation disqualifying it from exemption under sec_501 and sec_501 better business bureau v united_states u s pincite copyright clearance center inc v commissioner t c pincite decision will be entered for respondent


number release date id office uilc cca_2009040112481135 ------------------ from -------------------- sent wednesday april pm to -------------------------------------------------- cc subject re ftc calc generally as under us law foreign withholding taxes on interest do not accrue until a cash payment is made there is no liability to withhold and pay over tax to the foreign taxing authority on a daily basis even if interest_income and expense are considered to accrue economically over the period covered by the interest coupon as under us law if the taxpayer sold the note before the interest payment became due it would have no legal liability under foreign law to pay tax on the accrued interest_income the withholding rate on interest could vary depending on whether the holder of the note on the date the coupon is due qualifies for treaty benefits finally if the creditor defaulted and did not make the payment withholding_tax generally would not be payable by the lender these considerations confirm that the fact and amount of withholding_tax liability cannot be determined with reasonable certainty until the coupon is in fact paid and the tax_liability arises therefore the all_events_test for a foreign withholding_tax is not met and the tax does not accrue until the date the payment is made note that the economic_performance requirement does not apply to creditable_foreign_taxes regardless of whether the taxpayer elects to deduct or credit the tax sec_1_461-4 however in the case of a creditable withholding_tax the foreign law legal liability to pay the tax ordinarily will not arise until an actual payment of interest is made at which point the tax is required to be withheld and paid therefore creditable foreign withholding taxes on interest are considered to accrue and are eligible to be credited or deducted in the year the payment is made not in the prior year or years when the associated interest_income accrued for us or foreign tax purposes let me know if you have additional questions on this timing issue thanks


internal_revenue_service department of the treasury index nos number release date p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si - plr-115268-98 date date re legend grantor a_trust spouse a foundation trust trust trust trust dear sir in a letter dated you requested several rulings concerning the estate gift and generation-skipping_transfer gst tax consequences of the proposed release of a testamentary_power_of_appointment this letter responds to your request the facts and representations submitted are summarized as grantor established the trust on a article iii follows of the trust directs the trustee to divide any property received by the trustee per stirpes into trusts for the benefit of grantor’s then living descendants on spouse’s death the trustee is to distribute each trust to or for the persons or organizations other than spouse spouse’s estate and the creditors of either in the proportions and subject_to the trusts powers and conditions as spouse appoints by will specifically referring to this power_of_appointment if spouse fails to exercise the power_of_appointment article iii of the trust directs the trustee to pay all the net_income to the descendant except that the trustee may withhold any net_income that the trustee considers not to be in the descendant’s best interests the trustee may pay to any one or more of the descendant’s descendants so much or all of any withheld net_income as the trustee considers necessary or desirable for the beneficiary’s comfortable support medical_care education welfare and best interests any undistributed_income is to be added to principal each year article iii of the trust also directs the trustee to pay to the descendant so much or all of the principal as the trustee considers necessary or desirable for the descendant’s generous support medical_care education welfare and enjoyment for travel for luxuries appropriate for the descendant’s accustomed standard of living for use in business to assist in the purchase of a home or for any other purpose the trustee considers to be in the best interests of the descendant the trustee may pay to any one or more of the descendant’s descendants so much of the principal as the trustee considers necessary or desirable for the beneficiary’s comfortable support medical_care education welfare and best interests on the death of a descendant article iii of the trust directs the trustee to distribute the trust estate to or for the persons or organizations other than the descendant his estate and creditors of either in such proportions and subject_to such trusts powers and conditions as the descendant appoints by will specifically referring to this power_of_appointment to the extent a descendant does not effectively exercise the descendant’s power_of_appointment on the descendant’s death the trustee is to divide the trust estate per stirpes into trusts for his then living descendants or if none for the then living descendants of his most immediate ancestor who is a descendant of grantor’s father a and of whom there is a descendant then living the trustee is to add any trust set_aside for a descendant for whom a_trust is then held under the trust instrument to that trust if any trust is not effectively disposed of by the exercise of a power_of_appointment article iii of the trust directs that on the death of the surviving beneficiary the trustee is to distribute the trust to spouse or if spouse is not then living to the foundation if at the time any payment is to be made to the foundation it is not then in existence the trustee is to make payment to charities described in sec_170 of the internal_revenue_code and in the proportions among those charities as the trustee determines at that time at the time of the initial contribution to the trust there were four descendants of grantor then living thus four trusts trust trust trust and trust were established under the trust these trusts were irrevocable on date and you represent that there have been no additions actual or constructive to the trusts since that date spouse proposes to execute a written release of the power_of_appointment granted to spouse under the trust you have requested the following rulings spouse’s irrevocable and complete release of the testamentary_power_of_appointment will not be a release of a general_power_of_appointment and will therefore not be a taxable transfer for federal estate and gift_tax purposes spouse’s irrevocable and complete release of the testamentary_power_of_appointment will not cause any part of the trust to be included in spouse’s gross_estate under sec_2041 the trust is exempt from the gst tax because it was created funded and irrevocable on date and no additions actual or constructive have been made to it since that date spouse’s irrevocable and complete release of the testamentary_power_of_appointment will not be treated as a constructive_addition to the trust and thus the release will not cause any part of the trust to be subject_to the gst tax rulings no and sec_2041 provides that the value of the gross_estate includes the value of all property to the extent of any property with respect to which the decedent has at the time of his death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent the property would be includible in the decedent's gross_estate under sec_2035 to inclusive for purposes of sec_2041 the power_of_appointment is considered to exist on the date of the decedent's death even though the exercise of the power is subject_to a precedent giving of notice or even though the exercise of the power takes effect only on the expiration of a stated period after its exercise whether or not on or before the date of the decedent's death notice has been given or the power has been exercised sec_20_2041-1 of the estate_tax regulations provides that a decedent’s gross_estate includes the value of property in respect of which the decedent possessed exercise or released certain powers of appointment sec_20_2041-1 defines the term general_power_of_appointment as any power_of_appointment exercisable in favor of the decedent his estate his creditors or the creditors of his estate a power_of_appointment is not a general power if by its terms it is either a exercisable only in favor of one or more designated persons or classes other than the decedent or his creditors or the decedent’s estate or the creditors of his estate or b expressly not exercisable in favor of the decedent or his creditors or the decedent’s estate or the creditors of his estate sec_20_2041-3 provides that property subject_to a power_of_appointment created after date is includible in the gross_estate of the holder of the power under varying conditions depending on whether the power is i general in nature ii possessed at death or iii exercised or released sec_20_2041-3 provides that if the power is a general_power_of_appointment the value of an interest in property subject_to the power is includible in a decedent’s gross_estate under sec_2041 if either i the decedent has the power at the time of his death and the interest exists at the time of his death or ii the decedent exercised or released the power or the power lapsed under the circumstances and to the extent described in sec_20_2041-3 sec_20_2041-3 provides that if a power is not a general_power_of_appointment the value of property subject_to the power is includible in the holder’s gross_estate under sec_2042 only if it is exercised to create a further power under certain circumstances described in sec_20_2041-3 based on the information submitted and the representations made we conclude that spouse’s irrevocable and complete release of the testamentary_power_of_appointment will not be a release of a general_power_of_appointment and will therefore not be a taxable transfer for purposes of the federal estate and gift_tax and spouse’s irrevocable and complete release of the testamentary limited_power_of_appointment will not cause any part of the trust to be included in spouse’s gross_estate rulings no and sec_2601 imposes a tax on every generation-skipping_transfer made by the transferor to a skip-person sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides that the provisions of chapter do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date the rule_of the preceding sentence does not apply to a pro_rata portion of any generation-skipping_transfer under an irrevocable_trust if additions are made to the trust after date sec_26_2601-1 provides that except as provided in sec_26_2601-1 or c any trust as defined in sec_2652 in existence on date is considered an irrevocable_trust sec_26_2601-1 provides that the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment as defined in sec_2041 is not treated as an addition to a_trust if-- such power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26_2601-1 and in the case of an exercise the power_of_appointment is not exercised in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of the trust extending beyond any life in being at the date of creation of the trust plus a period of years plus if necessary a reasonable period of gestation the perpetuities period for purposes of sec_26_2601-1 the exercise of a power_of_appointment that validly postpones or suspends the vesting absolute ownership or power of alienation of an interest in property for a term of years that will not exceed years measured from the date of creation of the trust will not be considered an exercise that postpones or suspends vesting absolute ownership or the power of alienation beyond the perpetuities period if a power is exercised by creating another power it is deemed to be exercised to whatever extent the second power may be exercised based on the information submitted and the representations made we conclude that the trust is exempt from the gst tax because it was created funded and irrevocable on date and no additions actual or constructive have been made to it since that date and spouse’s irrevocable and complete release of the testamentary_power_of_appointment will not be treated as a constructive_addition to the trust and thus the release will not cause any part of the trust to be subject_to the gst tax except as ruled above we express or imply no opinion concerning the federal tax consequences of this transaction under the cited provisions of the code or any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours christine e ellison christine e ellison chief branch office of the assistant chief_counsel passthroughs and special industries


t c summary opinion united_states tax_court sean michael bears and greta bears petitioners v commissioner of internal revenue respondent docket no 11980-06s filed date sean michael bears and greta bears pro sese micheal j proto 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 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 pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a dollar_figure deficiency in petitioners’ federal_income_tax the issues for decision are whether petitioners are entitled to a dependency_exemption deduction and dollar_figure child_tax_credit background some of the facts have been stipulated and are so found the stipulation of facts and the exhibits received into evidence are incorporated herein by reference at the time the petition was filed sean michael bears petitioner resided in pawtucket rhode island and greta bears resided in methuen massachusetts petitioner fathered a child with kristen mutter rodenbaugh child’s mother a judgment of support was rendered by the probate family court department of the commonwealth of massachusetts petitioner was ordered to pay dollar_figure per week as child_support he was also required to secure and maintain health care coverage for his child and if he was current on his obligations he may take the child as his dependent for state and federal_income_tax purposes petitioners filed a joint federal_income_tax return for on the return petitioners claimed a dependency_exemption deduction and a dollar_figure child_tax_credit petitioners did not attach a form_8332 release of claim to exemption for child of divorced or separated parents or its equivalent to their return at the time they filed their return petitioners were unaware that they were required to attach form_8332 or its equivalent to the return respondent issued a notice_of_deficiency to petitioners respondent denied petitioners’ dependency_exemption deduction and the dollar_figure child_tax_credit since petitioners did not attach a form_8332 or its equivalent to the return the denials resulted in a dollar_figure deficiency respondent does not dispute that petitioner has satisfied the conditions of the judgment of support discussion respondent urges us to sustain the disallowance of petitioners’ dependency_exemption deduction and the dollar_figure child_tax_credit because petitioners did not attach form_8332 or its equivalent to their joint federal_income_tax return as required by sec_152 and sec_1_152-4t a q a-3 temporary income_tax regs fed reg date the commissioner’s determinations in a notice_of_deficiency are presumed correct and the burden_of_proof is on the taxpayer to prove that the determinations are in error rule a 290_us_111 pursuant however to sec_7491 the burden_of_proof on factual issues that affect a taxpayer’s tax_liability may be shifted to the commissioner where the taxpayer introduces credible_evidence with respect to such issue in this case there is no dispute as to any factual issue accordingly the case is decided by the application of law to the undisputed facts and sec_7491 is inapplicable dependency_exemption deduction sec_151 in pertinent part allows a taxpayer to claim as a deduction the exemption_amount for each individual who is a dependent of the taxpayer as defined in sec_152 and who is the taxpayer’s child and satisfies certain age requirements sec_152 defines dependent in pertinent part to include a son or daughter of the taxpayer over half of whose support is received from the taxpayer for the calendar_year in which the taxable_year of the taxpayer begins or is treated under sec_152 or e as received from the taxpayer sec_152 provides a general_rule that limits the dependency_exemption deduction as follows if the child received over half of his support during the calendar_year from his parents who lived apart at all times during the last months of the calendar_year and is in the custody of one or both parents for more than one-half of the calendar_year then the child is treated as receiving over half of his support during the calendar_year from the parent having custody for a greater portion of the calendar_year the custodial_parent but sec_152 provides an exception to the general_rule of sec_152 if the custodial_parent signs a written declaration in such manner and form as the secretary may by regulations prescribe that he will not claim the child as a dependent and the noncustodial_parent attaches the written declaration to his return for the taxable_year then the noncustodial_parent is entitled to the dependency_exemption sec_152 applies to both married parents and parents who have never been married to each other 121_tc_245 2in the present case the exceptions in sec_152 and do not apply there was no multiple_support_agreement as defined in sec_152 and since the judgment of support was entered in there is no pre-1985 instrument thus petitioner is entitled to the dependency_exemption only if the requirements of sec_152 are met deduction for purposes of sec_152 the term noncustodial_parent means the parent who is not the custodial_parent sec_152 the temporary_regulation states that a noncustodial_parent may claim the exemption for a dependent_child only if the noncustodial_parent attaches to his her income_tax return for the year of the exemption a written declaration from the custodial_parent stating that he she will not claim the child as a dependent sec_1_152-4t a q a-3 temporary income_tax regs supra the written declaration may be made on a form provided by the service or a document that conforms to its substance 114_tc_184 citing sec_1 4t a q a-3 temporary income_tax regs supra see also neal v commissioner tcmemo_1999_97 the written declaration is embodied in form_8332 and it incorporates the requirements of sec_152 miller v commissioner supra pincite in miller v commissioner supra the court stated that in order for the noncustodial_parent to claim the dependency 3form requires a taxpayer to furnish the names of the children for which exemption claims were released the years for which the claims were released the signature of the custodial_parent the custodial parent’s social_security_number the date of the custodial parent’s signature and the noncustodial parent’s name and social_security_number 114_tc_184 exemption sec_152 clearly required the custodial parent’s release of the dependency_exemption by signing a written declaration to that effect id pincite simply attaching to the return of the noncustodial_parent a state court order that was not signed by the custodial_parent did not satisfy the express statutory requirements of sec_152 id pincite the mere fact that the state court granted the taxpayer the right to claim the dependency_exemption was immaterial because a state court cannot determine issues of federal tax law id citing 783_f2d_966 10th cir white v commissioner tcmemo_1996_438 citing with approval 327_us_280 the parties agree that the child’s mother is the custodial_parent as defined in sec_152 because petitioners the noncustodial parents did not attach form_8332 or its equivalent to their return they are not entitled to a dependency_exemption deduction accordingly we sustain respondent’s disallowance of the dependency_exemption deduction child_tax_credit sec_24 provides a credit against income_tax for each qualified child of a taxpayer who is under years of age the statutory definition of a qualified child is one for whom a taxpayer may claim a deduction under sec_151 sec_24 thus a taxpayer is ineligible for the child_tax_credit under sec_24 unless the taxpayer is eligible for the dependency_exemption under sec_151 having determined that petitioners are not entitled to the dependency_exemption deduction it follows that they are not entitled to the child_tax_credit accordingly we sustain respondent’s disallowance of the child_tax_credit to reflect the foregoing decision will be entered for respondent


internal_revenue_service p o box cincinnati oh number release date department of the treasury employer_identification_number contact person - id number date date contact telephone number uil legend ethnicity b name c names d e name f length g organization t dollars amount u number v dollars amount dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants loans meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request your letter indicates that you will operate an educational grant program called b is to provide funds to enable children from the counties of c to attend the purpose of b overnight summer camp for promoting d religious identity and d culture among children you intend for b to bring more of these children into an environment where they can achieve a better education and understanding of the d religion and the d traditions history and culture you will pay the funds directly to the summer camps to offset the recipients’ cost of attendance you will promote b in many ways such as through the distribution of post cards and brochures at various events as well as post information on social media sites you will use materials from g a tax-exempt_organization who has worked with numerous communities to fund children to attend d camps in addition the application to apply for b is available on g’s website your web site will provide a link to g’s website you will budget in the range of t dollars to fund in the range u grants based on your projections individual grants will be in the range of v dollars depending on the duration of the particular camp to be eligible individuals must be children under years of age who self-identify of the d religion and have not previously attended an overnight d summer camp unless receiving a renewal grant recipients must select from a exempt summer camps or e summer camps administered by a non-profit tax-exempt_organization that you have preapproved list you provide one of the tax- grants may also be awarded to fund a second year for children who previously received a grant to attend one of the approved camps and previously attended the applicable summer camp these children must demonstrate financial need your board_of trustees intends to administer b with the assistance of an advisory committee consisting of individuals with a demonstrated commitment to the promotion of the d life and culture which will serve as the selection committee the advisory committee will report to your board_of trustees who has final authority for all decisions you will monitor the grants by insuring the recipients have attended the duration of the camp you will also take steps to monitor risk of any diversions by the recipient organization to insure compliance with your requirements to determine if grants used for these camps in future years are appropriate you represent that you will maintain the following all records relating to individual grants including information obtained to evaluate grantees identify whether a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you undertook the supervision and investigation of grants described above you represent that you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes and take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees' assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversion from occurring you will check the ofac list of specially designated nationals and blocked persons for names of individuals and entities with whom you are dealing to determine if they are included on the list you will comply with all statutes executive orders and regulations that restrict or prohibit persons from engaging in transactions and dealings letter catalog number 58222y with designated countries entities or individuals or otherwise engaging in activities in violation of economic sanctions administered by ofac if necessary you will acquire from ofac the appropriate license and registration where necessary basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - - - ascholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or a prize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show e e e the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination e e e this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don’t differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations letter catalog number 58222y p o box cincinnati oh e e e you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements letter catalog number 58222y


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si br 1-plr-103256-00 date date legend x d1 state this responds to your representative’s letter dated date and subsequent correspondence written on behalf of x requesting a ruling that x's s_corporation status will be effective as of d1 facts x incorporated under state law on d1 x's shareholders intended that x be a subchapter_s_corporation for its tax_year beginning d1 however the s_corporation_election under sec_1362 of the internal_revenue_code was not filed timely x requests a ruling that it will be recognized as a subchapter_s_corporation effective d1 pursuant to sec_1362 law and analysis sec_1362 provides that a small_business_corporation may elect to be a subchapter_s_corporation sec_1362 provides the rule on when a subchapter_s_election will be plr-103256-00 effective if a subchapter_s_election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as a subchapter_s_corporation for the year in which the election is made if a subchapter_s_election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as a subchapter_s_corporation until the taxable_year after the year in which the subchapter_s_election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that taxable_year x's subchapter_s_corporation election was not filed timely for the election to be effective as of its taxable_year beginning on d1 nevertheless x has established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusions based solely on the facts submitted and representations made and assuming that x otherwise qualifies as a subchapter_s_corporation as of d1 and x's shareholders make any adjustments to their federal_income_tax returns necessary to comply with this ruling we conclude that x will be recognized as a subchapter_s_corporation effective for the period beginning on d1 please file a completed form_2553 with a copy of this ruling attached reflecting x’s election of subchapter_s_corporation status as of d1 with the applicable service_center within days from the date of this letter except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x otherwise satisfies the subchapter_s_corporation eligibility requirements the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-103256-00 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative signed dianna k miosi sincerely dianna k miosi chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


uniform issue list no l y i department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division nov kkekkekekkrkekkkkkkrekkkrrkekre krrekkkkkkekkrkkkkkekkkrkkkee kheekkkkekrkkkrkekkrkrkrkkek it ‘o78 ‘ - e attention fr kerr kekkrkekkkkekk rrr ker kr kr rr rk rrr keke erk er kee kek legend employer a rrr kk ek kkk kekekkekkkeeke plan x mr ek kek keke kkkkkkekkeeee krrekkkekekkrrekekekrrkekrkkkkkrkkekkr kkk kk kkk ee rkrkkkkekekekkeke keke kkk kerr kkekkkkekekekkekekekkeker kkkekkkkrkrkkkkek custodian c rrr kk eker kkk kerr eker kke kkk keke keke ladies and gentlemen in response to a request for a letter_ruling dated this is date submitted on your behalf by your authorized representative concerning the above-named matched savings_plan plan x under sec_403 of the internal_revenue_code the code date june that request was supplemented by letters dated and date the following representations have been submitted on your behalf kreekekkrkkekkekkrkrkrekrkrrek employer a was determined to be exempt from federal_income_tax as an organization described in sec_501 in a letter dated january of the code employer a established plan x which was intended to meet the requirements of sec_403 of the code effective date matching_contributions and rollover_contributions contributions to plan x are paid to custodian c pursuant to an agreement between employer a and custodian c plan x was amended and restated effective january plan x provides for salary deferral contributions section dollar_figure defines employer as the section dollar_figure of plan x provides that company means employer a or any successor company and any commonly controlled_entity that is described in code sec_501 sec_501l a commonly controlled_entity as an employer and any corporation required to be aggregated with the company under code sec_414 sec_414 sec_414 and sec_414 appendix a lists eight employers that have adopted plan x and is exempt from tax under code in effect defines section dollar_figure of plan x under section dollar_figure of the plan an eligible_employee means any employee of an employer but excluding any employee who is a member of a collective bargaining agreement under section dollar_figure of plan x employees may elect to reduce their compensation in an amount equal to the percentage of their compensation and to have such amount allocated to his salary deferral account sec_5 of plan x provides that any eligible_employee who desires to have a salary deferral contribution made on his behalf by the employer shall file a contribution election with the committee specifying his contribution_percentage of not less than nor more than and authorizing the compensation otherwise payable to him to be reduced accordingly a contribution election shall be effective only with respect to compensation not yet earned as of the date the contribution election is effective contribution election shall become effective on the first day of the next payroll_period after it is received and processed by the committee that was appointed to administer plan x a participant's krrekekkkekkrekkkrekkekekkkeree elective_deferrals are limited under sec_5 a to the dollar amounts imposed by code sec_402 g b plus the special catch-up_contributions described in sec_5 of plan x and sec_402 of the code of plan xx a qualified_employee of of plan x provides that in the case of sec_5 b participant who is organization the limitation on elective_deferrals in any calendar_year shall be increased by the lesser_of ii dollar_figure reduced by amounts not included in gross_income for prior taxable years or the excess of dollar_figure times the participant’s number of years_of_service with the qualified_organization over the elective_deferrals made by the qualified_organization on behalf of the participant for prior taxable years a qualified i dollar_figure iii a sec_4 b of plan x provides for matching_contributions for an employee who has attained age and completed big_number hours_of_service matching formula that provides for different levels of matches based on the employees’ years_of_service under section of plan x matching_contributions vest over a six-year period the board_of directors may establish a section a of plan x provides in part that the vested portion of a participant’s accrued_benefit is the entire balance of the participant’s salary deferral account and rollover account and the vested portion of the participant’s matching account will be used to reduce the employers matching_contributions or administrative expenses in the discretion of the committee to pay reasonable under sec_4 c of plan xx forfeitures section dollar_figure of plan x provides that custodial agreement means the agreement between employer a and the custodian to provide for holding of assets received by the custodian under the plan pursuant to article ix sec_9_1 of plan x provides that employer a may enter agreements for holding investing and payment of plan x assets or direct by execution of an insurance_contract for all or a specified portion of plan x assets be held invested and paid under such contract all of the assets shall be krekkeekkeekrkrkekekkrkkekkreke invested either in one or more annuity_contracts which satisfy the requirements of code sec_403 thereunder or in one or more custodial accounts which satisfy the requirements of code sec_401 stock of one or more regulated_investment_companies as such term is defined in sec_851 of the code and which hold only and the regulations section of plan x provides that no accrued_benefit shall be paid or made available to any distributee before the participant dies attains age incurs a severance_from_employment becomes disabled within the meaning of sec_72 pursuant to a salary reduction agreement as defined in code sec_3121 encounters financial hardship of the code or in the case of contributions made sec_4 of plan x provides that the maximum annual_additions to a participant’s account with respect to any limitation_year shall not exceed the lesser_of of the participant’s sec_415 compensation and dollar_figure as adjusted in accordance with sec_415 of the code percent section c of plan x provides that the required_beginning_date for the commencement of distributions to a participant is a date not later than april of the calendar_year following the later of the calendar_year in which the participant attains age incurs a severance_from_employment or the calendar_year in which the participant additionally section of plan x provides that distributions will be made in accordance with code sec_401 a and b section of plan x provides for trustee-to-trustee transfers in accordance with sec_401 b of the code and section sec_15 of plan x provides that no benefit payable at any time shall be subject_to alienation sale transfer assignment pledge attachment or other legal process or encumbrance of any kind except payments pursuant to a qualified_domestic_relations_order rrerkekkkkrkkrkekkrkrkrkrkkrkeek such contract shall not contain any provisions that section f of plan x provides that the committee may direct the custodian to purchase a nontransferable annuity_contract conflict with the provision of the plan and shall provide the optional forms of payment available to a beneficiary under the plan at the date of the participant’s death and any notification election consent or other requirements provided by the plan in satisfaction of the obligation to which the annuity_contract shall relate based on the foregoing facts and representation a ruling was requested that plan x satisfies the requirements of sec_403 of the code of the code as amended by the economic the employee performs services for an employer sec_403 growth and tax relief and reconciliation act of egtrra and applicable for years beginning after date provides that amounts contributed by an employer to purchase an annuity_contract for an employee are excludable form the gross_income of the employee in the year contributed provided which is exempt from tax under sec_501 as an organization described in sec_501 or the employee performs services for an educational_institution as defined in sec_170 subdivision of a state or an agency_or_instrumentality of one or more of the foregoing subject_to sec_403 contract are nonforfeitable except for failure to pay future premiums meets the nondiscrimination requirements of paragraph and provides a salary reduction agreement the contract meets the requirements of sec_401 a in the case of a contract purchased under a plan which such contract is purchased under a plan which a ii which is a state a political the employee's rights under the such annuity_contract is not of the code provides further that the sec_403 employee shall include in his gross_income the amounts actually distributed under such contract in the year distributed as provided in sec_72 addition except as provided in sec_403 b custodial_account described in sec_403 an annuity_contract for all purposes of the code of the code in a is treated as krerkkkkrkkkerkekkkekkekkkek of the code requires that arrangements sec_403 pursuant to sec_403 must satisfy requirements similar to those of sec_401 death_benefit requirements of sec_401 with respect to benefits accruing after december ending after such date that requirements of sec_401 rollovers in taxable years in addition this section provides for distributions made after december and similar to the incidental are met regarding direct the of the code sec_401 in general provides that the required_beginning_date for commencement of benefits igs april of the calendar_year following the later of the calendar_year in which the employee attains age year in which the employee retires specifies required_minimum_distribution rules for the payment of benefits from qualified_plans sec_401 a or the calendar of the code provides in general that sec_403 sec_403 annuity_contract distributions attributable to contributions made pursuant to a salary reduction agreement within the meaning of sec_402 c may be paid only when the employee attains age incurs a severance_from_employment becomes disabled within the meaning of sec_72 contract may not provide for the distribution of any income attributable to such contributions in the case of hardship of the code or encounters financial hardship such sec_401 of the code requires that the contract be nontransferable sec_403 e of the code provides that in the case of a contract purchased under a salary reduction agreement the contract meets the requirements of sec_401 a sec_401 arrangement which provides for elective_deferrals to limit such deferrals under the arrangement in combination with any other qualified_plans or arrangements of an employer maintaining such plans or arrangements providing for elective_deferrals to the limitation in effect under sec_402 g for taxable years beginning in such calendar_year of the code requires a sec_403 b rrkkkkkkkkrkrkrkrekrk kerr kr kek of the code provides that the amounts paid sec_403 by a qualifying employer to a custodial_account which satisfies the requirements of sec_401 f shall be treated as amounts contributed by the employer for an annuity_contract for his employee if the amounts are to be invested in regulated_investment_company stock to be held in that custodial_account and under the custodial_account no such amounts may be paid or made available to any distributee before the employee dies attains age severs from employment becomes disabled within the meaning of sec_72 salary reduction agreement encounters financial hardship or in the case of contributions made pursuant toa of the code states that a custodial sec_403 b b account which satisfies the requirements of sec_401 shall be treated as an organization described in sec_401 solely for purposes of subchapter_f and subtitle f with respect to amounts received by it and income from investments thereof of the code provides that a custodial if the assets thereof are held by a bank as defined in sec_401 account shall be treated as a qualified_trust under sec_401 sec_408 or another person who demonstrates to the satisfaction of the secretary that the manner in which he holds the assets will be consistent with the requirements of sec_401 of the code provide generally that the sec_402 elective_deferrals of any individual for any taxable_year shall be included in such individual's gross_income to the extent the amount of such deferrals exceeds dollar_figure on amounts set forth in the schedule under sec_402 b of the code provides that sec_402 qualified_employee of a qualified_organization with respect to employer contributions used to purchase an annuity_contract under sec_403 under a salary reduction agreement the limitation of sec_402 as modified by sec_402 whichever of the following is the least dollar_figure reduced by amounts not included in gross_income for prior taxable years by reason of this paragraph or for any taxable_year shall be increased by in the case of a i dollar_figure ii iii the rrekkekrkekekrekrkrkrkkrrerrekeke excess of dollar_figure multiplied by the number of years_of_service of the employee with the qualified_organization over the employer contributions described in paragraph made by the organization on behalf of such employee for prior taxable years determined in the manner prescribed by the secretary a qualified_organization for these purposes means any educational_organization hospital home health service agency health and welfare service agency church_or_convention_or_association_of_churches and included any organization described in sec_414 e b ii anda qualified_employee means any employee who has completed years_of_service with the qualified_organization of the code provides in relevant part that sec_415 an annuity_contract described in sec_403 shall not be considered described in sec_403 unless it satisfies the sec_415 limitations described in sec_403 the preceding sentence applies only to the portion of the annuity_contract exceeding the sec_415 or sec_415 limitations of the code contributions to a sec_403 b plan fora limitation_year are generally limited to the lesser_of dollar_figure or of compensation in the case of an annuity_contract under sec_415 in this case employer a and the other members of the controlled_group listed in appendix a are employers described in sec_403 b a i of the code because these employers are described in sec_501 sec_501 all employee contributions and earnings thereon are fully vested and nonforfeitable at all times plan x does not meet the requirements of a sec_403 a annuity plan the restrictions of nontransferability are present in plan x as required by sec_401 of the code and exempt from tax under plan x satisfies the limits under sec_403 code that amounts attributable to elective_deferrals shall not be distributed earlier than the employee’s attains age severance_from_employment death disability or hardship in addition plan x satisfies the sec_403 b requirements and limits contributions in accordance with sec_402 g and of the code demonstrates compliance with the applicable salary reduction rules in sec_1 b -1 b plan x contains language that of the regulations of the krkkkrkkkkkrkrkrkkrkekkekrekkak therefore with respect to the ruling_request we conclude that plan x satisfies the requirements of sec_403 of the code this ruling is based on the assumption that an official or officials of employer a formally exectite plan x does not address whether plan x satisfies the nondiscrimination and coverage requirements of code sec_403 also this letter is not a ruling as to whether any specific annuity_contract purchased under plan x satisfies the requirements of sec_403 of the code this letter this letter_ruling is directed only to the taxpayer that requested it may not be used or cited by others as precedent sec_6110 of the code provides that it a copy of this ruling is being sent to your authorized representative in accordance with a power_of_attorney on file in this office any questions concerning this ruling should be addressed to rrrkkkkakkk td ke kekke qt karl kek not a toll free number kek sincerely yours alan pipkin manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice