t c no united_states tax_court natalie w mcgee petitioner v commissioner of internal revenue respondent docket no filed date by notice_of_determination dated date r denied p’s request for relief under the equitable relief provisions of sec_6015 i r c for the taxable_year solely because p’s request was made more than years after r’s first collection activity on the account in date r withheld a dollar_figure refund p claimed on her individual federal_income_tax return to partially offset the unpaid joint liability r’s related notice of offset did not advise p of her rights to seek relief under sec_6015 i r c held the date offset was a collection action 121_tc_290 held further the commissioner is required to include with collection-related notices such as the letter sent to p informing her of the withholding of her refund for a description of taxpayers’ rights under sec_6015 i r c internal_revenue_service restructuring and reform act of rra sec_3501 publaw_105_206 112_stat_770 held further it is inequitable and an abuse_of_discretion for r to apply the 2-year limitation period of revproc_2000_15 sec_5 2000_1_cb_447 because of r’s failure to send the notice required by rra sec_3501 natalie w mcgee pro_se marshall r jones for respondent opinion goeke judge the sole matter before the court is whether it was an abuse_of_discretion for respondent to deny petitioner’s request for equitable relief from joint liability based on sec_6015 f solely because petitioner made her request more than years after respondent’s first collection activity petitioner challenges the application of the 2-year limit on sec_6015 requests imposed by revproc_2000_15 sec_5 2000_1_cb_447 when inadequate notice of collection activity was sent to her and as a result she did not become aware of her sec_6015 rights until after the 2-year period expired 1unless otherwise indicated all section references are to the internal_revenue_code currently in effect background petitioner timely filed a petition requesting a review of respondent’s denial of her request for equitable relief under sec_6015 following respondent’s denial of such relief in a notice_of_determination issued on date respondent denied relief solely because petitioner’s form_8857 request for innocent spouse relief and separation of liability and equitable relief was untimely respondent argues that the 2-year period began with the first collection activity on date at the time the petition was filed petitioner resided in birmingham alabama petitioner and her former spouse filed a joint federal_income_tax return for the return the return was dated date the return showed a joint tax_liability of dollar_figure the only payment made regarding this liability was the withholding from petitioner’s earnings as a teacher in the amount of dollar_figure leaving an unpaid liability of dollar_figure petitioner’s former spouse was a self-employed veterinarian and no estimated_tax payments were made regarding his business income the unpaid liability for and related additions to tax and interest are the source of the present dispute on date respondent withheld a dollar_figure refund petitioner claimed on her individual federal_income_tax return to partially offset the unpaid joint liability the offset at or about that time respondent sent petitioner a letter notifying her of the offset this letter was not in respondent’s administrative file and is not a part of the record but based on petitioner’s testimony and the parties’ agreement at trial this notice is consistent with a similar notice petitioner received on date neither of the notices sent to petitioner regarding the offset advised petitioner of her potential rights to relief under sec_6015 as a result petitioner was unaware of those rights until she hired an attorney in late after a problem arose with her credit rating because a notice_of_federal_tax_lien had been filed on her residence on date petitioner filed with respondent an executed form_8857 with respect to the liability discussion sec_6013 provides that married individuals who file a joint_return are jointly and severally liable for the tax arising from the return sec_6015 provides that notwithstanding sec_6013 an individual who filed a joint_return may seek relief from joint liability under three specific alternatives set forth in subsections b c and f of sec_6015 this case only involves a request for relief under subsection f which provides that the secretary may relieve an individual of joint liability if subsections b and c do not apply and if based on the facts and circumstances it is inequitable to hold the individual liable for the joint unpaid tax or deficiency respondent argues it is not necessary to use a facts and circumstances analysis in this case because petitioner’s request for relief was not submitted to respondent within years of the first collection action on the joint liability as a result respondent made no analysis of the facts and circumstances in denying petitioner’s request sec_6015 and c b provides that requests for relief under each of these two subsections must be made not later than years after the secretary has begun collection activities applicable at the time of petitioner’s request for relief revproc_2000_15 sec_5 2000_1_cb_447 provides that requests under sec_6015 must also be made within years of the first collection activity against the requesting spouse sec_6015 does not impose a limitation period respondent bases his position on revproc_2000_15 sec_5 maintaining that the offset was a collection activity however respondent also asserts that a collection- 2rev proc 2001_1_cb_447 is applicable for requests for relief under sec_6015 made before date thereafter sec_1_6015-0 through income_tax regs are operative since sec_1_6015-0 through income_tax regs are not applicable to petitioner’s request for relief we do not address the regulations here related notice was not required to be sent to petitioner because the offset only merited an accounting adjustment notice in other words respondent asserts the offset was a collection activity under the revenue_procedure but that the notice of the offset is not a collection-related notice the 2-year limitation period applicable to sec_6015 and c was added to the internal_revenue_code by the internal_revenue_service restructuring and reform act of rra sec_3201 publaw_105_206 112_stat_734 rra sec_3501 112_stat_770 required that the commissioner change collection-related notices to inform individuals subject_to joint liability of their rights to relief under sec_6015 rra sec_3501 112_stat_770 rra sec_3501 is part of the 3rra sec_3501 provides as follows sec_3501 explanation of joint_and_several_liability a in general --the secretary_of_the_treasury or the secretary’s delegate shall as soon as practicable but not later than days after the date of the enactment of this act establish procedures to clearly alert married taxpayers of their joint_and_several liabilities on all appropriate publications and instructions b right to limit liability --the procedures under subsection a shall include requirements that notice of an individual’s right to relief under sec_6015 of the internal_revenue_code_of_1986 shall be included in the statement required by sec_6227 of the omnibus taxpayer_bill_of_rights internal_revenue_service publication no and in any collection- related notices public law but was not codified however despite not being incorporated into the code rra sec_3501 has the force of law see eg 116_tc_356 n affd 293_f3d_740 5th cir 114_tc_489 affd 275_f3d_912 10th cir respondent offers inconsistent meanings of the word collection in the context of offsets as between revproc_2000_15 sec_5 and rra sec_3501 respondent argues that collection actions requiring notice only occur when the taxpayer retains a right to prevent the actual collection action from occurring however rra sec_3501 makes no such distinction and requires the commissioner to send notice regardless of the type of collection activity that is occurring the notice is not intended to preempt collection action rather it is intended to be informative congress enacted the change to collection-related notices in connection with the same statutory scheme that added the 2-year period of limitations to claims made under subsections b and c of sec_6015 s rept pincite 1998_3_cb_537 the legislative_history makes it clear that congress imposed the 2-year limitation period as part of a new statutory mechanism that also requires the commissioner to alert taxpayers to their sec_6015 rights id see also h conf rept pincite 1998_3_cb_747 in addition rra sec_3501 and the legislative_history reflect congress’s view that knowledge of the relief provisions by married taxpayers was important to the effective application of sec_6015 sec_6015 added new options for taxpayers seeking relief from joint liability see 115_tc_118 114_tc_354 the notice of the offset in this case the accounting adjustment notice did not inform petitioner of her sec_6015 rights and as a result petitioner was unaware of her rights to relief under sec_6015 until she hired counsel in late the incongruity of respondent’s position is untenable the offset was a collection action 121_tc_290 accordingly the notice of the offset was a collection-related notice and should have included the information required by rra sec_3501 respondent asserts that petitioner’s claim is nonetheless barred by the 2-year limitation period reflected in revproc_2000_15 sec_5 revproc_2000_15 supra has been cited and referenced by this court in determining whether the commissioner abused his discretion in determinations regarding sec_6015 campbell v commissioner supra pincite hall v commissioner tcmemo_2004_170 we have not previously been faced with the commissioner’s reliance on the 2-year limitation period when the commissioner took an inconsistent_position in failing to provide the collection-related notice required by rra sec_3501 in this case respondent’s treatment of the offset as a collection action coupled with his failure to send petitioner notice of her sec_6015 rights as required by rra sec_3501 resulted in petitioner’s failure to seek sec_6015 relief within years after the first collection action because she did not know of her rights the problem here is not with the language of the revenue_procedure per se but that the revenue_procedure has been interpreted in this case in a fashion inconsistent with respondent’s application of the public law and that interpretation causes a result that is inconsistent with the statutory scheme it would be inequitable if respondent could prevent review of a request for relief under sec_6015 by failing to inform petitioner of her right to relief in defiance of a congressional mandate such a result would be contrary to the very purpose of sec_6015 which is to relieve inequitable situations involving joint liabilities respondent’s administrative interpretations are given little weight when inconsistent with a statutory scheme 455_us_16 fec v democratic senatorial campaign comm 454_us_27 revproc_2000_15 sec_5 should not be applied in a manner which frustrates the legislative intent of sec_6015 and the related public law accordingly we hold that the running of the 2-year period set forth in revproc_2000_15 sec_5 was not commenced by the collection activity in date respondent’s contrary interpretation of revproc_2000_15 sec_5 is an abuse_of_discretion in rochelle v commissioner supra and smith v commissioner supra we upheld the adequacy of notices of deficiency despite their failure to state accurately the tax_court petition due_date where there was no prejudice to the taxpayers as a result of the commissioner’s failure to follow the public law the petition due dates in those cases were statutory not provided by a revenue_procedure regardless we specifically stated in rochelle that simply put this is not a case of taxpayer prejudice which congress intended to rectify rochelle v commissioner t c pincite our holding in smith relied on the lack of prejudice to the taxpayer stating where respondent failed to put the petition date on the notice and petitioners nevertheless received the notice and filed a petition 4petitioner also argues that it is inappropriate to have a strict limitations_period on sec_6015 because sec_6015 is designed to address inequitable situations because of our analysis in this case it is not necessary for us to reach this argument in a timely manner such notice was valid smith v commissioner t c pincite in the present case respondent’s failure to follow sec_3501 resulted in prejudice to petitioner by causing her to fail to realize that she had rights to relief under sec_6015 until more than years after respondent applied her refund unlike the notices of deficiency in rochelle and smith which notified the taxpayers of the 90-day period and the right to petition the tax_court the notice of offset in the present case did not give petitioner any information about her rights under sec_6015 to reflect the foregoing an appropriate order will be issued


internal_revenue_service number release date index number ----------------------------------------- ------------------------------ --------------------------------------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-132312-05 date date ---------- ------------------------- ----------------------------- ----------------------------------------- ----------------------- legend x state d1 d2 dear --------------- this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a partnership for federal_income_tax purposes facts based upon the information submitted and representations made within your request x was formed as a state limited_liability_company on d1 x elected to be treated as an association_taxable_as_a_corporation for federal tax purposes effective on d1 on d2 x intended to elect to be classified as a partnership for federal tax purposes however a form_8832 entity classification election electing to be treated as a partnership was not timely filed plr-132312-05 law and analysis sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 further provides that an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or - an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that unless the entity elects otherwise a domestic eligible_entity is a partnership if it has two or more members sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing a form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_7701-3 provides in relevant part that if an eligible_entity makes an election under sec_301_7701-3 to change its classification the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election however an election by a newly formed eligible_entity that is effective on the date of formation is not considered a change for purposes of this paragraph under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-132312-05 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of sixty days from the date of this letter to elect to be classified as a partnership for federal_income_tax purposes effective d2 the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes cc heather c maloy heather c maloy associate chief_counsel passthroughs and special industries sincerely


internal_revenue_service number release date index number ----------------- --------------------- ------------------------------------------------------------ ------------------------------ ------------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------ telephone number -------------------- refer reply to cc tege eoeg teb plr-109193-06 date date legend tribe ------------------------------------------------------------ --------------------------------------------------- authority --------------------------------------------------------------------------------------------------------------- ------------------------------------------------ -------------------------------------------------------------------------------- ------------------------ ----------------------- ------------------------------------------------------ tribal council date dear ------------ this letter is in response to your request for rulings submitted by your authorized representative on behalf of authority that authority is a political_subdivision of tribe within the meaning of sec_7871 of the internal_revenue_code the code authority is not subject_to federal_income_tax and authority is not required to file federal_income_tax returns facts and representations plr-109193-06 tribe is listed in revproc_2002_64 2002_2_cb_717 as an indian_tribal_government that is to be treated similarly to a state for specified purposes under the code authority is not included in the list of political subdivisions of indian tribal governments published in revproc_84_36 1984_1_cb_510 modified revproc_86_17 1986_1_cb_550 tribal council is the representative governing body of tribe members of tribal council are elected by vote of general council which is composed of all members of tribe who are duly registered to vote general council has authorized tribal council to act on behalf of tribe to exercise a variety of powers including the authority to establish and regulate political subdivisions authority was established by resolution of tribal council on date as a political_subdivision of tribe authority is authorized to exercise governmental power over the development construction operation promotion financing regulation and licensing of certain new and existing tribal businesses in order to further the economic and social development of tribe and its members pursuant to its charter authority has been delegated the power to among other things impose and collect business income or franchise_taxes sales and use taxes and other business-related taxes on any persons including but not limited to certain tribally-chartered business entities transactions or activities within the taxing jurisdiction of tribe and service and licensing fees on certain tribal enterprises and other business enterprises operating within the regulatory jurisdiction of tribe the board_of directors of authority the authority board consists of five members appointed by tribal council the authority board members may be removed by tribal council at any time with or without cause authority’s capital and operating budgets must be approved by tribal council before they become effective authority also must file with tribal council annual balance sheets and quarterly reports of the financial affairs of authority law and analysis sec_7701 defines the term indian_tribal_government as the governing body of any tribe band community village or group of indians or if applicable alaska natives which is determined by the secretary after consultation with the secretary of the interior to exercise governmental functions sec_7871 treats an indian_tribal_government as a state for certain specified tax purposes sec_7871 provides that for purposes of sec_7871 a subdivision of an indian_tribal_government shall be treated as a political_subdivision of a state if and only if the secretary_of_the_treasury determines after consultation with the secretary of the plr-109193-06 interior that such subdivision has been delegated the right to exercise one or more of the substantial governmental functions of the indian_tribal_government revproc_84_36 provides a list of political subdivisions of indian tribal governments that are to be treated as political subdivisions of a state for specified purposes of the code revproc_84_37 1984_1_cb_513 modified revproc_86_17 provides procedures for a governmental_unit of an indian_tribal_government not included on the list published in revproc_84_36 to request a ruling qualifying it for treatment as a political_subdivision of a state as provided under sec_7871 section dollar_figure of revproc_84_37 provides that a subdivision of an indian_tribal_government that has been delegated one of the generally accepted sovereign powers may qualify as a political_subdivision of a state as provided under sec_7871 section dollar_figure indicates that the generally accepted sovereign powers of states are the power to tax the power of eminent_domain and the police power tribe is an indian_tribal_government that is to be treated as a state for specified purposes under the code tribe chartered authority as a political_subdivision of tribe and authority is authorized to exercise taxing powers the portion of tribe’s taxing power delegated to authority is not insubstantial this office has consulted with the united_states department of the interior regarding tribe and authority the united_states department of the interior has opined that tribe has effectively delegated to authority the power to tax accordingly after consultation with the secretary of the interior we conclude that within the meaning of sec_7871 authority has been delegated one or more of the substantial governmental functions of tribe therefore for purposes of sec_7871 authority will be treated as a political_subdivision of a state generally the income of states or indian tribes and their political subdivisions is not subject_to federal income_taxation see revrul_71_131 1971_1_cb_28 revrul_71_132 1971_1_cb_29 and revrul_94_16 1994_1_cb_19 the service does not require states local governments or indian tribes to file federal_income_tax returns conclusion based on the information submitted and representations made we conclude that pursuant to sec_7871 authority is a political_subdivision of an indian_tribal_government tribe and accordingly authority will be treated as a political_subdivision of a state for purposes of sec_7871 the income of authority is not subject_to federal_income_tax and authority is not required to file federal_income_tax returns plr-109193-06 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to authority’s authorized representatives the ruling contained in this letter is based upon information and representations submitted by authority and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the materials submitted in support of the request for a ruling it is subject_to verification upon examination sincerely assistant chief_counsel exempt_organizations employment_taxes government entities by johanna som de cerff senior technician reviewer tax exempt bond branch


internal_revenue_service number release date index numbers -------------- ------------------------------------------------- ------------------------- ------------------------------------------------------ ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number -------------------- refer reply to cc corp plr-100186-08 date date legend taxpayer ------------------------------------------------------------------- ----------------------------------------------------------- ------------------------- entity a entity b entity c entity d entity e entity f entity g state a date date date date -------------------------------------- ------------------------------------- ------------------------------------------------- ---------------------------------- ---------------------------------------------- ------------------------------------ --------------------------------------- ------------- --------------------- --------------------------- ----------------- ------------------------ plr-100186-08 date date date date date date date date date date date date date date date date date date date date year year ------------------ ------------------ --------------------------- ---------------------- ----------------------- ----------------------- --------------------- --------------------- ------------------ -------------------------- ------------------------ --------------------- ----------------- ------------------ ----------------------- ------------------------ --------------------- ------------------ ------------------- -------------------------- ------- ------- plr-100186-08 a b c d e f g h i j k l m n o p q r s t u v ----------- -- ----------- ----------- -------- ------------- ------ ----------- -------- ------------- ----------- --------- ------------- -------- -------- --------- ----- ------------- -------- --------------- ------------- ------------- plr-100186-08 w x y z aa bb cc dd ee ff gg hh ii jj kk ll mm nn oo pp qq rr --------------- ------ -------- ------------- -------- -------- ---------------- ---------------- ---------------- ---------------- ------------- --------------- ------------- ------------- ------------- -- -- ------ -------- --------------- --------------- ------------- plr-100186-08 ------------- ------------- ------------- ------------- ------------- ss tt uu vv ww dear -------------- this letter responds to your letter dated date requesting rulings regarding sec_382 of the internal_revenue_code the relevant information provided in that letter and in later correspondence is summarized below summary of facts taxpayer is a privately-held state a corporation and a loss_corporation within the meaning of sec_382 between date and date the relevant period taxpayer engaged in numerous rounds of financing involving different classes of common and preferred_stock the fair_market_value of each of these classes of stock has fluctuated relative to the other classes of stock from the time of their respective issuances taxpayer also engaged in recapitalizations in year and year the year recapitalization and the year recapitalization on date taxpayer initially issued a shares of common_stock at a price of dollar_figureb per share to its founders throughout the relevant period taxpayer issued additional common_stock generally in connection with the exercise of stock_options by employees or former employees and certain acquisitions and recapitalizations taxpayer has identified the following issuances transfers conversions and recapitalizations of stock as relevant to the application of sec_382 on date taxpayer issued c shares of series a preferred_stock at a price of dollar_figured per share on date taxpayer engaged in a stock split at a ratio of e of both its series a preferred_stock and its common_stock on date taxpayer issued f shares of series b preferred_stock at a price of dollar_figureg per share plr-100186-08 on date taxpayer issued h shares of series c preferred_stock at a price of dollar_figurei per share on date taxpayer issued j shares of series c preferred_stock at a price of dollar_figurei per share on date entity a sold k shares of series b preferred_stock to entity b which was a 5-percent_shareholder as of the date of the transfer on the same date entity b sold l shares of series b preferred_stock to entity c on date taxpayer issued m shares of series d preferred_stock at a price of dollar_figuren per share on date entity d a 5-percent_shareholder sold o shares of common_stock to entity e on date entity d a 5-percent_shareholder sold p shares of common_stock to entity f on date entity d a 5-percent_shareholder sold q shares of common_stock to entity g on date taxpayer issued r shares of series d preferred_stock at a price of dollar_figuren per share on date taxpayer issued r shares of series d preferred_stock at a price of dollar_figuren per share on date pursuant to the year recapitalization all of the outstanding common_stock of taxpayer was exchanged for class a common_stock at a conversion ratio of s the year recapitalization also authorized the issuance of class b common_stock class a and class b common_stock held identical rights with the exception of the class b common_stock having certain liquidation preferences over the class a common_stock on date date date and date taxpayer issued t u v and w shares of series e preferred_stock respectively at a price of dollar_figurex per share participation in the series e preferred_stock financing was offered initially to existing preferred shareholders preferred shareholders who did not purchase their pro_rata allocation of series e preferred_stock automatically had their preferred_stock converted to class b common_stock certain preferred shareholders holding series b preferred_stock declined to participate in the series e financing and accordingly their preferred_stock was converted into class b common_stock at a conversion ratio of y the series b plr-100186-08 conversion in addition certain preferred shareholders holding series c preferred_stock declined to participate in the series e financing and accordingly their preferred_stock was converted into class b common_stock at a conversion ratio of z the series c conversion on date taxpayer completed the year recapitalization and commenced a unit financing as part of the year recapitalization all of the class a and class b common_stock and series a series b series c and series d preferred_stock was converted to a single class of new common_stock at the conversion ratios of aa bb cc dd ee and ff respectively in addition all of the series e preferred_stock was converted to shares of new class b preferred_stock at a conversion ratio of gg holders of new class b preferred_stock who elected to participate in the unit financing purchased an investment_unit consisting of new class a preferred_stock and additional new class b preferred_stock holders of new class b preferred_stock that did not purchase their pro_rata share of the investment units had their new class b preferred_stock received upon conversion of their series e preferred_stock automatically converted into new class a preferred_stock the class b conversion the new class a and new class b preferred_stock held identical rights with the exception of the new class b preferred_stock having certain liquidation preferences over the new class a preferred_stock certain preferred shareholders holding new class b preferred_stock declined to participate in the unit financing and accordingly their new class b preferred_stock was converted into new class a preferred_stock in connection with the unit financing on date date date and date taxpayer issued hh ii jj and kk investment units respectively each consisting of ll shares of new class a preferred_stock and mm share of new class b preferred_stock at a price of dollar_figurenn per unit with each share of new class a and new class b preferred_stock priced at dollar_figureoo specifically on date taxpayer issued pp shares of new class a preferred_stock and qq shares of new class b preferred_stock each at a price of dollar_figureoo per share on date taxpayer issued rr shares of new class a preferred_stock and ss shares of new class b preferred_stock each at a price of dollar_figureoo per share on date taxpayer issued tt shares of new class a preferred_stock and uu shares of new class b preferred_stock each at a price of dollar_figureoo per share on date taxpayer issued vv shares of new class a preferred_stock and ww shares of new class b preferred_stock each at a price of dollar_figureoo per share throughout the relevant period taxpayer issued warrants to purchase various classes of its common and preferred_stock in connection with the preferred_stock financing transactions described above and other business transactions taxpayer also issued stock_options to service providers with respect to its common_stock pursuant to compensatory_option plans plr-100186-08 rulings based solely on the information submitted for purposes of factoring out changes in proportionate ownership of taxpayer’s stock which are attributable solely to fluctuations in the relative fair market values of different classes of stock under sec_382 we hold that taxpayer may apply the following principles with respect to all testing dates that occurred during the relevant period on any testing_date in determining the ownership percentage of any percent shareholder the value of such shareholder's stock shall be considered to remain constant since the date that shareholder acquired the stock relative to the value of all other stock of the taxpayer outstanding on such date the value of such shareholder's stock relative to the value of all other stock of the taxpayer issued on any date subsequent to such acquisition shall also be considered to remain constant since that subsequent date in applying the methodology described above a value-for-value recapitalization or conversion of stock of taxpayer into other stock of taxpayer shall be disregarded and the exchanging shareholder shall be considered to have acquired such newly issued stock as of the date it acquired the stock exchanged therefor caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular no opinion is expressed regarding whether taxpayer experienced any ownership_change as defined under sec_382 or whether any warrants or options should be treated as exercised for purposes of calculating an owner shift under sec_382 further no opinion is expressed whether any exchange of stock pursuant to the class b conversion the series b conversion the series c conversion the year recapitalization or the year recapitalization of taxpayer constituted a value-for-value exchange verification of these facts should be required as part of the audit process procedural statements this ruling letter is directed only to the taxpayer who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent a copy of this ruling letter should be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the transactions covered by this ruling letter are completed alternatively taxpayers filing their returns electronically may plr-100186-08 satisfy this requirement by attaching a statement to their return that provides the date and control number of the ruling letter under the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely _____________________________________ marie c milnes-vasquez senior technician reviewer branch office of associate chief_counsel corporate cc


internal_revenue_service department of the treasury number release date index number re washington dc person to contact telephone number refer reply to cc psi b9-plr-150934-02 date date legend trustor trust date date son x dear this is in response to your letter dated date requesting a ruling regarding the generation-skipping_transfer gst tax consequences of a proposed modification of a_trust the facts submitted and representations made are as follows trustor created trust on date trust became irrevocable as of trustor’s death on date a date prior to date son is the sole current beneficiary of trust article of trust provides for the payment of the net_income of trust quarter- annually or at more frequent intervals to son during his lifetime article provides that the trustee may pay to son so much of the principal of trust up to the whole thereof as in the trustee’s sole discretion is reasonably required for his support in his accustomed manner of living plr-150934-02 article provides that in addition to any other_payments that son may receive from trust the trustee shall pay to son from the principal of trust such amounts as he may request in writing not exceeding in any calendar_year the greater of the following amounts five thousand dollars or five percent of the value of the principal of trust determined as of the end of the calendar_year hereinafter withdrawal power this right of withdrawal is noncumulative thus if son does not withdraw during any calendar_year the full amount to which he is entitled under this provision his withdrawal right shall lapse at the end of the calendar_year article provides that upon the death of son the trustee shall distribute the trust estate to such one or more persons and on such terms and conditions either outright or in trust as son shall appoint by will provided however that son shall not exercise the power_of_appointment for the benefit of son his estate his creditors or the creditors of his estate article provides that if son fails to exercise his testamentary_power_of_appointment the trustee shall divide the whole trust estate or part thereof not appointed into as many equal shares as there are children of son then living and children of son then deceased represented by issue then living so that there will be one equal share set apart for each then living child of son and one equal share set apart for the then living issue collectively of each deceased child of son article paragraph a provides that each share set apart for the issue of a deceased child of son shall be distributed free of trust paragraph b provides that each share set apart for a living child of son shall be held as a separate trust for the benefit of such child the trustee shall apply so much of the net_income and such portion of the principal as in the trustee’s discretion is necessary for the support education and medical_care of such child until the child attains the age of twenty-one years thereafter the entire net_income shall be paid to such child quarter-annually or at more frequent intervals article paragraph c provides that i upon such child of son attaining the age of twenty-five years one fourth of such share shall be distributed to such child ii upon such child of son attaining the age of thirty years one-third of the remainder shall be distributed to such child iii upon such child of son attaining the age of thirty-five years one-half of the remainder shall be distributed to such child and iv upon such child of son attaining the age of forty years the balance of the remainder shall be distributed to such child and the trust for such child shall terminate article paragraphs d e and f provide that the trustee shall distribute free of trust the trust fund of a child of son who has attained any of such respective ages at the time when such trust fund is directed to be set apart if any surviving child of son dies during the term of his or her trust the property shall be distributed to such child’s plr-150934-02 issue by right of representation any property not otherwise_disposed_of shall pass to the heirs of son it has been represented that no additions actual or constructive have been made to trust the trustee has proposed to file a petition with the court having jurisdiction over trust requesting that the court direct modification of trust to limit the time during which son may exercise his withdrawal power each year to the month of x the trustee of trust requests a ruling that the modification of trust to limit the sole beneficiary’s withdrawal power to the month of x each year and the administration of trust pursuant to that modification will not cause trust to lose its status as a_trust that is exempt from the gst tax and that distributions from trust as modified will not be subject_to the gst tax sec_2041 of the internal_revenue_code provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition that is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive sec_2041 provides that the term general_power_of_appointment means a power that is exercisable in favor of the individual possessing the power his estate his creditors or the creditors of his estate under sec_2041 the lapse of a power_of_appointment created after date during the life of the individual possessing the power shall be considered a release of such power during any calendar_year to the extent that the property which could have been appointed by exercise of such lapsed power exceeds in value the greater of dollar_figure or percent of the aggregate value of the assets out of which or the proceeds of which the exercise of the lapsed power could be satisfied sec_20_2041-3 of the estate_tax regulations provides that the failure to exercise a power_of_appointment created after date within a specified time so that the power lapses constitutes a release of the power however such a lapse during any calendar_year is treated as a release only to the extent that the property which could have been appointed by exercise of such lapsed power exceeds in value the greater of dollar_figure or percent of the aggregate value of the assets out of which or the proceeds of which the exercise of the lapsed power could be satisfied plr-150934-02 under sec_2514 the exercise or release of a general_power_of_appointment created after date is deemed the transfer of property by the individual possessing such power sec_2514 defines a general_power_of_appointment as a power which is exercisable in favor of the individual possessing the power the possessor his estate his creditors or creditors of his estate under sec_25_2514-3 the failure to exercise a general_power_of_appointment created after date within a specified time so that the power lapses constitutes a release of the power however under sec_2514 a lapse during any calendar_year is considered as a release for gift_tax purposes only to the extent that the property which could have been appointed exceeds the greater of dollar_figure or percent of the aggregate value at the time of the lapse of the assets out of which or the proceeds of which the exercise of the lapsed power could be satisfied sec_2601 imposes a tax on each generation-skipping_transfer made by a transfer to a skip_person under a of the tax_reform_act_of_1986 the generation-skipping_transfer_tax is generally applicable to generation-skipping transfers made after date however under b a of the tax reform act and sec_26 b i of the generation-skipping_transfer_tax regulations the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax will not cause the trust to lose its exempt status the regulation provides that the rules contained in the paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower plr-150934-02 generation beneficiary if the modification can result in either an increase in the amount of a generation-skipping_transfer or the creation of a new generation-skipping_transfer to determine whether a particular amendment to a_trust shifts a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification after the proposed modification son will continue to have a noncumulative power to withdraw the greater of five thousand dollars or five percent of trust however son’s right of withdrawal will be limited to the month of x the proposed modification of trust will not result in a shift of any beneficial_interest in trust to any beneficiary who occupies a generation lower than the persons holding the beneficial interests prior to the modification further the modification of trust will not extend the time for vesting of any beneficial_interest in trust beyond the period provided for in the original trust under these circumstances based on the facts submitted and the representations made we conclude that the proposed modification will not cause trust to lose its exempt status for gst tax purposes and that distributions from trust as modified will not be subject_to the gst tax the ruling contained in this letter is 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_ruling it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant sincerely james f hogan acting branch chief branch office of associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index numbers ---------------------------------------- ----------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc psi b03 plr-121342-16 date x ------------------------------------------------------------------------------------------------------------------- legend state ----------------- d1 d2 d3 ------- ---------------------- ------------------ month1 ------ month2 ------- dear -------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting rulings under sec_1362 and sec_1362 of the internal_revenue_code code facts according to the information submitted x was organized as a corporation under the laws of state on d1 subsequently x made an election to be treated as an s plr-121342-16 corporation effective d2 at the time of its s_corporation_election x’s tax_year ended on the last day of month1 and consequently the service accepted x’s s_corporation_election with an effective date of d3 the first day of month2 x subsequently filed a form_1128 application to adopt change or retain a tax_year to change its tax_year to one beginning on d2 however the effective date of its s_corporation_election remains d3 in addition at the time of its s_corporation_election x had more than one class of stock when x’s advisers later discovered that x had two classes of stock outstanding x cancelled one class of stock effective the day before d2 x represents that the ineffective s_corporation_election was inadvertent and not the result of tax_avoidance or retroactive tax planning x further represents that no federal tax_return of any person has been filed inconsistent with a valid s_corporation_election having been made for x effective d2 x also represents that all distributions and allocations of income to its shareholders have been made pro_rata in accordance with their interests in x x and its shareholders have agreed to make any adjustments required by the service consistent with the treatment of x as an s_corporation law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a small_business_corporation makes an election under sec_1362 for any taxable_year and the election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then the election is treated as made for the following taxable_year plr-121342-16 sec_1362 provides that if an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply sec_1362 provides that if an election under sec_1362 or sec_1361 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or or sec_1361 the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation for which the election was made or the termination occurred is a small_business_corporation or a qualified_subchapter_s_subsidiary as the case may be or b to acquire the shareholder consents and the corporation for which the election was made or the termination occurred and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation or a qualified_subchapter_s_subsidiary as the case may be as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation or a qualified_subchapter_s_subsidiary as the case may be during the period specified by the secretary sec_1_1361-1 of the income_tax regulations provides in part that a corporation is generally treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds sec_1_1361-1 provides that the determination of whether all outstanding shares of stock confer identical rights to distribution and liquidation proceeds is made based on the corporate charter articles of incorporation bylaws applicable state laws and binding agreements relating to distribution and liquidation proceeds collectively governing provisions conclusion based solely on the facts submitted and representations made we conclude that x has established reasonable_cause for failing to make a timely s_corporation_election thus we conclude that x is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 within days following the date of this letter containing an plr-121342-16 effective date of d2 the election shall be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose further we conclude that x’s s_corporation_election was ineffective because x had more than one class of stock we also conclude that the circumstances resulting in any ineffectiveness of x’s s_corporation_election were inadvertent within the meaning of sec_1362 thus under the provisions of sec_1362 x will be treated as an s_corporation effective on d2 and thereafter provided that x’s s_corporation_election was otherwise valid and not otherwise terminated under sec_1362 except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provisions of the code specifically we express or imply no opinion on whether x was otherwise eligible to be an s_corporation 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 as precedent pursuant to a power_of_attorney on file we are sending a copy of this letter to x’s authorized representative the ruling contained in this letter is 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 ruling_request it is subject_to verification on examination sincerely brad poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------- ----------------------------- ----------------------- --------------------------------- ------------------------------------- ----------------------- tin ---------------- ty ------- ty ------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number ------------------- refer reply to cc ita b03 plr-134752-11 date date legend taxpayer tax advisor costs date a date b year year year year year ----------------------- ---------------------- --------------------------------------- ------------------ -------------- ------- ------- ------- ------- ------- dear ------------------- this ruling is in reply to a request submitted by taxpayer for an extension of time under sec_301_9100-1 of the procedure and administration regulations and revproc_2011_1 2011_1_irb_1 to submit a late form_3115 application_for change in accounting_method requesting permission to change its method_of_accounting for costs facts taxpayer files consolidated federal_income_tax returns based on a week taxable_year in year congress enacted a temporary provision the benefits of which were available by election only for taxable years ending after december year and beginning before january year plr-134752-11 taxpayer intended to make this election and separately request permission to change its method_of_accounting for costs for the same taxable_year in order to maximize the tax_benefit available under the election the change in method_of_accounting requires a sec_481 adjustment while preparing taxpayer’s year tax_return taxpayer’s in-house tax advisors and taxpayer’s tax advisor concluded that taxpayer could legally make the election on taxpayer’s year tax_return taxpayer’s in-house tax advisors and tax advisor reasoned that because taxpayer’s year taxable_year began on date a year the year taxable_year was within the effective date prescribed by congress soon thereafter taxpayer filed a form_3115 with the national_office to change its method_of_accounting for costs for its year taxable_year taxpayer filed its year tax_return implementing the change in method_of_accounting for costs and making the election subsequently taxpayer filed form_1139 corporation application_for tentative refund a substantial portion of the anticipated refund was a result of the change in method_of_accounting for costs taxpayer was later informed by the irs service_center that its refund application was denied because taxpayer was ineligible to make the election for its year taxable_year under sec_441 of the internal_revenue_code taxpayer’s ineligibility to make the election for year and its failure to make the election and the change in method_of_accounting for costs for year has resulted in significant economic detriment to taxpayer taxpayer indicated that the extraordinary economic conditions during the years at issue resulted in such significant economic harm to taxpayer that the election together with the change in method_of_accounting for costs would provide it with the relief that congress intended to provide when it enacted the temporary legislation rulings requested taxpayer has requested a ruling granting permission under sec_301 to file a late form_3115 to change its method accounting for costs for year law and analysis sec_446 of the internal_revenue_code and sec_1_446-1 of the income_tax regulations state that except as otherwise provided a taxpayer must secure the commissioner's written consent before changing a method_of_accounting for federal_income_tax purposes sec_1_446-1 requires that in order to obtain the commissioner's consent to a method change a taxpayer must file form_3115 during the taxable_year in which the taxpayer desires to make the proposed change section dollar_figure of revproc_2008_52 2008_36_irb_587 provides that unless specifically authorized by the commissioner a taxpayer may not request or otherwise make a retroactive change in method of plr-134752-11 accounting regardless of whether the change is from a permissible or an impermissible method sec_301_9100-3 provides generally for extensions of time to make regulatory elections under sections of the code other than those for which sec_301_9100-2 expressly prescribes automatic extensions sec_301_9100-3 provides in part that the commissioner will grant a request for an extension of time when a taxpayer provides evidence including affidavits described in paragraph e of the regulation establishing to the commissioner's satisfaction that the taxpayer acted reasonably and in good_faith and that granting relief would not prejudice the interests of the government sec_301_9100-3 states that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer i requests relief before the failure to make the regulatory election is discovered by the service ii inadvertently failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 provides in part that a taxpayer is deemed to have not acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides in part that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money if the tax consequences of more than one taxpayer are affected by the election the government's interests are prejudiced if extending the time for making the election may result in the affected taxpayers in the aggregate having a lower tax_liability than if the election had been timely made sec_301_9100-3 provides in part that the interests of the government ordinarily are prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment sec_301_9100-3 imposes special rules for accounting_method regulatory elections such as the one in question the regulation provides that the interests of the plr-134752-11 government are deemed to be prejudiced except in unusual and compelling circumstances if the accounting_method regulatory election for which relief is requested i is subject_to the requirement in sec_1_446-1 for advance written consent of the commissioner ii requires an adjustment under sec_481 or would require such an adjustment if the taxpayer changed to the method_of_accounting for which relief is requested in a taxable_year subsequent to the year in which the election should have been made iii would permit a change from an impermissible method_of_accounting that is an issue under consideration by examination an appeals_office or a federal court and the change would provide a more favorable method or more favorable terms and conditions than if the change were made as part of an examination or iv provides a more favorable method_of_accounting or more favorable terms and conditions if the election is made by a certain date or taxable_year thus barring unusual and compelling circumstances taxpayer would not receive relief under sec_301_9100-3 because the government's interests are deemed prejudiced by its late filing based solely on the facts and the representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been met taxpayer has shown that it acted reasonably and in good_faith and without hindsight further taxpayer has shown that the facts and circumstances surrounding its failure to timely file its change in method_of_accounting for costs were so uncommon and of such disproportionate effect as to constitute a combination of unusual and compelling circumstances that lead to the conclusion that the interests of the government are not prejudiced by granting the requested relief for an extension of time under sec_301_9100-1 ruling consent is hereby granted to taxpayer to file form_3115 requesting permission to change its method_of_accounting for costs effective year in this regard we will consider the form_3115 attached to taxpayer's amended consolidated federal_income_tax return for year and the copy mailed to the irs national_office to be timely filed if filed within the time designated in a private_letter_ruling to be issued by the associate chief_counsel corporate granting an extension of time to make the election for year a copy of this letter_ruling should be associated with the form_3115 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this private_letter_ruling specifically no opinion is expressed or implied regarding whether the requested change in method_of_accounting is a proper method_of_accounting or has been properly implemented plr-134752-11 this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely christopher f kane branch chief branch income_tax accounting


internal_revenue_service number release date index number department of the treasury washington dc person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-154465-07 date april ------------------------ --------------------------------- ---------------------------- in re ------------------------ -------------------------- - legend legend ------------------ ----------------------------------------------------------------------------------------- first donor trust ---------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------- ------------------------- trust ----------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ ---------------------------------------------------------------------- date date date date -------------------------- ------------------ -------------------------- ----------------------- ------------------- ----------------------------- ------------------------------------ ------------------------- ------------------------ ------------------------ --------------- a b c d e taxpayer state state statute ---------------------------------------------------------- state statute ------------------------------------------------- state statute ------------------------------------------------- state statute ------------------------------------------------- plr-154465-07 dear -------------- this is in response to a letter dated date and subsequent correspondence requesting a ruling on the gift_tax consequences of proposed disclaimers to be executed by taxpayer facts the facts submitted and representations made are as follows trust trust an irrevocable_trust was executed by first donor on date under article second paragraph b of the trust instrument the trustees are to pay such sum or sums from time to time out of the income accumulated income or principal of trust to or for the benefit of a first donor's child or any of a's descendants in the trustees' sole and absolute discretion in the event of illness accident other misfortune or any emergency or if in the trustees' judgment it is necessary to provide for the beneficiaries’ comfortable maintenance support or education trust will terminate twenty years after the death of the survivor of a b and c and all of first donor's descendants living on date on termination the remaining trust principal and undistributed_income will be distributed to the descendants of a who have no living ancestor who is a descendant of a per stirpes on the date trust was executed first donor had eleven living descendants consisting of three children a b and c and eight grandchildren all of whom are still living a's child d was born on date after the trust instrument was executed and is still living taxpayer who is under age is d's child and a's grandchild the trustees may in their discretion make distributions of income and principal to taxpayer as a's descendant during the trust term further taxpayer will be entitled to receive a share of the per stirpital portion of the trust remainder if d dies prior to the termination of trust and taxpayer survives until the termination taxpayer has received discretionary distributions from trust trust trust an irrevocable_trust was executed by a on date under paragraph first of the trust instrument the trust is to be held in three equal shares under paragraph first subparagraphs a b and c the income derived from one share is to be accumulated and added to principal the income of the second one-third share is to be paid to a and on his death to e if she survives him as his spouse the income of the remaining one-third share is to be paid to e so long as she is a's spouse or has survived a as his spouse or to any of a's descendants in the event of need occasioned plr-154465-07 by illness accident or other misfortune or in any emergency or if in the trustee's discretion it is necessary for the comfortable maintenance support or education of any beneficiary or of his or her family under paragraph first subparagraph d after a's death or on e's later death if she survives a as his spouse all of the one-third shares of trust are to be combined into a single trust less any portion of the second one-third share for which a has made a contrary testamentary_disposition of the income pursuant to the right a reserved to do so in paragraph third subparagraph d along with accumulated income trust is then to be divided into equal shares one such share for each of a's then living children and deceased children leaving surviving issue the surviving issue to take the deceased child's share by representation during the continuation of the trust term the trustee is to pay to the beneficiaries of a respective share a child of a if living or if a child dies his or her surviving issue by representation so much income of that share as the trustee in the trustee's discretion determines in addition under paragraph first subparagraph e after a's death the trustee may distribute such principal as the trustee deems necessary to an income_beneficiary in the event of illness accident other misfortune or any emergency or if in the judgment of the trustee it is necessary for the comfortable maintenance support or education of any beneficiary or of the beneficiary's family any amount_paid is to be charged against the share from which the beneficiary is then receiving or entitled to receive income under paragraph first subparagraph d trust is to terminate twenty years after the death of the last survivor of a e and those of a's children living on date on termination the trust principal and accumulated income will be distributed per stirpes to a's descendants then living who have no living ancestor who is a descendant of a when a executed trust a had two children including d d's is one of the measuring lives determining the duration of trust while a is living taxpayer as a's descendant is entitled to distributions of income from a one-third share described above in the event certain needs arise after both a and d have died if taxpayer is living he will be entitled as a surviving issue of d to i distributions of income and principal of the trust share set_aside with respect to d and ii on termination of trust distribution of all or a portion of the remainder of that share by representation taxpayer will attain the age of majority under state law on date with respect to each of trust and trust taxpayer proposes to disclaim his contingent right to receive the trust corpus on termination of the trust the disclaimers will be executed by taxpayer within nine months after attaining his majority date date and date are all before plr-154465-07 taxpayer requests a ruling that the proposed disclaimers will not constitute a transfer subject_to federal gift_tax law and analysis trust and trust are governed by the laws of state under state statute any individual to whom property or an interest therein is donatively transferred by any means including a transfer resulting from another disclaimer may disclaim all or any portion of the transfer unless the terms of the transfer otherwise provide the disclaimer shall cause the terms of the transfer to be applied to the disclaimed transfer and to any future interests taking effect thereafter as if the disclaimant had died immediately before the transfer state statute provides that a disclaimer is made by a writing showing an unconditional refusal to accept a transfer or a portion thereof signed by the disclaimant or representative and delivered on or before nine months after the transfer or by any later time provided in the particular case or pursuant to other provisions of the state statutes and before any acceptance of the disclaimed interest delivery of a disclaimer may be accomplished by delivery to the transferor the transferor's personal representative or other legal_representative or the holder of legal_title to the property to which the interest is related state statute provides that each separate interest in property is subject_to disclaimer or acceptance and each separate interest including any specific amount part fraction or asset thereof or formula amount based on present or future facts independent of the disclaimant's volition is subject_to disclaimer or acceptance state statute provides that a contingent future_interest may be disclaimed in whole or in part at any time before or within nine months after beneficiaries of the interest have been fully ascertained and their interests vested sec_2501 of the internal_revenue_code imposes a tax on the transfer of property by gift sec_2511 provides that the gift_tax imposed under sec_2501 applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-1 of the gift_tax regulations provides that in the case of transfers creating an interest in the beneficiary disclaiming made before date where the law governing the administration of the decedent's_estate gives the beneficiary a right completely and unqualifiedly to refuse to accept ownership of property transferred from a decedent a refusal to accept ownership does not constitute the making of a gift if the refusal is made within a reasonable_time after knowledge of the existence of the transfer is unequivocal is effective under local law and plr-154465-07 is made before the disclaimant has accepted the property compare sec_2518 and sec_25_2518-1 through providing rules for determining whether a disclaimer is a qualified_disclaimer effective for estate and gift_tax purposes in the case of the disclaimer of an interest in property that is created in the beneficiary disclaiming by a transfer made after date as noted above under sec_25_2511-1 if the interest to be disclaimed was created before date the disclaimant must disclaim the interest in the property within a reasonable_time after knowledge of the existence of the transfer creating the interest to be disclaimed in the case of a disclaimer of an interest in trust in general the transfer occurs when the trust is established rather than when the interest actually vests in the disclaimant if the transferor has not reserved any power over the trust see 455_us_305 however the time limitation for making the disclaimer does not begin to run until the disclaimant has attained the age of majority and is no longer under a legal disability to disclaim see jewett v commissioner supra u s pincite see also sec_2518 and sec_25_2518-2 in this case taxpayer will execute each disclaimer within nine months after reaching age under these circumstances the proposed disclaimers will be considered to be made within the time prescribed in sec_25_2511-1 under sec_25_2511-1 the disclaimers must be unequivocal revrul_76_ 1976_1_cb_292 which considers the application of sec_25_2511-1 concludes that a disclaimer is unequivocal if the disclaimant's act of refusal is unambiguous in its consequences that is the disclaimant must unqualifiedly refuse to accept ownership of the property for example a disclaimer is unequivocal if the disclaimed property must pass as otherwise provided in the instrument and not pursuant to the direction of the disclaimant similarly a disclaimer is unequivocal if the disclaimant does not accept the benefits from the property interest disclaimed in this case the disclaimed interests will not pass pursuant to any direction on the part of taxpayer further taxpayer will not accept the benefits of the disclaimed interests after the disclaimers cf sec_25 a i and d examples and regarding treatment of certain interests in the same property as separate interests eligible for qualified_disclaimer treatment under sec_2518 under sec_25_2511-1 the disclaimers must be effective under local law in this case state law specifically provides that an individual may make a valid disclaimer of any separate interest in property while retaining other separate interests in the same property further the disclaimers will be timely under state statute consequently if taxpayer satisfies the procedural requirements prescribed under state law the disclaimers will be valid under local law plr-154465-07 finally under sec_25_2511-1 the disclaimant must not have accepted the property before the disclaimer in the instant case distributions to taxpayer prior to attaining the age of majority are not considered acceptance of the property subject_to the disclaimer cf sec_25_2518-2 sec_25_2518-2 example accordingly we conclude that based on the representations made assuming that the disclaimers are executed as proposed the disclaimers will not constitute transfers subject_to the federal gift_tax the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express no opinion on the federal tax consequences of the proposed disclaimers under the cited provisions or under any other provisions 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 _________________________ george masnik chief branch office of associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes