t c memo united_states tax_court ozie r m quarterman petitioner v commissioner of internal revenue respondent docket no filed date r determined a tax_deficiency and additions to tax under sec_6651 and sec_6654 i r c for p for r has no record that p filed a return either jointly with her husband h now deceased or separately p and h did file timely joint returns for and p claims that she and h filed a timely joint_return and on that basis she alleges that the notice_of_deficiency is barred by the 3-year statute_of_limitations on assessment under sec_6501 i r c she further alleges that the notice_of_deficiency is insufficient because it is not a joint notice assuming the notice_of_deficiency is timely and valid she alleges that she is taxable on only one-half of the interest included in her income by r because it was paid on a joint bank account and is not liable for the additions to tax held the notice_of_deficiency was timely issued and constitutes a valid notice_of_deficiency under sec_6212 sec_2 held further r’s determinations of a tax_deficiency and addition_to_tax under sec_6651 i r c are sustained held further r’s determination of an addition_to_tax under sec_6654 i r c is modified by application of the safe_harbor provided by sec_6654 i r c bernard a quarterman jr for petitioner nancy c carver for respondent memorandum findings_of_fact and opinion halpern judge by notice_of_deficiency dated date the notice respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax an dollar_figure addition_to_tax under sec_6651 for failure_to_file a return and a dollar_figure addition_to_tax under sec_6654 for failure to pay estimated income taxes after concessions the issues for decision are whether assessment of the tax and additions to tax would be untimely because of the 3-year period of limitations generally imposed on such assessments whether the notice is insufficient because it was not a joint notice to both petitioner and her husband bernard quarterman sr mr quarterman and assuming issues and are decided in unless otherwise indicated all section references are to the internal_revenue_code in effect for and all rule references are to the tax_court rules_of_practice and procedure all dollar amounts have been rounded to the nearest dollar respondent’s favor whether the interest included in petitioner’s income by respondent constituted interest on a joint bank account belonging to petitioner and mr quarterman with the result that one-half of that interest is excludable from her income and whether petitioner is liable for the additions to tax findings_of_fact some facts are stipulated and are so found the stipulation of facts with accompanying exhibits is incorporated herein by this reference at the time the petition was filed petitioner resided in washington d c petitioner was employed as an architect by the federal government department of veterans affairs when on date at age she retired on full disability during both petitioner and mr quarterman were retired and receiving pensions she from the federal government and he from his former employer the district of columbia mr quarterman died on date petitioner and mr quarterman filed a joint form_1040 u s individual_income_tax_return joint_return for each of the years and but respondent has no record that petitioner filed a return either separate or joint with mr quarterman for on date almost months after the notice was issued petitioner submitted to counsel for respondent a completed form_1040 u s individual_income_tax_return for dated date on behalf of herself and mr quarterman the form_1040 petitioner prepared the form_1040 by copying a draft or copy of a return that mr quarterman had previously prepared the income items listed in the form_1040 consist of dollar_figure representing an estimate of the combined pension income received by her and mr quarterman during approximately dollar_figure for each dollar_figure of taxable interest_income and a dollar_figure refund of federal income taxes the form_1040 also reports an dollar_figure loss attributable to rental real_estate dollar_figure of itemized_deductions dollar_figure for personal exemptions taxable_income of dollar_figure and tax due of dollar_figure the form also claims tax_payments of dollar_figure resulting in a refund due of dollar_figure the dollar_figure tax_deficiency determined by respondent for is the result of respondent’s inclusion in petitioner’s income for that year of dollar_figure listed on a form 1099r distributions from pensions annuities retirement or profit- sharing plans iras insurance contracts etc issued by the there is an arithmetical error in the computation of taxable_income based upon the items of income and loss the itemized_deductions and the personal_exemption amount set forth in the form_1040 taxable_income should be dollar_figure not dollar_figure office of personnel management opm as paid to petitioner for and described by respondent as a gross distribution and dollar_figure of bank account interest listed on forms 1099-int interest_income issued by the first union national bank of dc the bank as paid to petitioner for and respondent’s allowance of a dollar_figure personal_exemption and a dollar_figure standard_deduction adjustments which give rise to taxable_income of dollar_figure respondent gives petitioner credit for zero pre-paid credits withholding es tax_payments etc opinion i introduction a petitioner’s concessions by the petition petitioner assigned error to the deficiency in and additions to tax determined by respondent specifically petitioner claims that respondent erred in determining that she was taxable on her retirement income at trial she characterized her retirement income pension as a disability insurance annuity prior to trial in a letter to respondent dated date petitioner’s counsel made the same argument characterizing petitioner’s pension as disability insurance benefits on brief petitioner abandons that argument as mistaken and concedes that her pension is taxable we accept petitioner’s concession that the dollar_figure paid to petitioner by opm in is includable in petitioner’s gross_income also by the petition petitioner does not claim any benefit either a reduction in the tax_deficiency or in the additions to tax as determined by the notice attributable to the rental real_estate loss itemized_deductions and tax_payments reported on the form_1040 nor did she offer any substantiation of those items during the trial therefore we find that the dollar_figure included in petitioner’s gross_income by respondent is characterized in the notice as a gross distribution the notice indicates that that adjustment is based upon a form 1099r the 1099r issued by opm to petitioner we have examined a blank 1099r box of the 1099r provides for the amount of the gross distribution and box 2a provides for the taxable_amount because opm advised petitioner at the time of her retirement that she had been credited with dollar_figure in retirement contributions during her career with the federal government it is possible that box 2a of the 1099r’s issued to petitioner by opm since her retirement has listed a taxable_amount smaller than the gross distribution listed in box and that the difference represents the nontaxable return of her investment in her retirement as computed by applying the exclusion_ratio of sec_72 alternatively it may be that the 1099rs have left box 2a blank and that taxable_amount not determined in box 2b has been checked in which event it was petitioner’s obligation to compute the excluded amount pursuant to sec_72 because the 1099r for is not in evidence we have no basis for concluding that a portion of dollar_figure included in petitioner’s income by respondent is subject_to exclusion from income under sec_72 for prior years for which a refund claim may be timely filed and for future years however petitioner may be entitled pursuant to sec_72 to exclude from income a portion of her pension regarding the payment of taxes petitioner testified during the trial that she did not know of any_tax payments by her or mr quarterman for and that because she and mr quarterman were due a refund for she would not have continued petitioner has failed to raise for our consideration an issue regarding her entitlement to any such benefit b petitioner’s arguments on brief petitioner argues that the notice was both untimely and insufficient petitioner did not by pleading or motion raise the affirmative defense of statute_of_limitations or claim lack of jurisdiction see rule sec_39 and sec_40 nevertheless at trial and on brief petitioner has pursued the theory that the notice was both untimely and insufficient those arguments are premised upon petitioner’s position that she and mr quarterman filed a timely joint_return petitioner also argues that she is taxable on only one-half of the interest_income attributed to her by respondent and that she is not liable for the additions to tax issues not specifically addressed in the petition respondent has not objected that petitioner has attempted to try issues not raised by the pleadings see rule b we shall treat petitioner’s claims as having been raised by the pleadings no amendment of the petition is required see id ii the notice was both timely and sufficient the stipulation of facts entered into by the parties includes an original certification of lack of record form_3050 which states that respondent’s philadelphia pennsylvania continued the need to make a payment toward anything owed office conducted a thorough search but found no record that petitioner filed a form_1040 for arun sharma one of respondent’s revenue agents testified during the trial that he had examined irs transcripts in the administrative file for this case which show that petitioner did not file a tax_return petitioner testified that she had no way to be positive that mr quarterman mailed them the tax forms that he had filled out but it is my belief that he mailed the tax_return respondent’s form_3050 and the testimony of revenue_agent sharma which support respondent’s position that petitioner never filed a return for are more persuasive than petitioner’s unsubstantiated belief that mr quarterman filed a joint_return see rodriguez v commissioner tcmemo_2003_153 as we stated in 78_tc_412 a long line of cases has established that the running of the statute_of_limitations on assessment requires the taxpayer to prove the date of the filing of a return where there is a question as to whether the return was filed the records of the irs are an item of evidence moreover the absence of an entry on such record is evidence of the nonoccurrence of an event ordinarily recorded citations omitted therefore we find that petitioner and mr quarterman did not file a joint_return for on the basis of that finding we conclude that the notice was timely issued see sec_6501 which provides in pertinent part in the case of failure_to_file a return the tax may be assessed at any time see also espinoza v commissioner supra taxpayer’s motion for summary_judgment claiming that proposed deficiencies were barred by expiration of the statute_of_limitations on assessments denied where the evidence indicated that no returns had been filed for the years in dispute we also reject petitioner’s argument that the notice is insufficient which we interpret to mean invalid for purposes of sec_6212 because it was not a joint notice issued to both petitioner and mr quarterman although petitioner and because we base our finding upon a preponderance_of_the_evidence assignment of the burden_of_proof under sec_7491 is unnecessary see frcg inv llc v commissioner tcmemo_2002_276 affd on this issue 89_fedappx_656 9th cir polack v commissioner tcmemo_2002_145 n affd on this issue 366_f3d_608 8th cir petitioner does not suggest that her hand delivery of the form_1040 to counsel for respondent on date constituted the filing of a valid return we agree that hand delivery of a return to counsel for respondent does not constitute the filing of that return see 78_tc_412 sec_1_6091-2 income_tax regs on date sec_1_6091-2 income_tax regs was amended prospectively by t d 2004_42_irb_669 therefore that filing did not commence the running of the 3-year statute_of_limitations on assessments for pursuant to sec_6501 but even if it had it would be of no consequence in this case since it occurred well after the issuance of the notice on date mr quarterman may have filed joint returns for taxable years other than we have found that they did not elect to file a joint_return under sec_6013 and sec_1_6013-1 income_tax regs therefore respondent could not issue a joint notice under sec_6212 which is only applicable i n the case of a joint income_tax return filed by husband and wife iii respondent’s attribution of interest_income to petitioner petitioner argues on brief that the dollar_figure of interest attributed to petitioner by respondent in the notice_of_deficiency the interest constituted interest on a joint bank account and that only one-half of that interest is includable in petitioner’s income statements in briefs do not constitute evidence rule b and there is no evidence in the record to support petitioner’s allegation on brief that the interest was generated by a bank account jointly owned by petitioner and the notice lists petitioner’s filing_status as single and the dollar_figure tax_deficiency determined therein on the basis of dollar_figure of taxable_income is computed under the rate schedule applicable to single taxpayers respondent has failed to explain his application of the rate tables applicable to single individuals and not the rate tables applicable to married persons filing separately compare sec_1 with sec_1 because respondent does not argue for an increase in the deficiency determined in the notice we do not undertake to correct respondent’s computation of that deficiency in certain circumstances the income from jointly held property is taxed one-half to each co-owner see eg 7_tc_142 sarnow v commissioner tcmemo_1979_452 mr quarterman because petitioner has failed to introduce credible_evidence of a joint bank account she retains the burden_of_proof with respect to the propriety of attributing one- half the interest to mr quarterman see sec_7491 in fact the available evidence suggests that the interest was paid to petitioner in the notice respondent refers to forms int issued by the bank which list interest payments of dollar_figure dollar_figure and dollar_figure as paid to ozie r m quarterman in addition the form_1040 on line 8a and on schedule b line lists dollar_figure of taxable interest which suggests that respondent has in fact sought to tax only that portion of the total interest that was separately paid to petitioner lastly in response to a question by counsel for respondent petitioner admitted during the trial that she received dollar_figure of interest from the bank therefore we sustain respondent’s inclusion of dollar_figure of interest in petitioner’s income iv respondent’s sec_6651 determination sec_6651 provides for an addition_to_tax in the event a taxpayer fails to file a timely return determined with we may treat the referenced entries on the form_1040 as an admission by petitioner that she mr quarterman or both combined received dollar_figure of interest_income in even though we conclude see supra n and infra n that that return is not a valid_return for purposes of various provisions of the internal_revenue_code see 121_tc_308 ndollar_figure regard to any extension of time for filing unless it is shown that such failure is due to reasonable_cause and not due to willful neglect the amount of the addition is equal to percent of the amount_required_to_be_shown_as_tax on the delinquent_return for each month or fraction thereof during which the return remains delinquent up to a maximum addition of percent for returns more than months delinquent for the reasons discussed in section ii supra we find based upon a preponderance_of_the_evidence that petitioner did not file a timely return therefore unless that failure_to_file was due to reasonable_cause and not due to willful neglect respondent’s sec_6651 determination must be sustaineddollar_figure petitioner retains the burden of proving reasonable_cause for her failure_to_file 116_tc_438 petitioner argues that she typically relied upon mr quarterman to prepare and file their tax returns including in particular a federal joint income_tax return such reliance is insufficient to establish reasonable_cause for a failure_to_file the failure to make a timely filing of a tax_return is not excused by the taxpayer’s reliance on an agent and such reliance is not ‘reasonable cause’ for a late filing under sec_6651 469_us_241 by providing persuasive evidence of petitioner’s failure_to_file a timely return respondent has obviously satisfied the burden of production imposed on him by sec_7491 with respect to his sec_6651 determination therefore we sustain respondent’s imposition of a 25-percent addition_to_tax under sec_6651dollar_figure v respondent’s sec_6654 determination sec_6654 provides for an addition_to_tax in the event of an underpayment of a required_installment of individual estimated_tax sec_6654 and b as relevant to this case each required_installment of estimated_tax is equal to percent of the required_annual_payment which in turn is equal to the lesser_of percent of the tax shown on the individual’s return for that year or if no return is filed percent of his or her tax for such year or if the individual filed a return for the immediately preceding_taxable_year percent of the tax shown on that return sec_6654 and b i and ii the due dates of the required installments for a calendar taxable_year are april june and september of that year and january of the following year sec_6654 petitioner argues that the sec_6654 addition_to_tax is not merited in this case because there is no evidence of willful neglect and because there is evidence that petitioner is covered under safe_harbor provisions of either sec_6654 or sec_6654 because the record indicates that petitioner even if we were to find that the form_1040 constituted a validly filed return which we do not that filing occurred well beyond the 4-month period of nonfiling needed to justify respondent’s imposition of a 25-percent penalty under sec_6651 and her husband filed a joint_return in as well as in dollar_figure petitioner’s argument based upon reasonable_cause and lack of willful neglect is without merit except in very limited circumstances not applicable in this case see sec_6654 sec_6654 provides no exception for reasonable_cause or lack of willful neglect 121_tc_308 however because petitioner and mr quarterman did file a joint_return for petitioner may rely on the safe_harbor provided by sec_6654 which limits the amount of the required_annual_payment to percent of the tax shown on that return ie petitioner’s return_for_the_preceding_taxable_year dollar_figure petitioner apparently acknowledges that neither the safe_harbor provided by sec_6654 which provides in part that the required_annual_payment cannot exceed percent of the tax_shown_on_the_return for the year in question nor the exception provided by sec_6654 the sec_6654 addition_to_tax is not imposed if the tax shown on that return reduced by allowable credits for withholding is less than dollar_figure is applicable in this case presumably on the ground that the form_1040 does not constitute a valid_return for purposes of either provision we agree see mendes v commissioner supra pincite return filed after issuance of a notice_of_deficiency is disregarded for purposes of computing the required_annual_payment under sec_6654 see also espinoza v commissioner t c pincite respondent’s computation of the sec_6654 addition_to_tax is based upon a required_annual_payment equal to percent of the dollar_figure tax due see sec_6654 not upon the tax shown on the joint_return exhibit 4p attached to the stipulation of facts is stipulated by the parties to be a photocopy of what petitioner contends is a retained copy of the joint income_tax return filed by petitioner and mr quarterman for the retained return that return shows a tax due of dollar_figure and federal_income_tax withheld of dollar_figure resulting in a net overpayment to be refunded of dollar_figure the parties also stipulate as follows respondent’s computer records reflect that petitioner and her husband filed with respondent’s philadelphia service_center a timely joint income_tax return for the taxable_year the account indicates that they owed a tax_liability of dollar_figure received a withholding credit of dollar_figure and were issued a refund in the amount of dollar_figure the issue we must resolve is whether it is the dollar_figure tax_liability reflected on the retained return or the dollar_figure tax_liability for reflected in respondent’s computer records that constitutes the tax_liability reflected on the joint_return the joint_return liability we conclude that a preponderance_of_the_evidence which consists solely of the two stipulations and the retained return requires a finding that the dollar_figure tax_liability reflected on the retained return constitutes the joint_return liability in reaching that conclusion we rely upon the following facts the stipulation with respect to respondent’s computer records refers to a tax_liability of dollar_figure which may or may not be the tax_liability reflected on the joint_return ie the dollar_figure could just as easily represent the tax_liability after respondent’s adjustment to the tax_liability reflected on the joint_return we have no reason to disbelieve petitioner’s contention that the retained return is in fact a retained copy of the joint_return ie there was nothing in petitioner’s demeanor during trial and there is nothing in the record to suggest that she would deliberately fabricate a return copy in order to slightly reduce an already modest dollar_figure addition_to_tax respondent failed to introduce into evidence either the filed joint_return or a printout of his computer records of petitioner’s account in order to clarify the actual amount of tax shown on the joint_return that failure gives rise to the presumption that either document if produced would have been unfavorable to respondent 6_tc_1158 affd 162_f2d_513 10th cir because respondent is taxing petitioner on a separate_return basis for the tax shown on the joint_return for purposes of applying the sec_6654 safe_harbor is the portion of the dollar_figure joint tax_liability for that results from multiplying dollar_figure by the ratio of what would have been petitioner’s separate_return_tax_liability for to what would have been petitioner’s and mr quarterman’s combined separate_return tax_liabilities for see sec_1 e and example income_tax regs decision will be entered under rule


department of the treasury internal_revenue_service washington d c date cc ebeo tl-n-4904-97 uilc internal_revenue_service national_office field_service_advice number release date memorandum for brooklyn district counsel’s office attn peter gavagan catherine chastanet from chief branch office of associate chief_counsel ebeo cc ebeo subject this field_service_advice responds to your request for assistance regarding certain issues arising on an examination of the above-referenced taxpayer field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend tp tp tp tp tp tp tp tp tp tp tp tp tp tp a plan b plan c plan d plan e plan f plan g plans h plans i plans j plans k plans l plans m plans n plans o plans p plan q plans r plans s plans t plans a_trust issue sec_1 whether the a_trust is a grantor_trust under sec_671 and if so which entity or entities is entitled to any_tax attributes resulting from that determination whether tp1 must include in gross_income the interest_paid on the a trust’s promissory note whether tp1 may exclude from gross_income under sec_1032 the proceeds from the disposition of stock by the a_trust whether tp1 or one of its subsidiaries tp2 through tp14 is entitled to deduct the fair_market_value of tp1 stock contributed by the a_trust to various nonqualified incentive compensation plans maintained by tp1 or its subsidiaries whether tp1 or one of its subsidiaries tp2 tp5 tp6 tp9 tp10 or tp13 is entitled to deduct the fair_market_value of the stock contributed by the a_trust to various qualified_plans maintained by tp1 or its subsidiaries tp2 tp5 tp6 tp9 tp10 or tp13 whether the a_trust can contribute tp1 stock to satisfy obligations of tp1 or its subsidiaries tp2 tp5 tp6 tp9 tp10 or tp13 under their respective sec_401 plans whether participants in the a-f plans who receive allocations of shares of tp1 stock from the a_trust may diversify such holdings after the stock is allocated under such plans whether the shares of tp1 stock held by the a_trust are treated as treasury_stock and included in the calculation of earnings per share conclusions based on the facts presented we believe that the a_trust is a grantor_trust tp1 and tp2-tp14 will each be treated as a grantor and an owner with respect to the amount that is used to fund the a-t plans in satisfaction of their legal obligations tp1 is deemed to make a capital_contribution to tp2-tp14 with respect to those amounts further factual development is recommended before a final_determination can be made interest_paid on the a trust’s promissory note is not required to be reported as income to tp with respect to the portion of the trust that it owns however assuming tp1 and tp2-tp14 are treated as owners of the a_trust interest that is paid to tp1 and which is attributable to portions of the a_trust that tp2-tp14 own is considered to be interest_paid by a subsidiary to the parent_corporation as stated in issue above additional factual information is necessary before determining whether there are multiple grantors assuming tp1 and tp2-tp14 are treated as owners sec_1032 would not apply to the a trust’s disposition of tp1's stock that was treated as contributed to the a_trust by a subsidiary of tp1 each subsidiary would recognize gain_or_loss on the a trust’s sale of tp1 stock however as stated in issue above additional factual information is necessary before determining whether there are multiple grantors tp1 and tp2-tp14 are entitled to deduct the fair_market_value of the stock contributions used by the a_trust to provide benefits on behalf of their respective employees under the g-t plans however confirmation is needed with respect to which entity is taking deductions for contributions made on behalf of which employees whether the contributions are made in cash or stock and how and when a_trust assets are used to fund nonqualified benefits in addition additional information regarding the time at which deductions are being claimed and copies of the g-t plans is needed before a proper analysis can be made regarding whether deductions are being taken in accordance with sec_404 for benefits provided under the g-t plans and whether the plans effectively defer the receipt of compensation tp2 tp5 tp6 tp9 tp10 and tp13 not tp1 are entitled to deduct an amount equal to the fair_market_value of the stock contributed by the a_trust to fund the a-f plans on behalf of the subsidiaries’ employees however confirmation of the facts is needed with respect to which entity is taking deductions with respect to contributions made on behalf of which employees whether the contributions are made in cash or stock and how and when the contributions are made to the a-f plans although sec_4975 prohibits the indirect sale_or_exchange of any property between a plan and a disqualified_person the code exempts a plan’s acquisition of qualifying employer_securities from the prohibited_transaction rules under certain conditions in this case assuming the valuation of tp1 stock is appropriate at the time it is contributed to the sec_401 plans tp1 stock may be used to satisfy obligations of tp1 and its subsidiaries tp2 tp5 tp6 tp9 tp10 or tp13 under their respective sec_401 plans except in the case of an employee_stock_ownership_plan esop as defined in sec_4975 the code does not limit a participant’s ability to diversify plan assets under qualified_plans see sec_1_401-1 trustees of trusts which form a part of such plans are subject_to substantial limitations under the code and erisa title i in their management of plan assets the treatment for tax purposes of tp1 stock held by the a_trust as either treasury_stock or issued stock may have no effect on the earnings per share computation which is a financial_accounting concept with its own rules facts we understand that tp1 established the a_trust in for the purpose of holding tp1 stock the stock held by the a_trust is subsequently allocated to the a-f plans qualified_plans under sec_401 and the g-t plans nonqualified incentive compensation plans maintained by tp1 or its subsidiaries tp2-tp14 the a_trust was established for a term of years under the terms of the a_trust the a_trust acquired approximately dollar_figure of newly issued common_stock of tp1 from tp1 the a_trust purchased the stock with cash it received from tp1 in an amount equal to the aggregate par_value of the stock and a year promissory note to tp1 the note in an amount equal to the difference between aggregate par and market values of the tp1 stock each year thereafter the a_trust either repays a portion of the note with a cash contribution from tp1 or pursuant to section of the a_trust that year’s portion of the debt is forgiven the stock is then apportioned and released to the trusts of the qualified a-f plans and the committees administering the nonqualified g-t plans maintained by tp1 or its subsidiaries tp2-14 in accordance with the terms of the a_trust a_trust et seq under the terms of the a plan b plan and f plan included in your submission the term employer see a plan and f plan 1our response assumes that only tp1 stock is held by the a_trust and that only tp1 is contributing such stock however we note that this fact is unclear under the terms of the a_trust and the documents provided by tp1 the a_trust refers to company stock the definition of which is unclear as to whether subsidiary stock is also involved see a_trust however references to the company and the description of the arrangement in the recitals appear only to refer to tp1 2footnote of your field_service_advice request dated date indicated that you have identified plans however we have only identified the addressed herein 3our response also assumes based on the terms of the a_trust described above that and b plan and in addition the a plan and the f plan provide that see a and f plans the b plan provides that b plan and also under the plans terms in addition the a_trust provides that a_trust the a_trust also provides that ' a_trust accordingly while it appears from the terms of the a_trust that in addition to tp1 tp2-tp14 participate in the a_trust arrangement it is unclear whether assets of the a_trust are available to satisfy claims of general creditors of tp2-tp14 in the event of bankruptcy or insolvency tp1 intends the a_trust to be a grantor_trust under sec_671 documents provided by tp1 explaining the a_trust also appear to indicate that in addition although the information provided does not identify which tax years are at issue we understand that we also understand that tp1 and its subsidiaries deduct on those returns contributions to the qualified a-f plans or nonqualified g-t plans which are made for the benefit of their respective employees for the purposes of our response we assume that tp1 through tp14 constitute a controlled_group_of_corporations under sec_1563 discussion issue sec_671 provides that where a grantor shall be treated as the owner of any portion of a_trust under subpart e part subchapter_j chapter of the code there shall be included in computing the taxable_income and credits of the grantor those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against tax of an individual sec_677 provides that the grantor shall be treated as the owner of any portion of a_trust whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be held or accumulated for future distribution to the grantor sec_1_677_a_-1 provides that under sec_677 a grantor is in general treated as the owner of a portion of a_trust whose income is or in the discretion of the grantor or a nonadverse_party or both may be applied in discharge of a legal_obligation of the grantor as noted above the a_trust provides that we believe that at the time tp1 funds the a_trust it is deemed to make a contribution_to_capital of tp2-tp14 because the trust assets will be used to satisfy the legal obligations of tp2-tp14 under their respective plans based on the allocation formula set forth in the a_trust accordingly tp1 and tp2-tp14 will each be treated as a grantor of the trust with respect to the amount that is to be used to satisfy each corporation’s legal_obligation pursuant to sec_677 tp2- tp14 and tp1 will be treated as the owners of the portion of the a_trust that they are treated as the grantors of accordingly under sec_671 there would be included in computing the taxable_income and credits of each grantor those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust that each grantor is treated as owning see also sec_1_671-3 case development hazards and other considerations this determination assumes that the transfer of cash to the a_trust will not be treated as a transfer of property under sec_83 to the employees of tp1 and tp2- tp14 this determination also assumes that the claims of the creditors of each subsidiary and tp1 will be limited to the amount of stock allocated to it in article of the a_trust for example the a plan and the g plan are allocated percent of the available stock we believe that at the time of the funding of the a_trust tp1 has made a contribution_to_capital of tp2 because tp2’s obligation to fund the retirement plans has been satisfied to the extent of percent of the available stock however if tp1's creditors can reach the for tp2 the argument that tp2’s obligations have been satisfied would be more tenuous and further review would be required by national_office in sum the ability of a creditor to reach more than the percentage of the assets allocated for its debtor would undercut our belief and argument that there is a capital_contribution at the time of the funding of the a_trust and our conclusions thereto percent specifically allocated we recommend contacting tp1 regarding however if further factual development suggests that our assumptions as described above are incorrect our office would want to reconsider the issue issue revrul_85_13 1985_1_cb_184 holds that where a grantor is treated as the owner of the entire trust the grantor is treated as the owner of the trust's property for federal_income_tax purposes therefore a sale between the grantor and the trust will not be recognized for federal_income_tax purposes to the extent that the a_trust pays tp interest that is attributable to the portion of the trust owned by tp the transaction will be ignored for federal_income_tax purposes to the extent that the a_trust pays tp1 interest that is attributable to the portions of the trust owned by tp2-tp14 the interest will be considered as an amount_paid by the subsidiary to the parent_corporation see revrul_85_13 case development hazards and other considerations as noted in issue above further factual development is needed before determining whether tp1-tp14 as multiple grantors would be treated as owning the assets of the a_trust that are available to satisfy claims of their general creditors and their liabilities under the plans we note however that the second sentence of the fourth full paragraph on page of your memorandum states that emphasis added in our view if tp1 does not recognize income on the interest payments from the a_trust the a_trust should not be permitted to deduct such payments issue sec_1032 provides that a corporation does not recognize gain_or_loss on the receipt of money or other_property in exchange for its stock including treasury_stock for purposes of sec_1032 a corporation’s transfer of its own stock as compensation_for services is considered to be a disposition by the corporation for money or other_property sec_1_1032-1 when a corporation is treated as the owner of a grantor_trust the corporation is required to include those items of income deductions and credits attributable to the trust in computing its taxable_income and credits as if the trust does not exist moreover the owner of a grantor_trust is treated as the owner of all property held in the grantor_trust see revrul_57_390 1957_2_cb_326 corporate grantor of trust includes in taxable_income the gross_income from trust properties determined by grantor-corporation as if trust had not been created revrul_66_159 1966_1_cb_162 where individual grantor is treated as the owner of the entire trust no gain is recognized pursuant to sec_1032 on the trust’s sale of grantor’s principal_residence and timely reinvestment of the proceeds in a new residence accordingly in this case sec_1032 applies only to the portion of the a trust’s stock that tp1 owns tp1 would not recognize any gain_or_loss when the a_trust transfers or sells any such stock we assume based on the discussion in issue above that each subsidiary is treated as a grantor of the amount deemed contributed to its capital accordingly we believe that each subsidiary would recognize gain_or_loss on the a trust’s sale of any tp1 stock that it is deemed to own case development hazards and other considerations the amount of gain_or_loss the subsidiaries recognize depends on whether the subsidiaries are deemed to receive a cost_basis in the portion of tp1 stock that they are treated as owning we understand that you have not asked us to address this question however we note that this issue would probably need to be considered further in order to obtain a definitive resolution these conclusions are based on the assumptions and necessary additional factual development addressed in issue above should these assumptions change as a result of further factual development our office would want to reconsider the issue a which entity is entitled to the deduction issue accordingly and based on the following discussion we have concluded that tp1- tp14 respectively are the entities entitled to deduct contributions by the a_trust to the g-t plans for the benefit of their employees however such deductions are only allowable as otherwise provided under sec_404 and sec_83 under sec_404 employer contributions to plans other than tax qualified_plans are deductible in the taxable_year in which the amounts attributable to the contributions are includible in the gross_income of the employees participating in the plan provided separate_accounts are maintained for each employee if the plan covers more than one participant under sec_83 in the case of a transfer of property to which sec_83 applies there is allowed as a deduction under sec_162 to the person for whom the services were performed an amount equal to the amount included under sec_83 in the gross_income of the person who performed the services if the a_trust is a grantor_trust under sec_671 the assets of the a_trust are treated for tax purposes as though they are part of the general assets of the owner s -either tp1 or tp1 - tp14 as addressed in issue above under revrul_84_68 1984_1_cb_3 when a parent_corporation transfers cash to an employee of a subsidiary of the corporation the parent’s payment is treated as a contribution to the subsidiary’s capital and a constructive_payment by the subsidiary to its employees the payment is deductible by the subsidiary as compensation provided it is reasonable for the service’s performed see also revrul_80_76 1980_1_cb_15 amplified by revrul_81_45 1981_1_cb_483 when a majority stockholder of a corporation transfers stock of the corporation to an employee of the subsidiary of the corporation the fair_market_value of the stock is includible in the employee's income under sec_83 and the subsidiary is allowed the sec_83 deduction accordingly if tp1 is the sole grantor the a trust’s contribution to the plans would be treated as a contribution to the subsidiary’s capital and a constructive_payment by the subsidiary to its plan which would be deductible by the subsidiary as compensation provided it otherwise satisfied the requirements of sec_404 and sec_83 if tp1 and tp2 - tp14 are treated as the grantors and owners of the a_trust assets amounts paid_by the a_trust to the g-t plans would be considered to be amounts paid_by tp1 and tp2-tp14 the respective grantors and owners of the a_trust therefore amounts paid_by the a_trust on behalf of tp1 and tp2-tp14's employees would be paid and deductible by tp1 and tp2-tp14 the employer service recipients in accordance with sec_404 and sec_83 b timing of deduction we note that some of the incentive compensation plans submitted indicate that a portion of the annual bonus is deferred and paid out over a year period according to some of the submitted documents the deferred_bonus is deemed to have been earned out and vested on a pro_rata basis at the end of each year during the year period only to the extent the employee does not terminate employment during that year some of the other plans indicate that the bonus is earned at the end of the year but paid during the next year these facts suggest that there may be an issue regarding the timing of the compensation deductions this is distinguishable from a situation in which the parent_corporation makes a contribution on behalf of a subsidiary_corporation and the parent takes the deduction in general a parent_corporation may not deduct compensation it pays for the benefit of the employees of its wholly owned subsidiary even though the indirect benefit of their services inures to the parent_corporation 42_tc_800 acq on other issues 1965_1_cb_4 therefore under sec_404 and sec_83 contributions by the a_trust to the g-s plans would not be deductible by tp1 where tp1 is neither the employer nor the recipient of the services provided by employees of tp2 - tp14 sec_404 provides in part that if contributions are paid_by an employer on account of any employee under a plan deferring the receipt of compensation such contributions or compensation are not deductible under chapter of subtitle a of the code but if they would otherwise be deductible they are deductible under sec_404 subject_to the limitations contained therein as noted above pursuant to sec_404 contributions to a nonqualified_deferred_compensation_plan are deductible in the taxable_year in which the contribution is includible in the gross_income of employees participating in the plan or that would be includible but for an exclusion under chapter of the code but in the case of a plan in which more than one employee participates only if separate_accounts are maintained for each employee see also sec_1 a - b the rules of sec_404 apply to any method or arrangement that has the effect of a plan deferring the receipt of compensation or other_benefits for employees under sec_1_404_b_-1 where a corporation is under an obligation whether funded or unfunded to pay a pension or other deferred_compensation to an employee or his beneficiaries there is a method having the effect of a plan deferring the receipt of compensation_for which deductions are governed by sec_404 according to sec_1_404_b_-1t q a-1 sec_404 clarifies that any plan or method or arrangement deferring the receipt of compensation is to be treated as a plan deferring the receipt of compensation_for purposes of sec_404 thus for example under sec_404 a contribution paid_or_incurred to a nonqualified_plan or method or arrangement providing for deferred benefits is deductible in the taxable_year of the employer in which or with which ends the taxable_year of the employee in which the amount attributable to the contribution is includible in the gross_income of the employee sec_1_404_b_-1t q a-2 a provides that a plan defers the receipt of compensation or benefits to the extent that it is one under which an employee receives compensation or benefits more than a brief period of time after the end of the employer's taxable_year in which the services creating the right to such compensation or benefits are performed under sec_1_404_b_-1t q a- b a plan is presumed to defer the receipt of compensation_for more than a brief period of time to the extent that an employee receives compensation after the fifteenth day of the third calendar month following the end of the employer's taxable_year in which the related_services were rendered as an example the regulation provides that salary under an employment contract or a bonus under a year-end bonus declaration is presumed to be paid under a plan or method or arrangement deferring the receipt of compensation to the extent that the salary or bonus is received beyond the applicable ½ month-period see also sec_1_404_b_-1t q a-2 c as noted above sec_83 provides that in the case of a transfer of property to which sec_83 applies there is allowed as a deduction under sec_162 to the person for whom the services were performed an amount equal to the amount included under sec_83 in the gross_income of the person who performed the services this deduction is generally allowed to the service_recipient for the taxable_year in which or with which ends the taxable_year in which the amount is included as compensation by the person who performed the services under sec_1_83-6 however where property is substantially_vested on transfer the deduction is allowed to the service_recipient in accordance with its method_of_accounting in conformity with sec_446 and sec_461 the tax_court addressed the issue of deferred_compensation in 107_tc_271 in schmidt baking the taxpayer was an accrual-basis taxpayer with a fiscal_year that ended date the taxpayer funded its accrued vacation and severance_pay liabilities for by purchasing an irrevocable letter_of_credit on date the parties stipulated that the letter_of_credit represented a transfer of a substantially_vested interest in property to employees for purposes of sec_83 and that the fair_market_value of such interest was includible in the employees' gross incomes for as a result of the transfer the tax_court held that the purchase of the letter_of_credit and the resulting income inclusion constituted payment of the vacation and severance_pay within the ½ month period described in the regulations according to the tax_court because the vacation and severance_pay was treated as received by the employees within the ½ month period and were not treated as deferred_compensation under sec_404 it was deductible by the taxpayer for its fiscal_year pursuant to its normal accrual_method of accounting sec_7001 of the internal revenue restructuring and reform act publaw_105_206 enacted on date prospectively overrules the result in schmidt baking by enacting sec_404 under that section for purposes of determining whether an item of compensation is deferred_compensation the compensation is not considered to be paid or received until actually received by the employee in addition an item of deferred_compensation is not considered paid to an employee until actually received by the employee the conference_report states that no inference is intended that the result in schmidt baking is prior_law beyond its immediate facts or that the use of similar arrangements is permitted under present or prior_law see conf_rep 105th cong 2d sess the question of the timing of the deduction arises regardless of whether the a_trust is a grantor_trust under sec_671 or a secular_trust under sec_402 if the a_trust is a grantor_trust then the timing of the deduction is governed by sec_404 if the a_trust is a secular employee’s trust taxable under sec_402 then the timing of the deduction includes an analysis of sec_404 and may also include consideration of schmidt baking if there is an income inclusion event prior to the expiration of the ½ month period described in the sec_1_404_b_-1t however we cannot conclude based on the facts submitted when tp1-tp14 are entitled to claim the deductions case development hazards and other considerations we recommend that you obtain more information regarding whether the contributions from the a_trust to the nonqualified plans are made in cash stock or a combination of both we note above that however confirmation on this fact is necessary if the contributions are made in stock we recommend that you obtain more information about whether the stock contains any restrictions related to the performance of future services regarding additionally we recommend that you obtain more information again we note that however confirmation on this fact is necessary as stated above some of the submitted documents suggest that this may be incorrect if the amounts are considered deferred_compensation under sec_404 additionally if the g-t plans are considered funded and the a_trust considered an sec_402 trust consideration of schmidt baking may be required to determine the timing of the deduction however it is unclear whether we would consider schmidt baking to apply to the facts of this case 6payment of funds before actual payment of benefits to employee participants suggests that these arrangements are funded_deferred_compensation arrangements further development of the facts in this regard is necessary issue under sec_404 regarding deductions for employer contributions to a qualified profit sharing plan contributions are deductible by an employer in the taxable_year when paid if the taxable_year ends within or with a taxable_year of the trust in a year in which the trust is exempt under sec_501 the amount of deduction cannot exceed percent of the participants’ compensation_otherwise_paid_or_accrued during the taxable_year the a_trust provides in part that upon the payment or forgiveness in any trust year of any principal on the note common_stock held by the a_trust is allocated and transferred to the trusts established under the qualified a-f plans the amount of the annual allocation is prescribed by the a_trust as stated above we understand that tp2 tp5 tp6 tp9 tp10 and tp13 file consolidated tax returns with tp1 and that tp2 tp5 tp6 tp9 tp10 and tp13 respectively not tp1 claimed deductions on the returns for contributions paid_by the a_trust to the qualified a-f plans accordingly we believe that the contributions by tp2 tp5 tp6 tp9 tp10 and tp13 which the a_trust pays to the qualified a-f plans are deductible under sec_404 first as stated above as a grantor_trust under sec_671 assets of the a_trust are treated for tax purposes as though they are part of the general assets of the owner s who is either tp1 or tp1 and tp2 tp5 tp6 tp9 tp10 and tp13 however as noted in issue above if tp1 is the sole grantor and owner a payment by a parent_corporation for the benefit of its subsidiary is recognized for federal_income_tax purposes as a contribution of capital to the subsidiary_corporation and a constructive_payment by the subsidiary see revrul_84_68 1984_1_cb_31 citing 26_tc_600 aff’d per curiam 253_f2d_267 6th cir and 67_tc_522 aff’d per curiam 583_f2d_953 7th cir accordingly contributions by the a_trust to the a-f plans in satisfaction of tp2 tp5 tp6 tp9 tp10 and tp13's liabilities under the plans would be deemed to be paid_by tp2 tp5 tp6 tp9 tp10 and tp13 respectively therefore the contributions are deductible in the year paid to the extent that they are otherwise deductible under sec_404 the amount of the deduction equals the fair_market_value of the money or property contributed at the time it is paid over to the trusts see 282_f2d_9 6th cir cert_denied 363_us_641 and 45_bta_716 aff’d 135_f2d_310 as stated in footnote above this is distinguishable from a situation in which the parent_corporation makes a contribution on behalf of a subsidiary_corporation and second if tp1 and tp2 tp5 tp6 tp9 tp10 and tp13 are treated as the grantors and owners of a_trust assets contributions by the a_trust to the a-f plans as prescribed by the terms of the a_trust would be considered to be contributions by tp1 and tp2 tp5 tp6 tp9 tp10 or tp13 the respective grantors and owners for purposes of sec_671 therefore a_trust contributions would be considered to be paid_by tp1 and tp2 tp5 tp6 tp9 tp10 or tp13 the respective employer and deductible in the tax_year paid in an amount equal to the fair_market_value of the money or property contributed at the time it is paid over to the trusts provided the contributions otherwise satisfy the requirements of sec_404 however the additional factual development discussed above is needed before determining which entity is the grantor and owner of a_trust assets issue under the terms of the a plan b plan and f plan the sec_401 plans included in your submission employer contributions appear to be required to fund profit sharing contributions sec_401 elective_deferrals employer matching_contributions and or employer matching stock contributions in general although the code does not require that employer contributions be made in cash the prohibited_transaction rules under sec_4975 prohibit the direct or indirect sale_or_exchange of property between a plan and a disqualified_person unless an exemption applies see sec_4975 sec_4975 under the circumstances presented the a_trust as well as tp1 through tp14 are disqualified persons under the code see sec_4975 under sec_4975 the prohibitions described under sec_4975 do not apply to transactions exempt under sec_406 of erisa title i sec_406 of erisa title i lists transactions that are prohibited under erisa title i which the parent takes the deduction in general a parent_corporation may not deduct compensation paid_by it for the benefit of employees of its wholly owned subsidiary even though the indirect benefit of their services inures to the parent_corporation 42_tc_800 acq on other issues 1965_1_cb_4 therefore under sec_404 contributions by the a_trust to the a-f plans would not be deductible by tp1 since tp1 is not the employer maintaining the plan on behalf of its employees sec_404 under the facts as we understand them tp1 has not adopted the a-f plans on behalf of its own employees see sec_414 our response does not address whether the a_trust is a plan under the provisions of erisa title i erisa title i imposes a number of requirements on employee benefit plans such as reporting and disclosure requirements funding standards and duties owed by plan fiduciaries generally parallel the prohibited_transactions under sec_4975 sec_408 of erisa title i provides exemptions under title i which generally parallel the exemptions under sec_4975 for instance pursuant to sec_408 of title i the provisions governing prohibited_transactions under title i found in sec_406 do not apply to a plan’s acquisition of qualifying employer_securities under certain conditions see erisa title i sec_408 those conditions are as follows the acquisition must be for adequate_consideration the acquisition must not give rise to a commission and the plan is an eligible_individual account plan eg a profit sharing or stock_bonus_plan see erisa title i sec_408 - sec_407 according to the material provided the conditions under erisa sec_408 - appear to be satisfied provided the valuation of the stock at the time it is contributed to the qualified_plans constitutes adequate_consideration thus the plans’ acquisition of tp1 stock appears to fall within the exemption provided by sec_4975 consequently sec_4975 provides an exemption to the prohibition on the sale_or_exchange of property between the plans and the a_trust it is unclear whether assets of the a_trust are used to satisfy all or a portion of these employers’ liabilities under the plans however in general the code does not require that employer contributions be funded in cash issue except in the case of an employee_stock_ownership_plan esop as defined in sec_4975 the code does not limit a participant’s ability to diversify plan assets under qualified_plans subject_to some important exceptions trustees of trust which is part of an sec_401 plan can in general use plan assets to purchase any investments permitted by the trust agreement to the extent allowed by local law see eg sec_1_401-1 under that regulation no specific limitations apply to investments by trustees of an sec_401 plan’s related trust however the trustees of such a_trust are subject_to substantial constraints under the code and erisa title i under the exclusive benefit rule under sec_401 plan assets must be used for the exclusive benefit of participants and beneficiaries under the plan in addition sec_404 of erisa title i sets forth the duties owed by a fiduciary of an erisa plan including the duty to discharge his duties for the exclusive purpose of providing benefits to participants and their beneficiaries in a prudent manner erisa sec_404 also requires the the term qualifying employer_securities means generally the common_stock of the employer which is readily_tradable on an established market see sec_409 see also sec_409 special rule for stock not readily_tradable we understand that the tp1 stock is readily_tradable on an established market trustees of an erisa plan to diversify the plan investments unless it is not prudent under the circumstances issue assuming the subsidiaries are treated as grantors of the a_trust and are therefore treated as owning a portion of tp1 stock held by the a_trust the portion of the stock that the subsidiaries are considered to own is generally treated as outstanding for tax purposes the portion owned by tp1 would be treated as treasury_stock we note however that the treatment of tp1 stock as treasury_stock for tax purposes may have no effect on the calculation of earnings per share which is a financial_accounting concept with its own rules we are not aware of any rules in the code or regulations for calculating earnings per share or of any relevance of the earnings per share calculation for tax purposes the securities exchange commission sec the financial_accounting standards board fasb and other rule making authorities for financial_accounting are responsible for providing guidance on these matters consequently the tax treatment of the stock held by the a_trust may have little if any bearing on the calculation of earnings per share supplement and conclusion in addition to the foregoing issues we recommend further development of facts regarding whether contributions to the a_trust by tp1 and the rights conferred on plan participants under the a_trust constitute a transfer of property under sec_83 sec_83 of the code provides that the excess if any of the fair_market_value of property transferred in_connection_with_the_performance_of_services over the amount_paid if any for the property is includible in the gross_income of the person who performed the services for the first taxable_year in which the property becomes transferable or is not subject_to a substantial_risk_of_forfeiture sec_1_83-3 of the income_tax regulations provides that for purposes of sec_83 the term property includes real and personal_property other than money or an unfunded and unsecured promise to pay money or property in the future property also includes a beneficial_interest in assets including money transferred or set_aside from claims of the transferor's creditors for example in a_trust or escrow account under the economic_benefit_doctrine a person has currently includible income from an economic or financial benefit received as compensation though not in cash form economic benefit applies when assets are unconditionally and irrevocably paid into a fund or trust to be used for the person's sole benefit 16_tc_244 aff'd per curiam 194_f2d_541 6th cir revrul_60_31 situation in revrul_72_25 1972_1_cb_127 and revrul_68_99 1968_1_cb_193 an employee does not receive income as a result of the employer's purchase of an insurance_contract to provide a source of funds for deferred_compensation because the insurance_contract is the employer's asset subject_to claims of the employer's creditors whether a plan is funded depends on the facts and circumstances of each case the essential feature of a funded plan is that its assets are segregated from the general assets of the employer and are not available to general creditors if the employer becomes insolvent 848_fsupp_1515 n d ala however an arrangement will be considered to be unfunded if the benefits are to be paid from the employer's general assets and there is no res or property which has been set_aside from the corporation's ordinary assets in order to fund the plan 653_f2d_1208 8th cir cert_denied 454_us_968 thus whether there has been a transfer of property for the performance of service within the meaning of sec_83 or a person has incurred an economic benefit because the a_trust will be considered to have funded the nonqualified_deferred_compensation benefits of participants will depend on the particular facts and circumstances of the arrangement it is unclear from the documents provided us whether assets of the a_trust are available to subsidiaries' creditors in the event of bankruptcy or insolvency of a subsidiary before a determination on this issue can be made addition under of the a_trust further information is necessary regarding how this provision is administered in finally we want to emphasize that separate and distinct laws and analysis apply to qualified and nonqualified plans accordingly it is critical that you bear this point in mind when developing the case and the additional facts addressed herein if you have any further questions please call the branch telephone number by michael roach chief branch


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division - é ey ot a é uniform issue list jun xxx xxkxkxkxxkx xxxkxxkxkx legend taxpayer a financial_institution b financial_institution c financial advisor d fund e ira x account y date date amount dear this letter is in response to your request dated date as supplemented by correspondence dated date submitted on your behalf by your authorized representative in which you requested a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code perjury in support of the ruling requested the following facts and representations have been submitted under penalty of page taxpayer a age __ represents that he received a distribution from his individual_retirement_account ira at financial_institution b in amount taxpayer a asserts that his failure to roll over amount within the 60-day period prescribed by sec_408 was due to errors made by financial advisor d of financial_institution c taxpayer a further represents that amount has not been used for any other purpose taxpayer a represents that he wished to transfer amounts in his ira ira x at financial_institution b to an ira invested in fund e a hedge fund managed by financial_institution c on date taxpayer a met with a representative of financial_institution b and requested the rollover of amount from ira x to fund e financial advisor d principal of financial_institution c instructed taxpayer a to label the subscriber of his account in fund e account y as an ira taxpayer a was unaware that he had not properly rolled over amount until date when financial advisor d contacted him after learning that the rollover had been mishandled documentation provided shows that financial advisor d incorrectly advised taxpayer a that ira x could be properly rolled over to fund e specifically financial advisor d has provided a statement under penalty of perjury explaining that he advised taxpayer a that if taxpayer a identified the subscriber of account y as an ira the transfer of amount to fund e would constitute a non-taxable ira rollover based on the foregoing facts and representations you request a ruling that the internal_revenue_service service waive the 60-day rollover requirement with respect to the distribution of amount from ira x at financial_institution b sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if -- i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into page such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includibie in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a are consistent with his assertion that his failure to accomplish a timely rollover was caused by errors made by financial advisor d of financial_institution c which resulted in amount being deposited into account y a non-ira account therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira x taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution amount will be considered a rollover_contribution within the meaning of sec_408 of the code this letter expresses no opinion as to whether the ira described herein satisfied the requirements of sec_408 of the code this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent page a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office if you wish to inquire about this ruling please contact xxxxx xxxxxxx id please address all correspondence to se t ep ra t2 at - enclosures deleted copy of ruling letter notice of intention to disclose cc sincerely d onzete tthe oka donzell employee_plans technical group cittlejohn manager


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 plr-106230-15 date date legend x y a country date date ----------------------------------------------------------------------------------------------- --------------------- ----------------------------------------------------------------------------------------------- ------------------------------- ---------------------- ------- ----------------------- ------------------ dear -------------- this letter responds to a letter dated date and subsequent correspondence 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 under sec_301_7701-3 to be treated as a disregarded for federal tax purposes facts the information submitted states that x was formed under the laws of country on date on date x was a wholly owned by y and represents that as of date it was a foreign_entity eligible to elect a disregarded_entity for u s federal tax purposes and y intended x to be treated as a disregarded_entity until date when a a non-resident alien individual acquired an interest in x x represents that it was not advised of the need to make an election for u s federal_income_tax purposes to be treated as a disregarded_entity as a result x failed to timely file a form_8832 entity classification election electing to be treated as a disregarded_entity for u s federal tax purposes effective date plr-106230-15 x represents that y consistently filed u s tax returns treating x as a disregarded_entity until date and from date on as a partnership x also represents that granting relief will not prejudice the interests of the government and that hindsight is not involved in seeking relief to file a late election x further represents that such relief would not result in a lower tax_liability in the aggregate for all years to which the request applies as the owners of x properly reported the net_income of x on their respective returns finally x represents that it acted reasonably and in good_faith law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single member having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 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 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 the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and no more than months after the date the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic_extension of time for making certain elections sec_301_9100-3 provides the standards the plr-106230-15 commissioner will use to determine whether to grant an extension of time for the regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when a taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonable and in good_faith and granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 accordingly x is granted an extension of time of one hundred twenty days from the date of this letter to file form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity for federal tax purposes effective date a copy of this letter is attached for that purpose this ruling is contingent on the owners of x filing within days of this letter all required returns for all open years consistent with the requested relief to the extent appropriate these returns must include but are not limited to form_8858 information_return of u_s_person with respect to disregarded entities and where appropriate form_8865 information_return of u s persons with respect to certain foreign_partnerships such that the forms and returns reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except as expressly set forth herein no opinion is expressed or implied concerning the federal tax consequences any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely associate chief_counsel passthroughs special industries by david r haglund david r haglund branch chief branch passthroughs special industries enclosures copy of letter copy for purposes


internal_revenue_service number release date index number ----------------------------------- ------------------------ -------------------------------- -------- --------------------------------- legend legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number --------------------- refer reply to cc psi plr-116981-10 date september x ------------------------------------------ ---------------------------- d ---------------------- state --------- dear -------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts according to the information submitted x was incorporated under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d but the proper election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 if the 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 an s_corporation until the taxable_year after the year in which the s election is made plr-116981-10 sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not timely file an election to be treated as an s_corporation under sec_1362 effective d x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be treated as an s_corporation effective d if within days from the date of this letter x submits a properly completed form_2553 with a copy of this letter attached to the appropriate service_center the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed or implied concerning whether x otherwise qualifies as an s_corporation for federal tax purposes this ruling is directed only to the taxpayer 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 sincerely david r haglund david r haglund chief branch office of the associate chief_counsel passthroughs and special industries plr-116981-10 enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------------------------- ---------------------------------------------------------- ----------------------------------------- ------------------------ in re ------------------------------------------------ --------------------------------------------------- ------------------------------ ---------------------------- department of the treasury washington dc person to contact --------------------- id no --------------- telephone number --------------------- refer reply to cc tege eb qp2 - plr-143670-03 date april legend federal credit_union cu ----------------------------------------------------------- ----------------------------------------- executive e ---------------------- ---------------------------------- dear ---- -------------- this responds to your letter of date and subsequent correspondence on behalf of federal credit_union cu requesting a ruling concerning the application of sec_457 of the internal_revenue_code the acode to the nonqualified_deferred_compensation_plan that cu intends to implement for its executive e in the near future cu is represented to be a federal credit_union that is a tax-exempt_entity described in sec_501 of the code your letter submitted a second ruling_request that you subsequently withdrew hence we do not deal with the second requested ruling in this letter cu intends to establish a non-qualified deferred_compensation plan to provide deferred_compensation benefits for its executive e sec_457 of the internal_revenue_code provides rules regarding the taxation of deferred_compensation plans of eligible employers for this purpose the term aeligible employer is defined in sec_457 as a state political_subdivision of a state and any agency_or_instrumentality of a state or political_subdivision of a state in addition sec_457 includes as an eligible_employer any other organization other than a governmental_unit exempt from tax under subtitle a of title of the code federal government agencies or instrumentalities are not eligible employers described in sec_457 or b plr-143670-03 as stated above cu is represented to be a federal credit_union_exempt from tax as an organization described in sec_501 sec_501 provides in relevant part that organizations exempt from federal_income_tax include any corporation organized under act of congress which is an instrumentality of the united_states but only if such corporation is exempt from federal_income_tax under such act as amended and supplemented before date the tax exemption for federal credit unions is derived from u s c last substantively amended in which provides the federal credit unions organized hereunder their property their franchises capital reserves surpluses and other funds and their income shall be exempt from all taxation now or hereafter imposed by the united_states or by any state territorial or local taxing authority the service has stated that credit unions chartered under the federal credit_union act are recognized as united_states instrumentalities and are exempt under sec_501 revrul_69_283 1969_1_cb_156 based upon the information presented and summarized above we conclude a sec_1 sec_457 of the internal_revenue_code is inapplicable to the nonqualified_deferred_compensation_plan that federal credit_union cu proposes to establish for the benefit of executive e because cu is a federal governmental instrumentality described in sec_501 of the code and does not constitute an eligible_employer under sec_457 or b no opinion is expressed concerning the tax treatment of cu’s nonqualified_deferred_compensation_plan for e this ruling is directed only to cu and e sec_6110 of the internal_revenue_code provides that this ruling may not be used or cited as precedent follows plr-143670-03 temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling may be modified or revoked if the adopted temporary or final regulations are inconsistent with any conclusion in the ruling see section dollar_figure of revproc_2004_1 2004_1_irb_1 however when the criteria in section dollar_figure of revproc_2004_1 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances sincerely robert d patchell branch chief qualified_plan sec_2 office of division counsel associate chief_counsel tax exempt government entities enclosure cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date feb contact person oo ss identification_number telephone number tco by employer_identification_number dear sir or madam this is in response to your letter dated date in which you requested certain rulings with respect to a proposed transfer of all of the assets of b to c b and c are exempt under sec_501 of the internal_revenue_code and are classified as private_foundations under sec_509 b and c were originally organized and funded by e and f both b and c have always operated as grant-making organizations for the purpose of supporting other organizations organized and operated for charitable and educational_purposes e is the sole voting member of both b and c the board_of directors for b and c intend to approve a plan of merger under which b would merge with c under the plan c would be the surviving entity the directors have concluded that the proposed merger would eliminate duplicative expenses associated with the operation of two foundations and would result in greater efficiency with respect to planning and making distributions to qualifying charitable organizations after the merger all of b's assets and liabilities would be transferred to c b has not notified the service that it intends to terminate its private_foundation_status nor has b ever received notification that its status as a private_foundation has been terminated furthermore b has stated that it has not committed wiilful repeated acts or failures to act ora willful and flagrant act or failure to act giving rise to liability for tax under chapter sec_507 of the code states in part that except for transfers described in sec_507 an organization's private_foundation_status will be terminated only if the organization notifies the service of its intent to terminate or there have been either willful repeated acts or failures to act or a willful and flagrant act or failure to act giving rise to liability for tax under chapter sec_507 of the code provides that when a private_foundation transfers assets to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization the transferee foundation shall not be treated as a new organization sec_507 of the code imposes a tax on an organization that terminates its private_foundation_status under sec_507 of the code sec_1_507-3 of the income_tax regulations provides that a transferor private_foundation is required to meet its charitable distribution_requirements under sec_4942 of the code for any taxable_year in which it makes a transfer of all or a part of its assets to another private_foundation such transfer shall itself be counted toward satisfaction of such requirements to the extent the amount transferred meets the requirements of sec_4942 of the code however where the transferor has disposed of all of its assets the record-keeping requirements of sec_4942 of the code shall not apply during any period in which it has no assets sec_1_507-1 of the regulations provides that if a private_foundation transfers all or part of its assets to one or more other private_foundations pursuant to a transfer described in sec_507 of the code such transferor foundation will not have terminated its foundation status under sec_507 sec_1_507-1 of the regulations provides that neither a transfer of all of the assets of a private_foundation nor a significant disposition of assets as defined in sec_1_507-3 by a private_foundation whether or not any portion of such disposition of assets is made to another private_foundation shall be deemed to result in a termination of the transferor private_foundation under sec_507 of the code unless the transferor private_foundation elects to terminate pursuant to sec_507 or sec_507 is applicable sec_1_507-3 of the regulations provides that in the case of a significant disposition of assets to one or more private_foundations within the meaning of paragraph c of this subsection the transferee organization shall not be treated as a newly created organization sec_1_507-3 of the regulations provides that a transferee organization in the case of a transfer described in sec_507 of the code shall succeed to the aggregate tax_benefit of the transferor organization in an amount equal to the amount of such aggregate tax_benefit of the transferor organization multiplied by a fraction the numerator of which is the fair market_value of the assets less encumbrances transferred to such transferee and the denominator of which is the fair_market_value of the assets of the transferor less encumbrances immediately before the transfer transfer fair_market_value is determined at the time of sec_1_507-3 and ii of the regulations provides that in a sec_507 transfer the provisions enumerated in subparagraphs a through g thereof apply to the transferee foundation with respect to the assets transferred to the same extent and in the same manner that they would have applied to the transferor foundation had the transfer described in sec_507 not been effected sec_1_507-3 of the regulations provides that if a transferor private_foundation transfers assets to a private_foundation which is effectively controlled within the meaning of sec_1_482-1a directly or indirectly by the same person or persons who effectively control the transferor private_foundation the transferee foundation will be treated as if it were the transferor foundation for purposes of sec_4940 through and sec_507 through of the code the transferee is treated as the transferor in the proportion which the fair_market_value of the transferor’s assets that were transferred bears to the fair_market_value of all of the assets of the transferor immediately before the transfer sec_1_507-3 of the regulations provides that unless a private_foundation gives notice under sec_507 of the code a transfer of assets described in sec_507 of the code will not constitute a termination of the transferor’s private_foundation_status sec_1_507-4 of the regulations provides that the tax on termination of private_foundation_status under sec_507 of the code does not apply to a transfer of assets pursuant to sec_507 of the code unless the provisions of a become applicable sec_4941 of the code imposes a tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4942 of the code requires a private_foundation to make specified distributions of income for each taxable_year including the year in which it transfers substantial assets to another private_foundation under sec_507 sec_4942 of the code defines a qualifying_distribution as any amount including that portion of reasonable and necessary administrative expenses paid to accomplish one or more purposes described in sec_170 other than any contribution to i an organization controlled by the foundation or one or more disqualified persons or ii a private_foundation which is not an operating_foundation except as otherwise provided or b any amount_paid to acquire an asset used directly in carrying out one or more purposes described in sec_170 sec_4942 of the code requires that a grantor private_foundation in order to have a qualifying_distribution for its grant to another private_foundation which is not an operating_foundation under sec_4942 of the code must have adequate_records as required by sec_4942 of the code to show that the grantee private_foundation in fact subsequently made qualifying distributions that were equal to the amount of the grant and that were paid out of the grantee’s own corpus within the meaning of sec_4942 of the code such grantee foundation’s qualifying distributions out of corpus must be expended before the close of the grantee’s first tax_year after its tax_year in which it received the grant sec_4945 of the code imposes tax upon a private foundation’s making of any taxable_expenditure under sec_4945 sec_4945 of the code defines the term taxable_expenditure to include any amount_paid or incurred by a private_foundation as a grant to an organization unless a the organization is described in subparagraphs or of sec_509 of the code or is an exempt_operating_foundation as defined in sec_4940 of the code or b the private_foundation exercises expenditure_responsibility with to such grant in accordance with sec_4945 of the code the exercise of expenditure_responsibility requires the foundation that makes the transfer to keep detailed records of the way the payment is spent by the recipient foundation sec_4945 of the code provides that expenditure_responsibility referred to in subsection d means that the private_foundation is responsible to exert all reasonable efforts and to establish adequate procedures to see that the grant is spent solely for the purpose for which made to obtain full and detailed reports with respect to such expenditures and to make full and detailed reports to the secretary sec_4946 of the code defines the term disqualified_person as a person who is a substantial_contributor to a private_foundation a foundation_manager an owner of more than of a corporation or partnership which is a substantial_contributor to the private_foundation a family_member of persons described above or a corporation partnership trust or estate of which persons described above own more than of the combined voting power sec_53_4945-5 of the foundation and similar excise_taxes regulations refers to the rules relating to the extent to which the expenditure_responsibility_rules contained in sec_4945 and h and this section apply to transfers of assets described in sec_507 sec_53_4945-6 of the regulations provides that a transfer of assets of a private_foundation under sec_507 of the code is not a taxable_expenditure if such transfer is to an organization described in sec_501 other than an organization described in sec_509 or treated as so described under sec_4947 sec_53_4946-1 of the regulations provides that for purposes of sec_4941 the term disqualified_person does not include any organization described in sec_501 other than an organization described in sec_509 under sec_507 of the code in the case of a transfer of assets of any private_foundation to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization the transferee foundation shall not be treated as newly created organization thus the transfer by b to c will constitute in the aggregate an adjustment organization or reorganization within the meaning of sec_507 accordingly the transfer by b to c will not be treated as a transfer to a newly created organization because b is not terminating its existence and assuming there has been no willful repeated or flagrant act giving rise to liability under chapter no tax will be imposed on b under sec_507 as a result of the transfer of assets from b to c under sec_507 of the code the value of b's assets after it has transferred all of its assets to c will be zero thus b’s voluntary notice of termination of its private_foundation_status pursuant to sec_509 will not result in tax under sec_507 of the code because b and c are effectively controlled by the same persons c should be treated as if it were b for purposes of sec_507 through and chapter of the code therefore the rulings requested under sec_4940 sec_4941 sec_4942 and sec_4944 would be provided because these rulings are consistent with the approach in sec_1_507-3 i of the regulations which is in effect to disregard the change in form of the organization for purposes of chapter because b is transferring all of its assets to c pursuant to a merger and b and c are controlled by the same persons c will be treated as b the transfer will be treated as not having taken place for expenditure_responsibility purposes under sec_4945 of the code thus the transfer will not be a taxable_expenditure under sec_4945 therefore b need not exercise expenditure_responsibility with regard to the merger subsequent to the merger c will be treated as if it were b therefore c will succeed to b’s duty to exercise expenditure_responsibility with respect to any outstanding grants of b for which expenditure_responsibility is required and b would be relieved of any duty to exercise expenditure_responsibility after the merger b has represented that it currently has no grants for which expenditure_responsibility is required based upon this representation c would not assume any expenditure_responsibility obligations as a result of the transfer as a result of the merger c will be treated as b for purposes of chapter therefore the distribution_requirements of sec_4942 for the year of transfer should be regarded as satisfied by both b and c if treating b and c distributions for such year by b and c would satisfy its distripution requirement because c is treated as taking over b's obligations as of the date of merger it follows that as of that date b will no longer have any such obligations as a single organization the aggregate qualifying because b and c are controlled by the same persons for purposes of chapter of the code and sec_507 through of the code c will be treated subsequent to the transfer of all of b’s assets as if carryover for purposes of sec_4942 of the code it were b thus c can succeed to b's excess qualifying distributions because b as an organization described in sec_501 of the code is not a disqualified_person with respect to c the transfer of assets to c will not constitute an act of self- dealing within the meaning of sec_4941 of the code because b will dispose_of all of its assets the recordkeeping requirements of sec_4942 will not apply during any period in which it has no assets therefore b’s recordkeeping under sec_4942 will not apply after the merger since b will have disposed of ail of its assets accordingly based on the information furnished we rule as follows the transfer of the assets of b to c pursuant to the merger constitutes a transfer of assets described in sec_507 of the code and will not result in termination of b’s status as a private_foundation under sec_507 of the code neither the transfer of assets of b to c pursuant to the merger nor any subsequent notice of termination of b will result in the imposition of the termination_tax under sec_507 of the code because c and b are controlled by the sarne person c will be treated as if purposes of chapter sec_507 and sec_509 of the code it were b for as the result of the proposed merger c will succeed to b’s excess qualifying_distribution carryover as of the effective date of the merger c will succeed to the aggregate tax_benefit of b the contemplated transaction will not constitute an act of self-dealing and therefore will not result in the imposition of tax under section 1of the code the proposed transfer of the assets of b to c pursuant to the merger will not subject b to any_tax under sec_4942 of the code for a failure to distribute income b will not be required to comply with the record-keeping requirements of section g b of the code with respect to the transfer of all of its assets to c pursuant to the merger after the transfer of all of its assets the contemplated transaction will not be a taxable_expenditure under sec_4945 of the code and therefore will not subject b to tax under sec_4945 of the code nor will b be required to exercise expenditure_responsibility over the assets transferred to c we are informing the ohio te_ge office of this action please keep a copy of this ruling in your organization’s permanent records this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely gerald v sack manager exempt_organizations technical group