internal_revenue_service number release date index number strategic decisions group international llc attn mary lea kirvein managing director emerson street palo alto ca department of the treasury washington dc third party communication none date of communication not applicable_person to contact laura fields id no telephone number refer reply to cc psi br01 plr-128893-11 date date legend x y date country state dear ms kirvein strategic decisions group sal ein strategic decisions group international llc ein date lebanon california this private_letter_ruling is in response to your request dated date on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be disregarded as an entity separate from its owner for federal tax purposes under sec_301_7701-3 facts based on the information submitted x is a country entity that is wholly owned by y a state entity y represents that as of date x was eligible to make an election under sec_301_7701-3 to be disregarded as an entity separate from its owner for federal income purposes however the form_8832 entity classification election was inadvertently not timely filed x represents that granting relief to allow x to file a late election to be disregarded as an entity separate from its owner y will not prejudice the plr-128893-11 interests of the government in addition x represents that it acted reasonably and in good_faith law and analysis 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_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if a foreign eligible_entity has one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 if a foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions for time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301 a conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of time of days from the date of this letter to elect to be disregarded as an entity separate from its owner for federal tax purposes effective date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election plr-128893-11 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to the taxpayer sincerely associate chief_counsel passthroughs and special industries david r haglund by david r haglund chief branch passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c government entities ‘olvision’ number release date date date xxxoxkk ook xxxkkx xxxxxx contact person identification_number telephone number employer_identification_number xxxxxx rm issue list dear this is in response to n's request for a ruling that certain proposed contractual relationships will not generate unrelated_business_taxable_income under section sec_12 of the internal_revenue_code the code mis exempt under sec_501 of the code as an organization described in sec_501 and has been classified as an educational_organization under sections a and b anayci mis the trustee of a number of charitable_remainder trusts collectively the trusts’ and as trustee m is the legal owner of the trusts’ assets in addition mhas a remainder_interest in each of the trusts remainder beneficiary n is one such charitable_remainder_trust in which m is trustee and as a result of the relationship with the trusts as both trustee and beneficiary mhas a moreover the donors to the trusts have funded substantial interest in the value of each trust the trusts with the intention that m benefit substantially from the assets of the trusts and that the assets will be managed to achieve the greatest possible return on investment xxkxkk w's endowment is invested in a diversified manner with investments in domestic and international equity securities hedge funds fixed income assets venture capital real_property private equity options and cash much of the income earned by the portfolio consists of passive dividends interest and long and short-term_capital_gains but some income is debt-financed or otherwise treated as unrelated_business_taxable_income m proposes to create a contractual obligation pursuant to which it would issue a contract right to each of the trusts for a proportionate share or unit’ of m's endowment the cumulative value of the units would be the dollar value of the assets held by the individual trusts combined with the units of the endowment held by the various departments and schools making up m's institution the contract right would entitle the trusts to receive periodic_payments based on the units owned by each of the trusts the trusts would thereby be able to receive an investment return equal to that of the endowment m determines a spending rate on the endowment each year based in part on the endowment's investment performance m calculates the market_value of each endowment unit on a monthly basis the market_value of each endowment unit initially equals the value of the ift of contribution to the endowment and is subsequently adjusted in accordance with the market_value of the endowment each department and division is entitled to an amount equal to the spending rate times the number of units it holds m seeks to enable the trusts to invest in the endowment in a manner identical to m's a_trust would acquire a unit in the endowment which would give the departments or schools trusts a contractual right against the university but no interest whatsoever in the underlying investment_assets of the endowment the units would have the same value that m uses for intemal accounting purposes ‘the contract would provide that each trust would receive payments on the units held by it equal to the spending rate m has established for the endowment with payouts made at least annually or more frequently as appropriate a_trust could choose either to reinvest part of the the trusts will treat payout or redeem additional units depending on its cash requirements payouts as ordinary_income regardless of the character of the underlying income of the endowment whether capital_gain ordinary_income or return_of_capital and regardless of whether the payout is made entirely by distributions of income or in part by redemption of units the trusts will treat redemptions of units over and above receipt of the spending rate as generating long or short-term_capital_gain or loss depending on the holding_period of the redeemed units under the contract the trusts would not have any ownership_interest in the underlying assets of the endowment or any contract rights with respect to the other trusts would have no power of right of any kind to control direct supervise recommend or review m's business activities operations or decisions with respect to the endowment except the right to review the payout computations they would not have the right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of units m is neither a partner nor an agent of the trusts that the trusts would never be or become liable for any cast expense or payment incurred or due by m or for which m is the trusts xxxxxx liable or responsible relating to the endowment or the underlying endowment assets and m would indemnify and hold the trusts harmless from and against any liability arising out of any_action or inaction by m with respect to the endawment or the underlying endowment assets ‘n has requested the following ruling the issuance of units by m to the trusts the making or receipt of payments with respect to the units and the holding or redemption of the units will not generate unrelated_business_taxable_income to n law sec_512 of the code defines the term unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions which are directly connected with the carrying on of such trade_or_business both computed with the modifications provided in sec_512 sec_512 of the code sets forth so-called ‘modifications which are excluded from the computation of unrelated_business_taxable_income these modifications include dividends interest royalties rent from real_property and gain from the sale of property sec_513 of the code defines the term unrelated trade or business’ as any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_purpose or function sec_513 of the code provides that the term trade_or_business includes any activity which is carried on for the production_of_income from the sale_of_goods or the performance of services sec_1_513-1 of the income_tax regulations provides that gross_income of an exempt_organization subject_to the tax imposed by sec_511 of the code is includible in the computation of unrelated_business_taxable_income if is income from a trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the production of funds to the organization's performance of its exempt functions it section big_number of the regulations provides that for purposes of sec_513 the term trade_or_business has the same meaning it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services section big_number c of the regulations provides that in determining whether trade_or_business from which a particular amount of gross_income derives is regularly carried on within the meaning of sec_512 of the code regard must be had to the frequency and continuity with which the activities productive of the income are conducted and the manner in which they are pursued for example specific business activities of an exempt_organization will ordinarily xxkxxk be deemed to be regularly carried on if they manifest a frequency and continuity and are pursued in a manner generally similar to comparable commercial activities of non-exempt organizations sec_1_513-1 of the regulations provides that in general gross_income derives from unrelated_trade_or_business within the meaning of sec_513 of the code if the conduct of the trade_or_business which produces the income is not substantially related other than through the production of funds to the purposes for which exemption is granted the presence of this requirement necessitates an examination of the relationship between the business activities which generate the particular income in question -- the activities that is of producing or distributing the goods or performing the services involved -- and the accomplishment of the organization's exempt purposes sec_1_513-1 of the regulations provides that trade_or_business is related to exempt purposes in the relevant sense only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes and is substantially related for purposes of sec_513 of the code only if the causal relationship is a substantial one thus for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes where the production or distribution of the goods or the performance of the services does not contribute importantly to the accomplishment of the exempt purposes of an organization the income from the sale of the goods or the performance of the services does not derive from the conduct of related trade_or_business whether activities productive of gross_income contribute importantiy to the accomplishment of any purpose for which an organization is granted exemption depends in each case upon the facts and circumstances involved rev_rul 1969_2_cb_127 describes an organization that was formed to provide investment services an a fee basis exclusively to organizations exempt under sec_501 of the code it receives funds from the participating exempt_organizations invests in common stocks reinvests income and realized appreciation and upon request liquidates a participant's interest and distributes the proceeds to the participant the rev_rul states that providing investment services on a regular basis for a fee is a trade_or_business ordinarily carried on for profit tax-exempt organizations such activity would constitute unrelated_trade_or_business the rev_rul holds that the organization is not exempt under sec_501 c if the services were regularly provided by one tax-exempt_organization for other as noted previously organizations described in sec_601 of the code are subject in order for such an organization's to tax on their unrelated_business_income under sec_511 income to be subject_to the unrelated_business_income_tax three requirement must be met the income must be from a trade_or_business the trade_or_business must be regularly carried on and the conduct of the trade_or_business must not be substantially related to the organization's exempt_purpose or function see sec_1_513-1 of the regulations analysis kxkxkk m proposes to enter into a contractual relationship with certain trusts that are charitable_remainder trusts in which m has an interest as a beneficiary and serves as trustee of the trust under such a contractual relationship each trust would receive payments on the units held by it equal to the spending rate m establishes for its endowment with payouts made in accordance with the trust instruments a_trust would acquire units from m’s endowment which would give the trusts a contractual right against m but no interest whatsoever in the underlying investment_assets of the endowment the contract between m and the trusts would provide that the price of the units would equal their value at the time of acquisition that m uses for internal accounting purposes the units would have the same value consequently a_trust could choose either to reinvest part of the payout or redeem a portion of the units depending on its cash requirements thus under the contractual relationship with m the trusts would have a right to the payout declared by m plus the right to redeem the units at the value that m uses for internal accounting purposes generally an organization that otherwise qualifies for recognition of exemption under sec_501 of the code and provides investment services on a regular basis for a fee to other exempt or nonexempt organizations would be engaged in an unrelated_trade_or_business under section a see revrul_69_528 supra such an activity would constitute a trade_or_business under sec_513 and sec_1_513-1 of the regulations and would be regularly carried on under sec_512 and sec_1_513-1 thus if m charged a fee for investment management services provided to organizations unrelated to m or generated income from the management of the funds invested by such organizations these activities could result in unrelated_business_taxable_income under sec_512 here however m is not charging a fee for its services and not otherwise receiving income from the services it provides to the trusts thus under these circumstances m will not receive unrelated_business_taxable_income under sec_512 a the fact that m will engage in the investment activity for the benefit of individuals who are co-beneficiaries of the trusts at the same time that it engages in investment activity for its own benefit as the remainder beneficiary limits the scope of the service provided to others and distinguishes it from a commercial venture as stated above under the contract the trusts would not have any ownership_interest in the underlying assets of the endowment nor any contract rights with respect to the other trusts the trusts would have no power or right of any kind to control direct supervise recommend or review m's business activities operations or decisions with respect fo the endowment except the right to review the payout computations they would not have any right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of the units m is neither a partner nor an agent of the trusts that the trusts would never be ar become liable for any cost expense or payment incurred or dus by m or for which mis liable or responsible relating to the endowment or the underlying endowment assets and m would indemnify and hold the trusts harmless from and against any liability arising out of any_action or inaction by m with respect to the endowment or the underlying endowment assets xxxkkk ‘the trusts do not have a position of ownership in the underlying assets of m’s endowment since the contractual relationship between m and the trusts is not in the nature of a partnership or agency the income eared by the trusts from the payout m establishes for the units reflects ordinary_income and does not take on the character of the income of the underlying assets or debt-financed or unrelated_business_taxable_income m would pay any_tax owed on ubt earned by the endowment portfolio with no deduction taken against ubti for any payments made to the trusts in view of the foregoing we rule as follows the issuance of units from m to the trusts the making or receipt of payments with respect to the units and the holding or redemption of the units wili not generate unrelated_business_taxable_income to n a charitable_remainder_trust this ruling is based on the understanding that there will be no material changes in the facts upon which it is based we express no opinion as to the tax consequences of the proposed transaction under any other section of the code pursuant to a power of attomey on file in this office a copy of this letter is being sent to a copy of this letter shoutd be kept in its permanent records n's authorized representatives this ruling is directed only to the organization that requested it code provides that it may not be used or cited by others as precedent sec_6110 of the if there are any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert c harper jr manager exempt_organizations technical group enclosure notice


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date jul contact person identification_number uniform issue list telephone number legend m n o r xx aa dear sir or madam we have considered your ruling_request dated date in which you requested certain rulings under sec_4945 of the internal_revenue_code code and sec_53 a of the foundation and similar excise_taxes regulations regulations m is a delaware nonprofit corporation that is recognized as exempt from federal income_taxation under sec_501 of the code m sec_509 m was formed in aa by n and o as a national effort to help young people who are currently in the foster care system or who have aged out of the system make a successful transition from foster care to adulthood m’s mission is to bring together people resources and focus to help these young people make successful transitions m has implemented several strategies to accomplish this mission including youth engagement is also a private_foundation as described in m plans to provide grants to other tax-exempt entities that meet m’s grant criteria grant criteria include a commitment to the strategies and more specifically to youth engagement - the entities are expected to be public_charities and the grants will be made to carry out activities chosen by the recipients and supervised by them proposals may relate to any activity chosen by the recipient that recipient thinks m might be willing to fund additionally there must be an intention to pay stipends to any young person who participates youth engagement is a program by which these young persons will be provided support and training in youth leadership personal and strategic planning communications and other skills that will allow them to serve as partners and advocates on both the community and national levels youth engagement will bring young people who are currently in foster care or those who have aged out of the system into a series of decision-making roles including assessing the needs of those in foster care identifying new forms of services to better meet the needs of children in foster care identify efforts that support successful transitions to adulthood and serve as informed and empowered advocates for changes in public systems policies and legislation to ensure opportunities for successful transitions of children in foster care consistent with the youth engagement strategy is the utilization of two programs the community youth leadership board community board and the national r board national board to ensure a commitment to m’s strategies each grant must provide for the establishment of a new or the utilization of an existing r that is governed by the young people additionally m and the grant recipient must enter into a grant agreement that expressly incorporates the provisions of the proposal and requires the recipient to use the grant as described the community board is intended by m to constitute the primary mechanism by which m carries out the youth engagement strategy and thereby seeks to accomplish its mission the community board will involve the engagement of the young people in the communities and m will invest resources to build the capacity of communities to provide increased opportunities for those in foster care and those who have aged out of the system members of the community board will receive the technical assistance training support and resources necessary to function effectively m will not be involved in selecting the individuals participating in the community boards nor will it participate in any of the actual operations of the community boards m acknowledges that each of participants of the community boards will vary from place to place and from time to time in size nature of organization system of governance and membership requirements m’s only requirement is that young people who are currently in foster care or those who have aged out of the system govern the local community board the second program is the national board each local community board will designate one or more representatives to serve on the national board the national board will be composed of representatives from the community board and related national initiatives the national board will advise m on the overall direction and policy of youth engagement members will direct the investment of some resources and serve as informed advocates for improved policies additionally the national board will provide technical assistance to the local community boards advocate for participation in the community boards and related programs and activities provide feedback and recommendations to m for actions and directions of m and make decisions regarding the expenditure of funds available to the national board activities of the national board will include networking on-going training and personal development for board members and initiating projects in local communities in addition to participation in the community and national boards individuals have an opportunity to participate in committees focus groups or meetings under m to assist in the development of programs related to youth engagement m believes that in order for its youth engagement strategy to work best the young persons who serve on the community board national board or the committees focus groups or meetings should be reimbursed for any travel_expenses incurred by them in connection with such service and given some payment as compensation_for such service these payments are referred by m as stipends the stipends have three components the actual travel costs incurred for participation the actual cost of meals_and_lodging and a nominal amount of dollar_figurex to dollar_figure 50x per day of participation participation generally means actual participation in a particular meeting of the community board national board or the committees or focus groups m states that the stipends serve the purpose of providing a modest incentive for these young persons to participate as well as enhance the self-worth of those who participate so that they will become more involved in foster care and its related issues in the case of grants made by m to tax-exempt entities that utilize the community boards m generally intends only to accept grant proposals and to enter into grant agreements with grant recipients that intend to pay stipends to participating young persons this intent will be communicated to potential grant recipients however m will not determine the amount of any stipends paid to the community board participants the procedure for the payment of these stipends or the amount of participation required if any to receive a stipend m will not be involved in choosing the young persons who serve on the community boards nor select any individual who may receive a stipend in the case of the national board and the committees focus groups and meetings stipends will be paid directly by m to participants m will only reimburse for the actual travel costs incurred and approved in advance by m meals_and_lodging for participation at an event and provide nominal compensation in the amount of dollar_figurex to dollar_figurex per day for participation the stipends will only be paid to the young people currently in foster care or who have aged out of the system and not to any adults participating the following rulings are requested any grant made by m to a public charity that is used by the public charity in part to pay stipends to the young people who are currently in the foster care system or who have aged out of the system and who participate in the national board will not be treated for purposes of sec_4945 of the code as grants made by m to the young people the stipends paid_by m to the young people who are currently in the foster care system or who have aged out of the system and who participate the national board or on committees focus groups or meetings for reimbursement of travel_expenses reimbursements or direct payment of meal and lodging_expenses and cash portions of the stipend are not taxable_expenditures under sec_4945 of the code sec_4945 of the code provides that a taxable_expenditure includes any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or similar purposes by such individual unless such grant satisfies the requirements of sec_4945 sec_4945 of the code provides in effect that any grant to an individual for travel constitutes a scholarship or fellowship_grant not includible as gross_income pursuant study or similar purposes is not a taxable_expenditure if it is awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary and the grant to sec_117 and is used to study at an educational_organization described in sec_170 constitutes a prize or award not includible as gross_income pursuant to sec_74 and and the recipient is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or other similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee section a of the regulations defines the term grants as used in sec_4945 of the code grants do not ordinarily include payments such as salaries consultants’ fees and reimbursement for travel_expenses such as transportation board and lodging to persons regardless of whether such persons are individuals for personal services in assisting a foundation in planning evaluating or developing projects or areas of program activity by consulting advising or participating in conferences organized by the foundation section a i of the regulations provides that a grant by a private_foundation to another organization which the grantee organization uses to make payments to an individual for purposes described in sec_4945 of the code shall not be regarded as a grant by the private_foundation to the individual grantee if the foundation does not earmark the use of the grant for any named individual and there does not exist an agreement oral or written whereby such grantor foundation may cause the selection of the individual grantee by the grantee organization revrul_74_125 1974_1_cb_327 describes a private_foundation that assists educators in employing improved educational methods in connection with this activity the foundation utilizes the services of consultants the services include the development of model curricula in a particular educational area and the design of materials to assist educators in the performance of their educational functions the services provided by the consultants constitute personal services and assist the foundation in planning and developing its program activity the revenue_ruling holds that payment for such services do not constitute grants within the meaning of the applicable regulations and are therefore not taxable_expenditures within the meaning of sec_4945 of the code revrul_77_212 1977_1_cb_356 illustrates the requirement that the public charity controls the selection process in this revenue_ruling a private_foundation provides grants to a vocational school that are used to purchase tools for students the students submit grant applications with lists of needed tools to the selection committee composed of representatives of the private_foundation the recipients are selected on ability and financial needs the grants are made to the vocational school which then purchases tools for the students the service concluded that the grants are deemed made to the individual students by the private_foundation because the foundation retained the authority to select the grantee students revrul_81_293 1981_2_cb_218 holds that the payment of compensation to research assistants by an individual grantee of a private_foundation where the grantee controls the selection of these persons independently of the grantor private_foundation and where the private foundation’s grant-making procedures satisfy the requirements of sec_4945 of the code does not constitute a grant within the meaning of sec_4945 the requested rulings are discussed below m will provide grants to other tax-exempt public_charities whose mission and activities are consistent with its mission similar to revrul_81_293 supra m is not involved in the selection of any individual grantee nor is there any oral or written_agreement by which m may cause the selection of the individual grantee by the grant recipient m’s grants to public_charities that utilize a local community board are not earmarked for named persons who currently serve or may serve in the future on community board section a i of the regulations unlike the organization in revrul_77_212 m does not retain the authority to select the individual grantees m is not involved in the selection of the young persons who participate nor does it play a role in the process by which these young persons are selected to serve instead these people are chosen by the public charity itself therefore the grants provided by m are deemed as grants to the public_charities the young persons who participate in the national board and the committees focus groups or meetings are providing services to m through the combined experiences and knowledge of the participants m is developing programs policies legislation and advocacy to improve the conditions of foster care and help the young people make a successful transition from foster care reimbursement for travel meals_and_lodging by m does not constitute grants for purposes of sec_4945 of the code such expenses are incurred for participation in m's program areas section a of the regulations similarly the stipends provided by m to the individual participants of the national board and the committees focus groups or meetings are payments provided to the individual participants as recognition for their service to m as discussed in revrul_74_125 supra payment for services do not constitute grants accordingly based on the facts represented we rule that any grant made by m to other tax-exempt public_charities that is used by the public charity in part to pay stipends to young people who are currently in the foster care system or who have aged out of the system who participate in the local community board is not treated as a grant made by m to the young people for purposes of sec_4945 of the code the stipends paid_by m to young people who are currently in the foster care system or who have aged out of the system who participate in the national board or the committees focus groups or meetings are not taxable_expenditures under sec_4945 because this ruling letter could help resolve any questions please keep it in m’s permanent records this ruling is directed only to m 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 signed terrell m berkovsky terrell m berkovsky manager exempt_organizations technical group


internal_revenue_service number release date index number - ------------------------------------------------- ----------------------------- ---------------- --------------------- ---------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------ telephone number -------------------- refer reply to cc tege eoeg teb presp-144784-06 date date dear ----------------- pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the project described in appendix a attached hereto is qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------------------------- ----------------------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure--------- ----------------of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the project described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met if you have any questions with respect to this allocation please contact --------------------- ----------------------------------------of the office of division counsel associate chief_counsel tax-exempt and government entities on -------------------- not a toll-free call 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 presp-144784-06 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in appendix a is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation 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 application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-144784-06 borrower name appendix a project type project location --------------------------------- wind facility --------------------- -------------------------------- -------------- amount allocated dollar_figure-------------


department of the treasury internal_revenue_service washington d c date tl-n-1394-00 cc psi br9 number release date uilc internal_revenue_service national_office field_service_advice memorandum for north-south carolina district_counsel from associate chief_counsel passthroughs special industries cc psi subject lease-in_lease-out_transaction this field_service_advice responds to your memorandum dated date 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 disclosure statement field_service_advice is chief_counsel_advice and is open to public inspection pursuant to the provisions of sec_6110 the provisions of sec_6110 require the service to remove taxpayer identifying information and provide the taxpayer with notice of intention to disclose before it is made available for public inspection sec_6110 and i sec_6110 also authorizes the service to delete information from field_service_advice that is protected from disclosure under u s c sec_552 b and c before the document is provided to the taxpayer with notice of intention to disclose only the national_office function issuing the field_service_advice is authorized to make such deletions and to make the redacted document available for public inspection accordingly the examination appeals or counsel recipient of this document may not provide a copy of this unredacted document to the taxpayer or their representative the recipient of this document may share this unredacted document only with those persons whose official tax_administration duties with respect to the case and the issues discussed in the document require inspection or disclosure of the field_service_advice legend t f g h j equipment nation year year year year year a b c d dollar_figureg dollar_figureh dollar_figurei dollar_figurej dollar_figurek dollar_figurel dollar_figurem dollar_figuren dollar_figureo dollar_figurep dollar_figureq dollar_figurer dollar_figures dollar_figuret dollar_figureu dollar_figurev dollar_figurew dollar_figurex dollar_figurey dollar_figurez dollar_figureaa dollar_figurebb dollar_figurecc dollar_figuredd dollar_figureee dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figureff dollar_figuregg dollar_figurehh dollar_figureii issue dollar_figure dollar_figure dollar_figure dollar_figure whether the lease-in_lease-out_transaction lacks economic_substance conclusion the lease-in_lease-out_transaction lacks economic_substance facts t is a financial_institution pursuant to a_trust agreement dated october year g is the trustee of a grantor_trust created by t f is a municipality of nation in the two years prior to october year f purchased and operated equipment f owns directly or indirectly a percent of h a foreign joint_stock_company j a company with limited_liability organized under the laws of nation might be related to f on october year f t h j and g entered into a participation_agreement pursuant to this agreement g proposed to lease equipment from f f proposed to sublease the equipment from g h and j agreed to finance a portion of certain lease payments and prepayments to be made by g and the parties agreed to enter into other operative documents with respect to the transaction concurrent with the participation_agreement through two lease agreements dated as of october year f agreed to lease to g the equipment the amount of the lease payments was a stated percentage of closing date market_value of the equipment the terms of the leases were from october year until january year simultaneously through two leases g agreed to sublease to f the equipment the terms of the sublease were from october year until january year under the participation_agreement prior to the expiration of the sublease f could elect one of three options first under the purchase option it could elect to purchase all of g’s interest in the equipment by paying an amount equal to the purchase option_price and the final sublease payment or dollar_figureg the first installment in the amount of dollar_figureh would be due january year the second through fifth installments each would be in the amount of dollar_figurei and would be due on april year june year september year and december year second under the new sublease option f could elect to arrange a new sublease of all the equipment with a new sublessee the terms of the new sublease would begin upon expiration of the sublease base term and end april year the new sublease would contain substantive terms and conditions identical in all material respects to those contained in the sublease third under the return option f could return all of the equipment to g and pay g a specified amount the participation_agreement provided that g would elect to prepay certain specific amounts of the lease base rent concurrent with the participation_agreement on october year g notified f through a prepayment notice that g would prepay the lease base rents on the closing date of october year g paid dollar_figurej and dollar_figurek or a total of dollar_figurel for the first and second lease respectively these amounts represented the present_value of the specified base rent prepayments discounted at b percent per annum the participation_agreement provided that t would finance a portion of the prepayment amount consistent with the agreement t contributed to g dollar_figurem and dollar_figuren for the first and second lease respectively the participation_agreement provided that h would loan to g a portion of the prepayment amount on october year g and h entered into a loan and security_agreement on october year f and h entered into two swap agreements the agreements were effective october year and terminated on january year f funded swap payments in the amount of dollar_figureo and dollar_figurep respectively to h and h loaned these amounts to g the total payments made by g are summarized as follows first lease contribution from t loan from h second lease contribution from t loan from h total dollar_figurem o dollar_figuren p dollar_figurel this total amount dollar_figurel was paid_by g to f on october year on october year t paid brokerage and loan fees to various parties in the amounts of dollar_figureq and dollar_figurer for the first and second lease respectively the participation_agreement provided that j would loan to g a portion of scheduled lease base rent prepayment or mandatory prepayment amounts on october year g and j entered into a loan and security_agreement on november year g prepaid to f dollar_figures and dollar_figuret or a total of dollar_figureu for the first and second lease respectively the prepayment amounts were funded indirectly by a loan from f f loaned the prepayment amounts to j and j loaned such amounts to g the amounts represented the remaining rentals due under the lease determined at present_value f purchased u s treasury strips maturing in year with a face_amount of dollar_figurev for dollar_figurew the treasury strips were held in a_trust established on october year and were to be used to pay the equity portion of the purchase option_price if f elected to exercise the option at the end of the lease the equity portion is the difference between the purchase option_price under the sublease less the portion of the purchase option_price that is required to be applied to the repayment of t’s outstanding loans the dollar_figurex representing the excess of the two prepayments received by f over the swap payments made to h the loan amount_paid to j and amount invested in the treasury strips was retained by f in year and year t reported the following income and expenses related to the lease and sublease agreement rental receipts expenses amortization note interest_expense fee amortization taxable loss_year dollar_figure-- z bb dd ff year dollar_figure y dollar_figureaa cc ee gg law and analysis to be respected a transaction must have economic_substance separate and distinct from the economic benefit achieved solely by tax reduction if a taxpayer seeks to claim tax benefits which were not intended by congress by means of transactions that serve no economic purpose other than tax savings the doctrine_of economic_substance is applicable 31_f3d_117 3d cir 861_f2d_494 7th cir aff’g 87_tc_1087 364_f2d_734 2d cir aff’g 44_tc_284 31_tc_33 aff’d 270_f2d_294 3d cir acm partnership v commissioner tcmemo_1997_115 aff’d in part and rev’d in part 157_f3d_231 3d cir whether a transaction has economic_substance is a factual determination 338_us_451 this determination turns on whether the transaction is rationally related to a useful nontax purpose that is plausible in light of the taxpayer’s conduct and useful in light of the taxpayer’s economic situation and intentions the utility of the stated purpose and the rationality of the means chosen to effectuate it must be evaluated in accordance with commercial practices in the relevant industry 89_tc_986 acm partnership supra a rational relationship between purpose and means ordinarily will not be found unless there was a reasonable expectation that the nontax benefits would be at least commensurate with the transaction costs yosha supra acm partnership supra in determining whether a transaction has economic_substance so as to be respected for tax purposes both the objective economic_substance of the transaction and the subjective business motivation must be determined acm partnership f 3d pincite 968_f2d_1229 d c cir 909_f2d_1360 9th cir 81_tc_184 aff'd in part and rev'd in part 752_f2d_89 4th cir the two inquiries are not separate prongs but are interrelated factors used to analyze whether the transaction had sufficient substance apart from its tax consequences to be respected for tax purposes acm partnership f 3d pincite casebeer f 2d pincite courts have recognized that offsetting legal obligations or circular cash flows may effectively eliminate any real economic significance of the transaction 364_us_361 in knetsch the taxpayer repeatedly borrowed against increases in the cash_value of a bond thus the bond and the taxpayer’s borrowings constituted offsetting obligations as a result the taxpayer could never derive any significant benefit from the bond the supreme court found the transaction to be a sham as it produced no significant economic_effect and had been structured only to provide the taxpayer with interest deductions in 94_tc_738 the tax_court denied the taxpayer the purposed tax benefits of a series of treasury bill sale-repurchase transactions because they lacked economic_substance in the transactions the taxpayer bought treasury bills that matured shortly after the end of the tax_year and funded the purchase by borrowing against the treasury bills the taxpayer accrued the majority of its interest_deduction on the borrowings in the first year while deferring the inclusion of its economically offsetting interest_income from the treasury bills until the second year the transactions lacked economic_substance because the economic consequence of holding the treasury bills were largely offset by the economic cost of the borrowings the taxpayer was denied the tax_benefit of the transactions because the real economic impact of the transactions was infinitesimally nominal and vastly insignificant when considered in comparison with the claimed deductions sheldon t c pincite in 157_f3d_231 3d cir the taxpayer entered into a near-simultaneous purchase and sale of debt instruments taken together the purchase and sale had only nominal incidental effects on the taxpayer’s net economic position acm partnership f 3d pincite the taxpayer claimed that despite the minimal net economic_effect the transaction had economic_substance the court held that transactions that do not appreciably affect a taxpayer’s beneficial_interest except to reduce tax are devoid of substance and are not respected for tax purposes acm partnership f 3d pincite the court denied the taxpayer the purported tax benefits of the transaction because the transaction lacked any significant economic consequences other than the creation of tax benefits it is the position of the internal_revenue_service that certain lease-in lease-out transactions lack economic_substance revrul_99_14 1999_13_irb_3 when the form of a transaction lacks economic_substance the form is disregarded and consistent with the substance of the transaction the proper tax treatment is determined acm partnership id compaq computer v commissioner 113_tc_17 viewed as a whole the objective facts of the above-described lease-in_lease-out_transaction indicate that the transaction lacks the potential for any significant economic consequences other than the creation of tax benefits the transaction lacks economic_substance the payments due during the term of the subleases represent a circular cash_flow g is obligated to make lease payments to f g prepaid to f dollar_figurel and dollar_figureu the prepayment amount was funded in part indirectly by a loan from f through j and a loan from h which was funded with swap payments made to h by f f is obligated to pay rent to g and g is obligated to pay debt service interest plus small amounts of principal to h and j j is obligated to pay debt service to f the amount of the debt service received by j from g is equal to the amount of the debt service j must pay to f h is obligated to pay under the swap agreement to f the amount of the debt service received by h from g is equal to the amount it is obligated to pay under the swap agreement to f in sum the amount of the rent obligation is equal to the amount of the debt service thus all such funds represent a circular cash_flow as a result the offsetting and circular nature of the obligations eliminate any significant economic consequences of the transaction the different options given f at the end of the sublease term do not present real economic risk to g or t under the first option the purchase option f could elect to purchase all of g’s interest in the equipment if f made this election on january year f was obligated to pay g the first installment plus the final sublease payment in the amount of dollar_figureg on receipt of such payments g would be required to pay off the loans from h and j the total of g’s payoff amount to h and j would be dollar_figureg also on january year the total amount h was obligated to pay f under the swap agreement and the remaining amount j was obligated to pay f under the loan totaled dollar_figureg thus all such funds represent a circular cash_flow accordingly the first installment_payment of the purchase option is circular in nature the second through fifth installments in the amount of dollar_figurei would be due on april year june year september year and december year the treasury strips funded with amounts contributed by t to g and paid to f to make the october year prepayment mature in precisely the required amounts one to two months before each of the four installments are due under the second option the new sublease option a new sublessee which could not be f or an affiliate would be obtained the new sublessee would be required to pay rent sufficient to discharge g’s loans from h and j plus the amount of true rental value of the equipment given the rent required under this option to be economically viable the equipment would have to have a high fair_market_value if the fair_market_value were at such value then the more economical choice for f would be to purchase the equipment under the first option because there is no scenario wherein the second option would be the least expensive it will never occur furthermore if f intended to lease or sell the equipment to a third-party lessor at the end of the sublease rather than subject a third-party lessee to the convoluted terms of the second option it could exercise the purchase option at no cost and independently enter into a lease or sale agreement with the third party on terms to which they mutually agreed finally the nature of the equipment makes finding a substitute lessee not controlled by f or nation impractical under the third option the return option f could pay g dollar_figurehh and return the equipment to g for the next c years this option would be economically feasible only if the rental value of the equipment were less than the cost of the first option the purchase option based on the facts provided and appraisals obtained by t prior to entering into the lease-in_lease-out_transaction it is highly unlikely that in year the value of the equipment will be less than the cost of electing to purchase the equipment the appraisals note that this option is unlikely to be exercised in addition this option would be feasible only if f has other similar equipment to serve its customers and perform its duties during the remaining c years of the lease there is no indication that f has such other similar equipment accordingly it is highly improbable that f would elect the third option based on the above the parties expect f to exercise the purchase option f has historically used the equipment in addition because the purchase option payment obligation is fully defeased the funds were specifically set_aside in a_trust f need not draw on other sources of capital to exercise the option rather the option can be exercised merely by book entries and giving the proceeds of the treasury strips held in trust to g as they mature under the given facts pretax return is nonexistent or at most insignificant in substance t through g has invested dollar_figureii dollar_figurem and dollar_figuren contribution to g and dollar_figureq and dollar_figurer paid in fees in year to receive the proceeds of the lease strips or dollar_figurei in each of four installments in year without taking into consideration the time_value_of_money this return would be approximately d percent taking into consideration the time_value_of_money t would realize an economic loss on its investment because the lease-in lease-out lacks economic_substance the rent payments arising from the transaction are not deductible in addition no deductions for expenses arising out of the transaction are deductible under sec_162 and sec_467 finally the loans were an integral part of the lease-in_lease-out_transaction as such a deduction for the interest on the loans is not allowable under sec_163 case development hazards and other considerations please call if you have any further questions by harve m lewis chief branch associate chief_counsel passthroughs special industries branch


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 ita b04 plr-148017-08 date date legend ----------------- -------------------------------------------------------------- ------------------ decedent trust niece dear --------------- this letter responds to a request for a private_letter_ruling concerning certain federal_income_tax consequences of a proposed division of a_trust facts decedent created trust under decedent’s will in for the benefit of niece’s issue in general the trustee is directed to distribute all of the net_income of trust to the issue of niece in equal shares per stirpes during niece’s lifetime the trust will terminate upon the death of and the assets will be distributed in equal shares per stirpes to the issue of niece then living niece has five living children the trustee of trust proposes to divide trust into five equal and separate trusts one for the benefit of each living child of niece a pro_rata portion of the trust’s assets will be allocated each of the five new trusts law and analysis plr-148017-08 sec_61 of the internal_revenue_code provides that gross_income includes gain derived from dealings in property sec_1001 provides that the gain from the sale_or_other_disposition of property is the excess of the amount_realized over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss must be recognized except as otherwise provided sec_1_1001-1 of the income_tax regulations provides that except as otherwise provided in subtitle a the gain_or_loss realized from the exchange of property for cash or for other_property differing materially either in_kind or in extent is treated as income or loss sustained revrul_56_437 1956_2_cb_507 holds that the conversion of a joint_tenancy in stock to a tenancy_in_common in order to eliminate the survivorship feature and the partition of a joint_tenancy in stock are not sales or exchanges similarly divisions of trusts are also not sales or exchanges of trust interests where each asset is divided pro_rata among the new trusts see revrul_69_486 1969_2_cb_159 pro_rata distribution of trust assets not a sale_or_exchange here trust’s assets will be distributed in_kind on a pro_rata basis among the five separate trusts accordingly the division of trust will not result in the realization of gain_or_loss under sec_61 and sec_1001 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copies of this letter are being sent to your authorized representatives sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting


internal_revenue_service number release date index number ---------------------- ---------------------------- ----------------------- ------------------------------- department of the treasury washington dc person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 - plr-101950-09 date july re ---------------------------------------------- re ---------------------------------------------- legend donor ------------------------------------------------- spouse --------------------------------------------------- year ------- trust ------------------------------------------------------------------------------------- dollar_figurea ----------- law firm -------------------------------------- accounting firm -------------------------- dear ------------ this responds to a letter dated date submitted by your authorized representative requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to allocate donor’s available gst exemptions to a_trust facts donor and spouse established an irrevocable_trust trust in year and each transferred dollar_figurea to trust the beneficiaries of trust include donor and spouse’s descendants donor and spouse hired law firm and accounting firm to prepare all tax returns for year because of some confusion between the parties no form_709 plr-101950-09 united_states gift and generation-skipping_transfer_tax return was filed and no gst_exemption was allocated by donor or spouse to trust to date no taxable_distributions taxable terminations or any other events have occurred with respect to trust that would give rise to a gst tax_liability on the part of trust or any of its beneficiaries law and analysis sec_2601 of the internal_revenue_code imposes a tax on every generation- skipping transfer gst within the meaning of subchapter_b a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 as in effect for generation-skipping transfers before date provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime is made on form_709 sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to plr-101950-09 grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute see notice_2001_50 2001_20_cb_189 sec_2652 and sec_26_2652-1 provide that if under sec_2513 one-half of a gift is treated as made by an individual and one-half is treated as made by the spouse of the individual then for purposes of the gst tax each spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor spouse regardless of the interest the electing spouse is actually deemed to have transferred under sec_2513 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 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 section b provides that an automatic_extension of months from the due_date of a return excluding extensions is granted to make regulatory or statutory elections whose due dates are the due_date of the return or the due_date of the return including extensions provided the taxpayer timely filed its return for the year the election should have been made and the taxpayer takes corrective action as defined in sec_301_9100-2 within that 6-month extension period requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 are satisfied therefore donor is granted an extension of time of days from the date of this letter to allocate his respective gst_exemption to trust with respect to the transfer to trust in year the allocation will be effective as of the respective date of the transfer to trust and will be based on the value of the assets contributed to trust in year the allocations of donor’s gst_exemption should be made on the form_709 and plr-101950-09 filed with the internal_revenue_service center in cincinnati a copy of this letter should be forwarded to the internal_revenue_service cincinnati service_center - stop cincinnati oh for association with the form_709 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 specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely curt g wilson associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes copy of this letter


internal_revenue_service number release date index number ------------------------------------------------------------ -------- ----------------------------- ---------------------------- ------------------------------ --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc intl b06 plr-105607-14 date date legend ------------- -------------------------------------------------------------------- taxpayer accounting firm ------------------------------- cpa ------------------------------ ------------------------------------------------ company ----------------------- individual year ------- ------------------ date dear ---------------- this responds to a letter dated date submitted by accounting firm requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc for taxpayer’s first taxable_year the rulings contained in this letter are based upon information and representations submitted by taxpayer and accounting firm and accompanied by affidavits and penalty of perjury statements executed by appropriate parties this office has not verified any of the materials submitted in support of the request for rulings it is subject_to verification on examination plr-105607-14 facts representations taxpayer a wholly owned subsidiary of company is a domestic_corporation that sells products manufactured by the company on a commission basis in year company decided to establish an interest charge domestic_international_sales_corporation ic-disc and engaged an attorney to complete the necessary organizational documents taxpayer was incorporated on date and began operating as an ic-disc individual was appointed as taxpayer’s treasurer at the time of taxpayer’s incorporation individual relied on accounting firm and cpa to make the necessary elections to qualify taxpayer as an ic-disc as a result of an inadvertent oversight the due_date for filing form 4876-a was not entered into the cpa’s due_date monitoring system after taxpayer discovered in late year that the form 4876-a had not been timely filed cpa advised taxpayer that the best course of action to remedy the situation was to seek a private_letter_ruling granting an extension of time to file form 4876-a for year its first taxable_year taxpayer represents that the extension does not prejudice the government’s interests and that taxpayer is not placed in a better position by making the election at this time than it would have been in had the election been timely made law and analysis sec_992 provides that an election by a corporation to be treated as a disc1 shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate sec_992 provides that such election shall be made in such manner as the secretary shall prescribe and shall be valid only if all persons who are shareholders in such corporation on such first day of the first taxable_year for which such election is effective consent to such election temporary sec_1_921-1t provides in part that a corporation electing ic-disc status must file form 4876-a and that a corporation electing to be treated as an ic-disc for its first taxable_year shall make its election within days after the beginning of that year as used in this letter the terms ic-disc and disc have the same meaning plr-105607-14 sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that a regulatory election is 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 for this purpose an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government based on the facts and representations submitted with taxpayer’s ruling_request we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file form 4876-a such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year the granting of an extension in this ruling letter is not a determination that taxpayer is otherwise eligible to make the election or to claim ic-disc status or benefits see sec_301_9100-1 taxpayer should attach a copy of this ruling letter to its federal_income_tax return for the taxable years to which this letter applies 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 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 plr-105607-14 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely _____________________________________ marissa k rensen assistant to the branch chief branch office of associate chief_counsel international


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp 3-plr-116463-99 date date distributing dsub1 dsub2 dsub2sub1 dsub2sub2 dsub2sub3 dsub3 plr-116463-99 dsub3sub1 dsub3sub2 dsub3sub3 dsub3sub4 dsub4 controlled csub1 business a business b state x exchange year date date a b plr-116463-99 c d e f g this letter is in reply to a letter dated date requesting rulings as to the federal_income_tax consequences of a proposed transaction additional information was provided in letters dated november and date and january january and date the material submitted for consideration is summarized below distributing a state x corporation is the common parent of an affiliated_group filing a consolidated_return distributing is a holding_company engaged through direct and indirect subsidiaries in business a and related businesses business a is primarily conducted directly by dsub1 and indirectly by dsub2 both dsub1 and dsub2 are wholly-owned subsidiaries of distributing distributing has a single class of common_stock outstanding which is widely held and publicly traded on the exchange controlled a state x corporation is a holding_company engaged through csub1 in business b controlled has no directly owned subsidiaries other than csub1 controlled was formed in year to separate business a and business b within the distributing consolidated_group controlled has two classes of stock outstanding which are class a and class b voting common_stock the class b shares have more votes per share than the class a shares the class a and class b shares otherwise contain identical terms distributing owns all of the class b shares which represent approximately a percent of the vote and b percent of the value of controlled’s stock the class a shares representing approximately c percent of the vote and d percent of the value of controlled’s stock are widely held and publicly traded on the exchange controlled’s capital structure has been in place since year information has been submitted indicating that business a and business b each have had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years the management of both distributing and controlled have determined that it is in plr-116463-99 the best interests of each corporation to focus on its respective core business and accordingly to completely separate business a and business b by distributing controlled to its shareholders while the transaction in year achieved some separation between business a and business b a complete separation is needed for each corporation to focus on its key business strategies documentation has been provided including the report of an independent consultant that management systemic and other problems continue to exist because of distributing’s ownership of controlled for example lost opportunities for controlled have occurred with respect to business b because of distributing’s ownership of controlled to accomplish the separation distributing and controlled propose the following transaction the proposed transaction i prior to step ii below controlled will pay a cash dividend in the amount of dollar_figuree pro_rata to all of its class a and class b shareholders dollar_figuref per share distributing will use its share of the dividend proceeds to fund its capital_expenditure plan and strengthen its balance_sheet ii distributing’s class b shares in controlled with be converted to class a shares iii distributing will distribute all of its shares of controlled class a stock which represent more than percent of the voting power of controlled’s stock pro_rata to its shareholders each shareholder will receive g shares of controlled stock for each share of distributing stock owned the distribution no fractional shares of controlled class a shares will be issued to the holders of distributing stock pursuant to the distribution in lieu thereof each shareholder of distributing who would otherwise be entitled to receive a fractional share of controlled class a stock will receive cash as soon as practical after the distribution the dividend agent will aggregate and sell all fractional shares of controlled class a stock in the open market at then prevailing market prices and will distribute the aggregate proceeds net of fees pro_rata to the entitled shareholders prior to the proposed transaction distributing has or will have taken steps to reorganize certain of its subsidiaries the following transactions have occurred or may occur prior to the proposed transaction the internal restructuring i on date1 three wholly-owned subsidiaries of dsub3 dsub3sub1 dsub3sub2 and dsub3sub3 which is a plr-116463-99 wholly owned subsidiary of distributing were liquidated into dsub3 dsub3sub1 dsub3sub2 and dsub3sub3 were inactive and did not have any assets on date dsub3 was liquidated into distributing also on date after the liquidation of dsub3 distributing contributed the stock of dsub3sub4 another wholly-owned subsidiary of dsub3 to dsub1 dsub3sub4 in addition to other business activities provides training services to the employees in business a directly conducted by dsub1 dsub2 a wholly-owned subsidiary of distributing owns all of the stock of dsub2sub1 dsub2sub1 leases equipment to other direct and indirect subsidiaries of dsub2 dsub2sub1 is indebted to each of dsub2 and distributing distributing and dsub2 will each exchange its current dsub2sub1 debt for new debt with longer maturity dates distributing will transfer its new dsub2sub1 debt to dsub2 in exchange for debt of dsub2 with identical terms dsub2 will transfer its new dsub2sub1 debt and the dsub2sub1 debt received from distributing to dsub2sub2 another wholly-owned subsidiary of dsub2 in exchange for debt of dsub2sub2 with identical terms in addition dsub2 will transfer all of the stock in dsub2sub1 to dsub2sub2 in constructive exchange for stock of dsub2sub2 of equal value in addition to the debt exchanges and transfers described in ii immediately above dsub2 will transfer all of the stock and securities in dsub2sub3 another wholly-owned subsidiary of dsub2 to dsub2sub2 in constructive exchange for stock of dsub2sub2 of equal value various intercompany accounts_receivable existing among distributing and its subsidiaries other than controlled and its subsidiaries will either be settled contributed to capital or exchanged for other indebtedness ii iii iv the following representations have been made concerning the proposed transaction a the indebtedness if any owed by controlled to distributing after the distribution will not constitute stock_or_securities b no part of the consideration to be distributed by distributing will be received by a distributing shareholder as a creditor employee or in any plr-116463-99 c d e f g h capacity other than that of a shareholder of distributing immediately after the distribution at least percent of the fair_market_value of the gross assets of distributing will consist of the stock and securities of controlled corporations that are directly or indirectly engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 immediately after the distribution at least percent of the fair_market_value of the gross assets of controlled will consist of the stock and securities of controlled corporations that are directly or indirectly engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 immediately after the distribution the gross assets of each distributing subsidiary conducting business a and related businesses and csub1 used in the conduct of each corporation's business will have a fair_market_value equal to or greater than five percent of the total fair_market_value of the gross assets of such corporation the five years of financial information submitted on behalf of distributing's subsidiaries conducting business a and related businesses and csub1 conducting business b are representative of each corporation's present operations and with regard to each corporation there have been no substantial operational changes since the date of the last financial statements submitted following the distribution the distributing subsidiaries directly engaged in business a and related businesses and csub1 will each continue the active_conduct of its business independently and with its separate employees the distribution is carried out for the following corporate business_purpose to enhance the success of business a and business b by enabling distributing to resolve management systemic or other problems that arise because of or are exacerbated by distributing's operation of these different businesses within distributing's affiliated_group the distribution of the stock of controlled is motivated in whole or substantial part by this corporate business_purpose there is no plan or intention by any shareholder who owns five percent or more of the stock of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of either distributing or controlled after the distribution plr-116463-99 i j k l m n o there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the distribution other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 there is no plan or intention to liquidate either distributing or controlled to merge either distributing or controlled with any other corporation or to sell or otherwise dispose_of the assets of distributing or controlled after the distribution except in the ordinary course of business except for accounts_payable that arise in connection with continuing services between distributing or its post-distribution subsidiaries and controlled or its post-distribution subsidiaries no intercorporate debt will exist between distributing or its post-distribution subsidiaries and controlled or its post-distribution subsidiaries at the time of or subsequent to the distribution of the controlled stock immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations furthermore distributing's excess_loss_account with respect to controlled stock if any will be included in income immediately before the distribution see sec_1_1502-19 payments made in connection with all continuing transactions between distributing or its post-distribution subsidiaries and controlled or its post- distribution subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of distributing or controlled or stock possessing percent or more of the total value of all classes of stock of distributing or controlled the payment of cash in lieu of fractional shares of controlled's class a shares is solely for the purpose of avoiding the expense and inconvenience to distributing of issuing fractional shares and does not represent separately bargained for consideration the total cash consideration that will be paid in the transaction to the controlled shareholders instead of issuing fractional shares of controlled stock will not exceed one percent of the total consideration that will be distributed in the transaction to the distributing shareholders the fractional share plr-116463-99 interests of each distributing shareholder will be aggregated and no distributing shareholder will receive cash in an amount equal to or greater than the value of one full share of controlled class a stock based on the information submitted and representations made we rule as follows on the proposed transaction the distribution by controlled to distributing described in step i above will not be included in the gross_income of distributing sec_1_1502-13 no gain_or_loss will be recognized by distributing upon the distribution of controlled class a shares to distributing's shareholders sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of the distributing shareholders upon the receipt of controlled class a shares sec_355 the aggregate basis of the distributing and controlled class a shares in the hands of the distributing shareholders immediately after the distribution will be the same as the aggregate basis of the distributing stock held by the distributing shareholders immediately before the distribution allocated between the distributing and controlled class a shares in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 and b the holding_period of the controlled class a shares received by a distributing shareholder will include the holding_period of the distributing shares with respect to which the distribution is received provided the distributing shares are held as a capital_asset on the date of the distribution sec_1223 any payment of cash in lieu of fractional shares of controlled class a shares will be treated for federal_income_tax purposes as if the fractional shares were issued in the distribution and then were redeemed by controlled the cash payments will be treated as having been received as a distribution in full payment in exchange for the shares redeemed as provided in sec_302 provided the fractional share interest is a capital_asset in the hands of the recipient shareholder the gain_or_loss will constitute capital_gain or loss subject_to the provisions and limitations of subchapter_p of chapter revrul_66_365 1966_2_cb_116 revproc_77_41 1977_2_cb_574 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 plr-116463-99 we express no opinion about the federal_income_tax treatment of this transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings in particular no rulings were requested and no opinion is expressed concerning the tax treatment of the exchange in step ii of the proposed transaction or the tax treatment of any of the transactions in the internal restructuring described above this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each affected taxpayer must attach a copy of this letter to the taxpayer’s federal_income_tax return for the tax_year in which the transaction covered by this ruling letter is consummated we have sent a copy of this letter to your authorized representative pursuant to the power_of_attorney on file in this office sincerely yours assistant chief_counsel corporate by michael j wilder assistant to the chief branch


internal_revenue_service number release date index numbers ------------------------------------------------------- ------------------------------- ----------------------- -------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number -------------------- refer reply to cc psi plr-144592-08 date date legend x d -------------------------------- ----------------------- ------------------ country --------------- dear ------------------ this is in response 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_entity for federal tax purposes facts according to the information submitted x was formed on d under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d however x inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes 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 a single owner can plr-144592-08 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 owner 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 entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective d x must make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form 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 plr-144592-08 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 curt g wilson curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number x washington dc person to contact telephone number refer reply to cc psi 2-plr-108889-02 date date a date date year dear this letter responds to a letter dated date requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on date a the president of x represents and x’s filing form_1120s u s income_tax return for an s_corporation in year indicates that x was intended to be an s_corporation beginning on date however no timely filed form_2553 election by a small_business_corporation was filed on behalf of x for year sec_1362 provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the plr-108889-02 federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling 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 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours matthew lay senior technician reviewer branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes