t c summary opinion united_states tax_court donald l zinger and nicole a zinger petitioners v commissioner of internal revenue respondent docket no 13096-16s filed date donald l zinger and nicole a zinger pro sese alissa l vanderkooi and robert d heitmeyer for respondent summary opinion leyden special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not 1unless otherwise indicated all section references are to the internal continued reviewable by any other court and this opinion shall not be treated as precedent for any other case in a notice_of_deficiency dated date respondent determined a deficiency in mr and mrs zinger’ sec_2013 federal_income_tax of dollar_figure and a sec_6662 accuracy-related_penalty of dollar_figure after concessions by the parties the only issue for decision is whether the settlement payment of dollar_figure that mrs zinger received in is excludable from mr and mrs zinger’s gross_income under sec_104 the court holds that the settlement payment is not excludable continued revenue code as amended in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure 2the deficiency arises from unreported gross retirement income of dollar_figure unreported taxable retirement income of dollar_figure a additional tax under sec_72 of dollar_figure on the unreported gross and taxable retirement income and unreported other income of dollar_figure mr and mrs zinger do not dispute that they received the gross retirement income of dollar_figure and taxable retirement income of dollar_figure and that they are liable for the additional tax under sec_72 of dollar_figure they also do not dispute that mrs zinger received a settlement payment ie the other income of dollar_figure but dispute whether it must be included in gross_income for respondent concedes that mr and mrs zinger are not liable for the sec_6662 accuracy-related_penalty for background at the time mr and mrs zinger filed their petition they resided in michigan they timely filed their joint federal_income_tax return and as relevant in this case did not report the settlement payment of dollar_figure i mrs zinger’s conflict at work sometime before mrs zinger began working for the department of the army army and she continued to work for the army until her resignation on date in late mrs zinger was in a car accident while driving home from work the car accident resulted in a back injury for which she was required to receive physical therapy frequently for two to three months after the accident her supervisor at that time leniently allowed her to use sick time to receive the necessary physical therapy in date mrs zinger’s supervisor was reassigned and jack spielman became her supervisor shortly thereafter mrs zinger and mr spielman had conflicts mr spielman was not aware of mrs zinger’s accident or her physical condition after the accident and questioned her availability at work mrs zinger provided mr spielman with information about her accident and according to mrs zinger everything was squared away and set in date mrs zinger took a preapproved two-week family vacation during the family vacation her grandmother became very ill after the family vacation mrs zinger returned to work she had another preapproved vacation with mr zinger scheduled to start date but her grandmother’s health worsened mrs zinger changed her vacation plans to be with her grandmother and received approval from an acting supervisor cynthia person to begin her preapproved leave early on date so that she could spend the last few days with her grandmother while traveling to see her grandmother she continued to do some work and took business phone calls at some point mr spielman notified her that she was not to take any business phone calls while she was on leave and mrs zinger stopped and arranged for another employee to conduct business while she was on leave after her grandmother had passed away mrs zinger returned to the office and logged her leave as bereavement leave mr spielman notified her that he was changing her bereavement leave to absent without leave awol because a grandparent’s death did not qualify for bereavement leave he requested that mrs zinger provide documentation from her grandmother’s attending physician verifying that mrs zinger’s presence was required for the leave to qualify as bereavement leave mrs zinger obtained the requested documentation and her awol status was changed to bereavement leave mrs zinger felt that mr spielman belittled and personally attacked her while mrs zinger was on leave mr spielman relocated her desk to an area that separated her from her coworkers when she returned to work she asked her coworkers if another desk closer to them was available and moved her belongings to that available desk mrs zinger believed that being separated from her coworkers was not conducive to the work she needed to perform mr spielman ordered her to move her belongings back to her relocated desk mrs zinger continued to feel personally attacked and belittled by mr spielman he told her she did not know what she was doing and that she was not conducting her work properly he questioned what mrs zinger did where she was and why she was not working at night mrs zinger testified that after this her heart began racing she experienced shortness of breath and she felt as though she might be having a heart attack on date mrs zinger sought medical attention for her symptoms her doctor determined that her white blood cell count was severely elevated her doctor recommended that she be placed on medical leave status starting date and that certain tests be performed to determine her condition her doctor performed the tests prescribed her various medications and cleared her to return to work on date on date she received a memorandum of reprimand in that memorandum mr spielman reprimanded her for discourteous behavior toward a supervisor mr spielman alleged that a date email from mrs zinger had a very discourteous tone the memorandum of reprimand notified mrs zinger of her right to file a grievance and also to file a complaint of discrimination with the tacom-lcmc equal employment opportunity office eeo if she believed the action discriminated against her on the basis of race color religion sex national origin age physical or mental handicap and or reprisal on date mrs zinger was experiencing car trouble and notified ms person by email that she would be late to work that morning on date ms person requested that mrs zinger provide documentation to prove that she had car trouble and notified her that her leave would be documented as awol until the requested documentation was provided on that same day mrs zinger filed a formal written grievance to dispute mr spielman’s facts in the memorandum of reprimand in her grievance she stated the untimeliness of this reprimand only came with reprisal for the previous actions and claims made by myself against mr spielman to include creating a hostile work environment and creating a very intimidating situation which led to serious health conditions on my part requiring me to be under doctor’s care for a week she further stated i feel i have received reprisal and have been intim id ated enough that it is affecting my health and my health continues to be of concern which is demonstrated by the medications i have been placed on in addition to requesting that the memorandum of reprimand be removed from her personnel file and destroyed mrs zinger also requested that the army reassign her to another supervisor or to stop mr spielman from engaging in actions that she believed were hostile or intimidating for example she requested to be placed in an environment where mr spielman cannot act in a hostile nor intimidating manner towards myself since this dispute has arisen i have suffered from medical issues and conditions to include chest pains shortness of breaths hypertension due to stress high blood pressure and high white blood cell count i am still undergoing medical tests originally i felt the situation between mr spielman and myself was causing severe anxiety on date mrs zinger’s doctor recommended that she be placed on medical leave from june through and that she return to work on date at a reduced work schedule until date the noted medical_condition was anxiety panic attacks and hypothyroidism her treatment included medication rest and a stress free environment on date after a follow up doctor’s appointment mrs zinger notified ms person that her doctor recommended that she not return to work until date when mrs zinger returned to work on date at the reduced work schedule she learned that she had lost her computer access and security clearance as a result she had to sit at a desk with little work to perform ii eeo complaint at some point thereafter the eeo began an investigation the record is not clear whether mrs zinger filed both a formal written grievance and a complaint of discrimination with the eeo or whether her formal written grievance was forwarded to the eeo and served as the basis for that complaint in a statement of claims the eeo listed the following as mrs zinger’s stated claims to be investigated whether mrs zinger was discriminated against based on sex female and subjected to a hostile work environment when a b c on may she was placed on awol for not producing a physician’s statement letter excusing her absences on date she was denied a developmental assignment in the program executive office peo ground combat systems gcs on date she received a letter of reprimand for discourteous behavior towards mr spielman d f on date s he was required to provide proof of repairs and placed in awol status for hours when her vehicle broke down e on date she was ordered to return a government issued cell phone and laptop computer to mr spielman when she was on five days of sick leave and on date she became aware that she had been stripped of her computer access and security clearance the eeo statement of claims does not refer to any personal physical injuries or physical sickness mrs zinger was offered the opportunity to use the eeo alternative dispute resolution program and agreed to participate in mediation mr zinger who accompanied mrs zinger to the eeo mediation testified that mrs zinger explained during the mediation how she felt however mediation was not successful from date through date mrs zinger was placed on administrative leave while the eeo conducted its investigation a preconference was scheduled for date followed by a formal fact-finding conference scheduled from december to mr zinger accompanied mrs zinger to these conferences as her representative and to provide moral support iii settlement agreement on date mrs zinger and the army executed a negotiated settlement agreement settlement agreement to settle the eeo complaint of discrimination pursuant to that agreement the army did not admit it had violated the civil rights act of or any other federal or state statute law or regulation agreed to pay mrs zinger dollar_figure agreed to change an awol status recorded on mrs zinger’s records for november and to regular duty time and agreed to make arrangements for mrs zinger to retrieve her belongings from her work station pursuant to the settlement agreement mrs zinger agreed to immediately tender her resignation from federal service effective date including agreeing to sign a resignation letter and any official paperwork or forms required to complete the resignation that the settlement agreement constituted a full and complete settlement of any and all issues and claims arising from the eeo complaint and waived her right to pursue any administrative or judicial action concerning the matters raised in the eeo complaint to withdraw any other complaints appeals or grievances she may have filed and to waive her right to pursue any administrative or judicial action regarding any other matters that had been filed and not to file or pursue any complaints appeals or grievances the settlement agreement did not refer to mrs zinger’s formal written grievance the agreement expressly stated the document contains the entire agreement of the parties no other promises or agreements have been made this agreement may not be modified or amended except in writing signed by all the signatories the settlement agreement does not refer to any personal physical injuries or physical sickness suffered by mrs zinger mrs zinger received a check dated date for dollar_figure the dollar_figure settlement payment was reported to mrs zinger and to the irs on form 1099-misc miscellaneous income discussion the commissioner’s determination in a notice_of_deficiency is presumed correct and a taxpayer bears the burden of proving that the determination is erroneous see rule a 290_us_111 under sec_7491 the burden_of_proof may shift to the commissioner if the taxpayer produces credible_evidence with respect to any relevant factual issue and meets other requirements mr and mrs zinger have neither argued that 3a form 1099-misc was initially issued reporting a payment of dollar_figure as nonemployee compensation a corrected form 1099-misc was subsequently issued accurately reporting the settlement payment as dollar_figure and as other income the parties agree that the settlement payment at issue is dollar_figure of other income sec_7491 applies nor established that its requirements are met the burden_of_proof remains with mr and mrs zinger generally gross_income includes all income from whatever source derived see sec_61 sec_1_61-1 income_tax regs while sec_61 broadly applies to any accession to wealth statutory exclusions from gross_income are to be narrowly construed see 515_us_323 504_us_229 348_us_426 litigation settlement proceeds constitute gross_income unless the taxpayer proves that the proceeds fall within a specific statutory exclusion commissioner v schleier u s pincite- see save v commissioner tcmemo_2009_209 tax ct memo lexi sec_211 at mr and mrs zinger must bring themselves within the clear scope of a statutory exclusion to succeed in proving they are entitled to exclude the settlement payment from gross_income for see commissioner v schleier u s pincite burke u s pincite mr and mrs zinger assert that the settlement payment is excludable from gross_income under sec_104 that section provides that gross_income does not include the amount of any damages other than punitive_damages received whether by suit or agreement on account of personal physical injuries or physical sickness sec_104 congress intended this exclusion to cover damages that flow from a physical injury or physical sickness see h_r conf rept no pincite 1996_3_cb_741 for purposes of sec_104 emotional distress is not treated as a physical injury or physical sickness except for damages not in excess of the cost of medical_care attributable to emotional distress sec_104 flush language when damages are received under a settlement agreement the nature of the claim that was the actual basis for the settlement determines whether the damages are excludable under sec_104 burke u s pincite the nature of the claim is typically determined by reference to the terms of the agreement see 349_f2d_610 10th cir aff’g tcmemo_1964_33 102_tc_116 aff’d in part rev’d in part and remanded on another issue 70_f3d_34 5th cir the key question is in lieu of what were the damages awarded robinson v commissioner t c pincite quoting 144_f2d_110 1st cir aff’g 1_tc_952 to determine whether the dollar_figure settlement payment mrs zinger received pursuant to the settlement agreement is excludable from gross_income under sec_104 the court looks to the express terms of that agreement the settlement agreement between mrs zinger and the army states that its purpose was to settle the eeo complaint although the record does not contain a copy of the eeo complaint the claims in the eeo statement of claims presumably derive from that complaint the eeo statement of claims neither references any personal physical injuries or physical sickness of mrs zinger nor allocates the dollar_figure settlement payment as compensation to mrs zinger for personal physical injuries or physical sickness rather the eeo statement of claims explicitly states that the eeo was investigating whether mrs zinger had been subjected to a hostile work environment or was discriminated against on the basis of sex therefore the settlement agreement indicates that the army intended to settle the hostile work environment and discrimination claims not to compensate mrs zinger for personal physical injuries or physical sickness mrs zinger testified that during the conversations with the eeo attorneys it was mentioned that the settlement payment was to compensate her for the personal physical sickness she had suffered but that the army was unwilling to admit fault as to any claims in the settlement agreement undoubtedly mrs zinger’s formal written grievance references her personal physical sickness however neither the settlement agreement nor the eeo statement of claims refers to the formal written grievance or to any personal physical sickness let alone an intent to compensate mrs zinger for personal physical sickness although the court is sympathetic to mrs zinger’s situation she and mr zinger have not satisfied their burden of introducing objective and credible_evidence that any part of the dollar_figure settlement payment was made in lieu of damages for personal physical injuries or physical sickness see 141_tc_331 quoting 79_tc_680 aff’d without published opinion 749_f2d_37 9th cir aff’d 668_fedappx_241 9th cir robinson v commissioner t c pincite the court concludes that the settlement payment made to mrs zinger pursuant to the settlement agreement was for the resolution and withdrawal of her discrimination and hostile work environment claims and not on account of personal physical injuries or physical sickness therefore the dollar_figure settlement payment mrs zinger received pursuant to the settlement agreement is not excludable under sec_104 from mr and mrs zinger’s gross_income for the court has considered the parties’ arguments and to the extent not discussed herein the court concludes the arguments to be irrelevant moot or without merit to reflect the foregoing decision will be entered for respondent as to the deficiency and for petitioner as to the accuracy-related_penalty under sec_6662


t c summary opinion united_states tax_court rosemarie t reynolds petitioner v commissioner of internal revenue respondent docket no 16554-08s filed date elan r kaney for petitioner james r bamberg for respondent kroupa judge this case was heard pursuant to the provisions of section of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court 1all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated and this opinion shall not be treated as precedent for any other case respondent determined an dollar_figure deficiency in petitioner’s federal_income_tax for the sole issue for decision is whether the dollar_figure petitioner received from her ex-husband is alimony and therefore includable in gross_income we hold the payments are not alimony and therefore not includable in gross_income background this case was submitted fully stipulated pursuant to rule and the facts are so found the stipulation of facts and the accompanying exhibits are incorporated by this reference petitioner resided in holly hill florida at the time she filed the petition petitioner and her ex-husband divorced after an 11-year marriage and signed a marital settlement agreement the marital settlement in date petitioner was college educated and her ex-husband was an educated businessman who earned dollar_figure annually from several business interests he owned they intended the marital settlement to fully settle their rights and obligations relative to one another and with respect to their 2petitioner’s marital settlement agreement labels the payments as rehabilitative alimony accordingly we will refer to them as such son wac who was ten at the time the marital settlement required petitioner’s ex-husband to make payments for distribution of their marital assets monthly child_support and rehabilitative alimony petitioner’s ex-husband was to make fixed payments at specified times in equitable distribution of the marital assets which were listed in the relevant section of the agreement he also was obligated to pay monthly child_support child_support would terminate in specified circumstances including upon the noncustodial parent’s death petitioner’s ex-husband agreed to make specified monthly payments of rehabilitative alimony to petitioner for eight years and one month pursuant to the terms of the marital settlement he agreed to pay dollar_figure per month during he also agreed to maintain a life_insurance_policy designating petitioner as beneficiary with a death_benefit sufficient to cover the total amount of rehabilitative alimony due to petitioner the marital settlement did not require specific use of the funds but did note petitioner’s enrollment in a phd program in the time of execution the parties included language specifying that the payments of rehabilitative alimony could not be modified or 3the court uses the initials of minor children see rule a 4the marital settlement quantifies the total rehabilitative alimony payments as dollar_figure failing to account for an additional dollar_figure mandated payment terminated regardless of whether circumstances changed the marital settlement also bound petitioner’s and her ex-husband’s successors heirs and assigns a florida circuit_court granted a final judgment of dissolution of marriage that incorporated by reference the marital settlement and increased the amount of rehabilitative alimony due in to dollar_figure per month totaling dollar_figure for the year petitioner received the dollar_figure from her ex-husband in as prescribed in the marital settlement petitioner and her ex- husband were not members of the same household during petitioner did not report any alimony income on her federal_income_tax return for her ex-husband however claimed alimony deductions for the dollar_figure he paid to petitioner in respondent issued the deficiency_notice to petitioner determining that petitioner failed to report the alimony she received in respondent already resolved this issue in petitioner’s favor for the taxable_year but raised it again for petitioner timely filed a petition discussion we must decide whether the dollar_figure petitioner received in is alimony and therefore includable in her gross_income petitioner claims it is a property settlement or a lump-sum payment not alimony and therefore not taxable to her respondent argues that the dollar_figure is includable as alimony we begin with the burden_of_proof where as here the key facts are fully stipulated and we are faced with a question of law our holding does not depend on the burden_of_proof we impose or the standard of review we apply instead we must reject erroneous views of the law see 124_tc_69 and the cases cited thereat 124_tc_56 we now review the federal_income_tax law regarding alimony property_settlements incident to a divorce generally are not taxable and do not give rise to income sec_1041 112_tc_317 affd without published opinion sub nom schutter v commissioner 242_f3d_390 10th cir conversely alimony payments generally are taxable to the recipient and deductible by the payor in the year paid sec_61 sec_71 sec_215 the label assigned to a payment by the parties or the divorce court is not dispositive for federal_income_tax purposes see eg 77_tc_1275 sroufe v commissioner tcmemo_1995_256 instead alimony is defined as a cash payment received by or on behalf of a spouse meeting specified requirements sec_71 the parties agree that 5property interests of divorcing parties are determined by state law yet federal_law governs the federal_income_tax treatment of that property 855_f2d_289 6th cir revg on other grounds tcmemo_1986_269 petitioner satisfies all of the conditions except the requirement that the payor not be obligated to make any payments for any period after the death of the payee spouse sec_71 the language of the marital settlement does not specifically provide that petitioner’s ex-husband would be obligated to make payments after petitioner died the court must look to state law in the absence of specific agreement language to determine whether petitioner’s estate would have a right to payments of rehabilitative alimony see kean v commissioner tcmemo_2003_163 affd 407_f3d_186 3d cir notice_87_9 1987_1_cb_421 we therefore look to florida law to determine whether it would terminate the rehabilitative alimony payments at petitioner’s death florida family law provides that the characterization of alimony and other_payments is determined by their function not their title boyd v boyd so 2d fla dist ct app citing underwood v underwood so 2d fla karch v karch so 2d fla dist ct app zuccarello v zuccarello so 2d fla dist ct app alimony may be either periodic or lump sum fla stat ann sec_61 west canakaris v canakaris so 2d fla borchard v borchard so 2d fla dist ct app lump- sum alimony is a fixed non-modifiable monetary obligation that is immediately vested and therefore does not terminate upon the death of the payor or the payee boyd v boyd supra pincite see also canakaris v canakaris supra pincite borchard v borchard supra pincite lump-sum alimony despite its name may be paid in installments see borchard v borchard supra pincite respondent argues that the dollar_figure paid in was rehabilitative in nature as it was intended to pay for petitioner’s phd program and other rehabilitation respondent concludes therefore that this amount would not have been payable to petitioner’s estate had she died during because the rehabilitative purpose of the funds would have lapsed we disagree florida law provides that the rehabilitative intent of the funds is not dispositive id similarly lump-sum alimony may be rehabilitative in nature under florida law id the marital settlement obligations due to petitioner as rehabilitative alimony were fixed and certain in the number of payments and the amount of each payment they were not subject_to modification and termination by their terms this certainty was further clarified with language specifying that rehabilitative alimony could not be modified or terminated regardless of whether circumstances changed these payments met the requirements for lump-sum alimony in florida and therefore would remain payable to petitioner’s estate if she were to die see human v commissioner tcmemo_1998_106 stokes v commissioner tcmemo_1994_456 we find further support for our holding by looking to language in the marital settlement nothing in the marital settlement indicated that the rehabilitative alimony payments would terminate on petitioner’s death indeed the marital settlement language emphasized that the obligation could not be modified or terminated under any circumstances this language is in stark contrast to the language requiring child_support payments and specifying that the child_support obligation would end upon the death of the noncustodial_parent the ex-husband’s obligation to pay rehabilitative alimony was not contingent on any factor or event such as petitioner’s attending school indeed petitioner is the irrevocable beneficiary of her ex- husband’s life_insurance_policy required by the marital settlement to ensure payment of the total sum of the rehabilitative alimony petitioner and her ex-husband also bound 6when state family law is ambiguous regarding termination of payments upon payee’s death a federal court will base its decision on the divorce instrument’s language rather than engage in complex state law inquiries 102_f3d_842 6th cir affg tcmemo_1995_183 see also webb v commissioner tcmemo_1990_540 but see cunningham v commissioner tcmemo_1994_474 considering state contract law and extrinsic evidence to determine the parties’ intent where state family law did not terminate husband’s liability to make payments after wife’s death berry v commissioner tcmemo_2005_91 considering extrinsic evidence of parties’ intent regarding post-death liability to the extent permitted under state law principles their successors heirs and assigns to the terms of the marital settlement we have no reason to conclude that rehabilitative alimony payments as described in the marital settlement would terminate upon petitioner’s death see 102_f3d_842 6th cir affg tcmemo_1995_183 webb v commissioner tcmemo_1990_540 accordingly we hold that the rehabilitative alimony payments are not alimony for federal_income_tax purposes and therefore not includable in gross_income we note that respondent is not bound by his previous resolution of this issue in petitioner’s favor for the taxable_year see auto club of mich v commissioner 353_us_180 457_f2d_1 3d cir affg 54_tc_1691 we have considered all arguments made in reaching our decision and to the extent not mentioned we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered for petitioner


internal_revenue_service department of the treasury number release date index number 468a washington dc person to contact telephone number refer reply to cc psi 6-plr-116349-02 date date in re revised schedule of ruling amounts legend plant taxpayer parent_corporation transferor commission one commission two order method a b c d e f h i j k l plr-116349-02 m n o p q r s t u v w x -2- dear this letter responds to a request for private_letter_ruling dated date filed on behalf of the above taxpayer pursuant to the mandatory requirements of sec_1_468a-3 of the income_tax regulations requesting a schedule of ruling amounts relating to plant's qualified nuclear decommissioning fund fund taxpayer is requesting this schedule because plant was transferred from transferor a regulated_public_utility to taxpayer an unregulated electric generation company the transfer of plant to an unregulated entity changed the date after which plant will no longer be included in rate base and commission one in order decreased the amount of decommissioning costs to be included in cost of service for plant effective a the date of the transfer of plant to taxpayer transferor previously received a schedule of ruling amounts pertaining to plant on b information was submitted pursuant to sec_1_468a-3 in a reorganization dated a taxpayer was formed as a wholly owned subsidiary of parent which in turn is a wholly-owned subsidiary of corporation in the same reorganization transferor became a wholly-owned subsidiary of corporation and transferred through a multi-step transaction its entire_interest in plant and all liability for decommissioning plant to taxpayer as a result taxpayer directly owns a c percent interest in the plant which is situated in location taxpayer and transferor join corporation in filing a consolidated tax_return commission one d percent and commission two e percent have regulatory jurisdiction over the rates of taxpayer and taxpayer is under the audit jurisdiction of the industry director natural_resources and construction lm nrc the estimated cost of decommissioning the plant is dollar_figuref commission one in order provided for decommissioning costs for the plant of dollar_figureh to be included in taxpayer's cost of service for ratemaking purposes for the period i during this period transferor will purchase all of taxpayer’s generation capacity for an agreed price plr-116349-02 -3- pursuant to order transferor will collect decommissioning amounts approved by commission one from its ratepayers during period j and will pay over all such collections to taxpayer who will in turn contribute them to its decommissioning funds during the period j transferor has the option of buying power from taxpayer but is not required to do so under order and the amount of decommissioning costs that will be included in taxpayer’s cost of service for ratemaking purposes will be a function of the amount of taxpayer’s capacity that is actually purchased by transferor the level_funding limitation period begins on k and ends on l and the funding_period begins on m and ends on n the assumed after-tax rate of return to be earned by the assets of the fund is o percent the rate of escalation to determine the future cost of the plant is p percent compounded annually the proposed method for decommissioning the plant is method taxpayer has determined the estimated period for which the fund is to be in effect is q years r through s and the estimated_useful_life of the plant is t years u through v therefore the qualifying percentage is w percent sec_468a of the code provides that a taxpayer may elect to deduct the amount of payments made to a qualified decommissioning fund however sec_468a limits the amount_paid into such fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to this fund which is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the total nuclear decommissioning costs with respect to the nuclear power plant as the period for which the nuclear decommissioning fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within ½ months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an plr-116349-02 -4- eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in among other things a direct ownership_interest including an interest as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such tax_year if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b the excess is not deductible by the electing taxpayer in addition under sec_1_468a-5 there are rules which provide that the internal_revenue_service may disqualify a nuclear decommissioning fund if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes under sec_1_468a-3 the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3 of the regulations provides that in general the amount for any_tax year in the level_funding limitation period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's plr-116349-02 -5- share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant under sec_1_468a-3 the qualifying percentage for any nuclear decommissioning fund is equal to a fraction the numerator of which is the number of tax years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of tax years in the estimated_useful_life of the applicable plant sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant sec_1_468a-3 of the regulations provides that the estimated period for which a nuclear decommissioning fund is to be in effect begins on the later of the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund or deemed made or the first day of the taxable_year that includes the date that the nuclear power plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that the estimated_useful_life of a nuclear power plant begins on the first day of the taxable_year that includes the date that the plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate plr-116349-02 -6- base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant under sec_1_468a-3 this separate determination shall be based on the reasonable assumptions and determinations used by the relevant public_utility commission and shall take into account only that portion of the total estimated cost of decommissioning that is properly allocable to the ratepayer whose rates are established or approved by the public_utility commission according to sec_1_468a-3 the ruling amounts for any taxable_year is the sum of the ruling amounts for such taxable_year determined under the separate schedules of ruling amounts sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount we have examined the representations and the data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely upon these representations of the facts we reach the following conclusions for the period covered by this schedule of ruling amounts taxpayer had a qualifying interest in the plant and was therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commission one has determined the decommissioning costs to be included in taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual plr-116349-02 -7- payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by the commission and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund taxpayer has determined under sec_1_468a-3 of the regulations that the qualifying percentage for commission one is w percent the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the lesser amount of the cost of service amount applicable to the fund or the ruling_amount applicable to the fund as set forth under sec_1_468a-2 of the regulations taxpayer subject_to the jurisdiction of two public_utility commissions for ratemaking purposes has calculated its share of the total decommissioning costs allocable to commissions one and two as required by sec_1_468a-3 of the regulations based solely on the determinations above we conclude that the taxpayer's proposed schedule of ruling amounts in regard to the commissions satisfies the requirements of sec_468a of the code accordingly the schedule of ruling amounts requested by the taxpayer under sec_468a is approved as follows approved schedule of ruling amounts allocable to the taxpayer approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above in particular no opinion is expressed or implied concerning whether the contract termination charge is includible in the gross_income of and deductible by any entity other than taxpayer the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code payments made to such fund can qualify only to the extent they are made while taxpayer is the owner of the plant and only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year plr-116349-02 -8- the portion of this ruling pertaining to contributions to taxpayer’s qualified nuclear decommissioning fund made under the jurisdiction of commission one is expressly conditioned on the continued direct or indirect ownership and control of taxpayer parent and transferor by corporation during the periods i and j specifically as continuing conditions taxpayer and transferor must be part of the same affiliated_group or be treated as a division of a member of the same affiliated_group as corporation and corporation must satisfy the ownership requirement of sec_1504 with respect to taxpayer and transferor and corporation taxpayer and transferor must file a consolidated tax_return or must be treated for tax purposes as divisions of entities that file a consolidated_return with corporation for each year for which a deductible payment is made under sec_468a if any of these conditions are no longer applicable no further contributions may be made under the jurisdiction of commission one to the qualified nuclear decommissioning fund this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the powers of attorney we are sending a copy of this ruling to your authorized representatives we are also sending a copy of this letter_ruling to the industry director natural_resources and construction lm nrc pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries


t c memo united_states tax_court terry d smith petitioner v commissioner of internal revenue respondent docket no filed date richard e marsh jr for petitioner james e gray and paul g topolka for respondent memorandum findings_of_fact and opinion colvin judge respondent determined a deficiency of dollar_figure in petitioner's federal_income_tax for the issue for decision is whether petitioner may defer recognition of gain realized on the sale of two properties pursuant to sec_1031 we hold that he may not because he failed to establish that he identified replacement_property within days after he transferred the relinquished properties unless otherwise indicated section references are to the internal_revenue_code as in effect for the year in issue rule references are to the tax_court rules_of_practice and procedure some of the facts have been stipulated and are so found findings_of_fact a petitioner petitioner lived in charlotte north carolina when he filed the petition in this case petitioner has been a practicing certified_public_accountant since among his clients are a large number of individuals and small to medium-sized businesses in petitioner and david e parrish parrish owned properties pincite monroe road charlotte north carolina the monroe road property and pincite east seventh street charlotte north carolina the seventh street property b petitioner's sale of the propertie sec_1 the monroe road property in date petitioner contracted to sell his interest in the monroe road property to mr and mrs thomas hauch and mr and mrs everett wohlbruck the hauchs and the wohlbrucks petitioner sent a letter dated date to the hauchs' and wohlbrucks' attorney charles o dubose dubose dubose was an attorney at the law firm of kennedy covington lobdell hickman kclh the letter included the following statement this is to confirm our conversation today regarding monroe property as a tax free exchange for my one-half interest in the property although i have not yet identified the replacement_property i do intend to perfect an exchange petitioner transferred his one-half interest in the monroe road property to the hauchs and wohlbrucks on date the contract of sale did not specify any replacement_property kclh sent an internal memo to randall w lee at kclh's southpark office which included the following statement with respect to mr smith's one half undivided_interest in the monroe road property he intends to effect a tax free exchange and therefore wants us to hold his portion of the net_proceeds from the sale in escrow pending further instructions relative to the tax free exchange the seventh street property on date petitioner and parrish contracted to sell the seventh street property to donald p mccurdy mccurdy paragraph a of the contract of sale stated as follows sellers intend for this transaction to qualify under the tax-free_exchange provisions of the irs code and buyer agrees to execute any related documents required to do so the contract of sale did not identify any replacement_property petitioner transferred his interest in the seventh street property to mccurdy on date kenneth f essex essex was mccurdy's attorney for the closing of the seventh street property transaction essex's law firm was essex richards morris jordan p a essex was also petitioner's escrow agent for petitioner's portion of the proceeds from the sale of the seventh street property the record does not show whether the escrow agreement between petitioner and essex was oral or written handling of the proceeds from the sale of both properties in a letter dated date essex confirmed that he invested petitioner's share of the proceeds from the seventh street property dollar_figure in a certificate of deposit with the bank of mecklenburg around date kclh transferred the proceeds from the sale of petitioner's interest in the monroe road property dollar_figure by check drawn on kclh's trust account to essex's law firm essex added those proceeds to the certificate of deposit with the bank of mecklenburg c petitioner's purchase of the east boulevard property on date h p smith smith a real_estate broker with meca properties took petitioner to tour property pincite east boulevard charlotte north carolina the east boulevard property and gave him some preliminary information about the building the east boulevard property was well-located for petitioner's accounting practice east boulevard was one of two streets in charlotte on which petitioner was considering buying replacement_property it appeared that the property could possibly be suitable for petitioner but there were several points that had to be resolved first the east boulevard property needed to be substantially_rehabilitated to make it usable second petitioner thought the sellers' price was too high third petitioner wanted to structure the financing with a high debt-to-value ratio in order to buy the property petitioner wanted to obtain some seller financing fourth petitioner could not decide if the property was acceptable without the approval of frederick r black black his new partner black saw the east boulevard property in early date petitioner did not look at any properties after date he was extremely busy because of the tax season smith intended to talk to petitioner on march about making an offer on the east boulevard property but it is unknown whether he did so petitioner and black did not make an offer to buy the property until date on date petitioner and black as sb properties a north carolina general_partnership contracted with harold h and loretta k brown mr and mrs brown to buy the east boulevard property paragraph of addendum a of the offer to purchase and contract states as follows exchange provision buyer may wish to qualify this transaction under sec_1031 of the internal_revenue_code therefore buyer shall have the right to cause seller to accept suitable property in exchange for all or part of seller's property hereunder provided that property exchanged to seller shall be subject_to immediate purchase by a third party and provided further that the cost to seller of accepting the exchange property and transferring it to a third party shall be reimbursed to seller by buyer and provided that the terms and conditions of such exchange shall in no event be more onerous and burdensome to seller on date mr and mrs brown transferred the east boulevard property to petitioner and black as tenants in common petitioner's share of the cash portion of the purchase_price was dollar_figure of that amount petitioner paid dollar_figure as earnest money when the contract was signed also on date essex redeemed the certificate of deposit and thereafter disbursed dollar_figure to petitioner and bought two certificates of deposit for dollar_figure each petitioner deposited the dollar_figure he received in his account with united carolina bank petitioner used the two certificates of deposit as partial collateral for a dollar_figure loan to renovate the east boulevard property d petitioner's tax_return on the form_8824 like-kind_exchanges attached to petitioner's income_tax return petitioner reported that he transferred property as part of a like-kind_exchange on date in fact petitioner transferred his interests in the monroe road and seventh street properties on february and date respectively also on that form_8824 petitioner reported that he identified replacement_property on date date is the 46th day after date and the 55th day after date the dates that petitioner transferred his interests in the seventh street and monroe road properties respectively opinion a background and contentions of the parties the issue for decision is whether petitioner may defer the gains realized on the sale of the monroe road and seventh street properties pursuant to sec_1031 generally a taxpayer must recognize gain_or_loss on the sale of real_property sec_1001 however sec_1031 provides for the deferral of gain_or_loss when there is an exchange of like-kind business or investment properties as distinguished from a cash sale of property by the taxpayer and a reinvestment of the proceeds in other_property 74_tc_555 petitioner contends that his sale of the monroe road and seventh street properties and subsequent purchase of the east boulevard property qualifies as a nontaxable_exchange under sec_1031 respondent contends that those transactions do not qualify because petitioner did not identify the replacement_property within days of the sale of the relinquished properties petitioner received the proceeds from the sale of the relinquished properties and the sales and purchase were not an exchange as required by sec_1031 respondent's determinations are presumed correct and petitioner bears the burden_of_proof rule a 290_us_111 petitioner must rebut all three of respondent's arguments to qualify under sec_1031 b identification requirement sec_1031 requires replacement_property to be identified within days after the date the taxpayer transfers the property relinquished in the exchange the parties dispute whether petitioner identified the east boulevard property within days after he transferred the monroe road and seventh street properties petitioner contends that he orally identified the east boulevard property within days after he transferred the relinquished properties and points out that he saw no other_property after he saw the east boulevard property on date respondent argues that an oral identification is not sufficient under sec_1031 and that even if an oral identification is sufficient petitioner failed to identify replacement_property orally or otherwise within days we are not convinced that petitioner identified the east boulevard property within days after february or ie by march or this conclusion is supported by petitioner's tax_return petitioner reported on his tax_return that he identified the replacement_property on date date is the 55th day after petitioner sold the monroe road property and the 46th day after he sold the seventh street property statements in a tax_return are admissions and will not be overcome without cogent evidence that they are wrong waring 1in date the secretary proposed a regulation requiring written identification of replacement_property sec_1 a - c proposed income_tax regs fed reg date this section was adopted in as sec_1_1031_k_-1 income_tax regs by t d 1991-c b the regulation applies to transfers of property made on or after date at the time of the transactions in issue no regulations were in effect v commissioner 412_f2d_800 3d cir affg per curiam tcmemo_1968_126 92_tc_312 62_tc_739 statements made in a tax_return signed by a taxpayer may be treated as admissions affd without published opinion 521_f2d_1399 3d cir rankin v commissioner tcmemo_1996_350 sirrine bldg no v commissioner tcmemo_1995_ as statements of a party opponent the returns are admissions under rule d of the federal rules of evidence estate of ford v commissioner tcmemo_1993_580 affd 53_f3d_924 8th cir mooneyham v commissioner tcmemo_1991_178 estate of mcgill v commissioner tcmemo_1984_292 estate of kreis v commissioner tcmemo_1954_139 affd 227_f2d_753 6th cir see 428_fsupp_205 d ariz statements made in an income_tax return constitute admissions affd without published opinion 568_f2d_779 9th cir 28_tc_121 affd 255_f2d_833 3d cir there is no cogent or persuasive evidence that petitioner identified the replacement_property before date when petitioner saw the east boulevard property on date he liked the location but he thought the price was too high he had specific requirements for financing terms he knew he would need to make and arrange financing for extensive renovations and black had not yet approved the property according to petitioner black gave his approval in early march petitioner testified that he instructed smith on date that we would like to pursue the purchase of that building but smith did not corroborate that or act in the following weeks as if he had been instructed to arrange the purchase petitioner did not begin to negotiate the price with the sellers until may there is no evidence that his concerns other than approval by black were satisfied before may we give more weight to his statement on his tax_return that he identified the property as replacement_property on april than to his trial testimony that he identified it earlier we conclude that petitioner has not shown that he identified the east boulevard property as replacement_property within the time required by sec_1031 ie by late march petitioner may not defer recognition of the gains realized from the sale of the monroe road or seventh street properties under sec_1031 because he did not identify replacement_property within days after the date he relinquished either property sec_1031 c respondent's other contentions because we find that petitioner did not identify replacement_property on or before date we need not decide respondent's contention that an oral identification does not meet the identification requirement under sec_1031 similarly we need not decide respondent's contentions that petitioner's sale of the monroe road and seventh street properties is ineligible for like-kind_exchange treatment under sec_1031 because petitioner constructively received the proceeds from the sale of each of those properties and that the sales and purchase were not an exchange as required by sec_1031 decision will be entered for respondent


internal_revenue_service number release date index number ------------------------------ ------------------------------------------------- ----------------------------------- ------------- ------------------------------- legend legend x ------------------------------- ----------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-140251-07 date date ------------------- --------------------- ----------------------- d1 state d2 dear ------------- this responds to the letter dated date and related correspondence submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts x was incorporated on d1 under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d2 but the s election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation plr-140251-07 sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to ' a or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under ' a effective d2 x has however established reasonable_cause for not making a timely election and is entitled to relief under ' b conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d2 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center 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 requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-140251-07 in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely enclosures s dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries


significant index no ge department of the treasury tax_exempt_and_government_entities_division internal_revenue_service washington d c jul re dear plan no ein company this letter constitutes notice that the request of authorized representative for a modification of condition of our ruling letter of made by your is granted as modified condition of our ruling letter of requires that _ the company will provide the plan with security in a by manner satisfactory to the pension_benefit_guaranty_corporation pbgc for the sum of the required quarterly contributions under sec_412 of the code that are due on _ calculated as if no waiver for the plan_year had been granted -and if you have any questions concerning this letter please contact in any correspondence relating to this letter please refer to t -ep ra t a2 as well carol d gold director employee_plans


internal_revenue_service number release date index number -------------------------------------- -------------------------------------------- ------------------------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-135663-10 date date x y a b c d e f g h ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- state --------- plr-135663-10 date date date date year year n1 n2 n3 n4 -------------------------- ---------------------- -------------------------- ---------------------- ------- ------- ------------------- ------------------- ------------------- ------------------- dear ------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting a ruling that rental income received by y and y’s subsidiaries is not passive_investment_income within the meaning of sec_1362 of the internal_revenue_code the information submitted states that x was incorporated under the laws of state on date and elected under sec_1362 to be an s_corporation effective date x is the sole shareholder of y which was incorporated in state on date and in turn y is the sole shareholder of a b c d e f g and h collectively subsidiaries y and subsidiaries own lease and manage commercial real_estate properties collectively the properties x and y both have accumulated_earnings_and_profits x intends to make qualified_subchapter_s_subsidiary elections qsub under sec_1361 for y and subsidiaries effective date x represents that y and subsidiaries through their employees or independent contractors provide certain services with respect to the leasing of the properties these services involve maintaining and repairing water sewer fire sprinkler and irrigation systems roof and structural_components landscaping exterior lighting exterior loading areas parking areas sidewalks driveways and debris and providing security in common areas x further represents that y and subsidiaries negotiate leases collect rents and monitor compliance with lease terms plr-135663-10 for the tax years ending in year and year y and subsidiaries collected approximately dollar_figuren1 and dollar_figuren2 respectively in gross rents and paid_or_incurred approximately dollar_figuren3 and dollar_figuren4 respectively in relevant operating_expenses excluding depreciation sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect for the taxable_year sec_1362 provides that an s_corporation_election shall be terminated whenever the corporation i has accumulated_earnings_and_profits at the close of each of consecutive taxable years and ii has gross_receipts for each of such taxable years more than percent of which are passive_investment_income the termination is effective on and after the first date of the first taxable_year beginning after the third consecutive taxable_year referred to in sec_1362 sec_1362 except as otherwise provided in sec_1362 sec_1362 provides that the term passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1375 imposes a tax on the income of an s_corporation if the s_corporation has accumulated_earnings_and_profits at the close of such taxable_year and gross_receipts more than percent of which are passive_investment_income sec_1_1362-2 defines rent as amounts received for_the_use_of or right to use property whether real or personal of the corporation sec_1_1362-2 provides that the term rents does not include rents derived in the active trade_or_business of renting property rents are derived in an active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including but not limited to the number of persons employed to provide the services and types and amounts of costs and expenses_incurred other than depreciation based solely on the facts and representations submitted if x makes valid qsub elections for y and subsidiaries effective date the rental income that y and subsidiaries derive from properties will not be passive_investment_income as described in sec_1362 except as expressly provided herein we express or imply no opinion concerning plr-135663-10 the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion on whether x is a small_business_corporation eligible to be an s_corporation nor whether y or subsidiaries are eligible to be qualified subchapter_s subsidiaries under sec_1361 further the passive_investment_income rules of sec_1362 are independent of the passive_activity rules of sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 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 in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely charlotte chyr senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom p si-1-plr-1 ate date legend i o o l u o i o l l u d1 d2 d3 d4 d5 state this responds to your letter dated date and prior correspondence written on behalf of x requesting a ruling that the termination of x's s plr-114202-98 corporation status was inadvertent under sec_1362 of the internal_revenue_code facts x is a corporation that was incorporated in state on d1 x made ans corporation election under sec_1362 effective for its taxable_year beginning on d2 on d2 a b c and d shareholders were x's sole shareholders on d3 c contributed c’s x stock to y a partnership on d3 none of the shareholders knew that c’s transfer of x stock to y would terminate x’s subchapter_s status the transfer of x stock to y was not motivated by tax_avoidance or retroactive planning on d4 y's accountant learned that y owned shares of x stock on d5 y distributed the x stock back to c so that y no longer owned shares of x x the shareholders and y agree to make any adjustments consistent with the treatment of x as an s_corporation that the secretary may require for the period of termination law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect sec_1361 defines small_business_corporation as a domestic_corporation that is not an ineligible_corporation and that does not a have more than shareholders b have as a shareholder a person other than an estate and other than a_trust described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock under sec_1362 an election under sec_1362 is terminated whenever the corporation ceases to be a small_business_corporation under sec_1362 if an election under sec_1362 by any corporation was terminated under sec_1362 or the corporation will be treated as continuing to be an s_corporation during the period specified by the secretary if the secretary determines that the termination was inadvertent no later than a reasonable period of time after discovery of the event resulting in the termination steps were taken so that the corporation is once more a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to the subsection agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary regarding the period plr-114202-98 with respect to sec_1362 s rep no 97th cong 2d sess 1982_2_cb_718 provides in part as follows if the internal_revenue_service determines that a corporation's subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts conclusions based solely on the facts submitted and representations set forth above we conclude that x's s election terminated on d3 when c transferred c’s x stock to y we also conclude that the termination of x's s_corporation_election as described above was inadvertent within the meaning of sec_1362 pursuant to sec_1362 x will continue to be treated as an s_corporation during the period from d3 to d5 and thereafter unless x's s election is otherwise terminated under sec_1362 in addition during the period d3 to d5 c and not y will be treated as the owner of the x stock which c contributed to y therefore the shareholders must include their pro_rata share of the separately_stated and nonseparately computed items of x as provided in sec_1366 make any adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 as if y never held x stock f x the shareholders or y fail to comply with the requirements of this paragraph this ruling is null and void except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed on whether the original election made by x to be an s_corporation was a valid election under sec_1362 i plr-114202-98 this ruling is directed only to the taxpayer who requested it section k 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 signed daniel j coburn daniel j coburn assistant to the branch chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 1-plr-116864-98 date date legend x y date this responds to a request submitted on behalf of x dated date that x be given an extension of time in which to elect to treat y as a qualified_subchapter_s_subsidiary under sec_1361 of the internal_revenue_code facts y was incorporated on date and is a wholly-owned subsidiary of x x intended to elect to treat y as a qualified_subchapter_s_subsidiary as of date but failed to file the election timely law and analysis sec_1361 of the code provides that the term s_corporation means with respect to a taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines the term qualified_subchapter_s_subsidiary cc dom p si 1-plr-116864-98 qsub as any domestic_corporation which is not an ineligible_corporation if percent of the stock of such corporation is held by the s_corporation and the s_corporation elects to treat such corporation as a qsub notice_97_4 1997_2_irb_24 provides that a parent_corporation should file a form_966 to make a qsub election and that the election may be effective on the date the form_966 is filed or up to days prior to the filing of the form provided that date is not before the parent’s first taxable_year beginning after date and that the subsidiary otherwise qualifies as a qsub for the entire period for which the retroactive election is in effect under sec_301_9100-1 of the procedure and administration regulations 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 if the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting the relief will not prejudice the interests of the government sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a notice 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 of 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_9100-3 conclusion in the present situation the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of sixty days following the date of this letter to make an election to treat y as a qualified_subchapter_s_subsidiary effective date the election should be made by following the procedure set forth in notice_97_4 a copy of this letter should be attached x must file the required documents with the appropriate service_center except as specifically set forth above no opinion is expressed or implied as to cc dom p si 1-plr-116864-98 the federal_income_tax consequences of the transactions described above under any other provision of the code specifically no opinion is expressed concerning whether x is an s_corporation or whether y otherwise qualifies as a qualified_subchapter_s_subsidiary for federal tax purposes this ruling is directed only to the taxpayer on whose behalf it was requested sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to the first representative listed sincerely yours signed paul f kugler paul f kugler assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c no ll united_states tax_court ranie m raymond petitioner v commissioner of internal revenue respondent docket no 2354-o1l filed date on her tax_return p’s filing_status was listed as married filing separate_return on date r sent p a notice_of_determination concerning collection action s under sec_6320 and or regarding the tax_year in which r determined that p was not entitled to raise a spousal defense because she did not file a joint_return on date p sent to the tax_court a petition for lien or levy action under code sec_6320 or sec_6330 r filed a motion for partial summary_judgment on the issue of whether p is eligible for relief under sec_6015 held the petition was timely filed in order for the court to have jurisdiction to review r’s denial of spousal relief sec_6015 i r c held further r’s motion for partial summary_judgment is granted because there is no genuine issue as to whether p is entitled to relief under i r c sec - - p is not entitled to relief under sec_6015 c and f because she did not file a joint_return ranie m raymond pro_se a gary begun for respondent opinion vasquez judge this case is before the court on respondent’s motion for partial summary_judgment under rule background at the time of the filing of the petition petitioner resided in livonia michigan on her federal_income_tax return petitioner’s filing_status was listed as married filing separate_return at the time of the filing of the tax_return no payment was made on the amount reported as due on the tax_return respondent applied petitioner’s tax refunds from and in partial satisfaction of the amount due for on date respondent sent petitioner a final notice notice_of_intent_to_levy and notice of your right to a hearing ’ on date respondent sent petitioner a notice_of_determination concerning collection action s under sec_6320 unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect at all relevant times the notice listed that petitioner owed dollar_figure in unpaid taxes for and dollar_figure in penalties and interest for that year and or notice_of_determination regarding her tax_year in the notice_of_determination respondent determined that the collection against petitioner should be sustained because petitioner did not file a joint_return and therefore was not entitled to raise a spousal defense on date petitioner sent a letter to the court regarding the notice_of_determination the court received the letter on date the court filed petitioner’s letter as a petition for lien or levy action under code sec_6320 c or d petition on date the court received petitioner’s amended petition which was filed as an amended petition for lien or levy action under code sec_6320 or sec_6330 d on date respondent filed a motion to dismiss for lack of jurisdiction on the ground that the petition was not filed within the time prescribed by sec_6330 petitioner objected to this motion on date respondent filed a motion to withdraw respondent’s motion to dismiss for lack of jurisdiction on date respondent also filed a motion for partial summary_judgment on the issue of whether petitioner is eligible for relief under sec_6015 on date petitioner filed a response to respondent’s motion for partial summary_judgment wherein petitioner objected to the granting of the motion discussion petitioner alleges that she signed a blank form she did not fill out the tax_return and she did not earn the income listed on the tax_return petitioner filed the petition to request relief from liability under sec_6015 for tax due on the income listed on her tax_return that she allegedly did not earn the issues presented are whether the petition was timely filed for this court to have jurisdiction and whether a taxpayer must file a joint_return to be eligible for relief under sec_6015 i jurisdiction it is well settled that this court can proceed in a case only if we have jurisdiction and that any party or the court sua sponte can guestion jurisdiction at any time even after the case has been tried and briefed 115_tc_287 111_tc_273 normac inc 90_tc_142 78_tc_215 our jurisdiction under sec_6330 depends on the issuance of a valid notice_of_determination and a timely petition for review 117_tc_159 sec_6330 provides that a person may appeal a notice_of_determination by filing a petition within days of the notice sec_6330 - - we lack jurisdiction to review petitioner’s claim under sec_6330 petitioner filed a petition with this court later than days after the notice_of_determination we have held that the 30-day period provided by sec_6330 is jurisdictional and cannot be extended mccune v commissioner t cc however petitioner raised a spousal defense in the appeals_office proceeding before the commissioner made a final_determination sec_6330 a sec_301_6330-1 proceed admin regs in the notice_of_determination respondent determined that petitioner was not entitled to relief under sec_6015 because she did not file a joint_return the timeliness of the petition insofar as it seeks review of the administrative denial of sec_6015 relief is therefore dependent upon sec_6015 under thi sec_3 petitioner sent her petition to the tax_court days after respondent mailed her the notice_of_determination sec_6015 provides in pertinent part sec_6015 petition for review by tax_court ---- in general --in the case of an individual against whom a deficiency has been asserted and who elects to have subsection b or c apply-- a in general --in addition to any other remedy provided by law the individual may petition the tax_court and the tax_court shall have jurisdiction to determine the appropriate relief available to the individual under this section if such petition is filed--- continued -- - section we have jurisdiction to review respondent’s determination as to sec_6015 relief because petitioner filed her petition within days of the notice_of_determination continued at any time after the earlier of-- i the date the secretary mails by certified or registered mail to the taxpayer’s last_known_address notice of the secretary’s final_determination of relief available to the individual or ii the date which is months after the date such election is filed with the secretary and not later than the close of the 90th day after the date described in clause i see sec_301_6330-1 proced admin regs this regulation provides q-f2 with respect to the relief available to the taxpayer under sec_6015 what is the time frame within which a taxpayer may seek tax_court review of appeals’ determination following a cdp hearing a-f2 if the taxpayer seeks tax_court review not only of appeals’ denial of relief under sec_6015 but also of relief with respect to other issues raised in the cdp hearing the taxpayer should request tax_court review within the 30-day period commencing the day after the date of the notice_of_determination if the taxpayer only seeks tax_court review of appeals’ denial of relief under sec_6015 the taxpayer should request review by the tax_court as provided by sec_6015 within days of appeals’ determination if a request for tax_court review is filed after the day period for seeking judicial review under sec_6330 then only the taxpayer’s sec_6015 claims may continued - it motion for partial summary_judgment respondent moved for partial summary_judgment on the issue of whether petitioner is eligible for relief under sec_6015 respondent argues that petitioner is not entitled to relief under sec_6015 because she did not file a joint tax_return rule a provides that either party may move for summary_judgment upon all or any part of the legal issues in controversy full or partial summary_judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact and a decision may be entered as a matter of law see rule b 98_tc_518 affd 17_f3d_965 7th cir a relief under sec_6015 and c relief is not available to petitioner under sec_6015 b and c because petitioner did not file a joint_return both continued be reviewable by the tax_court --- - sections explicitly require that a joint_return be filed for relief to be granted sec_6015 and c sec_6015 provides sec_6015 procedures for relief from liability applicable to all joint filers -- in general ---under procedures prescribed by the secretary if-- a a joint_return has been made for a taxable_year b on such return there is an understatement_of_tax attributable to erroneous items of individual filing the joint_return c the other individual filing the joint_return establishes that in signing the return he or she did not know and had no reason to know that there was such an understatement d taking into account all the facts and circumstances it is inequitable to hold the other individual liable for the deficiency in tax for such taxable_year attributable to such understatement and fe the other individual elects in such form as the secretary may prescribe the benefits of this subsection not later than the date which i sec_2 years after the date the secretary has begun collection activities with respect to the individual making the election then the other person shall be relieved of continued b relief under sec_6015 on its face sec_6015 does not require that a joint_return be filed in order for equitable relief to be granted under that section ’ as directed by sec_6015 the commissioner sec continued the liability for tax for such taxable_year to the extent such liability is attributable to such understatement emphasis added c provides sec_6015 procedures to limit liability for taxpayers no longer married or taxpayers legally_separated or not living together --- in general --except as provided in this subsection if an individual who has made a joint_return for any taxable_year elects the application of this subsection the individual’s liability for any deficiency which is assessed with respect to the return shall not exceed the portion of such deficiency properly allocable to the individual under subsection d emphasis added sec_6015 provides sec_6015 equitable relief --under procedures prescribed by the secretary if-- taking into account all the facts and circumstances it is inequitable to hold the individual liable for any unpaid tax or any deficiency or any portion of either and relief is not available to such individual under subsection b or c continued -- - uses procedures under revproc_2000_15 2000_1_cb_447 the revenue_procedure to determine whether an individual qualifies for relief under that section section dollar_figure of the revenue_procedure lists seven threshold conditions including the filing of a joint_return that must be satisfied before the commissioner will consider a request for relief under sec_6015 the legislative_history of sec_6015 further demonstrates that congress intended a joint_return reguirement to apply to sec_6015 the conference agreement accompanying the enactment of sec_6015 contemplates that a joint_return be filed as a prerequisite for the grant of equitable relief h conf rept pincite 1998_3_cb_747 the agreement stated the conference agreement does not include the portion of the senate amendment that could provide relief in situations where tax was shown on a joint_return but not paid with the return the conferees intend that the secretary will consider using the grant of authority to provide equitable relief in appropriate situations to avoid the inequitable treatment of spouses in such situations continued the secretary may relieve such individual of such liability the revenue_procedure provides in pertinent part dollar_figure eligibility to be considered for equitable relief all of the following threshold conditions must be satisfied before the service will consider a request for equitable relief under sec_6015 the requesting spouse filed a joint_return for the taxable_year for which relief is sought the conferees do not intend to limit the use of the secretary’s authority to provide equitable relief to situations where tax is shown on a return but not paid the conferees intend that such authority be used where taking into account all the facts and circumstances it is inequitable to hold an individual liable for all or part of any unpaid tax or deficiency arising from a joint_return emphasis added id the agreement clarifies that the conferees intended that relief may be granted if it is inequitable to hold the taxpayer liable for the unpaid tax or deficiency shown on a joint_return this requirement of a joint_return is also consistent with the caption to sec_6015 relief from joint_and_several_liability on joint_return we therefore conclude that a joint_return must be filed in order for a taxpayer to be granted equitable relief under sec_6015 as a result we shall grant respondent’s motion for partial summary_judgment because no genuine issue exists as to whether petitioner is entitled to relief under sec_6015 petitioner is not entitled to relief under sec_6015 because she did not file a joint_return because respondent’s motion for partial summary_judgment covers the remaining issues in the instant case we treat it as a motion for full summary_judgment which we shall grant to reflect the foregoing an appropriate order and decision will be entered