internal_revenue_service index nos number release date cc dom fi p - plr-103947-99 date date legend parent bank dear this is in reply to a letter dated date requesting that bank be granted an extension of time under sec_301_9100-3 of the procedure and administration regulations to complete its compliance with the requirements of revproc_97_18 1997_1_cb_642 revproc_97_18 provides an exclusive automatic procedure for certain banks to follow in changing from the sec_585 reserve_method of accounting for bad_debts to the sec_166 specific_charge-off_method in order to elect s_corporation status for the tax_year parent is a calendar_year taxpayer that uses the cash_method_of_accounting it owns of the outstanding_stock of bank with which it files a consolidated_return parent elected to become an s_corporation by timely filing a form_2553 election by a small_business_corporation effective for its tax_year in addition parent elected to treat bank as a qualified_subchapter_s_subsidiary effective for the tax_year hence bank must change from the sec_585 reserve_method of accounting for bad_debts to the sec_166 specific_charge-off_method in and revproc_97_18 applies to this change in changing from the sec_585 reserve_method to the sec_166 specific_charge-off_method bank complied only partially with the requirements of revproc_97_18 its failure to comply completely with these requirements was an error of the independent accounting firm that prepared parent’s and bank’s s_corporation federal_income_tax return bank has requested an extension of time under sec_301_9100-3 to complete the compliance with revproc_97_18 sec_301_9100-1 of the regulations provides in part that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a plr-103947-99 notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 through c i of the regulations sets forth rules that the internal_revenue_service generally will use to determine whether under the facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides special rules for accounting_method regulatory elections this section provides in relevant part that the interests of the government are deemed to be prejudiced by granting an extension of time except in unusual and compelling circumstances if the accounting_method regulatory election is subject_to the procedure described in sec_1_446-1 requiring the advance written consent of the commissioner or if the accounting_method regulatory election for which relief is requested requires an adjustment under sec_481 based on the information provided and the representations made it is held that bank is deemed to have acted reasonably and in good_faith and that granting an extension of time to allow bank to complete its compliance with revproc_97_18 would not prejudice the interests of the government under the provisions of sec_301_9100-3 accordingly bank is granted an extension of time until days after the date of this letter to complete its compliance with revproc_97_18 no opinion is expressed as to the tax treatment of the transaction under the provisions of any other sections of the code and regulations which may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from the transaction which are not specifically set forth by the above ruling further no opinion is expressed as to whether bank’s tax plr-103947-99 liability is not lower in the aggregate for all years to which the regulatory election applies than bank’s tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon an audit of the federal_income_tax returns involved the district director’s office will determine bank’s tax_liability for the years involved if the district director’s office determines bank’s liability is lower that office will determine the federal_income_tax effect a copy of this letter will be forwarded to the district_director this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to bank’s authorized representative sincerely yours assistant chief_counsel financial institutions products enclosures copy of this letter sec_6110 copy


internal_revenue_service number release date index number --------------------------------------------- ------------------------------ --------------------------------- ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ----------------- telephone number --------------------- refer reply to cc psi plr-108045-11 date date legend company ------------------------------------------------------------------------------------------------ ----------------------- state --------------------- member date date date date date ------------------------------------------------------------------------------------------------ ------------------------- ---------------------- -------------------------- ---------------------- -------------------------- ------------------------ dear ---------------- this responds to a letter dated date submitted on behalf of company requesting a ruling under sec_1362 of the internal_revenue_code facts company was formed as a limited_liability_company under the laws of state on date on date company’s members executed an amended and restated operating_agreement which provided the members’ shares with different rights to plr-108045-11 distribution and liquidation proceeds company then timely filed a form_8832 entity classification election changing company’s classification to an association_taxable_as_a_corporation effective date not realizing that disproportionate_distribution and liquidation rights created a second class of stock or that having a second class of stock makes a corporation ineligible to elect to be taxed as an s_corporation company and its members timely filed a form_2553 election by a small_business_corporation effective date during the taxable_year ended on date company made disproportionate distributions to its members in accordance with its operating_agreement soon after realizing that its operating_agreement may have created a second class of stock and during the taxable_year ended on date company and its members amended the operating_agreement to remove the provisions creating the second class of stock on date company made a remedial distribution to member remedying the previous disproportionate_distribution company represents that there was no intent to make an invalid s_corporation_election in addition company and company's shareholders agree to make any adjustments consistent with the treatment of company as an s_corporation as may be required by the secretary with respect to the period specified by sec_1362 law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation 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 a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1_1361-1 of the income_tax regulations provides that a corporation that has more than one class of stock does not qualify as a small_business_corporation a corporation is treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made by reason of a failure to meet the requirements of sec_1361 the secretary determines that the circumstances resulting in the ineffectiveness were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness steps were taken so that the corporation is a small_business_corporation and the corporation for which the election was made and each person plr-108045-11 who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to that period then notwithstanding the circumstances resulting in the ineffectiveness the corporation will be treated as an s_corporation during the period specified by the secretary sec_1_1362-4 provides that the determination of whether a termination or invalid election was inadvertent is made by the commissioner the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should determine that the termination or invalid election was inadvertent the fact that the terminating event or invalidity of the election was not reasonably within the control of the corporation and in the case of a termination was not part of a plan to terminate the election or the fact that the terminating event or circumstance took place without the knowledge of the corporation notwithstanding its due diligence to safeguard itself against such an event or circumstance tends to establish that the termination or invalidity of the election was inadvertent conclusion based solely on the information submitted and the representations made by company we conclude that company's election to be treated as an s_corporation was not effective for date because it had more than one class of stock we further conclude that the election was an inadvertent invalid election under sec_1362 therefore company will be treated as an s_corporation beginning date and thereafter unless company's s_corporation_election otherwise terminates under sec_1362 the disproportionate and remedial distributions described above made pursuant to the operating_agreement will not terminate company’s s_corporation_election under sec_1362 but must be given appropriate tax effect this ruling is contingent on company and its shareholders treating company as an s_corporation for the period beginning date and thereafter except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed as to whether company otherwise meets the requirements to be an s_corporation this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request_for_ruling it is subject_to verification on examination plr-108045-11 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to company's authorized representative sincerely james a quinn senior counsel branch office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service appeals_office first street suite san francisco ca release number retease date date date p certified mail dear department of the treasury employer_identification_number person to contact employee id number tel fax uil this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code it is determined that you do not qualify as exempt from federal_income_tax under sec_501 of the code effective date our adverse determination was made for the following reason s this organization has not established that it is organized and operated exclusively for exempt purposes described in sec_501 the organization provides services for voluntary repatriation of undocumented aliens to their home countries and provides information useful to individuals and beneficial to the public organization’s goals and methods of operation fail to ensure that organization is operated exclusively for exempt purposes described in sec_501 therefore it could be operated for substantial nonexempt purposes accordingly you would not be organized and operated exclusively for exempt purposes described in sec_501 contributions to your organization are not deductible under sec_170 of the code you are required to file federal_income_tax returns on forms file your return with the appropriate - internal_revenue_service center per the instructions of the return for further instructions forms and information please visit www irs gov processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the code we will make this letter and the proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information we have provided to you in a separate mailing notice notice of intention to disclose please review the notice and the documents attached that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition or complaint in one of these three courts must be filed within days from the date this determination_letter was mailed to you please contact the clerk of the appropriate court for rules for filing petitions for declaratory_judgment to secure a petition form from the united_states tax_court write ‘to the united_states tax_court second street n w washington d c see also publication you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matters that may not have been resolved through normal channels get prompt and proper handling if you want taxpayer_advocate assistance please contact the taxpayer_advocate for the irs office that issued this letter you may call toll-free for the taxpayer_advocate or visit www irs gov advocate for more information if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours nan m shimizu appeals team manager enclosure publication and or department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date jan legend city wee - dear contact person identification_number contact number fax number employer_identification_number we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 based on the information submitted we have concluded that you do not qualify-for exemption _ under that section the basis for our conclusion is set forth below facts you were incorporated as a nonprofit corporation under state law your articles of incorporation explain that you are formed exclusively for charitable purposes and specifically to protect the american worker by arranging assisting and facilitating the repatriation of undocumented aliens -who-wish to return to their own countries but who are unable to return because of their lack of resources such repatriations should not only aid undocumented aliens who wish to return ‘to their own countries but also potentially improve the market in the u s for services of american workers consisting of both u s citizens and tegal immigrants including green card holders your primary activity is to arrange assist and facilitate the repatriation of undocumented aliens who want to return to their home countries but who are unable to return because of their lack of resources such assistance will consist chiefly of purchasing transportation including airline tickets to the undocumented alien's home_country your initial services are to be in state including throughout area you anticipate that many of the initial repatriations will be to central arrangements yourself you will not contract with a travel service you plan to provide local transportation to departure points such as airports you will also pay small cash amounts for meals and to facilitate timely local travel by train bus or taxi to meet the scheduled services for longer international journeys when appropriate you will also arrange visits by undocumented aliens to the nearby consulates or embassies of their home countries to obtain documentation such as passports for their use on their international trips home in many cases these services will be delivered through organizations that otherwise aid or work with undocumented aliens for example you plan to distribute and post fliers at facilities that provide shelter and food to many undocumented aliens you plan to screen undocumented aliens to identify those persons who are most likely to return home and least likely to seek to reenter the united_states illegally the selection of individuals for assistance is primarily based upon the results of fact-finding interviews your staff includes multilingual individuals to conduct interviews which are usually in spanish you do not have an application or questionnaire interview questions include time spent in america employment if any how the individual was referred to you whether an individual has a valid passport to their origin country and any compelling special issues eg health problems and or opportunities for family reunification you are particularly interested in identifying undocumented aliens who are unemploy ed particularly for extended periods with direct family members back in the home_country particularly with a history of remittance of funds back to family members but now without capacity to continue remittances because you believe that these factors together provide substantial evidence of a person who is likely to return home and less likely to seek reentry illegally you do not intend to assist any undocumented alien who has already been deported because such persons may be more likely to return to the u s illegally you plan to use volunteers employees and independent contractors to conduct your activities you plan to spend approximately to percent of your collective time on such activities with the remaining time devoted to fundraising and administration your fundraising activities will largely be conducted in city and state your activities are intended to improve the labor market conditions for u s citizens and legal immigrants by reducing the number of undocumented aliens in the u s labor market you believe that entry level workers should benefit from the repatriation of undocumented aliens who can affect the availability of scarce jobs in the united_states your application materials include a brochure in which you state the following e e e it’s time the damage to the american worker stop the poorest of americans are negatively impacted by illegal immigration - hard-working men and women have seen their job security their benefits and their paychecks shrink as forced and unfair competition from illegal workers strikes right at the heart of americans’ middle class hopes and dreams your brochure claims that your success could save taxpayers a lot of money it costs the ' federal government an average of dollar_figure to deport an illegal immigrant but it costs an average of dollar_figure for private repatriation you hope to meet with public officials especially those with budget responsibilities to communicate the cost-effective nature of privately funded repatriation versus federal detention and deportation in addition to your repatriation activities you plan to post information on your website concerning states or municipalities that face worker shortages so that u s citizens and legal immigrants willing to relocate can be informed of such worker shortages as funds become available you plan to utilize broad informational forums and educational conferences to publicize the benefits of your mission law sec_501 exempts from federal income_taxation organizations described in sec_501 sec_501 describes organizations including corporations that are organized and operated exclusively for religious charitable scientific educational or other specified exempt purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1 c -1 ay1 of the income_tax regulations provides that to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for purposes specified in sec_501 c if an organization fails to meet either test it is not exempt sec_1_501_c_3_-1 provides that the term charitable is used in sec_501 in its generally accepted legal sense and includes among other things relief of the poor and distressed or of the underprivileged and lessening the burdens of government sec_1 c -1 b i states that an organization is organized exclusively for one or more exempt purposes only if its articles of organization limit the purposes of such organization to one or more exempt purposes and do not expressly empower the organization to engage other than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 states that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish one or more of such exempt purposes specified in sec_501 cx3 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose revrul_68_117 1968_1_cb_251 describes an organization formed to help poor rural inhabitants of developing countries in part by conducting a guided self-help program for social and economic development in the rural areas of these countries the program includes furnishing expert guidance to subsistence-level farmer groups on modern agricultural methods livestock and poultry care and up-to-date marketing practices in an effort to raise their standard of living the ruling concludes that by raising the living standards of needy families in developing countries facilitating access to markets and credits teaching modern farming methods and furnishing other technical assistance the organization is furthering charitable and educational_purposes and accordingly qualifies for exemption under sec_501 revrul_68_422 c b provides that an organization created to pay pensions to all - retired employees of a company does not qualify as a charitable_organization under sec_501 c to come within the scope of the term relief of the poor the organization must at least show that the class it benefits is lacking in the necessities or comforts of life here the organization has not shown that the retired employees of the company as a class lack the necessities or comforts of life revrul_85_2 1985_1_cb_178 holds that an organization that provides legal assistance to _ guardians ad litem who represent abused and neglected children before a juvenile court that requires their appointment lessens the burdens of government and therefore qualifies for exemption under sec_501 the criteria for determining whether an organization's activities lessen the burdens of government are whether the governmental_unit considers the organization's activities to be its burdens and whether these activities actually lessen the burden of the governmental_unit to determine whether an activity is a burden of government the question to be answered is whether there is an objective manifestation by the government that it considers such activity to be part of its burden the fact that an organization is engaged in an activity that is sometimes undertaken by the government is insufficient to establish a burden of government similarly the fact that the government or an official of the government expresses approval of an organization and its activities is also insufficient to establish that the organization is lessening the burdens of government the interrelationship between the organization and the government may provide evidence that the government considers the organization's activities to be its burden to determine whether the organization is actually lessening the burdens of government all the relevant facts and circumstances must be _considered a favorable working relationship between the government and the organization is strong evidence that the organization is actually lessening the burdens of the government in this case the juvenile court requires the appointment of guardians ad litem and had previously undertaken to appoint and compensate attorneys to serve as guardians in juvenile court proceedings after several years of this practice the court determined that the best way to conduct the activity would be to appoint volunteers and arranged with this organization for the _ training and legal representation of the volunteers the court supports this organization through grants and-utilizes the volunteers trained by the organization these facts show that the government considers the activities of the organization to be its burden furthermore the organization's training of lay volunteers is an integral part of the government's program of providing guardians ad litem-in juvenile court proceedings without the organization's activities the government could not continue its present program unless it undertook fo train lay volunteers itself or appointed attorneys to act as guardians as it had in the past thus th organization actually lessens the burdens of government - _ revrul_85_1 1985_1_cb_178 concerns an organization created to assist a county's enforcement agencies in policing illegal narcotics traffic more effectively the organization provides funds that allow the county's undercover narcotics agents to buy drugs in the course of their efforts to apprehend persons engaged in illegal drug traffic no government funds are otherwise available for these purposes the organization meets the criteria set out in revrul_85_2 for determining whether activities lessen the burdens of government first the organization funds activities that the county treats as an integral part of its program to prevent the trafficking of illegal narcotics the county thereby demonstrates that these activities are a part of its burdens second the organization shows that it is actually lessening the burdens of the county by the fact that the government is able to augment its law enforcement activities in the area of illegal drug traffic the county’s law enforcement agencies can engage in certain aspects of drug enforcement without the appropriation of additional governmental funds thus the organization is lessening the burdens of government within the meaning of sec_1 c - d in 88_tc_1 aff'd without published opinion 838_f2d_465 cir columbia park the petitioner provides a wide range of services and facilities to the residents of a large private real_estate development petitioner argued that its activities lessen the burdens of government because the local or state government would have to provide these services if petitioner did not the tax_court in upholding an irs ruling that the petitioner is not organized and operated exclusively for exempt purposes within the meaning of sec_501 rejected the petitioner's argument saying that the mere assertion that in petitioner's absence government would have to assume the activities in question does not mean the activities are in fact the burdens of government rather the court said the organization must demonstrate that the government accepts the activities conducted by the petitioner as its responsibility and recognizes petitioner as acting on its behalf in addition the organization must establish that its activities actually lessen the burden of the state_or_local_government in public industries lnc v comm'r t c memo the tax_court opined that the petitioner had not shown that any of its anticipated activities were considered to be a burden of government citing federal and state law the court concluded that neither the federal government nor the government of the state of petitioner's incorporation viewed petitioner's activity - the sale of prison-made goods to the private sector - as a proper governmental function further the court said that while it appeared that some states do consider such activity a proper governmental function petitioner had not established any concrete relationship with those states or with any other governmental_unit having a similar policy which might support the conclusion that petitioner was acting on their behalf either directly or by way of participation in implementing the effort of any such unit the court emphasized that it is the existence of such a relationship that distinguishes revrul_85_2 and revrul_85_1 thus the court concluded that petitioner had not carried its burden_of_proof that the first prong of the test articulated in columbia park recreation assn v comm’r had been met with respect to petitioner’s other proposed activities the court found that petitioner had failed to explain how such activities would lessen any existing burden of government or otherwise further an exempt_purpose saying that the mere fact that such activities might improve the general economic well- being of the nation or a state or reduce any adverse impact from the failure of government to carry out such activities is not enough in westward ho v comm’r t c memo the court held that petitioner failed to establish that it was operated exclusively for exempt purposes petitioner was formed by business owners in downtown burlington for the purpose of providing travel grants to antisocial persons who have a need to leave the area but lack the means to pay the court stated that even if it assumes petitioner's purpose is a charitable one it must be concerned with both the actual as well as the stated purposes for the existence of the organization it is apparent petitioner's activities were designed to rid the area of disruptive homeless persons and to protect the commercial interests of petitioner's owners petitioner's creators expressed concerns with the harassing and abusive behavior of some of the homeless and fears of financial loss petitioner had no formal method for identifying individuals who could be benefited by relocation discouraged applications for its services and had no program to confirm potential lifestyles in cities where they were relocating persons receiving grants or for exploring whether or not an individual would benefit from relocation this suggests that petitioner was not genuinely concerned with the fate of the homeless but rather with relocating the persons out of the area the court concluded that petitioner was operated to serve the private interests of its creators more than incidentally by ridding the area of homeless persons petitioner's creators were providing themselves with a more desirable commercial location because more than an insubstantial part of petitioner's activities furthered a nonexempt purpose and petitioner served the private interests of its creators more than incidentally petitioner fails the operational_test of sec_501 analysis to qualify for exemption under sec_501 sec_1 c -1 a says that you must be both organized and operated exclusively for one or more of the purposes specified in that section organizational_test sec_1_501_c_3_-1 says that you are not considered to be organized exclusively for one or more exempt purposes unless your articles limit your purposes to one or more exempt purposes and do not expressly empower you to engage other than as an insubstantial part of your activities in activities which in themselves are not in furtherance of one or more exempt purposes your organizing documents expressly empower you to protect the american worker by arranging assisting and facilitating the repatriation of undocumented aliens who wish to return to their own countries but who are unable to return because of their lack of resources as explained below such activities do not further exempt purposes thus we do not consider you to be organized exclusively for exempt purposes within the meaning of sec_1 sotecks hoxtxo operational_test sec_1_501_c_3_-1 says that you are not considered to be operated exclusively for one or more exempt purposes unless you establish that you engage primarily in activities which accomplish one or more exempt purposes and that no more than an insubstantial part of your activities do not further an exempt_purpose upon review of your activities we find you are not engaged primarily in activities that accomplish exempt purposes among the exempt purposes listed under sec_1 c -1 d are charitable purposes _ according to sec_1 c - d the term charitable is used in sec_501 in its generally accepted legal sense and includes such purposes as relief of the poor and distressed or of the underprivileged and lessening the burdens of government issue whether your activities accomplish the relief of the poor and distressed to come within the scope of the term relief of the poor and distressed an organization must at least show that the class of persons it benefits is lacking in the necessities or comforts of life see revrul_68_422 supra the intent that the person to be benefited by the gift shall be poor may be implied from the situation of the donor and from the type of aid to be given see george gleason bogert the law of trusts and trustees sec_373 you purport to serve two charitable classes the first charitable_class you claim to serve is the class of undocumented aliens who want to return home but are unable to return because of their lack of resources undocumented aliens are not a charitable_class per se and while a person’s inability to return to his home_country because of a lack of resources may be the result of poverty or distress your actual operations show that you are not concerned with identifying and assisting the poor and distressed among the undocumented aliens but only with identifying those most likely to return home and least likely to seek to reenter the united_states illegally - while you do not seek to repatriate any undocumented aliens with the financial resources to leave the united_states on their own you have not shown that the criteria you use to select particular individuals is based on objective evidence of poverty or distress such as disposable income or assets rather you select beneficiaries primarily based on the results of oral fact- finding interviews the intent of which is not to establish whether the individual is poor and distressed but whether he or she is likely to attempt to reenter the united_states illegally your website and brochure express your frustrations with illegal immigration rather than concern for undocumented aliens because you appear to be more interested in effect ing the strongest possible impact in favor of the american workers who are legally authorized to work in the u s than in determining whether the object of assistance is poor and distressed it cannot be said for certain that your activities are limited to the charitable_class of the poor and distressed furthermore even if the undocumented aliens you assist were poor and distressed you have failed to show that your activities actually relieve their poverty or distress your primary activity is simply to provide undocumented aliens with transportation out of the united_states you do not appear to be concerned with their welfare during their stay in the united_states or with whether their situation upon return to their home_country would be an improvement on their situation in the united_states you do not provide transition or employment assistance you do not offer assistance in helping undocumented aliens reenter the united_states legally you have no formal methods to identify individuals who would benefit from voluntary relocation confirm the potential lifestyles of the individuals you assist or economic conditions in the countries of origin educate undocumented aliens to ensure they make a free and informed choice explore whether or not a prospective undocumented alien would benefit from relocation or confirm whether individuals you assist did in fact benefit from the relocation thus unlike the organization described in revrul_68_117 supra which furthered charitable and educational_purposes by conducting self-help programs designed to raise the living standards of needy families in developing countries you have not established that your activities benefit either the undocumented alien or their families living in the country of repatriation rather as with the organization described in westward ho supra your operations suggest that your sole concern is with removing undocumented aliens from the united_states permanently it does not seem to concern you that you may simply be sending them from one miserable situation to another consequently we do not find that your activities relieve the poor and distressed the second charitable_class you purport to serve are american workers you claim that american workers should benefit from the repatriation of undocumented aliens who can affect the availability of scarce jobs in the united_states but american workers are not poor or distressed per se and even if particular american workers do suffer from poverty or distress it is mere surmise that such workers would benefit from the repatriation of undocumented aliens you have made no objective showing that undocumented aliens particularly those who lack the resources to return home are employed in jobs that are scarce or sought by united_states citizens consequently you have failed to show that you operate in furtherance of the charitable purpose of relieving the poor and distressed or of the underprivileged issue whether your activities lessen the burdens of government among the purposes described as charitable under sec_1_501_c_3_-1 is the purpose of lessening the burdens of government you suggest that you further the charitable purpose of lessening the burdens of government by your claim that without exception the cost of privately funded repatriation is cheaper to the american taxpayer than federal detention and deportation proceedings to qualify as a sec_501 c organization on the basis of lessening the burdens of the government you must meet a two-pronged test the first prong requires that a government unit objectively manifest that it considers your activities to be its burden see revrul_85_2 supra to meet the requirement you must demonstrate that the government accepts your activities as its responsibility and recognizes that you are acting on its behalf see columbia park t c pincite you do not claim to participate in any government program or to act on behalf of any governmental_unit we are not aware and you have not shown that the federal government has ever undertaken to provide transportation out of the united_states to undocumented aliens who voluntarily choose to repatriate or that a governmental_unit has asked you to undertake such activities you have neither established any concrete relationship with a governmental_unit which might support a conclusion that you are acting on its behalf nor have you shown that the government has any control_over your activities or that the government has provided for your support thus unlike the organization described in revrul_85_2 you cannot be said to engage in activities that are an integral part of any government program and unlike the organization described in revrul_85_1 you cannot be said to fund activities that the government treats as an integral part of a governmental program consequently the facts do not show that the government considers your activities to be its burden furthermore the mere assertion that private repatriation costs less than it costs the government to detain and deport an illegal immigrant is not enough to establish that your activities actually lessen the burdens of government see public indus inc v comm’r the mere fact that an organization's activities might improve the general economic well-being of the nation or state or reduce any adverse impact from the failure of government to carry out such activities is not enough to show that the organization lessens the burdens of government consequently you have failed to show that you operate in furtherance of the charitable purpose of lessening the burdens of government conclusion because you are neither organized exclusively for exempt purposes within the meaning of sec_1 c -1 b 1xi nor operated exclusively for exempt purposes within the meaning of sec_1 c -1 cx1 we conclude by reason of sec_1 c3 -1 a that you do not qualify for exemption as an organization described in sec_501 c you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete _ you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you if you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to protest as a failure to exhaust available administrative remedies sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax please send your protest statement form_2848 and any supporting documents to this address constitution ave n w washington dc internal_revenue_service te_ge se t eo ra t if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely holly o paz director rulings and agreements


department of the treasury internal_revenue_service washington d c office_of_chief_counsel number info release date date cc tege eoeg et1 maowens cor-116805-01 uil this is in response to your letter dated date in which you requested information concerning federal_income_tax withholding this letter provides general information on mandatory withholding on wages and voluntary withholding on certain other_payments mandatory withholding sec_3402 of the internal_revenue_code code provides that except as otherwise specifically provided in sec_3402 every employer making payment of wages shall withhold federal_income_tax as determined in accordance with prescribed tables or computational procedures sec_3401 provides that the term wages means all remuneration for services performed by an employee for his employer unless a specific exemption under sec_3401 applies for example remuneration for services performed by a domestic worker in a private home is specifically excluded from the definition of wages by sec_3401 under sec_3402 of the code and sec_31_3402_f_2_-1 of the employment_tax regulations on or before the date on which an individual commences employment with an employer the individual must furnish the employer with a signed withholding_exemption certificate relating to the employee’s marital status and the number of withholding exemptions which the employee claims the employer is required to request a withholding_exemption certificate from each employee but if an employee fails to furnish such certificate the employer must withhold federal_income_tax from the employee as if the employee were a single_person with no withholding exemptions sec_31_3402_f_5_-1 of the employment_tax regulations provides that form_w-4 employee’s withholding allowance certificate is the form prescribed for the withholding_exemption certificate required to be furnished to the employer under sec_3402 of the code a copy of form_w-4 is enclosed a form_w-4 must be cor-116805-01 prepared in accordance with the instructions and regulations applicable thereto and must set forth fully and clearly the data therein called for a withholding allowance certificate that does not set forth fully and clearly the data therein called for is an invalid withholding_exemption certificate under sec_31_3402_f_2_-1 in addition any alteration of or unauthorized addition to a withholding_exemption certificate shall cause such certificate to be invalid sec_31_3402_f_2_-1 of the employment_tax regulations provides that if an employer receives an invalid withholding_certificate the employer shall consider it a nullity for purposes of computing withholding since an altered certificate is an invalid withholding_exemption certificate it can not authorize an employer to cease withholding_tax sec_31_3402_f_2_-1 of the employment_tax regulations further provides that if an employer receives an invalid withholding_certificate the employer shall inform the employee who submitted the certificate that it is invalid and shall request another withholding_exemption certificate from the employee if the employee who submitted the invalid certificate fails to comply with the employer’s request the employer must withhold federal_income_tax from the employee as if the employee were a single_person with no withholding exemptions however if a valid prior certificate is on file it remains controlling a discussion of constitutional issues associated with the requirement to furnish form_w-4 can be found in 707_f2d_978 8th cir cert_denied 464_us_942 drefke furnished forms w-4 in which he claimed exemption from federal income taxes and certified that he had not incurred a liability for federal income taxes in the preceding year he was convicted under sec_7205 of the code of filing false withholding_exemption certificates he argued that sec_7205 giving rise to his conviction constituted punishment for failure to give self- incriminating information the eighth circuit stated that the fifth_amendment right against self-incrimination does not authorize individuals to refuse to disclose information concerning their income an individual may be prosecuted under sec_7205 for filing a false withholding_exemption certificate or for willfully failing to supply information sec_7205 provides any individual required to supply information to his employer under sec_3402 who willfully supplies false or fraudulent information or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under sec_3402 shall in addition to any other penalty provided by law upon conviction thereof be fined not more than dollar_figure or imprisoned not more than one year or both cor-116805-01 also you may be interested in a recent nontax case involving a claim of discrimination based on national origin the district_court in el bey v dialysis clinic inc u s dist lexis empl prac dec cch big_number s d n y ruled that employees have an obligation to furnish forms w-4 and an individual's claim that a prospective employer would not allow the individual to begin working without filling out a form_w-4 does not raise an inference of discrimination the district_court further held that there was no legal basis to conclude that the individual's status as a moorish- american granted him the right under the ninth amendment -- or any other provision in the united_states constitution -- not to fill out a form_w-4 in summary an employee who refuses to provide an employer with a valid certificate will be subject_to income_tax_withholding as a single_person with no withholding exemptions voluntary withholding the employer and employee can also agree that the employer will withhold federal income taxes from payments for services that do not constitute wages such as domestic_service see sec_3402 p of the code form_w-4 is used to request and change voluntary withholding from these payments an individual may request the employer to discontinue voluntary withholding from these payments by giving the employer notice in writing in addition if an individual receives certain government payments the individual may have federal_income_tax withheld at the payee's request federal_income_tax is withheld from unemployment_compensation social_security_benefits and certain other federal payments as if the payments were wages see sec_3402 and of the code form w-4v voluntary withholding request is used to request change or discontinue voluntary withholding from these payments a copy of form w-4v is enclosed the regulations set forth in sec_31_3402_p_-1 provide the procedures for making voluntary withholding agreements on certain nonwage payments the rules concerning voluntary withholding and the termination of such withholding do not apply to withholding on wages thus reliance on sec_31_3402_p_-1 as a basis of terminating withholding on wages is inappropriate this letter provides general information only it describes well-established interpretations or principles of tax law without applying them to a specific set of facts it is advisory only and has no binding effect with the internal_revenue_service this letter is intended only to provide you with general guidance for determining how to comply with applicable law cor-116805-01 we hope this information is useful to you if you have any further questions please contact margaret owens employee id at sincerely michael a swim chief employment_tax branch office of the assistant chief_counsel exempt_organizations employment_tax government entities enclosures form_w-4 form w-4v


t c summary opinion united_states tax_court ollie marie blade petitioner v commissioner of internal revenue respondent docket no 342-09s filed date ollie marie blade pro_se melanie e senick for respondent dean 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 reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year at issue and rule references are to the tax_court rules_of_practice and procedure respondent determined for a deficiency in petitioner’s federal_income_tax of dollar_figure respondent also determined that petitioner had additional unreported federal withholding taxes of dollar_figure the credit under sec_31 for withholding_tax payments is specifically excluded from the computation of a deficiency sec_6211 once a decision is entered the withholding_tax will however be treated as a credit against petitioner’s ultimate tax_liability reducing it dollar-for-dollar see sec_31 the statutory notice includes adjustments for petitioner’s failure to include in income_interest of dollar_figure capital_gain dividends of dollar_figure taxable dividends of dollar_figure and wages of dollar_figure and for the 10-percent additional tax on early distributions from qualified_retirement_plans after the notice was issued petitioner submitted to respondent four successive form sec_1040x amended u s individual_income_tax_return petitioner reported on the form sec_1040x capital_gain dividends of dollar_figure tax-exempt_interest and tax exempt_interest and dividends of dollar_figure wages of dollar_figure and the 10-percent additional tax on early distributions from qualified_retirement_plans which she claimed as a credit after concessions by petitioner the issue remaining for decision is whether the 10-percent additional tax on early distributions from qualified_retirement_plans is deductible on petitioner’s federal_income_tax return as no fact is in dispute on whom the burden_of_proof rests is not relevant in this case see rule a 290_us_111 see also sec_7491 petitioner argues that the penalty for early withdrawal is deductible on her federal_income_tax return her stated authority for claiming the deduction is the tax_return itself petitioner points to line of form_1040 u s individual_income_tax_return line is in the section of the return where subtractions from gross_income are computed to arrive at adjusted_gross_income line allows a deduction from gross_income for penalty on early withdrawal of savings the line deduction is authorized by sec_62 adjusted_gross_income defined sec_62 provides for a deduction from gross_income for amounts forfeited to a bank savings and loan association or similar institution as a penalty for premature withdrawal of 1the court considers petitioner to have conceded respondent’s determinations to the extent not explicitly conceded on the form sec_1040x because she provided neither argument nor evidence on the issues at trial see 100_tc_367 96_tc_226 91_tc_524 ndollar_figure funds from a time savings account certificate of deposit or similar deposit the sec_72 10-percent additional tax2 on early distributions from qualified_retirement_plans is not the penalty for premature withdrawal described in sec_62 sec_72 provides in the case of an early withdrawal from a qualified_retirement_plan for an increase in the taxpayer’s income_tax by an amount of percent of the portion of the distribution that is includable in the taxpayer’s income the sec_72 amount is payable to the u s government and not forfeited to a bank savings and loan association or similar institution as a penalty for premature withdrawal of funds from a time savings account certificate of deposit or similar deposit petitioner may not deduct the additional tax due under sec_72 on her federal_income_tax return to reflect the foregoing decision will be entered for respondent 2whether or not the sec_72 10-percent additional tax is a penalty or additional_amount for which respondent would have the burden of production under sec_7491 he met that burden by showing petitioner was not when she received the distribution see milner v commissioner tcmemo_2004_111 n


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 corp b03 plr-145235-06 date date ------------------------------ ------------------------------------ ------------------------------------- ----------------------------------------- legend legend parent -------------------------------------------------------------------- ------------------------------------------------------------------------------ purchaser -------------------------------------------------------- purchaser --------------------------------------------------------- purchaser ---------------------------------------------------------- purchaser ----------------------------------------------------------- purchaser ----------------------------------------------------- seller ------------------------------------------------------------ sub ------------------------------------------------------------------------------ sub -------------------------------------------------------------------------------------------------- ------------------------------------------------ --------------------------------------------- -------------------------------------------- ----------------------------------------- ------------------------------------ ------------------------------------------------------------- -------------------------------------------------------- --------------------------- plr-145235-06 sub ---------------------------------------------------------------------------------------------- sub ------------------------------------------------------------------------------ sub ----------------------------------------------------------- sub --------------------------------------------------------------- llc x ---------------------------------------------------------------------------------------------- llc y ---------------------------------------------------------------------------------------------- target 1a --------------------------------------------------------------------- --------------------------------------------- ------------------------------------- -------------------------------- ------------------------------- -------------------------------------------------- ---------------------------------- ----------------------------------------- ------------------------------------------------------------ target 1a affiliates ------------------------------------------------------ ----------------------------------------------------------- target 1b -------------------------------------------------------------------- ----------------------------------------------------------------------------------------- target 1b affiliates -------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------- ---------------------------------------------------------------------------------- ---------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------- ----------------------------------------------------------------------- ------------------------------------- plr-145235-06 --------------------------------------------------------------------------------------- ------------------------------------------------------ ---------------------------------------------------- --------------------------------------------------------------------------------------- ---------------------------------------------------------------- ----------------------------------------------------------------------------------- -------------------------------------------------------- ---------------------------------------------------------------------------------- --------------------------------------------------------- ------------------------------------------------------------------------------------ -------------------------------------------------------- ------------------------------------------------------------------------------------------ ------------------------------------------------------------ target 1c -------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- target 1c affiliates ----------------------------------------------------------- -------------------------------------------------------------------------------------------- --------------------------------------------------------------- ------------------------------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------- ------------------------------------------------------------------------------- -------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------ ---------------------------------------------- -------------------------- --------------------------- plr-145235-06 ----------------------------------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------------------------------------ target --------------------------------------------------------- target --------------------------------------------------------- target ---------------------------------------------------------- target ----------------------------------------------------------- target 6a ----------------------------------------------------- target 6b ----------------------------------------------------- date a date b date c date d company official ---------------------------------------- ----------------------------------- ------------------------------ -------------------------- ------------------------ ---------------------- ------------------ ------------------------------------------------------------------------ ------------------------------------------------------------ ----------------------------------------------------------------- tax professional dear ------------- this letter responds to a letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election parent on its own behalf and as united_states_shareholder of purchaser purchaser purchaser purchaser and purchaser the foreign purchasing corporations is plr-145235-06 requesting an extension to file a sec_338 election under sec_338 sometimes hereinafter referred to as the election with respect to parent’s and the foreign purchasing corporations’ acquisitions of the stock of target 1a affiliates target 1b affiliates target 1c affiliates target target target target target 6a and target 6b all foreign_corporations sometimes hereinafter referred to as the targets on date c the material information is summarized below seller a foreign_corporation owned all of the stock of sub a domestic_corporation and all of the interests of sub an entity disregarded as separate from its owner for federal_income_tax purposes sub owned all of the interests in target 1a an entity disregarded as separate from its owner and owned all the interests in sub an entity disregarded as separate from its owner sub also owned a ------ interest in target 1b a domestic general_partnership with sub owning the remaining ------ interest and a -- ------ interest in target a foreign_corporation sub owns the remaining ------ interest in target target 1a owned all of the stock of target and all of the stock of target 1a affiliates two foreign_corporations target 1b owned all of the stock of target and all of the stock of target 1b affiliates sub owned all of the interests in target 1c an entity disregarded as separate from its owner for federal_income_tax purposes and all of the stock of sub a domestic_corporation and a ------ interest in target with sub owning the remaining ------ target 1c owned all of the stock of target and all of the stock of target 1c affiliates sub owned all of the stock of target 6a and target 6b on date a seller and llc x entered into a purchase agreement for llc x to purchase the stock of certain domestic and foreign subsidiaries of seller after entering into the agreement llc x formed llc y an entity disregarded as separate from its owner for federal tax purposes llc y subsequently formed parent a domestic_corporation on date b llc x assigned its rights and obligations under the purchase agreement to parent parent then incorporated purchaser purchaser purchaser sub a foreign_corporation and purchaser sub then formed purchaser finally parent contributed its shares of purchaser to sub a newly incorporated foreign_corporation parent and the members of its affiliated_group file a consolidated federal_income_tax return on date c purchaser acquired all of the stock of target from target 1b in exchange for cash purchaser acquired all of the stock of target from target 1a in exchange for cash purchaser acquired all of the stock of target from sub and sub in exchange for cash purchaser acquired all of the stock of target from target 1c in exchange for cash purchaser acquired all of the stock of target 6a and 6b from sub in exchange for stock target 1a target 1b and target 1c distributed the proceeds from the sales to their respective owners parent then acquired all of the equity interests in target 1a target 1b and target 1c for cash which included target plr-145235-06 1a affiliates target 1b affiliates and target 1c affiliates respectively it is represented that parent’s and the foreign purchasing corporations’ acquisition of the stock of targets qualified as a qualified_stock_purchase as defined in sec_338 target 1a affiliates target 1b affiliates target 1c affiliates target target target target target 6a and target 6b were controlled_foreign_corporations during their taxable_year that ends on the acquisition_date but they were not passive foreign investment companies or foreign_personal_holding_companies during their taxable_year that ends on the acquisition_date the foreign purchasing corporations are controlled_foreign_corporation as defined in sec_957 taking into account sec_953 and are not required under sec_1_6012-2 other than sec_1_6012-2 to file a united_states income_tax return for its taxable_year that includes the acquisition_date parent intended to file the election the election was due on date d but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for parent’s or target 1a affiliates target 1b affiliates target 1c affiliates target target target target target 6a or target 6b taxable years in which the acquisition occurred the taxable years in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections 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 in this case the time for filing the election is fixed by the regulations ie sec_1_338-2 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an plr-145235-06 extension of time for parent to file the election provided parent acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the government will not be prejudiced if relief is granted see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for parent to file the election with respect to the acquisition of the stock of target 1a affiliates target 1b affiliates target 1c affiliates target target target target target 6a and target 6b as described above within days of the date on this letter parent must file the election on form_8023 in accordance with sec_1_338-2 and e and the instructions to the form a copy of this letter must be attached to form_8023 within days of the date on this letter all relevant parties must file or amend as applicable all returns and amended returns if any necessary to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year a copy of this letter and a copy of form_8883 must be attached to any relevant tax returns alternatively instead of attaching a copy of this letter to the returns taxpayers filing their returns electronically may attach a statement to the return that provides the date and control number of the letter_ruling the above extension of time is conditioned on the taxpayers' parent’s consolidated group’s and target 1a affiliates’ target 1b affiliates’ target 1c affiliates’ target 2’s target 3’s target 4’s target 5’s target 6a’s and target 6b’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 plr-145235-06 we express no opinion as to whether the acquisition of the targets stock qualifies as a qualified_stock_purchase under sec_338 or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely ____________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


t c summary opinion united_states tax_court billie booker petitioner v commissioner of internal revenue respondent docket no 2813-01s filed date billie booker pro_se ronald t jordan for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that the petition was filed unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency in petitioner's federal_income_tax of dollar_figure for the issues for decision are whether petitioner is entitled to dependency_exemption deductions whether petitioner is entitled to earned_income credits and whether petitioner is entitled to head_of_household filing_status background some of the facts have been stipulated and are so found the stipulations of fact and exhibits received into evidence are incorporated herein by reference at the time the petition in this case was filed petitioner resided in fort wayne indiana petitioner's cousin ms angie d booker ms booker is the mother of contrille booker contrille petitioner's twin sister ms beverly booker-smith ms booker-smith is the mother of brandon booker brandon petitioner timely filed her electronic federal_income_tax return as head_of_household and reported income of dollar_figure petitioner claimed dependency_exemption deductions for contrille and brandon as well as earned_income credits relating to the children the return states that the children are petitioner's sons petitioner provided written statements from ms booker and ms booker-smith stating that they each had given petitioner permission to care for their children and to claim those children as dependents respondent issued a notice_of_deficiency determining that petitioner is not entitled to claim head_of_household filing_status dependency_exemption deductions or earned_income credits for because she failed to substantiate her claims discussion deductions are a matter of legislative grace and taxpayers must maintain adequate_records to substantiate the amount of any deductions or credits claimed sec_6001 503_us_79 sec_1_6001-1 income_tax regs taxpayers generally bear the burden of proving that the commissioner’s determinations are incorrect rule a 290_us_111 sec_7491 does not apply because petitioner has failed to substantiate her deductions and provide credible_evidence dependency_exemption deductions sec_151 allows a taxpayer to deduct an exemption_amount for each dependent as defined in sec_152 as relevant here sec_152 defines a dependent to include a son or daughter of a sibling of the taxpayer or an individual other than a spouse whose principal_place_of_abode is the home of the taxpayer and who is a member of the taxpayer's household over half of whose support for the calendar_year in which the taxable_year of the taxpayer begins was received from the taxpayer or is treated under subsection c or e as received from the taxpayer to qualify for a dependency_exemption deduction a taxpayer must establish the total support cost expended on behalf of a claimed dependent from all sources for the year and demonstrate that she provided over half of this amount see 73_tc_963 56_tc_512 sec_1_152-1 income_tax regs the term support includes food shelter clothing medical and dental care education and the like sec_1_152-1 income_tax regs the total amount of support for each claimed dependent furnished by all sources during the year in issue must be established by competent evidence blanco v commissioner supra pincite sec_1_152-1 income_tax regs the amount of support that the claimed dependent received from the taxpayer is compared to the total amount of support the claimed dependent received from all sources sec_1_152-1 income_tax regs petitioner testified that contrille and brandon lived with her for the entire year and that she took care of the household and paid all the bills petitioner did not provide any evidence at all regarding any amounts she may have expended to care for contrille or brandon the court sustains respondent's determination that petitioner is not entitled to dependency_exemption deductions for contrille and brandon in head_of_household filing_status sec_1 imposes a special tax_rate on individuals filing as head_of_household as relevant herein sec_2 defines a head_of_household as an unmarried individual who maintains as her home a household that for more than one-half of the taxable_year constitutes the principal_place_of_abode of a person who is a dependent of the taxpayer if the taxpayer is entitled to a deduction for the taxable_year for that dependent under sec_151 respondent determined that petitioner is not entitled to sec_151 dependency_exemption deductions for contrille and brandon in the court has sustained respondent's determination regarding the sec_151 deductions that holding is dispositive of this issue and as a result the court sustains respondent's determination that petitioner is not entitled to claim head_of_household filing_status for earned_income_credit sec_32 allows an eligible_individual an earned_income_credit against the individual's income_tax_liability an eligible_individual is any individual who either has a qualifying_child as defined by sec_32 or has no qualifying_child and meets the requirements of sec_32 merriweather v commissioner tcmemo_2002_ briggsdaniels v commissioner tcmemo_2001_321 a qualifying_child is one who satisfies a relationship_test a residency test an age_test and an identification requirement see sec_32 under the relationship_test the qualifying_child must be a son or daughter a stepson or stepdaughter or a foster_child of the taxpayer see sec_32 for the taxable_year in issue contrille and brandon were not the children or stepchildren of petitioner and thus would need to be eligible foster children to be petitioner's qualifying children the term eligible_foster_child means an individual who the taxpayer cares for as her own child and who has the same principal_place_of_abode as the taxpayer for the taxpayer's entire taxable_year sec_32 neither the code nor the regulations define how a taxpayer cares for an individual as his or her own child this court has indicated that merely contributing financially to the support of an individual does not rise to the level of caring for the individual as one's own child see mares v commissioner tcmemo_2001_216 smith v commissioner tcmemo_1997_544 there is not sufficient evidence in the record indicating that petitioner cared for contrille and brandon as her own children there were other members of petitioner's household including brandon's own mother mrs booker-smith and petitioner's mother who were available to care for him see perez v commissioner tcmemo_1998_442 petitioner has also failed to offer evidence sufficient to show that her residence was the principal_place_of_abode for the children she did not have legal custody of the children nor did she offer any documentation corroborating that they lived in her household during any part of the year in issue accordingly the court finds that the children were not the foster children of petitioner because petitioner has failed to meet the relationship_test under sec_32 it is not necessary to analyze the remaining factors of sec_32 a taxpayer with no qualifying children may be eligible for the earned_income_credit subject_to among other things the phaseout limitations of sec_32 merriweather v commissioner supra briggsdaniels v commissioner supra for the earned_income_credit is completely phased out under sec_32 for a taxpayer with no qualifying children if the taxpayer's earned_income and adjusted_gross_income is over dollar_figure see sec_32 and b see also revproc_96_59 1996_2_cb_392 petitioner's earned_income and adjusted_gross_income for was dollar_figure therefore petitioner is not entitled to claim an earned_income_credit for reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


department of the treasury internal_revenue_service washington d c ul stiff fh tax exempt and cover non uics legend taxpayer a taxpayer b taxpayer c date date date date tra x company m state n county o sum dear ms this is in response to the request for letter rulings under sec_401 and sec_408 of the internal_revenue_code submitted on your behalf by your authorized representative the request for letter rulings is based on the following facts and representations taxpayer a whose date of birth was date died testate on date at age having reached his required_beginning_date as that term is defined in sec_401 of the internal_revenue_code taxpayer a was survived by three children page including taxpayer b and taxpayer c taxpayer b taxpayer a’s daughter was alive as of the date of this ruling_request as of his date of death taxpayer a was the owner of an individual_retirement_arrangement ira x maintained with company m ira x has a value of approximately sum taxpayer a’s last will and testament dated date was duly admitted to probate in county o state n item four of taxpayer a’s last will and testament provides for the outright distribution of taxpayer a’s estate to his three children in equal shares on date taxpayer c taxpayer a’s son was appointed sole executor of taxpayer a’s estate taxpayer a did not designate a beneficiary of his ira x thus taxpayer a’s estate is the beneficiary thereof taxpayer b proposes to transfer by means of a trustee to trustee transfer her one third interest in taxpayer a’s ira x into a separate ira titled taxpayer a deceased ira f b o taxpayer b beneficiary thereof’ taxpayer b then proposes to receive code sec_401 minimum required distributions from her beneficiary ira beginning in calendar_year over taxpayer a’s remaining life expectancy based on the above facts and representations you through your authorized representative request the following letter rulings that taxpayer b’s one-third interest of taxpayer a’s ira x can be segregated and held in a separate ira for purposes of determining taxpayer b’s code sec_401 minimum required distributions that the ira created by means of a trustee to trustee transfer which will be titled taxpayer a deceased f b o taxpayer b beneficiary thereof’ constitutes an inherited ira under code sec_408 that taxpayer b may receive code sec_401 required distributions from the ira set up in the name of taxpayer a for her benefit over taxpayer a’s remaining life expectancy using the age of taxpayer a as of taxpayer a’s birthday in the calendar_year of taxpayer a’s death reduced by one for each calendar_year pursuant to sec_1_401_a_9_-5 of the final income_tax regulations question and answer a and that the transfer of taxpayer b’s one third interest in taxpayer a’s ira x to the above described beneficiary ira will not constitute a taxable_distribution page within the meaning of code sec_408 to taxpayer b and does not constitute a rollover as that term is used in code sec_408 with respect to your ruling requests code sec_408 provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit an ira trust is maintained code sec_401 provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee- i ii will be distributed to such employee not later than the required_beginning_date or will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary code sec_401g provides in general that if a plan participant ira holder dies after the distribution of his interest has begun in accordance with subparagraph a gi after his required_beginning_date the remaining portion of his interest must be distributed at least as rapidly as under the method of distribution being used under subparagraph a ii as of the date of death sec_401 of the code provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the ira holder attains age with respect to your ruling requests final income_tax regulations under code sec_401 and sec_408 were published in the federal_register pincite federal_register date and in the internal_revenue_bulletin pincite_19_irb_852 date the preamble to the final regulations in relevant part provide that the regulations apply for determining required minimum distributions for calendar years beginning after date sec_1_401_a_9_-4 of the final regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee’s or ira holder’s death generally an employee’s designated_beneficiary will be determined based on the beneficiaries designated as of the date of page death who remain beneficiaries as of september of the calendar_year following the calendar_year of death sec_1_401_a_9_-4 of the final regulations q a-3 provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate may not be a designated_beneficiary however q a-5 of sec_1_401_a_9_-4 provides that beneficiaries of a_trust with respect to the trust's interest in an employee's benefit may be treated as designated beneficiaries if the following requirements are met sec_1_401_a_9_-5 of the final regulations q a-5 a provides in summary that if an employee dies on or after his required_beginning_date without having designated a beneficiary then post-death distributions must be made over the remaining life expectancy of the employee determined in accordance with paragraph c of this a-5 sec_1_401_a_9_-5 of the final regulations q a-5 c provides in general that with respect to an employee who does not have a designated_beneficiary the applicable distribution period measured by the employee’s remaining life expectancy is the life expectancy of the employee using the age of the employee as of the employee’s - birthday in the calendar_year of the employee’s death in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after the calendar_year of the employee’s death sec_1_401_a_9_-9 of the final regulations q a-1 provides the relevant single life expectancy table sec_1_401_a_9_-8 of the final regulations q a-2 a provides the separate_account rules with respect to defined contribution plans a separate_account is an account under which the beneficiary or beneficiaries differ from the beneficiary or beneficiaries of the other accounts in general if separate_accounts are set up for years subsequent to the calendar_year containing the date on which the separate_accounts were established or the date of death if later a separate_account under a plan is not aggregated with the other separate_accounts under the plan in order to determine whether the distributions from such separate_account satisfy the requirements of code sec_401 instead the rules in code sec_401 apply separately to each separate_account under the plan sec_1_401_a_9_-8 of the final regulations q a-3 provides that a separate_account is a separate portion of an employee’s benefit which reflects the separate interest of an employee’s beneficiary under the plan as of the employee’s death for which separate_accounting is maintained the separate_accounting must allocate all post-death investment gains and losses contributions and forfeitures for the period prior to the page establishment of the separate_accounts on a pro-rata basis in a consistent and reasonable manner among the separate_accounts sec_1_401_a_9_-4 of the final regulations q a-5 c provides in relevant part that the separate_account rules are not available to beneficiaries of a_trust with respect to the trust’s interest in an employee’s benefit in like manner the separate_account rules are not available to beneficiaries of an estate with respect to the estate’s interest in an employee’s plan or ira interest code sec_408 provides generally that in accordance with the rules of sec_72 amounts paid or distributed from an ira are included in the gross_income by the payee or distributee code sec_408 provides generally that amounts from an inherited ira cannot be rolled over into another ira in general an inherited ira is an ira maintained by an individual who acquired said ira by reason of the death of another if the acquiring individual is not the surviving_spouse of said other individual in this case as noted above taxpayer b is taxpayer a’s daughter - revrul_78_406 1978_2_cb_157 provides that the direct transfer of funds from one ira trustee to another ira trustee even if at the behest of the ira holder does not constitute a payment or distribution to a participant payee or distributee as those terms are used in code sec_408 furthermore such a transfer does not constitute a rollover_distribution finally revrul_78_406 is applicable if the trustee to trustee transfer is directed by the beneficiary of an ira after the death of the ira owner as long as the transferee ira is set up and maintained in the name of the deceased ira owner for the benefit of the beneficiary the issues raised in this ruling_request are whether a beneficiary-daughter of an ira holder may after the death of the ira holder transfer her one-third interest in the deceased’s ira to an ira set up to solely benefit her and whether she may receive distributions from her beneficiary ira over the deceased’s remaining life expectancy without regard to the distribution decisions made by the other ira beneficiaries although neither the code nor the final regulations promulgated under code sec_401 preclude the posthumous division of ira x into more than one ira the final regulations do preclude separate_account treatment for code sec_401 purposes where amounts pass through an estate page in this case absent taxpayer b’s decision to transfer by means of a trustee-to- trustee transfer her one-third interest in taxpayer a’s ira x to her beneficiary ira as described above distributions of the entire ira x interest including taxpayer b’s one- third would have to be made over taxpayer a’s remaining life expectancy in accordance with sec_1_401_a_9_-5 of the final regulations q a-5 c after the trustee to trustee transfer taxpayer b will receive required distributions over taxpayer a’s remaining life expectancy thus the trustee to trustee transfer will have no effect on the timing or amount of minimum required distributions additionally a trustee to trustee transfer as described in revrul_78_406 does not constitute a distribution or payment as those terms are defined for purposes of code sec_408 finally since taxpayer b is taxpayer a’s daughter her interest in taxpayer a’s ira x constitutes an inherited ira as that term is defined in code sec_408 thus based on the specific facts and representations surrounding this ruling_request we conclude as follows that taxpayer b’s one-third interest of taxpayer a’s ira x can be segregated and held in a separate ira for purposes of receiving distributions furthermore with respect to determining over what period of time taxpayer b must receive code sec_401 minimum required distributions see our response to your third letter_ruling request below that the ira created by means of a trustee to trustee transfer which will be titled taxpayer a deceased f b o taxpayer b beneficiary thereof’ constitutes an inherited ira under code sec_408 that taxpayer b may receive code sec_401 required distributions from the ira set up in the name of taxpayer a for her benefit over taxpayer a’s remaining life expectancy using the age of taxpayer a as of taxpayer a’s birthday in the calendar_year of taxpayer a’s death reduced by one for each subsequent calendar_year pursuant to sec_1_401_a_9_-5 of the final income_tax regulations question and answer a and that the transfer of taxpayer b’s one third interest in taxpayer a’s ira x will not constitute a taxable_distribution within the meaning of code sec_408 to taxpayer b and does not constitute a rollover as that term is used in code sec_408 this ruling letter is based on the assumption that ira x and the beneficiary ira created after the trustee to trustee transfer either have met are meeting or will meet the requirements of code sec_408 at all times relevant thereto page pursuant to a power_of_attorney on file with this office the original of this letter_ruling is being sent to your authorized representative this letter is directed only to the taxpayer that requested it and is based solely on the representations made with respect thereto sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours peauep lt porm frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of ruling letter notice of intention to disclose