internal_revenue_service department of the treasury number release date index no p o box ben franklin station washington dc person to contact telephone number refer reply to cc psi - plr-108386-00 date april re legend decedent date spouse son daughter will trust ira1 ira2 ira3 ira4 ira5 ira6 plr-108386-00 plan objection court settlement agreement court order x y z w date year year dear this is in response to a letter dated date and subsequent correspondence requesting rulings regarding the federal gift estate and income_tax consequences of the settlement of a will_contest facts the facts submitted and representations made are as follows decedent died testate on date survived by spouse and by son and daughter adult children from a previous marriage during his life decedent executed a will will and a revocable_trust trust article ii paragraph b of decedent’s will expressly excludes daughter her spouse and her issue from any devise or benefit of any kind under the will and plr-108386-00 disinherits them fully and completely tangible_personal_property passes to spouse and son and the residuary_estate passes to trust article ii paragraph c of trust expressly disinherits daughter her spouse and her issue using the same language employed in the will under the terms of trust at decedent’s death the trust estate is to be divided into a credit trust holding assets equal in value to decedent’s unified_credit equivalent and a qualified_interest trust holding the balance of the trust assets spouse is to receive the net_income of the qualified_interest trust at least annually and any amount of principal the trustee deems advisable for spouse’s care support and maintenance the trustee may consider funds reasonably available to spouse and her accustomed style of life at spouse’s death the remaining assets of the qualified_interest trust pass to son if then living or to son’s then living children article v paragraph e provides that daughter has no interest in the assets of the qualified_interest trust remaining at spouse’s death article viii provides that spouse may compel the conversion of any non-productive property in the qualified_interest trust to productive property decedent’s personal representative or trustee has absolute discretion to make an election under sec_2056 to treat any part of the qualified_interest trust as qualified_terminable_interest_property any part for which an election is not made will be held as a separate trust trust provides that the credit trust is to be distributed outright to son at his death decedent owned six iras ira1 ira2 ira3 ira4 ira5 and ira6 and had an interest in a qualified_retirement_plan plan decedent reached age ½ on date and shortly thereafter began to receive minimum distributions from the iras and plan daughter challenged the validity of will and trust she claimed that son and decedent’s advisors unduly influenced decedent and also claimed that decedent had mistakenly relied on misrepresentations of facts made by son and the advisors as a result of this pending litigation son and spouse each hired attorneys if the claim had been litigated and the court had determined that will and trust were invalid will would have been set_aside and the parties would have been entitled to their intestate shares of decedent's_estate under state laws of intestacy percent to spouse and percent to each of son and daughter after strenuous negotiations spouse son and daughter executed settlement agreement which was approved by court in court order settlement agreement is contingent upon the receipt of a favorable letter_ruling from the internal_revenue_service under settlement agreement the parties agreed to set_aside will and trust plr-108386-00 of decedent’s property other than joint property but including the amounts from the iras and plan y percent will pass to spouse and z percent will pass to son daughter will receive dollar_figurex court in court order indicated that this reflects decedent’s intent on the schedule m of a timely filed federal estate_tax_return decedent’s estate made a protective_election to have the entire date of death value of the qualified_interest trust treated as qualified terminal interest property qtip under sec_2056 of the internal_revenue_code the estate attached a copy of settlement agreement a copy of the estate’s request for a letter_ruling as required under settlement agreement and an additional_estate_tax_return reporting the tax that would be due under the settlement agreement if the agreement becomes effective the estate also submitted a request for an extension to file and paid the estate_tax that would be due if settlement agreement becomes effective the following rulings have been requested the distributions under settlement agreement directly to spouse qualify for the federal estate_tax_marital_deduction under sec_2056 of the internal_revenue_code the distributions to son and daughter under settlement agreement are not gifts by spouse the distributions to spouse son and daughter under settlement agreement rather than under the qualified_interest trust provided under trust will not be a disposition under sec_2519 when spouse receives her share of the proceeds from iras and plan under settlement agreement within days of receiving these proceeds she may roll them over to her own ira under sec_402 and sec_408 law and analysis ruling sec_2056 provides that the value of the taxable_estate shall be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property which passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides that in the case of qualified_terminable_interest_property for purposes of the marital_deduction such property shall be treated as passing to the surviving_spouse and not to any person other than the surviving_spouse sec_2056 provides that the term qualified_terminable_interest_property qtip is property that passes from the decedent in which the surviving plr-108386-00 spouse has a qualifying_income_interest_for_life and to which an election applies a qualifying_income_interest_for_life is defined as the surviving_spouse being entitled to all of the income payable annually or at more frequent intervals and no person having the power to appoint any part of the property to anyone other than the surviving_spouse sec_20_2056_c_-2 of the estate_tax regulations provides that if as a result of a controversy involving the decedent’s will or involving any bequest or devise thereunder a property interest is assigned or surrendered to the surviving_spouse the interest so acquired will be regarded as having passed_from_the_decedent to the surviving_spouse only if the assignment or surrender was a bona_fide recognition of enforceable rights of the surviving_spouse in the decedent’s estate such a bona_fide recognition will be presumed where the assignment or surrender was pursuant to a decision of a local court upon the merits in an adversary proceeding following a genuine and active contest however such a decree will be accepted only to the extent that the court passed upon the facts upon which the deductibility of the property interest depends if the assignment or surrender was pursuant to a decree rendered by consent or pursuant to an agreement not to contest the will or not to probate the will it will not necessarily be accepted as a bona_fide evaluation of the rights of the spouse revrul_66_139 1966_1_cb_225 states that a valid claim by the surviving_spouse to a share in the decedent’s estate made in good_faith and settled as a result of arm’s length negotiations without any court contest will qualify as a bona_fide claim within the meaning of the regulations the ruling holds that where such claim is paid_by the decedent’s estate the payment will qualify for the marital_deduction to the extent that the interest that would have passed to the surviving_spouse as a result of the completed exercise of the spouse’s right ie in a court contest would have been a deductible_interest in 674_f2d_761 9th cir the court held that property distributed to a spouse pursuant to a compromise settlement will be treated as passing from the decedent for marital_deduction purposes only if the distribution represents a good_faith settlement of an enforceable claim relying on 387_us_456 the court stated that e ither a good_faith settlement or a judgment of a lower state court must be based on an enforceable right under state law properly interpreted in order to qualify as ‘passing’ pursuant to the estate_tax_marital_deduction ahmanson foundation v united_states f 2d pincite in view of ahmanson property passing to a spouse or charity pursuant to the settlement of a claim will be treated as passing from the decedent to the extent the compromise is a bona_fide settlement of a legally enforceable claim the claim must be settled pursuant to arm’s length negotiations plr-108386-00 in this case if the litigation had proceeded to judgment there were two possible outcomes the court could have determined that the will and trust were invalid in which case percent of decedent’s estate would have been distributed to spouse and percent each to son and daughter or the court could have determined that the will and trust were valid in which case spouse would have been entitled to her lifetime interests in the qualified_interest trust son would have been entitled to his interests in the qualified_interest trust and the credit trust and daughter would have had no interest in decedent’s estate settlement agreement resulted from a bona_fide adversarial proceeding and was the product of arm’s length negotiations under settlement agreement of decedent’s property other than joint property but including the amounts from the iras and plan spouse will receive y percent outright and son will receive z percent outright daughter will receive dollar_figurex under the agreement spouse will receive in value less than what she would have received if she had been successful in claiming her right to her interests in the qualified_interest trust son will receive less than what he would have received if he had successfully defended his right to his interests in the credit trust and qualified_interest trust daughter will receive less than the intestate share she would have received if successful in litigation we recognize that because of the uncertainty of litigation over the issues presented determining a precisely correct allocation of trust assets in a settlement is difficult we believe that settlement agreement provides an allocation of the estate’s assets that is within a range of reasonable settlements that is the interests to be received by the parties both as to the nature of the interests and their economic value reflect the enforceable rights of the parties consequently the property_passing_to_spouse under settlement agreement passes from decedent for marital_deduction purposes under sec_2056 accordingly based on the representations made and the information submitted we rule that the distributions under settlement agreement directly to spouse qualify for the federal estate_tax_marital_deduction under sec_2056 ruling sec_2501 provides for a gift_tax on the transfer of property by gift sec_2511 provides that the gift_tax imposed by sec_2501 shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible under sec_2512 where property is transferred for less than an adequate_and_full_consideration in money or money’s worth then the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift however under sec_25_2512-8 of the gift_tax regulations a transaction which is bona_fide at arm’s length and free from any donative_intent will be considered as made for an adequate_and_full_consideration in money or money’s worth plr-108386-00 based on the discussion above because the interests to be received by the parties reflect the enforceable rights of the parties and because settlement agreement provides an allocation of the trust assets that is within a range of reasonable settlements settlement agreement is regarded for transfer_tax purposes as properly reflecting the substantive rights of the parties accordingly we rule that the direct distributions to son and daughter under settlement agreement are not gifts by spouse ruling sec_20_2056_b_-7 provides that a protective_election may be made to treat property as qualified_terminable_interest_property only if at the time the federal estate_tax_return is filed the executor of the decedent’s estate reasonably believes that there is a bona_fide issue that concerns whether an asset is includible in the decedent’s gross_estate or the amount or nature of the property the surviving_spouse is entitled to receive ie whether property that is includible is eligible for the qualified_terminable_interest_property election the protective_election must identify either the specific asset group_of_assets or trust to which the election applies and the specific basis for the protective_election sec_20_2056_b_-7 provides that the protective_election once made on the return of tax imposed by sec_2001 cannot be revoked for example if a protective_election is made on the basis that a bona_fide question exists regarding the inclusion of trust corpus in the gross_estate and it is later determined that the trust corpus is so includible the protective_election becomes effective with respect to the trust corpus and cannot thereafter be revoked sec_2519 provides that for purposes of the federal estate and gift_tax any disposition of all or part of a qualifying_income_interest_for_life in any property to which sec_2519 applies will be treated as a transfer of all interests in such property other than the qualifying_income interest sec_2519 provides that sec_2519 applies to any property if a deduction was allowed with respect to the transfer of such property to the donor under sec_2056 by reason of sec_2056 or under sec_2523 by reason of sec_2523 in the present case the effectiveness of settlement agreement is conditioned upon the receipt by decedent’s estate of a favorable ruling letter from the service if an unfavorable letter were issued settlement agreement would not become effective and the qualified_interest trust would be funded but if a favorable letter were issued the qualified_interest trust would not be funded consequently the estate filed a protective qtip_election for the qualified_interest trust indicating that the inclusion of the value of the trust corpus in the gross_estate is conditioned upon the estate’s receipt of a favorable ruling letter as a result of this letter_ruling settlement agreement will become effective and the qualified_interest trust will not be funded thus under sec_20_2056_b_-7 the protective qtip_election will not become effective and for purposes of sec_2519 a deduction will not be allowed to decedent’s estate under section sec_2056 by reason of the estate’s making an election under sec_2056 consequently based on the plr-108386-00 representations made and the information submitted we rule that sec_2519 does not apply in this case and that therefore the distributions to spouse son and daughter under settlement agreement rather than under the qualified_interest trust provided under trust will not be a disposition under sec_2519 ruling decedent became age ½ on date and shortly thereafter began to receive minimum distributions from the iras and from plan sec_401 states that a_trust shall not constitute a qualified_trust unless it provides that if the distribution of the employee’s interest has begun in accordance with sec_401 and the employee dies before his entire_interest has been distributed to him the remaining part of such interest will be distributed at least as rapidly as under the method of distribution being used under sec_401 as of the date of his death under sec_408 a sec_401 applies to iras thus under sec_401 spouse as beneficiary must receive the balance of decedent’s iras at least as rapidly as he was receiving the distributions the facts are not clear as to whether decedent was recalculating his life expectancy or not it does not matter under sec_401 if spouse remains the beneficiary of an interest in decedent’s iras spouse is bound to continue to receive the balance in the iras at least as rapidly as the method that decedent was using sec_408 denies rollover treatment by an individual who inherits an ira sec_408 however does not treat a surviving_spouse of the owner of the ira as having inherited an ira and permits the surviving_spouse to roll over the ira into his or her own ira prior to the changes to the proposed_regulations published in the federal_register on date prop sec_1_408-8 q a-4 provided guidance with respect to a beneficiary spouse who wishes to acquire the ira of his or her deceased spouse that section states in relevant part a-4 q may an individual’s beneficiary elect to treat such beneficiary’s entire_interest in the trust upon the death of the individual or the remaining part of such interest if distribution to the beneficiary has commenced as the beneficiary’s own account a b in the case of an individual dying after december the only beneficiary of the individual who may elect to treat the beneficiary’s entire_interest in the trust or the remaining part of such interest if distribution thereof has commenced to the beneficiary as the beneficiary’s own account is the individual’s surviving_spouse if the surviving_spouse makes such an election the spouse’s interest in the account would then be subject_to the distribution_requirements of sec_401 rather than those of sec_401 an election will be considered to have been made by the surviving_spouse if either of the following occurs any required amounts in the account including any plr-108386-00 amounts that have been rolled over or transferred in accordance with the requirements of sec_408 into an individual_retirement_account or individual_retirement_annuity for the benefit of the surviving_spouse have not been distributed within the appropriate time period applicable to the decedent under sec_401 or any additional_amounts are contributed to the account or to the account or annuity to which the surviving_spouse has rolled such amounts over as described in above which are subject or deemed to be subject_to the distribution_requirements of sec_401 the result of such an election is that the surviving_spouse shall then be considered the individual for whose benefit the trust is maintained further a surviving_spouse who elects to treat an ira of a decedent or a portion thereof as her own becomes the owner of the ira and ceases to be the beneficiary thereof thus as owner she is not subject_to the as least as rapidly rule under sec_401 the surviving_spouse would then be subject_to the minimum_distribution_rules as if the decedent had never existed in this case pursuant to settlement agreement and court order as discussed above spouse is the named beneficiary of a y interest in each of decedent’s iras as such based upon sec_408 and prop sec_1_408-8 q a-4 spouse is eligible to roll over her y interest in decedent’s iras into an ira set up and maintained in her name the minimum distribution provisions under sec_401 apply to plan which is a sec_401 plan distributions from a sec_401 plan are governed by sec_402 sec_402 states that if any distribution attributable to an employee is paid to the spouse of the employee after the employee’s death the preceding provisions of the subsection shall apply to such distribution in the same manner as if the spouse were the employee thus sec_402 through c apply to a surviving_spouse as if he or she were the employee sec_402 defines eligible_rollover_distribution as any distribution to an employee of all or any portion of the balance_to_the_credit of the employee in a qualified_trust except that such term shall not include any distribution which is one of a series of substantially_equal_periodic_payments not less frequently than annually made for the life or life expectancy of the employee or the joint lives or joint life expectancies of the employee and the employee’s designated_beneficiary or for a specified period of ten years or more an eligible_rollover_distribution also does not include any distribution to the extent that such distribution is required under sec_401 q a c of sec_1_402_c_-2 provides the following however a new determination is not made merely because upon the death of the employee the spouse or former spouse of the employee becomes the distributee thus once distributions commence over a period that is at least as long as either the first annuitant’s life or years eg as provided by a life_annuity with a five-year or ten-year certain guarantee then substantially equal plr-108386-00 payments to the survivor are not eligible rollover distributions even though the payment period remaining after the death of the employee is or may be less than the period described in sec_402 for example substantially_equal_periodic_payments made under a life_annuity with a five year term certain would not be an eligible_rollover_distribution even when paid after the death of the employee with three years remaining under the term certain thus if spouse will receive from plan any payments under a term_certain_annuity over a period referenced in q a-5 c above she is not eligible to roll over such amounts q a of sec_1_402_c_-2 provides in relevant part similarly if an employee’s surviving_spouse receives a survivor life_annuity of dollar_figure per month plus a single payment on account of death of dollar_figure the single payment is treated as independent of the payments in the annuity and is an eligible_rollover_distribution unless otherwise excepted it is not clear how spouse will receive payments from plan however as noted above any type of fixed annuity over a period referenced in q a-5 c above that she receives will not be eligible for rollover treatment q a of sec_1_402_c_-2 states except as provided in paragraphs b and c of this q a if a minimum distribution is required for a calendar_year the amounts distributed during that calendar_year are treated as required minimum distributions under sec_401 to the extent that the total required_minimum_distribution under sec_401 for the calendar_year has not been satisfied accordingly these amounts are not eligible rollover distributions for example if an employee is required under sec_401 to receive a required_minimum_distribution for a calendar_year of dollar_figure and the employee receives a total of dollar_figure in that year the first dollar_figure distributed will be treated as the required_minimum_distribution and will not be an eligible_rollover_distribution and the remaining dollar_figure will be an eligible_rollover_distribution if otherwise qualified it is not clear if there have been any distributions from plan in year and year the minimum distributions for these two years must be made furthermore except as noted above the remaining amount can be rolled over by spouse into her own ira thus for example if spouse intends to receive a single sum distribution during calendar_year of her full y interest in decedent’s plan account she may roll over the entire single sum to the extent it exceeds the sec_401 required_distribution for calendar_year except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code plr-108386-00 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours associate chief_counsel passthroughs and special industries by james f hogan assistant to the chief branch enclosure copy for sec_6110 purposes


t c memo united_states tax_court bella vista chiropractic trust robert hogue trustee petitioner v commissioner of internal revenue respondent docket no filed date jeremy l mcpherson and melinda g williams for respondent memorandum opinion dawson judge this case was assigned to special_trial_judge robert n armen jr pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_183 the court agrees with and adopts the opinion of the special_trial_judge which is set forth below unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure - - opinion of the special_trial_judge armen special_trial_judge this matter is before the court on respondent’s motion to dismiss for lack of jurisdiction as supplemented respondent maintains that the petition was not filed by a trustee authorized to bring suit on behalf of bella vista chiropractic trust bella vista bella vista opposes respondent’s motion to dismiss as discussed in detail below we shall grant respondent’s motion as supplemented and dismiss this case for lack of jurisdiction background a notice_of_deficiency respondent issued a notice_of_deficiency to bella vista determining deficiencies in its federal income taxes and accuracy-related_penalties under sec_6662 as follows year deficiency accuracy--related penalty dollar_figure dollar_figure big_number big_number the deficiencies in income taxes are based on the disallowance of deductions claimed by bella vista on schedules c profit or loss from business in this regard respondent determined that the deductions use of the terms trust and trustee and their derivatives are intended for narrative convenience only thus no inference should be drawn from our use of such terms regarding any legal status or relationship are disallowed because you failed to establish the amount if any that was paid during the taxable_year for ordinary and necessary business_expenses and you failed to establish the cost or other basis of the property claimed to have been used in business b petition the court subsequently received and filed a petition for redetermination challenging the notice_of_deficiency the petition was signed by robert hogue as bella vista’s purported trustee paragraph of the petition which sets forth the bases on which bella vista challenges the notice_of_deficiency alleges as follows the district_director issued a statutory_notice_of_deficiency claiming petitioner had a tax_liability without there being a statutorily procedural correct lawful tax_assessment attached to the notice_of_deficiency irs form 4549-a income_tax examination changes line states total corrected tax_liability respondent has failed to provide the petitioners sic with the internal_revenue_code section or regulation that was used to calculate this total corrected tax_liability the respondent has failed to provide the petitioners sic with certified assessment information as per internal revenue regulation respondent has failed to identify the individual who will certify to the tax adjustments the determination was based on therefore the deficiency is unenforceable as the determination was based on unfounded evidence there can be no meaningful administrative hearing until respondent provides petitioner with the above requested information and until that time petitioner will disagree with all of the alleged tax_liability there has been no meaningful examination of books_and_records therefore we believe this is a naked assessment q4e- c respondent’s motion and supplement respondent filed a motion to dismiss for lack of jurisdiction in the motion respondent asserts that this case should be dismissed for lack of jurisdiction on the ground that the petition was not filed by a trustee authorized to bring suit on behalf of the trust upon the filing of respondent’s motion to dismiss the court issued an order directing bella vista to file an objection if any to respondent’s motion taking into account rule and attaching to its objection a copy of the trust instrument or other documentation showing that the petition was filed on behalf of a fiduciary legally entitled to institute a case on bella vista’s behalf shortly after the issuance of the foregoing order respondent filed a supplement to respondent’s motion to dismiss attaching thereto copies of certain documents that respondent had just received from robert hogue the court then extended the time within which bella vista was to file any objection to respondent’s motion to dismiss as supplemented d bella vista’s objection ultimately the court received an objection leave for the filing of which was granted to respondent’s motion to dismiss as supplemented the objection which was signed by robert hogue has as its core thesis that this case should be --- - dismissed for lack of subject matter jurisdiction on the grounds that the notice_of_deficiency issued by respondent was issued on heresay sic evidence petitioner demands that respondent provide certified facts or evidence of a statutory correct assessment or tax_liability to support any claimed deficiency lacking a statutory correct assessment or tax_liability the notice_of_deficiency is null and void and this court does not have subject matter jurisdiction the objection also states that robert hogue has authority to represent the trust in this matter attached to the objection are copies of two purported trust instruments the first purported trust instrument is dated date and it identifies e e salera d c as the creator of bella vista chiropractic clinic trust this instrument states that the trust shall have at least two trustees although the instrument identifies a michael welch and an edmond a salera as the trustees only michael welch purportedly executed the document accepting his appointment as a trustee in contrast there is nothing in the document or otherwise in the record demonstrating that edmond a salera purported to accept his appointment as a trustee e e salera also known as edmond e salera has a case pending before the court assigned docket no it appears that the letters d c following his name in the purported trust instrument are an abbreviation for doctor of chiropractic the record indicates that bella vista chiropractic clinic trust and bella vista chiropractic trust are one and the same -- - the second purported trust instrument is dated date and it identifies a carol ruthenberg as the creator or sovereign creator of bella vista chiropractic trust and robert hogue as legal trustee or sovereign trustee notwithstanding its date of date the instrument identifies as an article of personal_property subject_to the trust one honda accord lic 4kmx emphasis added the instrument also states that there need not be more than one trustee both purported trust instruments represent that they were executed within the state of california and that california state law is controlling eb respondent’s response at the court’s direction respondent filed a response to the foregoing objection simultaneously respondent filed a declaration attaching thereto inter alia copies of form sec_1041 u s income_tax return for estates and trusts filed in the name of bella vista chiropractic trust for and these returns which were executed by robert hogue on date and date respectively list the date the entity was created as date f bella vista’s failure to reply after considering respondent’s response and declaration the court directed bella vista to file a reply bella vista failed to do so g hearings on respondent’s motion this matter was called for hearing at the court’s motions sessions held in washington d c on date and date counsel for respondent appeared at the hearings and offered argument and evidence in support of respondent’s motion to dismiss as supplemented there was no appearance by or on behalf of bella vista at either hearing nor did bella vista file any written_statement pursuant to rule c discussion according to respondent bella vista failed to show that robert hogue is its duly appointed trustee respondent asserts that as a result no valid petition has been filed and the court must dismiss this case for lack of jurisdiction we agree it is well settled that the taxpayer has the burden of proving the court’s jurisdiction by affirmatively establishing all facts giving rise to our jurisdiction see patz trust v commissioner 69_tc_497 65_tc_346 35_tc_177 27_tc_837 furthermore unless the petition is filed by the taxpayer or by someone lawfully authorized to act on the taxpayer's behalf we are without jurisdiction see fehrs v commissioner supra pincite rule a requires that a case be brought by and in the name of the person against whom the commissioner determined the deficiency or by and with the full descriptive name of the fiduciary entitled to institute a case on behalf of such person rule c states that the capacity of a fiduciary or other representative to litigate in the court shall be determined in accordance with the law of the jurisdiction from which such person's authority is derived the record shows that california state law is controlling in this case under california law a trustee is authorized to commence litigation on behalf of a_trust cal prob code sec west supp however bella vista has failed to provide the court with the documentary_evidence necessary to support its contention that robert hogue was vested with authority to institute this action on its behalf as it pertains to the guestion of robert hogue’s status as a duly appointed trustee of bella vista the record in this case is at best muddled as previously discussed bella vista presented the court with two versions of the purported trust instrument the first document dated date identifies e e salera d c as creator and a michael welch and an edmond a salera as trustees the second document dated date --- - identifies a carol ruthenberg as creator and robert hogue as trustee significantly bella vista made no attempt to explain the patent discrepancies in the two purported trust documents----particularly the change in identity of the trust creator and the change in identity of the trustees we note further that although the version of the trust instrument required a minimum of two trustees the version required only one trustee in the absence of any persuasive basis for concluding that robert hogue was duly appointed as the trustee of bella vista we shall dismiss this case for lack of jurisdiction consistent with respondent’s motion as supplemented robert hogue has filed numerous petitions with the court on behalf of various so-called trusts as is the case here those petitions were dismissed on the ground they were not filed by a proper party see remedios chiropractic clinic trust robert hogue legal tr docket no jrep trust robert hogue tr v commissioner docket no 9795-01l perj trust robert hogue tr v commissioner docket no 9794-o1l r r trust robert hogue tr v commissioner docket no 7379-01s family chiropractic trust robert hogue tr v commissioner docket no perj trust robert hogue tr v commissioner docket no jrep trust robert hogue tr v commissioner docket no marfran trust robert hogue legal tr v commissioner docket no 12427-00s remedios chiropractic clinic trust robert hogue legal tr v commissioner docket no blr-slr trust robert hogue legal tr v commissioner docket no 12425-00s rancho residential facility trust robert hogue tr v commissioner docket no residential mgmt servs trust robert hogue tr v commissioner docket no home health servs trust robert hogue tr v commissioner docket no sunshine trust robert hogue tr v commissioner docket no residential mgmt servs trust robert hogue tr v continued -- - all of the arguments and contentions that have not been analyzed herein have been considered but do not require any further discussion in order to give effect to the foregoing an appropriate order will be entered continued commissioner docket no filed as tcmemo_2001_297


internal rev2nue service_department of the treasury washington dc contact person j oo a ose telephone number retsens bor date nov iggg e i n uil legend i e b i dear sir or madam this is in response to a ruling_request dated date submitted on your behalf by your authorized representatives you are seeking rulings on the federal_income_tax consequences of a proposed transaction as more fully set forth below x is a for-profit corporation whose common_stock is publicly held and traded x is the common parent of an affiliated_group_of_corporations filing consolidated federal_income_tax together with its affiliates maintains its consolidated books_and_records and files its consolidated tax returns on the accrual basis with a december taxable_year end through unrelated mergers v and w became members of x‘s affiliated_group_of_corporations returns xx is a non-profit corporation that has been recognized as exempt from federal_income_tax under sec_501 of the internal_revenue_code and as a private_foundation described in sec_509 x is is a disqualified_person with respect to y pursuant to sec_4946 a substantial_contributor to and as such makes grants in accordance with its charitable purpose and targets though not exclusively programs relating to certain areas of health care children’s issues quality of life self- sufficiency culture and arts x has recently pledged the option to y which provides y with an option to purchase shares of x common_stock at an option_price representing the closing price of a share of common_stock on the date that the pledge of the option was made the option is exercisable in whole or in part at any time and from time to time during the period specified in the stock_option pledge agreement y may transfer and assign the option or any portion thereof only to one or more unrelated charitable organizations described in sec_170 and sec_501 of the code the transferee may not transfer or assign the option or any portion thereof without the written consent of x it is expected that y will transfer the option to an unrelated charitable_organization and that the unrelated charitable_organization transferee will pay to y option equal to the difference between the fair_market_value of the common_stock subject_to the option on the date of the transfer and the exercise price of the option less an agreed upon discount it is represented that these terms will be negotiated at arms-length it unrelated charitable_organization transferee will thereafter exercise the option prior to its expiration is further expected that the a price for the it is further represented that the business_purpose of the pledge of the option is to further the charitable purposes of y and other charitable organizations sec_4941 of the code imposes a tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 of the code provides that the term self-dealing includes any lending of money or other extension of credit between a private_foundation and a disqualified_person sec_53_4941_d_-2 of the foundation and similar excise_taxes regulations provides that the making of a promise pledge or similar arrangement to a private_foundation by a disqualified_person whether evidenced by an oral or written_agreement a promissory note or other instrument of w w t s w e h t y o indebtedness to the extent motivated by charitable intent and unsupported by consideration is not an extension of credit within the meaning of this paragraph before the date of maturity sec_53_4941_d_-1 of the regulations provides that the term indirect self-dealing includes any transaction between a disqualified_person and an organization controlled by a private_foundation within the meaning of sec_53_4941_d_-1 sec_53_4941_d_-1 of the regulations provides that the foundation or one of its foundation for purposes relative to acts of indirect self-dealing under sec_4941 of the code two basic tests for determining whether an organization is controlled by a private_foundation there is control if managers acting only in such capacity may only by aggregating their votes or positions of authority require the organization to engage in a transaction which if engaged in with the private_foundation would constitute self- dealing or in the case of a transaction between the organization and a disqualified_person if such disqualified_person together with one or more persons who are disqualified persons by reason of such a person’s relationship within the meaning of sec_4946 through g to such disqualified_person may only by aggregating their votes or positions of authority with that of the private_foundation require the organization to engage in such a transaction the regulation also provides that an organization will be considered to be controlled by a private_foundation or by a private_foundation and disqualified persons if such persons are able in fact to control the organization even if their aggregate voting power is less than percent of the total voting power of the organization’s governing body or if one or more of such persons has the right to exercise veto power over the actions of such organization relevant to any potential acts of self-dealing sec_4942 of the code imposes a tax on the undistributed_income_of_a_private_foundation defined in part as the amount by which qualified distributions are less than a minimum_investment_return of five percent of the aggregate fair_market_value of all assets of the foundation other than specifically excluded assets the undistributed_income is sec_53_4942_a_-2 of the regulations further explains the computation of the minimum_investment_return t r l o o p o c o c o o d c n e o c sec_53 a -2 c iv of the regulations state that any pledge to the foundation of money or property whether or not the pledge may be legally enforced is not to be included in determining the minimum_investment_return sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations described in sec_501 of the code sec_512 of the code defines unrelated_business_taxable_income as the gross_income earned by an organization from an unrelated_trade_or_business which is regularly carried on less applicable deductions sec_512 of the code excludes from unrelated_business_taxable_income gains or losses from the sale exchange or other_disposition of property other than a stock_in_trade or other_property of a kind which would properly be includible in inventory if on hand at the close of the taxable_year or b property_held_primarily_for_sale to customers in the ordinary course of the trade_or_business in 755_f2d_404 5th cir the court held that gain from the sale of timberland was excluded from the computation of an organization’s capital_gain_net_income the court stated that property that produces capital_gain through appreciation is not an independent category of property whose disposition will be taxable and that the regulations to the extent that they imply it is are invalid because they exceed the scope of the code provisions because the pledge of the option was given without any consideration for the purpose of furthering the charitable purposes of y and other unrelated charitable organizations the pledge of the option by x to does not constitute an act of self dealing between x and y regs d -2 c furthermore assuming that the transferee unrelated charity will not be controlled by as defined in sec_53_4941_d_-1 of the regulations the exercise of the pledged stock_option by the unrelated charitable_organization will not constitute an act of self-dealing between x and y the transfer of the option by y to the unrelated charity will not be an act of self-dealing since the cancellation of the enforceable pledge will be for consideration paid_by the unrelated charity the consideration will be an amount equal to s ' o w t t a e r n o o c d c h c s o the difference between the fair_market_value of the stock subject_to the option on the date of the transfer less an agreed-upon discount also the transfer will not be an act of self-dealing since the transfer will be to a charitable_organization the option will be excluded from the assets taken into account in computing the amount of the minimum_investment_return of y for purposes of determining the tax on failure to distribute income under sec_4942 of the code since sec_53_4942_a_-2 of the regulations provides that pledges of property are not included in computing the minimum_investment_return as concluded in zemirray foundation v u s cited above the tax on capital_gain through appreciation applies only to noncharitable assets susceptible to use to produce interest dividends rents and royalties stock_options are not such assets accordingly y ’s proceeds from the sale of the option to an unrelated organization exempt under sec_501 of the code would be excluded from the computation of y’s net_investment_income under sec_4940 of the code sale of the options by foundation will not produce any unrelated_business_taxable_income because the sales come within the exclusion under sec_512 of the code the exceptions to the exclusion do not apply because y does not resemble a merchant who acquires or produces property to sell to customers based on the information submitted and the representations made therein we rule as follows the pledge of the option by x to y does not constitute an act of self-dealing between x and y under the provisions of sec_4941 of the code the exercise of the option py an unrelated charitable_organization to whom the option will be transferred will not constitute an act of self-dealing between y and a disqualified_person under sec_4941 of the code we have referred your third ruling_request which concerned sec_170 of the code to the office of the associate chief_counsel domestic income_tax and accounting for consideration they will respond directly to you ' ' o ’ r a e f d c n q r c the option will be excluded from the assets taken into account in computing the amount of the minimum_investment_return of y for purposes of determining the tax on failure to distribute income under sec_4942 of the code ’s proceeds from the sale of the option to an unrelated organization exempt under sec_501 of the code are excluded from the computation of y’s net_investment_income under sec_4940 of the code gain on y‘s sale of the option to unrelated sec_501 organizations will not be subject_to the tax on unrelated_business_taxable_income imposed by sec_511 of the code these rulings are directed only to the organization that requested them sec_6110 provides that they may not be used or cited as precedent because these rulings may help resolve any questions regarding your exempt status you should keep a copy of this ruling letter in your permanent files if you have any questions please call the person whose name and telephone number appear in the heading of this letter sincerely qaigned kenneth earnest edward-k -_kareher ach chief exempt_organizations technical branch


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi b09-plr-105948-03 date date re legend taxpayer taxpayer date trust year dollar_figurex accounting firm date date dear sir this is in response to your representative’s letter dated date on behalf of taxpayer and the estate of taxpayer requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make allocations of generation-skipping_transfer gst exemptions the facts and representations submitted are summarized as follows on date taxpayer established trust an irrevocable_trust for the benefit of taxpayer 1's daughter and her issue plr-105948-03 paragraph of trust provides that the trustee shall pay over the entire net_income of the trust not less often than quarter-annually to taxpayer 1's daughter during her lifetime paragraph provides that upon daughter’s death the trustee shall divide all of the trust’s principal together with any accrued income into separate equal shares so as to provide one share for each then living child of daughter and one share for the then living issue collectively of each deceased child of daughter each of these shares established at daughter’s death shall be held as a separate trust and the principal and income disposed of as follows the trustee is authorized to pay to or apply for the benefit of a beneficiary from the net_income of such beneficiary’s share amounts as they deem advisable for health support maintenance and education after a beneficiary reache sec_21 years the trustee shall pay to or apply for the benefit of such beneficiary all of the net_income from such share the trustee is also authorized to pay to or apply for the benefit of a beneficiary from the principal of such beneficiary’s share amounts to provide for health support maintenance and education of the beneficiary when a beneficiary of daughter reaches age the trustee shall distribute percent of the principal balance together with any accumulated and accrued income to such beneficiary when a beneficiary reaches age the trustee shall distribute the entire balance of the principal to such beneficiary together with any accumulated and accrued income if a beneficiary dies prior to complete distribution of a share the trustee shall distribute the remainder of the share in such amounts among such beneficiary’s issue as directed in such beneficiary’s last will and testament in year taxpayer made transfers totaling dollar_figurex to trust it is represented that accounting firm prepared taxpayer 1's and taxpayer 2's form sec_709 united_states gift and generation skipping tax returns for year reporting the transfers to trust and the election by taxpayer and taxpayer to split_gifts made by them to third parties during the calendar_year under sec_2513 accounting firm inadvertently failed to allocate taxpayer 1's and taxpayer 2's gst exemptions to trust taxpayer 1's and taxpayer 2's form sec_709 were filed on or about date taxpayer died on date taxpayer is a personal representative of taxpayer 2's estate you have requested an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-1 and sec_301_9100-3 to make allocations of taxpayer 1's and taxpayer 2's gst exemptions for the transfers to trust in year plr-105948-03 sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2642 provides the method for determining the inclusion_ratio sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period its value at the time of the close of the estate_tax_inclusion_period and such allocation shall be effective on and after the date of such transfer or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted on date sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation shall be treated as if not expressly prescribed by statute plr-105948-03 notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied you are granted an extension of time of days from the date of this letter to make allocations of taxpayer 1's and taxpayer 2's respective available gst exemptions with respect to the transfer to trust in year the allocations will be effective as of the date of the transfer to trust and the allocations will be made based on the value of the property transferred to trust as of the date of the transfer the allocations should be made on supplemental form sec_709 united_states gift and generation-skipping_transfer_tax return and filed with the internal_revenue_service center cincinnati oh a copy of this letter should be attached to the supplemental form sec_709 a copy is enclosed for this purpose plr-105948-03 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in addition we express or imply no opinion regarding the value of the property transferred to the trust in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayers this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


id office uilc cca_2010121008234957 ------------ 1400i number release date from ------------------ sent friday date am to ------------------------ cc ------------------------------------------------------------ subject re baucus' tax cut bill and hud's possible actions hi ------ yesterday senate majority leader harry reid introduced in the u s senate the tax bill that is the tax-cut compromise between president obama and the republicans this bill extends the empowerment_zone provisions through but does not extend the renewal_community provisions without an extension the commercial_revitalization_deduction expired for buildings placed_in_service after accordingly at this time it is premature to consider how the irs will treat allocations of commercial revitalization expenditures_for as though the renewal_community provisions are extended -----------------


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b1-plr-147560-01 date date legend x sub state date date date this letter responds to a letter dated date written on behalf of x requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election x is requesting a ruling that it be granted an extension of time in which to elect to treat its wholly owned subsidiary y as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code facts the information submitted discloses that x was incorporated on date under the laws of state x was to be taxed as a c_corporation on date x purchased all of the shares of y a validly organized corporation under the laws of state which was also taxed as a c_corporation x represents that it filed an election which was accepted by the internal_revenue_service to become an s_corporation effective date x intended to elect to treat y as a qualified_subchapter_s_subsidiary but failed to timely make the election x requests a ruling that its sec_1362 election to treat y as a qsub will be treated as effective on date law and analysis sec_1361 defines the term qualified_subchapter_s_subsidiary as a domestic_corporation which is not an ineligible_corporation as defined in sec_1361 if an s_corporation holds percent of the stock of the corporation and that s_corporation elects to treat the subsidiary as a qsub the election is made by plr-147560-01 filing form_8869 under sec_301_9100-1 of the procedure and administration regulations the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i if the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting the relief will not prejudice the interests of the government sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a notice published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election section provides automatic extensions of time for making certain elections but does not apply to qsub elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of sixty days from the date of this letter to make an election to treat its wholly owned subsidiary y as a qsub effective date x should submit the properly completed forms to the relevant service_center a copy of this letter should be attached to each of the forms filed with the service_center except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is a valid s_corporation or whether its subsidiary y is a valid qsub this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si - plr-110965-99 date date x a d1 year dear this letter responds to a letter dated date and subsequent correspondence submitted by x’s authorized representative on behalf of x requesting a ruling allowing x to make a late s_corporation_election the information submitted states that x was incorporated on d1 of year a the president of x represents that the shareholders of x intended for x to be an s_corporation effective for x’s year taxable_year however a further represents that the shareholders of x did not realize the importance of timely filing a form_2553 election by a small_business_corporation and forgot to do so therefore no form_2553 was timely filed for x effective for x’s year taxable_year sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x’s year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x’s authorized representative sincerely yours h grace kim assistant to the chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c october cc tege eb ec genin-100996-06 office_of_chief_counsel number info release date uil ---------------------------- ---------------------------------------- -------------------------------- dear -------------------- this letter regards an election you made under sec_83 of the internal rules governing elections filed pursuant to sec_83 provide that such revenue code regarding an interest in ------------------------------------ the election form was delivered to the internal_revenue_service building located pincite constitution ave nw washington dc elections are to be filed at the internal_revenue_service center where the taxpayer making the election files his or her federal_income_tax return an excerpt from publication taxable and nontaxable income discussing these rules is attached as a resident of ---------------------------------your sec_83 election should have been filed at the internal_revenue_service center ---------------------------------- we have forwarded your sec_83 election to that office if you have any additional questions please contact our office at --------------------- ------------------------------------------------------------------------------------------------------------------- sincerely _______________________________ kenneth m griffin assistant chief executive compensation branch office of the division counsel associate chief_counsel tax exempt and government entities


internal_revenue_service number release date index numbers ------------------------------ ------------------------------------------------------- ------------------------ --------------------------------- ------------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-122202-09 date date legend x --------------------------------------------------- ------------------------------------------------------ -------------------------- ----------------- ---------------- d1 d2 country dear ------------ this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed on d1 under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d2 however x inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes effective d2 plr-122202-09 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single owner having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 and iii provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_7701-3 provides that an election under sec_301_7701-3 must be signed by - a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organizational documents to make the election and who represents to having such authorization under penalties of perjury sec_301_7701-3 provides that if a purchasing_corporation makes an election under sec_338 regarding an acquired subsidiary an election under sec_301 c i for the acquired subsidiary can be effective no earlier than the day after the acquisition_date within the meaning of sec_338 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 plr-122202-09 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a properly executed form_8832 effective d2 with the appropriate service_center to elect to be classified as a disregarded_entity a copy of this letter should be attached to the form_8832 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely curt g wilson curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------ --------------------- -------------------------------------------------------- ------------------------------ ------------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------------- id no ------------------ telephone number ---------------------- refer reply to cc ita b05 plr-125298-14 date date ty --------- legend taxpayer exempt_organization -------------------------------------------------------- ------------------------ --------------------- ------------------------ ----------------------------------------------------- partnership ---------------------------------------------------------------- ------- tax_year -------------- state affidavit ---------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------- affidavit ----------------------------------------------------------------------------------------------------------- related partnership ----------------------------------------------------------------------------- ---------------------------------------------- dear ------------------ this letter is in response to a request for a private_letter_ruling dated date submitted on your behalf by your authorized representative specifically you have requested an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations for taxpayer a tax-exempt_controlled_entity under sec_168 of the internal_revenue_code to make an election under sec_168 to not be treated as a tax-exempt_controlled_entity facts plr-125298-14 taxpayer was formed in tax_year in state and is taxed as a c_corporation for federal_income_tax purposes taxpayer is wholly owned by exempt_organization a not-for- profit corporation exempt from taxation under sec_501 based on exempt organization’s ownership_interest in and control of taxpayer taxpayer is a tax- exempt controlled_entity within the meaning of sec_168 taxpayer is the general_partner of partnership partnership’s real_property was placed_in_service in tax_year and taxpayer filed a timely federal_income_tax return for tax_year but failed to make the sec_168 election on that return taxpayer’s failure to make the required sec_168 election was discovered for the first time when evidence of such election was requested in the case of related partnership which is also owned by exempt_organization however from affidavit affidavit and the other materials submitted it is clear that taxpayer at all times intended to make the sec_168 election to not be treated as a tax-exempt_controlled_entity affidavit and affidavit further make it clear that taxpayer’s return preparer was unaware that an affirmative election statement was required to be attached to the taxpayer’s federal tax_return for tax_year upon discovering its failure taxpayer promptly sought an extension of time in which to file the sec_168 election taxpayer makes the following representations notwithstanding omitting the statement of the sec_168 election from the tax_return for tax_year every tax_return prepared and filed by taxpayer reflects the same treatment as if the sec_168 election had been made taxpayer is not under audit nor is being considered by an appeals officer or federal court for any_tax year in which the sec_168 election should have been made or for any_tax year affected by that election taxpayer is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 taxpayer is not using hindsight in requesting the relief sought the requested relief will not result in a lower tax_liability in the aggregate for all tax years affected by the sec_168 election than taxpayer would have had if the sec_168 election had been timely made finally although the period of limitations on assessment under sec_6501 for tax_year has expired the government is not prejudiced in this case and thus relief should be granted law sec_167 of the internal_revenue_code provides generally for a depreciation deduction for property used in a trade_or_business under sec_168 the alternative_depreciation_system must be used for any tax-exempt_use_property as defined in sec_168 sec_168 provides that for purposes of sec_168 if any property which but for this subparagraph is not tax-exempt_use_property is owned by a partnership having plr-125298-14 both a tax-exempt_entity and a nontax-exempt entity as partners and any allocation to the tax-exempt_entity is not a qualified_allocation then an amount equal to such tax- exempt entity's proportionate share of such property is treated as tax-exempt_use_property sec_168 provides generally that any tax-exempt_controlled_entity is treated as a tax-exempt_entity for purposes of sec_168 under sec_168 a tax-exempt_controlled_entity means any corporation without regard to that subparagraph and sec_168 if percent or more in value of the corporation's stock is held by one or more tax-exempt entities other than a foreign_person_or_entity sec_168 applies similar rules in the case of tiered partnerships and other entities under sec_168 a tax-exempt_controlled_entity can elect not to be treated as a tax-exempt_entity such an election is irrevocable and will bind all tax-exempt entities holding an interest in the tax-exempt_controlled_entity under sec_301_9100-7t of the procedure and administration regulations a sec_168 election must be made by the due_date of the tax_return for the first taxable_year for which the election is to be effective sec_301_9100-7t provides the manner in which the sec_168 election is made sec_301_9100-1 provides that the commissioner of internal revenue has discretion to grant a reasonable extension of time to make a regulatory election sec_301_9100-1 defines the term regulatory election as including any election the due_date for which is prescribed by a regulation because the due_date of the sec_168 election is prescribed in sec_301_9100-7t the sec_168 election is a regulatory election sec_301_9100-1 through provide the standards the service will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-3 provides that requests for extensions of time for regulatory elections other than automatic extensions of time covered in sec_301_9100-2 will be granted when the taxpayer provides evidence including affidavits to establish that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer - i requests relief before the failure to make the regulatory election is discovered by the service plr-125298-14 ii failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election under sec_301_9100-3 a taxpayer is considered to have not acted reasonably and in good_faith if the taxpayer - i seeks to alter a return position for which an accuracy-related_penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires a regulatory election for which relief is requested ii was fully informed of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief sec_301_9100-3 provides that the service will grant a reasonable extension of time only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made under sec_301_9100-3 the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer's receipt of a ruling granting relief under this section analysis the information submitted indicate that taxpayer at all times intended from the outset to make the sec_168 election and that taxpayer’s failure to make the sec_168 election was inadvertent taxpayer represents that it has requested relief before the failure to make the sec_168 election was discovered by the service pursuant to an examination there is no evidence that taxpayer is using hindsight in requesting relief furthermore based on the facts presented and the representations made taxpayer will not have a lower tax_liability for all tax years affected by the sec_168 than it would have had if the sec_168 election had been timely made plr-125298-14 although the taxable_year in which the sec_168 election should have been made is closed under sec_6501 the above representations support our conclusion that taxpayer has acted reasonably and in good_faith therefore the interests of the government will not be prejudiced by the granting of relief conclusion based solely on the facts as represented and the applicable law we conclude that the requirements of sec_301_9100-3 have been met and the request for relief under sec_301_9100-3 is granted accordingly taxpayer is treated as if it had made the sec_168 election with the tax_return it filed for tax_year provided that taxpayer attaches a copy of this letter to the next tax_return it files taxpayer also must attach the aforementioned sec_168 election and the information set forth in sec_301_9100-7t to its next return if taxpayer files electronically it may satisfy this requirement by attaching a statement to the return that provides the date and control number of this letter_ruling in addition the letter_ruling or statement should be attached for all subsequent returns and amended returns for all taxable years to which this ruling is relevant pursuant to sec_301_9100-7t a copy of this letter and the sec_168 election statement also should be attached to the federal_income_tax returns of each of the tax-exempt shareholders or beneficiaries of taxpayer 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 further we express no opinion concerning the assessment of any interest additions to tax additional_amounts or penalties for failure_to_file a timely income_tax return with respect to any taxable_year the ruling in this letter is based upon the information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party although this office has not verified any of the material submitted in support of the request for the ruling it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent enclosed is a copy of the letter showing the deletions proposed to be made when it is disclosed under sec_6110 if you have any questions concerning this matter please contact the individual whose name and telephone number appear at the top of the letter plr-125298-14 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely seoyeon sharon park assistant to the branch chief branch office_of_chief_counsel income_tax accounting enclosure


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 -------------------------------- telephone number --------------------- refer reply to cc psi plr-125300-09 date date ty -------------------------- legend donor spouse child child date date year year trust trust trust ------------------------------------------------------ ----------------------------------------------------- ------------------------------------ ----------------------------------------- ------------------ ------------------ ------- ------- ------------------------------------------------------------- -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- ----------------------- ---------------------- --------------------------------------------- company company’s cfo ----------------- attorneys accounting firm ------------------------------ ---------------------------------- dear -------------------------- this responds to the letter dated date and subsequent correspondence submitted by your authorized representative requesting an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to allocate donor’s and spouse’s generation-skipping_transfer gst_exemption to the transfer made to trust and trust on date in year plr-125300-09 facts donor created trust for the benefit of her children and their issue on date in year which is prior to date trust has gst potential on date donor funded trust with shares of stock in company under the terms of trust the administrative trustee was directed to divide the trust estate into two equal shares one for the benefit of each of donor’s and spouse’s children and their descendants pursuant to this provision the administrative trustee established trust for the benefit of child and his descendants and trust for the benefit of child and his descendants company’s cfo was responsible for directing and overseeing the preparation of all tax returns for donor and spouse attorneys informed company’s cfo that donor and spouse needed to file form sec_709 united_states gift and generation skipping transfer_tax returns and to allocate gst_exemption to the transfer to trust and trust attorneys did not advise donor or spouse to file gift_tax returns and allocate their gst_exemption company’s cfo inadvertently failed to retain an accounting firm to prepare donor’s and spouse’s gift_tax returns for year and to allocate gst_exemption to trust and trust in year donor and spouse retained accounting firm to file gift_tax returns for year accounting firm discovered that no prior gift_tax returns had been filed for donor or spouse donor and spouse represent that to date no taxable_distributions taxable terminations or any other gst taxable events have occurred with respect to any of the trusts that would result in a gst tax_liability on the part of any of the trusts or their beneficiaries both donor and spouse have sufficient gst tax exemption remaining and available to allocate with respect to the transfer to trust and trust donor and spouse intend to treat the transfer on date for gift_tax purposes as made one-half by donor and one- half by spouse pursuant to sec_2513 law and analysis sec_2513 provides generally that for gift_tax purposes if the parties consent a gift made by one spouse to any person other than his or her spouse shall for gift_tax purposes be considered as made one-half by the donor spouse and one-half by his or her spouse both spouses must consent to the application of gift-splitting with respect to all gifts made during the calendar_year sec_2513 provides that such consent may be signified at any time until the 15th of april following the close of the year in which the gift was made unless no return has been filed for such year by either spouse the consent may not be signified after a return for such year is filed by either spouse thus if a late return is filed the consent must be made on the first return filed for such year plr-125300-09 sec_2601 imposes a tax on every gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the gst tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2642 provides the method for determining the inclusion_ratio under sec_2642 the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer is generally defined as the excess of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of gst_exemption under sec_2631 allocated to the trust or to property transferred in a direct_skip and the denominator of which is the value of the property transferred to the trust or involved in the direct_skip sec_2631 in effect at the time of the transfer provided that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime is made on form_709 sec_2652 and sec_26_2652-1 provide that if under sec_2513 one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of the individual then for purposes of the gst tax each spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor spouse regardless of the interest the electing spouse is actually deemed to have transferred under sec_2513 sec_2654 and provide that for purposes of chapter the portion of a_trust attributable to transfers from different transferors shall be treated as separate trusts and substantially separate and independent shares of different beneficiaries in a_trust shall be treated as separate trusts sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or plr-125300-09 before the date prescribed by sec_6075 for such transfer the value of such property for purposes of determining the inclusion_ratio under sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted into law on date sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant sec_2642 further provides that for purposes of determining whether to grant relief the time for making the allocation shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 section c provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-125300-09 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied donor and spouse intend to elect to split_gifts with respect to the year transfer to trust and trust assuming the requirements are satisfied under sec_2513 donor and spouse will be treated as the transferors for gst purposes of one-half of the entire value of the property transferred by donor regardless of the interest spouse is actually deemed to have transferred under sec_2513 therefore donor and spouse are each granted an extension of time of sixty days from the date of this letter to allocate donor’s and spouse’s available gst_exemption to the portion of trust and trust for which donor and spouse are each the transferor the allocations will be effective as of the date of transfer and will be based on the gift_tax value of the assets transferred to trust and trust on date the allocations should be made on form sec_709 for year and filed with the internal_revenue_service cincinnati service center-stop cincinnati ohio a copy of this letter should be attached to the forms two copies of this letter are enclosed for this purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative plr-125300-09 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely curt g wilson associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes two copies of this letter cc