department of the treasury internal_revenue_service washington d c cc dom fs proc date uilc number release date internal_revenue_service national_office field_service_advice memorandum for from deborah a butler assistant chief_counsel field service cc dom fs subject consistent settlement this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent issue s whether a settlement that disallows partnership losses and allows a theft_loss to the partners in the amount invested in the partnership is subject_to consistent settlement pursuant to i r c c whether spouses who signed and filed a joint_return are required to jointly execute a settlement agreement whether the failure to allow a spouse to settle separately violates a taxpayer’s right to consistent settlement pursuant to i r c c conclusion sec_1 a settlement that disallows partnership losses and allows a theft_loss for the amount invested in the partnership may be subject_to consistent settlement pursuant to i r c c depending upon the structure of the settlement but if it is subject_to consistent settlement rights the right to consistent settlement would only arise with regard to that part of the settlement that relates to partnership items spouses who signed and filed a joint_return may be requested to jointly execute a settlement agreement but there is no legal requirement to do so the failure to allow a spouse to settle separately does not violate a taxpayer’s right to consistent settlement pursuant to i r c c if the requirement of joint signatures was a requirement of the source agreement facts this request relates to the general procedures for entering into settlement agreements in several tax_shelters accordingly this is not based upon a specific set of facts but rather is based upon common situations faced when settling large tax_shelter projects thus the analysis contained herein has broad general application but its application to a specific set of facts is dictated by the facts that would be presented in each case the general situation presented is that the service intends to propose a settlement in which all partnership losses would be disallowed the investors would be allowed a theft_loss deduction to the extent of the amount invested in the partnership less any losses allowed to date as a related issue questions have arisen with regard to settlements with married persons who filed joint returns for the years at issue because the examination of tax_shelters often requires a significant amount of time many people who filed joint returns in the years at issue are no longer married and thus it may be difficult for some to obtain the signature of their former spouse on a settlement agreement law and analysis with regard to settlements the code generally allows the service to enter into written closing agreements with taxpayers in respect of any internal revenue tax for any taxable_period sec_7121 the tefra provisions provide for special rules in the case of settlements with regard to partnership items see i r c c see also segel v united_states ustc big_number s d fla specifically i r c c addresses three specific issues the binding effect on indirect partners of an agreement executed by a flow through partner i r c c the right of partners to request an agreement that is consistent with an agreement that another partner has executed i r c c and the authority of a tax_matters_partner tmp to execute an agreement binding nonnotice partners i r c c these provisions are exceptions to the general requirements of sec_7121 specifically that written_agreement with any person only relates to the liability of such person except as otherwise provided by i r c c this general_rule remains true in tefra cases as observed in the legislative_history no partner other than the tmp and other than a pass-through partner with respect to indirect partners may bind any other partner with respect to a settlement agreement conf_rep no pincite absent the statutory exceptions to sec_7121 as set forth in i r c c indirect partners and tax matters partners could not bind other partners to an agreement similarly absent the specific right to consistent settlement set forth in i r c c partners in the same partnership would have no right to enter into an agreement that is consistent with that of another partner see david v commissioner tcmemo_1993_621 n and accompanying text accordingly congress by enacting i r c c created an exception to the general rules regarding settlement and created a right of consistent settlement in favor of partners in a tefra partnership consistent agreements i r c c provides other partners have right to enter into consistent agreements --if the secretary enters into a settlement agreement with any partner with respect to partnership items for any partnership taxable_year the secretary shall offer to any other partner who so requests settlement terms for the partnership taxable_year which are consistent with those contained in such settlement agreement except in the case of an election under paragraph or of sec_6223 to have a settlement agreement described in this paragraph apply this paragraph shall apply with respect to a settlement agreement entered into with a partner before notice of a final_partnership_administrative_adjustment is mailed to the tax_matters_partner only if such other partner makes the request before the expiration of days after the day on which such notice is mailed to the tax_matters_partner 1note that with regard to the timing of the source agreement and the request for consistent agreement the service by regulation has granted a broader right of consistent settlement specifically temp sec_301_6231_c_-3t c ii allows consistent agreement within days of the source agreement without regard to whether the source agreement was executed after the issuance of the notice of final partnership without regard to the regulations promulgated under this provision the statute alone sets forth several requirements that must be met before the service is required to execute a consistent agreement the first clause of this rule states if the secretary enters into a settlement agreement with any partner with respect to partnership items for any partnership taxable_year first there must be a binding agreement between the secretary and any partner - referred to herein as the source agreement -- and the source agreement must be an agreement with respect to partnership items this requirement that the agreement relate to partnership items is reinforced by regulation which states consistent settlement terms are those based on the same determinations with respect to partnership items however consistent settlement terms also may include partnership level determinations of any penalty addition_to_tax or additional_amount that relates to partnership items settlements with respect to partnership items shall be self-contained thus a concession by one party with respect to a partnership_item may not be based upon a concession by another party with respect to any item that is not a partnership_item other than any penalty addition_to_tax or additional_amount that relates to an adjustment to a partnership_item temp sec_301_6231_c_-3t b date the regulation clarifies that a source agreement with respect to partnership items must be limited to partnership items thus an agreement that includes both partnership items and nonpartnership_items does not give rise to a consistent settlement right see 111_tc_198 as noted by the tax_court in greenberg brothers the consistent settlement regulation is a legislative_regulation and thus is accorded the highest level of judicial deference thus as required by the statute as well as the regulation promulgated thereunder the source agreement must be an agreement with regard to partnership items and only partnership items a similar requirement is imposed upon the consistent agreement beginning again with the statute a consistent agreement must be allowed for settlement terms for the partnership taxable_year which are consistent with those contained in such settlement agreement administrative adjustment accordingly if the source agreement must be limited to partnership items and the consistent agreement must be consistent therewith then a fortiori the consistent agreement must also be limited to partnership items as with the source agreement the legislative regulations promulgated under this provision clarify this provision consistent agreements whether comprehensive or partial must be identical to the original settlement that is the settlement upon which the offered settlement terms are based a consistent agreement must mirror the original settlement and may not be limited to selected items from the original settlement once a partner has settled a partnership_item or penalty addition_to_tax or additional_amount that relates to an adjustment to a partnership_item that partner may not subsequently request settlement terms consistent with a settlement that contains the previously settled item temp sec_301_6231_c_-3t b date the regulation encompasses a number of scenarios all intended to demonstrate the same principle - consistent settlement only applies to the same partnership items of partners in the same partnership for the same taxable_year for example if a partner enters into a settlement agreement and later determines that another settlement agreement may have been more favorable the partner may not request an agreement that is consistent with the later more favorable settlement this result occurs because the partner is not seeking a settlement of partnership items by virtue of having entered into the prior settlement the partner’s partnership items converted to nonpartnership_items pursuant to sec_6231 thus at the time of requesting a consistent agreement the partner who had previously settled no longer had partnership items for which consistent treatment could be sought see slovacek v united_states ustc big_number fed cl this regulation also prohibits the bifurcation of settlement agreements stated simply a partner cannot request consistent settlement only as to specific partnership items this concept that the agreement must relate to the same partnership items is premised upon the concept that a settlement agreement may contain concessions by both parties resulting in the final agreement thus another partner should not be entitled to select those elements of a settlement that are most favorable without also being bound to the other components of the settlement see 111_tc_198 as a result of the requirement that the source agreement and the consistent agreement relate to the same partnership items the agreements must also relate to the same taxable years again this requirement is expressly set forth in the statute and amplified by regulation the statute provides that a settlement of partnership items for any partnership taxable_year gives rise to settlement rights for the partnership taxable_year it is a fundamental concept of tax law that each taxable_period is viewed independently 333_us_591 income taxes are levied on an annual basis each year is the origin of a new liability and of a separate cause of action thus if partnership items relate to different taxable years they are not the same partnership items and not subject_to consistent settlement lastly the requirement that the partnership items be the same for the source agreement and the consistent agreement results in the inescapable conclusion that the items must stem from the same partnership for example in the tax_shelter context a tax_shelter promotor may create a number of substantially identical partnerships a settlement agreement executed by a partner in one of the shelters does not give rise to a consistent settlement right to a partner in a substantially_similar yet not the same partnership see boyd v commissioner tcmemo_1992_626 the specific question posed is whether a settlement that disallows partnership losses and allows a theft_loss to the partners in the amount invested in the partnership is subject_to consistent settlement pursuant to i r c c there are two methods by which this settlement could be achieved first a single settlement agreement in which the partnership loss is disallowed and the theft_loss is allowed could be executed this type of agreement does not give rise to a right of consistent settlement because it is not self-contained and is not limited to partnership items see 111_tc_198 it should also be noted that the use of a single agreement to cover both partnership and nonpartnership_items is generally disfavored because it tends to frustrate the intent of the consistent settlement rule the second method by which the same result could be obtained would be to execute two separate settlement agreements an agreement disallowing the partnership loss and a separate agreement allowing the theft_loss the agreement disallowing the partnership loss would be an agreement as to partnership items and would be set forth on either a form 870-p ad or the top half of form 870-l ad note that the top half of the form 870-l ad requires separate execution by the parties and is deemed to be a separate settlement agreement this agreement as to partnership items would be subject_to consistent settlement see 111_tc_198 ndollar_figure conversely the theft_loss agreement would not be subject_to consistent settlement the theft_loss agreement could be executed using either a form_906 or the bottom half of a form 870-l ad this agreement would be an agreement as to an affected nonpartnership item though the amount of the loss will be determined by taking into account partnership items the ultimate determination as to whether the partner is entitled to take the theft_loss will be based upon the determination that there has been a theft from the partner to be entitled to a theft_loss investors must demonstrate that they entered into a transaction only after having been deceived as to its nature bukove v commissioner t c memo relying on california law because the allowance of the theft_loss would be premised as determined on a case by case basis upon each partner’s knowledge of the nature of the transactions at issue the theft_loss cannot be a partnership_item because the theft_loss is based in part on nonpartnership_items it is not subject_to consistent settlement joint filers unique issues arise in the context of the tefra provisions when applied to persons who file a joint_return regardless of which spouse owned an interest in the partnership for the year at issue for tefra purposes both spouses are deemed to be partners temp sec_301 a -1t a for purposes of applying the unified_audit and litigation procedures sec_6231 provides a two part definition of partner first a partner is a partner in the partnership sec_6231 though circular this definition essentially relies on the common_law or state law definition of partner however for tefra purposes the term partner also includes any other person whose income_tax_liability is determined by taking into account partnership items sec_6231 a person who does not own a partnership_interest who files a joint_return with a person who owns a partnership_interest is deemed to be a partner under this provision pursuant to sec_6013 the liability for the tax reported on a joint_return is joint_and_several thus even if a spouse does not own an interest in the partnership if partnership items are reported on a return the spouse’s tax_liability is impacted by taking into account partnership items as a result the spouse is deemed a partner under sec_6231 2by definition any item that is not a partnership_item is a nonpartnership item sec_6231 thus an affected_item is a nonpartnership item that is affected by partnership items sec_6231 an element used in determining the amount of the theft_loss would be based upon the amount the partner contributed to the partnership contributions to a partnership generally are partnership items sec_301_6231_a_3_-1 thus it would be appropriate to treat the theft_loss as an affected_item 3furthermore because one of the elements is whether the partner was deceived insiders in the transactions at issue would not be able to demonstrate the necessary elements to qualify for relief under the proposed settlement though both spouses are deemed to be partners the service has in the past taken the position that married persons who own or are deemed to own a joint interest are treated as one partner see 99_tc_325 however in dubin the tax_court concluded that except in limited circumstances spouses are treated as separate persons id t c pincite when applying this rationale in dubin the tax_court concluded that if one spouse files for bankruptcy it causes a conversion of partnership items only for that spouse similarly a settlement of partnership items causes a conversion of partnership items of the partner who enters into the settlement sec_6231 consistent with the court’s rationale in dubin we conclude that interests held by spouses may be similarly bifurcated through settlement and that spouses who report partnership items on a joint_return may enter into separate settlement agreements we note however that the current instructions for signing a form 870-p for example state as follows if a joint_return of a husband and wife was filed both spouses must sign unless one spouse acting under a power_of_attorney signs as agent for the other we believe that this requirement is properly interpreted to mean that both spouses signatures are required in order to settle both spouses liability conversely it is unnecessary to obtain both spouses’ signatures in order to settle one spouse’s liability if under the rationale espoused in dubin each spouse is deemed to be a separate partner then each partner should be permitted to settle separately nonetheless the service has the discretion to decide whether and under what conditions a closing_agreement is executed michael i saltzman irs practice procedure dollar_figure pincite 2d ed general contract law principles govern the settlement of tax cases 967_f2d_206 5th cir it is a hallmark of contract law that an offer and an acceptance must express mutual assent and that the acceptance must comply with the terms of the offer restatement second of contracts sec_58 thus we believe that requesting dual signatures would be a permissible condition to place on a settlement but that the rationale of dubin makes such a requirement unnecessary case development hazards and other considerations if you have any further questions please call


t c summary opinion united_states tax_court gary l and jolene k pendleton petitioners v commissioner of internal revenue respondent docket no 14877-99s filed date gary l pendleton and jolene k pendleton pro sese igor s drabkin for respondent pajak special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subseguent section references are to the internal_revenue_code in effect for the years in issue respondent determined deficiencies of dollar_figure and dollar_figure in - petitioners’ federal income taxes for the years and respectively and a penalty under sec_6662 of dollar_figure for the year the petitioners have conceded the deficiencies and penalty by stipulation the only issue we must decide is whether either petitioner is entitled to relief from joint_and_several_liability under sec_6015 some of the facts in this case have been stipulated and are so found petitioners resided in burbank california at the time they filed their petition during each of the taxable years at issue petitioner gary l pendleton gary maintained a sole_proprietorship electrician business which was operated out of the personal_residence of petitioners in addition gary worked as an electrician for a number of employers most of his work was commercial work gary did his electrical work in the field during each of the taxable years at issue petitioner jolene k pendleton jolene worked as a staffing placement specialist for royal associates jolene earned dollar_figure of the dollar_figure reported as w-2_wages for and dollar_figure of the dollar_figure reported as w-2_wages for petitioners were married in date they were separated in date however during gary still was living with jolene he would go to her home every night and spend the night with jolene and their daughters amanda and danielle during petitioners were trying to determine whether they were going to remain married at the time each petitioner elected relief under sec_6015 petitioners were divorced gary testified that jolene kept the books_and_records of his endeavors gary provided the expense estimates to jolene both petitioners had access to their bank accounts and bank statements both petitioners deposited and withdrew money from the bank accounts both petitioners were responsible for the preparation of the and federal_income_tax returns and both reviewed the returns although jolene disputed some of gary’s statements we found gary to be a credible witness our evaluation of his testimony is founded upon the ultimate task of a trier of the facts---the distillation of truth from falsehood which is the daily grist of judicial life 58_tc_560 on their joint income_tax return petitioners deducted dollar_figure of expenses on schedule a itemized_deductions which included dollar_figure of job expenses and dollar_figure of expenses on schedule c profit or loss from business on their joint income_tax return they deducted dollar_figure of expenses on schedule a and dollar_figure of expenses on schedule c for respondent disallowed dollar_figure of the schedule a deductions and dollar_figure of the schedule c deductions for respondent disallowed dollar_figure q4e- of the schedule a deductions and dollar_figure of the schedule c deductions the deductions were disallowed because petitioners did not establish that the expenses were paid_or_incurred during the taxable_year petitioners conceded that respondent’s determinations were correct on each return petitioners claimed dollar_figure of rent expense of business property gary explained that the accountant said they could deduct a percentage of the rent on their home as an office rent for the home was dollar_figure per month or dollar_figure a year petitioners deducted more than percent of the rent and claimed a deduction of dollar_figure for each year in issue petitioners conceded that they did not incur rent expenses of dollar_figure with respect to gary’s sole_proprietorship electrician business as claimed for each of the years at issue the dollar_figure amounts were included in the schedule c adjustments made by respondent for each year as a result of these rent deductions and others petitioners showed a schedule c loss of dollar_figure on their return and a schedule c loss of dollar_figure on their return bach party claims relief from joint_and_several_liability pursuant to sec_6015 and c each party must satisfy each requirement set forth in sec_6015 braden v commissioner tcmemo_2001_69 the fact that one or the other of petitioners must be the individual who caused an - - understatement_of_tax is not a problem under our disposition of this case if a taxpayer had actual knowledge of the items giving rise to the deficiency then the taxpayer will not qualify for relief under sec_6015 or sec_6015 sec_6015 c and c c on this record we are convinced that both gary and jolene knew that they were claiming unwarranted rental and other business_expense deductions on their and returns and excessive itemized_deductions on their return and that these claimed deductions led to the understatements in question both petitioners were involved in and responsible for the preparation of their returns jolene was involved in the bookkeeping of the electrician business both petitioners knew what the expenses of the business were they knew the business rent deduction exceeded the amount they paid in rent for the entire house they occupied thus each petitioner fails to gualify for relief under either sec_6015 or sec_6015 we find that neither petitioner is entitled to relief under sec_6015 reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


t c memo united_states tax_court casey a roginiel petitioner v commissioner of internal revenue respondent docket no filed date marshall c sanders for petitioner robert taylor for respondent memorandum opinion pajak special_trial_judge this case is before the court pursuant to petitioner’s motion for litigation costs under sec_7430 and rules through unless otherwise indicated all section references are to the internal_revenue_code all rule references are to the tax_court rules_of_practice and procedure - - petitioner seeks to recover litigation costs of dollar_figure in accordance with rule a we dispose_of the motion before us without a hearing accordingly we rule on petitioner’s motion on the basis of the parties’ submissions and the record in this case the underlying issues raised in the petition were settled by a stipulation of settlement at the time the petition in this case was filed petitioner resided in phoenix arizona by letter dated date 30-day_letter respondent sent petitioner an examination_report with respect to petitioner’s taxable_year in which respondent determined that petitioner’s filing_status was changed from head_of_household to single the dependency_exemptions for petitioner’s two children were disallowed and the earned_income_credit was disallowed in the 30-day_letter respondent advised petitioner that if he disagreed with the proposed changes respondent would consider any supporting information and documentation that he might care to submit along with the 30-day_letter respondent provided petitioner with form 886-h supporting documents which outlined the type of information and documentation relevant to resolving issues related to filing_status dependency_exemptions and the earned_income_credit respondent also advised petitioner of his right to file an administrative appeal for the proposed changes and enclosed with the 30-day_letter a copy of publication your appeal rights and how to prepare a protest if you don’t agree petitioner did not request an appeals_office hearing on date petitioner responded to respondent’s date letter by providing a copy of petitioner’s decree of dissolution of marriage decree the decree designated petitioner as the primary residential parent for both children in response to petitioner’s date submission respondent sent petitioner form 886-a explanation of items which indicated that additional information was required by respondent respondent specifically stated that acceptable forms of supporting documentation to verify the children’s residency would include school and or medical records listing your name as parent or guardian the child’s name the address of record dated january through december of the tax_year acceptable forms of supporting documentation to verify support would include cancelled checks or receipts for rent mortgage and utilities the letter also stated that if you are able to furnish the required_documentation within days wk will be able to reconsider our current determination on date respondent mailed to petitioner a notice_of_deficiency in the amount of dollar_figure for the taxable_year the notice_of_deficiency reflected the same adjustments as determined in respondent’s 30-day_letter q4e- on or about date respondent received additional documentation from petitioner the documentation included a letter from the school attended by petitioner’s children social_security cards for the children magazine covers addressed to the children at petitioner’s home address and a customer statement to petitioner for child care for the children the school letter did not list the children’s home address on or about date petitioner met with his counsel on date respondent sent a second form 886-a to petitioner requesting additional information to substantiate petitioner’s positions again respondent enclosed a form 886-h detailing acceptable documentation on date petitioner’s petition was filed on date respondent’s answer was filed after the petition was filed appeals officer loren l peterson mr peterson was assigned petitioner’s case on or about date mr peterson mailed a letter to petitioner to schedule a conference to attempt to settle the case without going to trial during date respondent and petitioner’s counsel had two telephone conferences with regard to petitioner’s case asa result of the telephone negotiations and the submissions of the - - information on or about date mr peterson determined that petitioner was entitled to the head_of_household filing_status the two dependency_exemptions and the earned_income_credit respondent informed petitioner’s counsel that no concession for attorney’s fees and costs would be made on or about date respondent sent petitioner’s counsel a proposed stipulation decision conceding all of the tax issues between date and date respondent attempted via telephone calls and letters to contact petitioner’s counsel the letters included additional copies of the proposed stipulation decision sometime in date petitioner’s counsel contacted respondent as a result respondent prepared and mailed a stipulation of agreed issues to petitioner’s counsel on date at the calendar call of the case petitioner filed a motion for attorney’s fees and costs and the stipulation of agreed issues sec_7430 permits the award of reasonable_litigation_costs to a taxpayer in an administrative or court_proceeding brought against the united_states in connection with the determination of any_tax interest or penalty under the internal_revenue_code an award of litigation costs may be made where the taxpayer is the prevailing_party exhausted available -- - administrative remedies did not unreasonably protract the administrative or judicial proceeding and claimed reasonable_litigation_costs sec_7430 b c these requirements are conjunctive 88_tc_492 except as provided in sec_7430 c b petitioner bears the burden of proving that he meets each of the requirements of sec_7430 rule e to be a prevailing_party a taxpayer must substantially prevail with respect to either the amount in controversy or the most significant issue or set of issues presented and meet certain net_worth requirements sec_7430 a and however the taxpayer is not entitled to an award for reasonable_litigation_costs if the commissioner shows that the position_of_the_united_states in the proceeding was substantially justified sec_7430 b respondent concedes that petitioner substantially prevailed and meets the net_worth requirements respondent argues however that petitioner is not the prevailing_party because respondent was substantially justified in maintaining his position in the administrative and judicial proceedings respondent also argues that petitioner did not exhaust all administrative remedies that petitioner unreasonably protracted the proceedings and that the fees requested are unreasonable we focus first on whether petitioner exhausted all available - administrative remedies an award for litigation costs shall not be made unless the taxpayer has exhausted the administrative remedies available within the internal_revenue_service sec_7430 b sec_301_7430-1 proced admin regs we find that petitioner has not met this requirement the 30-day_letter sent to petitioner specifically provided that if petitioner disagreed with respondent’s findings petitioner had the right to file an administrative appeal prior to filing his petition in the tax_court petitioner never requested or participated in a conference with the appeals_office with respect to the taxable_year although such a conference was available sec_301_7430-1 proced admin regs provides that where a conference with the appeals_office is available administrative remedies are exhausted when the taxpayer participated in a conference with the appeals_office before petitioning this court or prior to the issuance of the notice_of_deficiency requested such a conference and no such conference was granted 117_tc_48 swanagan v commissioner tcmemo_2000_294 patel v commissioner tcmemo_1998_306 jacoby v commissioner tcmemo_1997_384 because petitioner did not exhaust his administrative remedies we have no choice but to rule for respondent thus we find no reason to delve into the other requirements we have --- - considered all other arguments made by petitioner and found them to be either irrelevant or without merit accordingly we hold that petitioner does not gualify for an award of litigation costs under sec_7430 to reflect the foregoing an appropriate order and decision will be entered


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc p si 7-plr-106741-00 date date legend company a corporation corporation b c d e f g h corporation merger consideration a b plr-106741-00 c d e f g h i j k l i m j n k l m o n o p p plr-106741-00 q q r s t r u y w s x y z aa bb dear sir or madam in a letter dated you requested a ruling concerning the proper timing of adjustments to the basis of shareholders’ stock in company under sec_1367 of the internal_revenue_code this letter responds to your request the information submitted and the representations made are summarized as follows company an s_corporation was organized in a to facilitate the acquisition of certain assets from corporation which was merged with and into corporation on b prior to the merger of corporation into corporation corporation contributed all of its other assets to company and distributed all of company’s stock to the shareholders of corporation the spin-off in a series of transactions that qualified under sec_368 sec_355 and sec_368 a private_letter_ruling was obtained confirming the tax consequences corporation has been an s_corporation since its taxable_year plr-106741-00 beginning c and company has satisfied the ten-year period of sec_1374 for any sales of company’s assets company currently has approximately d of accumulated subchapter_c_earnings_and_profits relating back to the period when corporation was a c_corporation allocated to company from corporation as a result of the spin-off in addition company’s accumulated_adjustments_account aaa was approximately e as of f on g the board_of directors of company adopted a plan of complete_liquidation for company the plan the shareholders of company approved the plan on h the plan is intended to constitute a plan of complete_liquidation under sec_331 and the distributions under the plan are to be distributions in complete_liquidation of company for all federal_income_tax purposes the plan for complete_liquidation is to be effected by the implementation of the following transactions the consummation of the transactions contemplated by certain assets purchase agreements company’s distribution to the shareholders or to a limited_liability_company the llc owned by the shareholders in the same proportion as they own shares of company of all of the net cash proceeds from the asset sales and certain other assets of company that do not relate specifically to any of company’s business divisions and a the merger of company with and into a subsidiary of corporation the merger is expected to be treated for all income_tax purposes as a sale by company of all of its assets to corporation in exchange for the merger consideration and the assumption by corporation of the liabilities of company followed by a final liquidating_distribution by company to the shareholders and or llc of the merger consideration or any right thereto in a complete_liquidation of company pursuant to the merger or b if the merger does not occur any other legal actions that would result in a complete_liquidation of company including a merger of company with and into the llc at the time it adopted the plan company consisted of four business units the a business the b business the c business and the d business the a business consisted of the e f and g divisions the b business consisted of the h and i divisions the c business consisted of the j and k divisions the d business consisted of a d site called l plr-106741-00 in anticipation of adopting the plan company entered into the following agreements the asset purchase agreements pursuant to which the assets of all its divisions other than the h division which is the subject of the merger agreement have been or will be sold the asset sales the asset purchase agreement by and between company and m dated i pursuant to which company will sell the e division to m for j plus the assumption_of_liabilities the asset purchase agreement by an between company and n dated k pursuant to which company on l sold the g division to n for m plus the assumption_of_liabilities the asset purchase agreement by and between company and o dated n pursuant to which company on o sold the f division to o for p plus assumption_of_liabilities the share purchase agreement by and among company p and q dated q as amended by a letter agreement dated r pursuant to which company on s sold the stock of q to p for t the asset purchase agreement by and between company and r dated u pursuant to which company on v sold the k division to r for w plus assumption_of_liabilities and the asset purchase agreement by and between company and s dated x pursuant to which company will sell the i division to s for y plus the assumption_of_liabilities on z company also entered into the merger agreement pursuant to which company will merge in a taxable transaction with and into a wholly-owned subsidiary of corporation in exchange for the merger consideration under the terms of the merger agreement all assets sales must be completed before the merger so that corporation will not acquire any of the operations that are committed to be sold pursuant to the asset purchase agreement the merger agreement provides that if among other things all the conditions to closing the merger are satisfied by aa except for the consummation of the asset sales or if by bb company does not have a reasonable expectation of consummating all of the asset sales on or before aa corporation can elect to require company to sell all of the assets of the h division to corporation for the same consideration pursuant to an asset purchase agreement rather than pursuant to the merger plr-106741-00 pursuant to the plan company has distributed to the shareholders the proceeds of the asset sales that have been completed company contemplates that it will distribute to the shareholders the net_proceeds of the sales of company’s remaining divisions as liquidating distributions from time to time after the sales close as a result it is anticipated that the shareholders will receive one or more liquidating distributions in each year that the complete_liquidation of company continues until the final liquidating distributions taxpayer represents that as of f the shareholders’ aggregate basis in their company stock was approximately e and each shareholder’s annual_accounting_period is the calendar_year you requested a ruling on behalf of company that for purposes of determining the amount of gain_or_loss to be recognized by a shareholder on the receipt of any liquidating_distribution made during a taxable_year such shareholder’s basis in company’s stock will be determined after giving effect to the adjustments provided in sec_1367 for such taxable_year including any adjustments to take into account the gains recognized by company pursuant to the sales of its divisions sec_1366 provides that in determining the tax under chapter of a shareholder for the shareholder’s taxable_year in which the taxable_year of the s_corporation ends or for the final taxable_year of a shareholder who dies or of a_trust or estate which terminates before the end of the corporation’s taxable_year there shall be taken into account the shareholder’s pro_rata share of the corporation’s- a items of income including tax-exempt_income loss deduction or credit the separate treatment of which could affect the liability for tax of any shareholder and b nonseparately_computed_income_or_loss sec_1366 provides that the character of any item included in a shareholder’s pro_rata share under sec_1 a is determined as if the item were realized directly from the source from which realized by the corporation or incurred in the same manner as incurred by the corporation sec_1367 provides that the basis of each shareholder’s stock in an s_corporation shall be increased for any period by the sum of the following items determined with respect to that shareholder for such period a the items of income described in sec_1366 b any nonseparately computed income determined under sec_1366 and c the excess of the deductions for depletion over the basis of the property subject_to depletion plr-106741-00 sec_1367 provides that the basis of each shareholder’s stock in an s_corporation shall be decreased for any period but not below zero by the sum of the following items determined with respect to the shareholder for such period a distributions by the corporation which were includible in the income of the shareholder by reason of sec_1368 b the items of loss and deduction described in sec_1366 c any nonseparately computed loss determined under sec_1366 d any expense of the corporation not deductible in computing its taxable_income and not properly chargeable to capital_account and e the amount of the shareholder’s deduction for depletion for any oil_and_gas property held by the s_corporation to the extent such deduction does not exceed the proportionate share of the adjusted_basis of such property allocated to such shareholder under sec_613a sec_1_1367-1 provides that the adjustments described in sec_1367 to the basis of a shareholder’s stock are determined as of the close of a corporation’s taxable_year and the adjustments are generally effective as of that date however if a shareholder disposes of stock during the corporation’s taxable_year the adjustments with respect to that stock are effective immediately prior to the disposition sec_1368 prescribes for the tax treatment of distributions of property made by an s_corporation with respect to its stock to which but for sec_1368 sec_301 would apply sec_1371 provides that except as otherwise provided and except to the extent inconsistent with subchapter_s subchapter_c shall apply to an s_corporation and its shareholders sec_301 in general prescribes rules for the tax treatment of a distribution_of_property made by a corporation to a shareholder with respect to its stock sec_331 provides that amounts received by a shareholder in a distribution in complete_liquidation of a corporation shall be treated as in full payment in exchange for the stock sec_301 does not apply to any distribution_of_property other than a distribution referred to in sec_316 in complete_liquidation sec_1_331-1 provides that the gain_or_loss to a shareholder from a distribution in partial or complete_liquidation is determined under sec_1001 by comparing the amount of the distribution with the cost or other basis of the stock plr-106741-00 based on the information submitted and the representations made and provided that the shareholders’ receipt of the proceeds from company’s sales of its divisions is treated as full payment to the shareholders in return for their stock in company under sec_331 we conclude that for purposes of determining the amount of gain_or_loss recognized by a shareholder on receipt of any liquidating_distribution made during a taxable_year the shareholder’s basis in company’s stock will be determined after giving effect to the adjustments provided in sec_1367 for that taxable_year including any adjustments to take into account the gains recognized by company pursuant to the sales of its divisions except as ruled above we express or imply no opinion concerning the federal tax consequences of this transaction under the cited provisions or any other provision of the code in particular we express or imply no opinion whether the shareholders’ receipt of the proceeds from company’s sale of its divisions is treated as full payment to the shareholders in return for their stock in company under sec_331 this ruling is directed only to the taxpayer who requested 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 we are sending a copy of this letter to your authorized representative sincerely yours christine e ellison chief branch office of the associate chief_counsel passthroughs and special industries


er y department of the treasury internal_revenue_service p o box irs cincinnati oh release number release date uil code date date employer id number contact person id number contact telephone number form you must file tax years dear this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 we'll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action catalog number 47635z letter rev sincerely jeffrey i cooper director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 other than c redacted letter final adverse determination under sec_501 other than c - no protest letter rev catalog number 47635z department of the treasury internal_revenue_service irs p o box cincinnati oh legend l year m year n year p date range r name s city t state v county w date x dollars amount y dollars dollar_figureamount dear date date employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you do not qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issues do you qualify for exemption under sec_501 of the code no for the reasons stated below facts you were created on w in the state of t prior to filing your application_for tax exemption you operated as a for-profit entity you provide recreational opportunities for the local rural community of s t as well as other surrounding counties in the southeast you provide general golfing activities at seasonal rates general golfing activities account for percent of your total activities your other golf activities consist of serving as a host facility for practice and competitive matches for v high school and v middle school boys and girls golf teams which accounts for percent of your activities and for ten years you have hosted junior golf activities letter rev catalog number 47628k associated with the r golf tournament which accounts for percent of your activities funds generated from the tournament are used for scholarships and to promote junior golf in the local area proceeds have been used to sponsor local youth in summer golf clinics another percent of your activities consist of serving as the host facility for the local recreation department’s youth golf tournaments at no charge in addition to golfing activities you allow access to the lake on your property for fishing you would like to seek public patronage of your club by offering reduced price winter specials in the local newspapers nonmembers may use your club grounds during normal business hours and the may also utilize your lake for fishing nonmembers are invited to compete in the annual r golf tournament and may bring their kids to the clinic hosted on your grounds nonmembers may also rent out your club house facility for wedding showers or other events your largest source of revenue is from green and cart fees from members and nonmembers for the period p of your gross_receipts came from green and cart fees in n of your gross_receipts were from the green and cart fees in m it wa sec_53 and in l it was your other revenue sources include membership dues equipment sales from the pro shop food and drink sales club tournaments range ball sales sponsor dues fishing fees range ball dues and club house rentals your largest expenses are for salaries and wages repairs and maintenance fertilizer chemical and turf supplies utilities payroll_taxes insurance and other equipment and supplies your financial information for p shows your total revenue is x dollars for the period of which y dollars was attributed to income from nonmembers revenue from nonmember use of your facilities made up of your gross_receipts for the period p law sec_501 of the internal_revenue_code the code provides for exemption from federal_income_tax for clubs organized for pleasure recreation and other non-profitable purposes substantially_all of the activities of which are for such purposes and no part of the net_earnings of which inures to the benefit of any private shareholder sec_1_501_c_7_-1 states the exemption provided by sec_501 applies only to clubs which are organized and operated exclusively for pleasure recreation and other nonprofitable purposes but does not apply to any club if any part of its net_earnings inures to the benefit of any private shareholder in general this exemption extends to social and recreation clubs which are supported solely by membership fees dues and assessments however a club otherwise entitled to exemption will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities sec_1_501_c_7_-1 states that a club which engages in business such as making its social and recreational facilities available to the general_public or by selling real_estate timber or other products is not organized and operated exclusively for pleasure recreation and other nonprofitable purposes and is not exempt under sec_501 solicitation by advertisement or otherwise for public patronage of its facilities is prima facie evidence that the club is engaging in business and is not being operated exclusively for pleasure recreation or social purposes however an incidental sale of property will not deprive a club of its exemption public law 1976_2_cb_596 provides that a social_club may receive up to percent of its gross_receipts including investment_income from sources outside its membership without losing exemption within thi sec_35 percent amount not more than percent of the gross_receipts should be derived from the use of a social club’s facilities or services by the general_public this means that an exempt social_club may receive up to letter rev catalog number 47628k percent of its gross_receipts from a combination of investment_income and receipts from nonmembers so long as the latter do not represent more than percent of the total receipts revrul_60_324 1960_2_cb_173 states that a club which has been granted exemption from federal_income_tax under sec_501 of the internal_revenue_code of may lose its exemption if it makes its club facilities available to the general_public on a regular recurring basis since it may then no longer be considered to be organized and operated exclusively for its exempt_purpose revrul_65_63 c b states that a nonprofit organization which is conducting sports car events for the pleasure and recreation of its members permits the general_public to attend such events for a fee on a recurring basis and solicits patronage by advertising does not qualify for exemption as a club organized and operated exclusively for pleasure recreation and other nonprofitable purposes under sec_501 of the internal_revenue_code revrul_69_219 1969_1_cb_153 states that a social_club that regularly holds its golf course open to the general_public and charges established green fees that are used for maintenance and improvement of club facilities is not exempt under sec_501 of the code application of law you are not described under sec_501 of the code because you are not organized for pleasure recreation or other nonprofitable purposes your main activity consists of providing general golfing activities at seasonal rates to members as well as nonmembers your largest source of revenue is from green cart fees from members as well as nonmembers from p of your gross_receipts were from nonmembers which far exceeds the limitation for nonmember use of a social club’s facilities or services in public law although you did not provide the exact amount of nonmember income for the years l through n it appears that you would likely exceed the limitation set forth in public law for those years due to the fact that over half of your gross_receipts each year are from green and cart fees from members and nonmembers the fees you collect are then used to pay your expenses including salaries and wages repairs and maintenance and turf upkeep you therefore operate more like a business per sec_1_501_c_7_-1 you are not organized and operated for pleasure recreation and other nonprofitable purposes because you make your activities available to the general_public like the organization in revrul_60_324 you do not qualify for exemption under sec_501 of the code because your activities and facility are available to the general_public on a regular recurring basis nonmembers are able to take part in your activities on a regular basis during normal business hours you are like the organization in revrul_65_63 although your activities are for the pleasure and recreation of your members you also allow nonmembers to participate in the golf and fishing activities on a regular basis during normal business hours the public participation in your activities is not incidental and the magnitude and recurrence of the public patronage of your activities constitute engaging in a business in addition you would like to seek public patronage by offering reduced price winter specials in the local newspapers per sec_1_501_c_7_-1 the solicitation of public patronage by advertising is evidence that you are engaged in a business and not operated exclusively for pleasure recreation or social purposes you are like the organization in revrul_69_219 your golf course is open to the general_public on a regular basis during normal business hours and you charge nonmembers as well as members green fees and cart fees like the organization in revrul_69_219 you do not qualify for exemption under sec_501 of the letter rev catalog number 47628k code since you are engaged in business with the general_public you regularly hold your golf course open to the general_public for use upon payment of established green cart fees and the income from the fees is inuring to the benefit of your members because it is being used for the maintenance and improvement of your club facilities per sec_1_501_c_7_-1 exemption under sec_501 of the code does not apply to any club if any part of its net_earnings inures to the benefit of any private shareholder conclusion you do not qualify for exemption under sec_501 by making your activities and facility open to the general_public for fees you are engaging in a business and are not organized and operated exclusively for pleasure recreation and other nonprofitable purposes additionally income from the fees is inuring to the benefit of your members because it is being used for the maintenance and improvement of your club facilities if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include e e e e e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with anexplanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative one of the following declarations for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we’ll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we’ll continue to process your case considering the information you provided if you haven’t provided a letter rev catalog number 47628k basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter sincerely enclosure publication jeffrey i cooper director exempt_organizations rulings and agreements letter rev catalog number 47628k


internal_revenue_service number release date index number ------------------------------------------- ------------------------ ---------------------------- --------------------------------------------------------- department of the treasury washington dc person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc fip b04 plr-109008-07 date date taxpayer date state a number b company c contract d number contract e document f contract g document h dear --------------- ------------------------------------------ ---------------------- ------------ -- ---------------------------------------- ---------------------------------- ------------------------------------------------------------------------------------------ -- -------------------- ------------------------------------------------- ------------------------------------------------------------------------------------------ -------------- --------------------------------------------------------------------------- this letter is in response to the date letter as supplemented from your taxpayer authorized representative requesting a ruling that taxpayer does not qualify as an insurance_company under sec_831 of the internal_revenue_code facts as represented by taxpayer taxpayer was formed on date under the captive_insurance_company laws of state a taxpayer is owned in equal proportion by number entities which are classified as b under the code the number entities are exposed to risks with regard to property they own which they insure through the commercial market this coverage involves high per occurrence deductibles taxpayer was formed to achieve various objectives related to the owners’ risk management functions in particular taxpayer was formed to formalize the funding of deductibles and possibly allow for higher retentions in future years while allowing access to the plr-109008-07 reinsurance market and maximizing potential benefits under the terrorism risk insurance act taxpayer has contracted with company c to provide management services on date taxpayer issued two contracts contract d provides coverage for the deductible self-insured retention under a specific commercial contract contract d covers only number of the number entities contract e provides coverage for all risks of direct physical loss or damage to property occurring during the policy period except as excluded contract e covers all of the number entities though the premium due is not divided equally between the number entities the aggregate premium paid_by the number entities exceeds the coverage limits both per occurrence and aggregate document f effects the operation of taxpayer it provides that with respect to contracts d and e the annual premium charged each participating entity will be actuarially determined based on that entity’s actual_loss_experience if losses and loss expenses both paid and estimated exceed the premium contribution of any other participating entity the excess shall be shared according to a ratio of premium contribution of each participating entity to the total premium contributions of all participating entities additionally taxpayer issued contract g which provides coverage for the deductible self-insured retention with respect to certain risks contract g covers only number of the number entities though the premium due is not divided equally between the number of the number entities the aggregate premium paid_by the number of the number entities equals the coverage limits both per occurrence and aggregate contract g implements a provision in taxpayer’s document f whereby each the number entities may contribute to a ‘fund’ maintained by taxpayer from which certain losses can be paid as provided in both document f and contract g the amount of the losses so paid is determined by a ratio of the claiming entity’s valid claim s to the total value of all valid claims document h governs the operation of taxpayer it provides that if one of the number entities fails to participate in one of taxpayer’s contracts for a stated number of consecutive years that entity shall pay taxpayer as liquidated_damages for dissociation an amount not greater than the pro-rated premium based on the last year_of_participation that would have been satisfied had the entity participated in one of taxpayer’s contracts almost all of taxpayer’s business activity is the issuance and administration of contracts d e and g ruling requested plr-109008-07 taxpayer requests a ruling that it does not qualify as an insurance_company under sec_831 of the code and should not be subject_to tax under the provisions of part ii of subchapter_l of the code law and analysis sec_831 provides that taxes computed as provided in sec_11 shall be imposed for each taxable_year on the taxable_income of every insurance_company other than a life_insurance_company sec_831 provides that for purposes of sec_831 the term_insurance company has the meaning given to such term by sec_816 sec_816 provides that the term_insurance company means any company more than half the business of which during the taxable_year is the issuing of insurance or annuity_contracts or the reinsuring of risks underwritten by insurance_companies neither the code nor the regulations thereunder define the terms insurance or insurance_contract the bedrock for evaluating whether an arrangement constitutes insurance is 312_us_531 in which the court stated that historically and commonly insurance involves risk - shifting and risk - distributing in a transaction which involve s an actual ‘insurance risk’ at the time the transaction was executed insurance has been described as involv ing a contract whereby for adequate_consideration one party agrees to indemnify another against loss arising from certain specified contingencies or perils i t is contractual security against possible anticipated loss epmeir v united_states 199_f2d_508 7th cir cases analyzing captive insurance arrangements have distilled the concept of insurance for federal_income_tax purposes to three elements applied consistently with principles of federal income_taxation involvement of an insurance risk shifting and distribution of that risk and insurance in its commonly accepted sense see eg 979_f2d_162 9th cir aff’g 96_tc_18 the risk transferred must be risk of economic loss 572_f2d_1190 7th cir cert_denied 439_us_835 the risk must contemplate the fortuitous occurrence of a stated contingency 183_f2d_288 2d cir cert_denied 340_us_853 and must not be merely an investment risk le gierse u s pincite revrul_89_96 1989_2_cb_114 risk shifting occurs if a person facing the possibility of an economic loss transfers some or all of the financial consequences of the potential loss to the insurer these principles include respecting the separateness of corporate entities the form and substance of the transaction s and the relationship between the parties 96_tc_61 aff’d in part and rev’d in part 972_f2d_858 7th cir plr-109008-07 such that a loss by the insured does not affect the insured because the loss is offset by the insurance payment risk_distribution incorporates the statistical phenomenon known as the law of large numbers distributing risk allows the insurer to reduce the possibility that a single costly claim will exceed the amount taken in as premiums and set_aside for the payment of such a claim by assuming numerous relatively small independent risks that occur randomly over time the insurer smooths out losses to match more closely its receipt of premiums 811_f2d_1297 9th cir risk_distribution necessarily entails a pooling of premiums so that a potential insured is not in significant part paying for its own risks see 881_f2d_247 6th cir revrul_2002_91 2002_2_cb_991 addressed the situation where a number of entities members joined to form a so-called group_captive to provide insurance coverage for stated liability risks among other facts no member owned more than nor had more than of the vote on any corporate governance issue of the group_captive no member’s individual risk exceeded of the total risk insured by the group_captive moreover no member had any obligation to pay additional premiums if that member’s actual losses exceeded the premiums_paid by that member the ruling holds the arrangement between the member and the group_captive constitutes insurance and the group_captive qualifies as an insurance_company under sec_831 the arrangements issued by taxpayer are distinct from that in revrul_2002_ the economic_effect of document f and contracts e and g may be that each participating entity is in significant part paying for its own risks moreover each of the number entities owns substantially more than of the ‘captive’ as described in revrul_2002_91 the number entities are significantly fewer than that the number implicitly involved in revrul_2002_91 thereby negating risk_distribution accordingly contracts d e and g do not constitute insurance for federal_income_tax purposes if as represented these contracts are more than half the business of taxpayer during the taxable_year taxpayer will not qualify as an insurance_company under sec_831 and therefore is not subject_to tax under sec_831 ruling provided more than half of its business during the taxable_year is issuing contracts d e and g which are contracts that do not constitute insurance for federal_income_tax purposes taxpayer does not qualify as an insurance_company under sec_831 of the code and is not subject_to tax under the provisions of part ii of subchapter_l of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter plr-109008-07 that it may not be used or cited as precedent this ruling is directed only to taxpayer sec_6110 of the code provides in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer’s authorized representatives a copy of this letter must be attached to any income_tax return to which it is relevant alternatively for a return s filed electronically this requirement is satisfied by attaching a statement to the return s that provides the date and control number of the letter_ruling the ruling contained in this letter is based upon information and representations submitted by 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 donald j drees jr senior technician reviewer branch


internal_revenue_service number release date index number ---------------------------------- ---------------------------------------- ------------------------ ---------------------------------------- ---------------------------------- ty ------- ty ------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number --------------------- refer reply to cc intl b03 plr-135901-08 date date legend corp a ------------------------ ------------------------ ----------------------------------------------- ------------------------------------------ ------- --------------------------- corp b corp c country l date n tax_year x ------- tax_year y ------- dear ---------------- this is in response to your letter dated date in which you request consent for corp a to revoke effective for tax_year y and for all subsequent taxable years its election effective beginning for tax_year x to use the safe_harbor method described in sec_1_901-2a in determining the amount of foreign_income_tax paid_or_accrued or deemed paid_or_accrued to country l the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations you submitted and accompanied by your penalty of perjury statement 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 corp a is a domestic_corporation that is the common parent of an affiliated_group_of_corporations corp a group that has filed a u s consolidated federal_income_tax return for tax_year x and for all subsequent tax years the due_date including extensions for corp a’s u s consolidated federal_income_tax return for tax_year y is date n which is more than days after date plr-135901-08 corp a group owns directly and indirectly percent of corp b a controlled_foreign_corporation cfc for u s tax purposes corp b owns percent of corp c another cfc which beneficially owns operations in country l corp c is and has been a dual_capacity_taxpayer as defined in sec_1_901-2 with respect to its operations in country l sec_1_901-2a permits dual capacity taxpayers in computing foreign tax_credits for qualifying levies of each country to use either a facts and circumstances method or a safe_harbor method to determine the amount of a levy that is not paid in exchange for a specific_economic_benefit corp a filed a safe_harbor method election under sec_1_901-2a with respect to country l levies paid_or_accrued or deemed paid_or_accrued by members of corp a group effective for tax_year x and for subsequent years that safe_harbor method election has not been revoked under sec_1_901-2a sec_1_901-2a describes the manner in which taxpayers may elect and revoke the safe_harbor method sec_1_901-2a provides that the safe_harbor method election may not be revoked without the consent of the commissioner consent is normally given provided the conditions set forth in the regulation are satisfied the regulation provides that an application_for consent to revoke the election must be made not later than days before the due_date including extensions for the filing of the income_tax return for the first taxable_year for which the revocation is sought to be effective with certain exceptions not applicable to this situation the commissioner may make his consent to any revocation conditioned upon adjustments being made in one or more taxable years so as to prevent the revocation from resulting in a distortion of the amount of any item relating to tax_liability in any taxable_year the commissioner will normally consent to a revocation under the circumstances described in sec_1_901-2a through vi sec_1_901-2a provides that the commissioner will normally consent to a revocation of a safe_harbor method election if the election has been in effect with respect to at least three taxable years prior to the taxable_year for which the revocation is to be effective based solely on the information and representations submitted corp a’s application_for consent to revoke the safe_harbor method election with respect to qualifying levies of country l was made not later than days before date n the due_date including extensions for corp a’s u s consolidated federal_income_tax return for tax_year y and the applicable safe_harbor method election has been in effect with respect to at least corp a’s last three taxable years prior to tax_year y accordingly consent is plr-135901-08 granted to corp a to revoke the safe_harbor method election with respect to qualifying levies of country l effective for tax_year y and for all subsequent taxable years no opinion was requested and no opinion is expressed as to whether based upon all of the relevant facts and circumstances the amount if any paid pursuant to a levy or levies imposed by country l is not an amount_paid in exchange for a specific_economic_benefit 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 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely richard l chewning senior counsel branch international enclosure copy for purposes


internal_revenue_service number release date index number - -------------------------------------------- ------------------------------------------------------- ---------------- ----------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc tege eoeg teb presp-148848-06 date november13 dear ------------------ pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the project described in appendix a attached hereto is qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------------------------- ----------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure------------- of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the project described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met if you have any questions with respect to this allocation please contact --------------------- -------- or -----------------------------of the office of division counsel associate chief_counsel tax-exempt and government entities on --------------------- not a toll-free call except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in appendix presp-148848-06 a is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-148848-06 borrower name appendix a project type project location -------------------------------- ----------------------------- -------------------------------- wind facility --------------------- ---------------------------------- ------------------------------------------------ ------------------------------------------------- -------------------------- -------------------------------------------- --------------------------- amount allocated dollar_figure-------------


internal_revenue_service index number number info release date cc dom p si cor-104484-00 mar dear your date letter to president clinton was forwarded by the u s department of transportation on date to this office for reply you inquire in your letter about a bill you received from your telephone company wherein you were charged a tax on the frequent flyer miles you earned you state that other businesses are not passing on to their customers the tax on miles earned in their frequent flyer programs you ask whether the u s government can require those companies that pass on the tax to their customers to cease doing so as enacted by the congress the taxpayer_relief_act_of_1997 added sec_4261 to the internal_revenue_code under that section any amount_paid for the right to award frequent flyer miles is subject_to the federal excise_tax on air transportation of persons thus when a business such as a telephone company purchases the right to award frequent flyer miles to a customer it pays the tax to the air carrier selling the miles the air carrier then pays the tax over to the united_states because the customer is not paying any amount for the right to award frequent flyer miles this tax does not apply to the transaction between the customer and the business the business may show on its invoice to the customer an amount representing the tax that was paid on its purchase of the frequent flyer miles but the tax as enacted by the congress does not apply to the customer’s receipt of the miles as a consequence of the customer’s purchase of goods or services under these circumstances no federal excise_tax provision prohibits a business from passing its costs of doing business on to customers this tax as well as several other federal excise_taxes relating to air transportation is paid into the airport_and_airway_trust_fund the trust fund amounts in the trust fund are used to plan construct develop operate and maintain air traffic control air navigation and communications for the airway system in addition certain portions of the budget of the department of transportation concerned with air transportation and air safety including over half of the expenditures of the federal aviation administration come from the trust fund i hope the above information is helpful to you sincerely assistant chief_counsel passthroughs and special industries by bernard weberman assistant to the chief branch


number release date id office uilc cca_2009120111015765 ---------------- from --------------------- sent tuesday december am to ----------------------- cc subject tam ------------ did you get my messages from a few weeks ago regarding submitting a new tam you can submit a new tam for a rehearing in the ------------ matter in a similar way to submission of a brand new tam send the tam through the -------------- counsel's office and then they'll submit the tam to us for our review


department of the treasury internal_revenue_service washington d c date number info release date cc tege eoeg et1 - genin-112732-03 uilc memorandum for director internal_revenue_service center cincinnati oh attn technical unit from subject office of division counsel associate chief_counsel tax exempt and government entities cc tege eoeg et1 - genin-112732-03 railroad retirement act tax status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion on reconsideration that the following businesses ceased to be employers under the railroad retirement act and the railroad unemployment insurance act effective date in an earlier opinion the rrb concluded that the businesses ceased to be employers under the acts effective date we have reviewed the opinion of the rrb and based upon the information submitted to the rrb we also conclude that and ceased to be employers under the railroad_retirement_tax_act effective date please take the appropriate action regarding these businesses will e mcleod cc


internal_revenue_service number info release date index number ----------------------- ------------------------------------------ ----------------------------- ---------------------------- - -re --------------------------------------------- ----------------------------------------------------------- ------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 genin-143194-04 date date this is in response to your letter dated date the company captioned dear -------------- above the taxpayer wishes to terminate its s election as of date according to the information provided a statement revoking the s election was sent to the service on date the taxable_year and on or before the 15th day of the 3rd month thereof shall be effective on the 1st day of such taxable_year and a revocation made during the taxable_year but after such 15th day shall be effective on the 1st day of the following taxable_year the service_center has been advised to make the necessary adjustments to the file on the taxpayer under sec_1362 of the interna l revenue code a revocation made during therefore the s election of the taxpayer is terminated as of date sincerely s dianna k miosi dianna k miosi chief branch passthroughs special industries


internal_revenue_service number release date index number ------------------------------------------ ------------------------------ ------------------------------ ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number ---------------------- refer reply to cc psi b03 plr-132856-12 date date legend x trust -------------------------------------------------------------------------------------------------- --------------------------------------------- -------------------------------------------------------------------------------------------------- ------------------------------------------------------------------ state --------------------- date ----------------- date ----------------- date ---------------------- date ---------------------- year ------- dollar_figuren ---------- dear --------------- this letter responds to a letter dated date and subsequent correspondence written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code plr-132856-12 facts x was incorporated under the laws of state on date x elected to be an s_corporation effective date on date shares of x’s stock were transferred to trust x represents that trust was qualified to be an electing_small_business_trust esbt within the meaning of sec_1361 however no election was made under sec_1361 to treat trust as an esbt consequently trust was an ineligible shareholder and as a result x’s s_corporation_election terminated on date x represents that there was no intent to terminate x’s s_corporation_election and that the failure to timely file the esbt election for trust was inadvertent and not motivated by tax_avoidance or retroactive tax planning for all taxable years x and x’s shareholders income was reported consistent with x qualifying as an s_corporation in addition x and x’s shareholders agree to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to the period specified by sec_1362 law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible shareholder and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1361 provides that for purposes of sec_1361 an esbt is a permissible shareholder sec_1361 provides that except as provided in sec_1361 the term electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in sec_170 - or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and subsequent taxable years of such trust unless revoked with the consent of the secretary plr-132856-12 sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to this period then notwithstanding the circumstances resulting in the termination the corporation shall be treated as an s_corporation during the period specified by the secretary sec_1_1362-4 of the income_tax regulations provides that the commissioner may require any adjustments that are appropriate in general the adjustments required should be consistent with the treatment of the corporation as an s_corporation during the period specified by the commissioner conclusion based solely on the facts submitted and representations made we conclude that x’s s_corporation_election was terminated on date when stock in x was transferred to trust because trust failed to timely file an esbt election under sec_1361 we further conclude that the termination was inadvertent within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation on and after date unless x’s s_corporation_election is otherwise terminated under sec_1362 the trustee of trust must file an esbt election effective date with the appropriate service_center within days of the date of this letter a copy of this letter should be attached to the esbt election accordingly the shareholders of x must include in their income their pro_rata share of separately_stated and nonseparately computed items of x as provided in sec_1366 and make any adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 this ruling is contingent upon x and each of its shareholders filing any amended returns and making such adjustments that are necessary to properly reflect the reporting of x’s items of s_corporation income specifically trust must file an amended_return and make adjustments that are necessary to properly reflect the treatment of trust as an esbt for year taxable_year plr-132856-12 additionally as an adjustment under sec_1362 a payment of dollar_figuren and a copy of this letter_ruling must be sent to the following address internal_revenue_service cincinnati service_center west rivercenter blvd covington ky stop terri lackey manual deposit this letter must be sent no later than date a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling if all of the above conditions are not met then this ruling is null and void furthermore if these conditions are not met x must notify the cincinnati service_center that its s_corporation_election has terminated except for the specific ruling above no opinion is expressed or implied concerning the federal tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed or implied regarding x’s eligibility to be an s_corporation or trust’s eligibility to be an esbt 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 this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely james a quinn senior counsel branch office of associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes cc


internal_revenue_service department oft index number washington dc refer reply to cc dom p si br 1-plr-110891-99 date aug legend d1 state this responds to your letter dated date written on behalf of x requesting a ruling that x's s_corporation status will be effective as of d1 facts x incorporated under state law on d1 x's shareholders intended that x be a subchapter_s_corporation for its tax_year beginning d1 however the s_corporation_election under sec_1362 of the internal_revenue_code was not filed timely x requests a ruling that it will be recognized as a subchapter_s_corporation effective d1 pursuant to sec_1362 law and analysis sec_1362 provides that a small_business_corporation may elect to be a subchapter_s_corporation lg plr-110891-99 sec_1362 provides the rule on when a subchapter_s_election will be effective if a subchapter_s_election is made within the first two and one-half months of a corporation's taxable_year then that corporation will be treated as a subchapter_s_corporation for the year in which the election is made if a subchapter_s_election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as a subchapter_s_corporation until the taxable_year after the year in which the subchapter_s_election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that taxable_year x's subchapter_s_corporation election was not filed timely for the election to be effective as of its taxable_year beginning on d1 nevertheless x has established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusions based solely on the facts submitted and representations made and assuming that x otherwise qualifies as a subchapter_s_corporation as of d1 and x's shareholders make any adjustments to their federal_income_tax returns necessary to comply with this ruling we conclude that x will be recognized as a subchapter_s_corporation effective for the period beginning on d1 please file a completed form_2553 with a copy of this tuling attached reflecting x's election of subchapter_s_corporation status as of d1 with the applicable service_center within days from the date of this letter except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x otherwise-satisfies the subchapter_s_corporation eligibility requirements plr-110891-99 this ruling is directed only to the taxpayer who requested it sec_6110 k provides that it may not be used or cited as precedent sincerely ibe fe ean nna k miosi chief branch office of the chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes