internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc intl br 1-plr-159370-01 date date do ty legend a country b company c company d business e date f year g year h year i date j date k date l dear plr-159370-01 this is in response to your letter dated date requesting a ruling on behalf of a under sec_877 of the internal_revenue_code_of_1986 the code that a’s loss of permanent resident status did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code the information submitted for consideration is substantially as set forth below 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 a is a citizen of country b a’s parents and spouse were all born in country b in year g a’s spouse began working for company c and in year h he was transferred to the united_states in year i a obtained a green card and became a permanent resident_of_the_united_states company c and its subsidiaries are in business e country b agreed to deregulate the business e industry beginning on date j a’s spouse was the senior executive for company c’s operations in country b which accounted for the majority of its business therefore company c transferred a’s spouse back to country b on date k to help position the company to compete effectively beginning on date k a moved back to country b with her spouse a gave up her green card on date l a has always maintained close ties with country b and has had property there a’s spouse intends to complete his career and retire in country b a is a resident fully liable to tax in country b sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be taxed on u s source income as modified by sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former citizen or former long term-resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual's average income_tax_liability or the individual's net_worth on the date of expatriation exceeds a certain threshold see sec_877 sec_2107 and sec_2501 a former u s citizen whose net_worth or average tax_liability exceeds one of these thresholds however will not be presumed to have a principal purpose of tax plr-159370-01 avoidance if that person is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 under notice_98_34 1998_2_cb_29 modifying notice_97_19 1997_1_cb_394 an eligible former long-term_resident will not be presumed to have a principal purpose of tax_avoidance if that former long-term_resident is described within certain categories and submits a complete and good_faith request for a ruling within one year of the date of loss of long term residency status for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_98_34 because a is described in two categories of individuals eligible to submit ruling requests first a is eligible to submit a request because a’s parents were born in country b second a is eligible to submit a request because a’s spouse was born in country b a submitted all the information required by notice_98_34 including any additional information requested by the service after review of the submission accordingly based solely on the information submitted and the representations made we conclude that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 therefore a will not be presumed under sec_877 to have as one of a’s principal purposes for expatriating the avoidance of u s taxes however because the information submitted does not clearly establish the existence or lack of a principal purpose to avoid taxes under subtitle a or b of the code no opinion is expressed as to whether a’s expatriation had for one of its principal purposes the avoidance of such taxes while this ruling rebuts the presumption of tax_avoidance under sec_877 it is not conclusive as to whether a subsequently may be found to have a principal purpose of tax_avoidance under sec_877 sec_2107 or sec_2501 based on all the facts and circumstances see sec_877 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 in addition no opinion is expressed as to a’s united_states tax_liability for taxable periods prior to expatriation or a’s u s tax_liability for periods after expatriation under sections of the code other than sec_877 sec_2107 and sec_2501 a copy of this letter must be attached to a's u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return plr-159370-01 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to a and an authorized representative ______________________________ sincerely senior technical reviewer cc intl br office of the associate chief_counsel international cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-151924-03 date date company shareholders property a b c d e f g h i dear this letter responds to your letter dated date as well as subsequent correspondence submitted on behalf of company requesting a ruling that the rental income received by company from the property is not passive_investment_income plr-151924-03 within the meaning of sec_1362 of the internal_revenue_code facts company owned equally by the shareholders was incorporated on a and intends to elect under sec_1362 to be an s_corporation effective b company has accumulated_earnings_and_profits company owns operates and leases commercial real_estate the property it has c tenants none of whom is under a net_lease all of the shareholders are officers and employees of company through the shareholders as well as independent contractors company provides various services to the property including regular property inspection common area maintenance and repair including carpeting and painting janitorial and cleaning services maintenance and repair of building structural_components including roofs and facades upkeep and repair of building systems heating air conditioning plumbing water and sewer electrical and lighting parking lot maintenance landscape maintenance snow removal and pest control in addition to the services provided to tenants company handles the usual leasing and administrative functions involved in managing real_estate company received or accrued approximately d in rents and paid_or_incurred approximately e in relevant expenses for f on the property the rental income and expense figures for g are h and i respectively law and analysis except as provided in sec_1362 sec_1362 provides that a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 terminates whenever the corporation i has accumulated_earnings_and_profits at the close of each of three consecutive tax years and ii has gross_receipts for each of such tax years more than percent of which are passive_investment_income except as otherwise provided in sec_1362 sec_1362 provides that the term passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1_1362-2 of the income_tax regulations provides that rents means amounts received for_the_use_of or the right to use property whether real or personal of the corporation sec_1_1362-2 provides that rents does not include rents plr-151924-03 derived in the active trade_or_business of renting property rents received by a corporation are derived in an active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation conclusion based solely on the facts and representations submitted we conclude that the rents company receives from the property are not passive_investment_income under sec_1362 except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding company's eligibility to elect to be treated as an s_corporation further the passive_investment_income rules of sec_1362 are completely independent of the passive_activity rules of sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative 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 sincerely yours s mary beth collins senior technician reviewer branch office of associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------- ------------------------------ ------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no --------- telephone number -------------------- refer reply to cc ita b04 plr-134319-14 date date in re --------------------------------------------------------------------------------------- legend s corp year year year year year year year cpa v x y z ---------------------------------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------------------------ ------------------------------------------------- --------------- ------------- ---- dear ----------------------------- this is in reply to a letter submitted by your authorized representative requesting a ruling on your behalf under sec_453 of the internal_revenue_code and sec_15a d ii of the temporary regulations under the installment_sales revision act of you are requesting permission to make a late election out of the installment_method for the sale of s corp stock facts plr-134319-14 in year you incorporated your business as an s_corporation and owned x percent of the company stock s corp was engaged in business as a v you use the cash_method_of_accounting and your annual_accounting_period is the calendar_year in year you sold your s corp stock for a share of a dollar_figurey down payment and contingent payment obligations earn-out payments_to_be_received in year sec_4 and on several occasions in year and year prior to filing your year form_1040 you had tax planning and tax_return preparation conversations with cpa many of these conversations dealt with the tax reporting of the sale of the stock during these conversations cpa explained to you the pros and cons of using the installment_method to report the gain on the sale of your stock because of concerns about increased tax_rates on the dates of the earn-out payments you informed cpa that you did not want to use the installment_method to report gain on the sale of the s corp stock you understood that you were required to report the total amount of recognized gain from the sale of the stock on the year form_1040 to effectively elect out of the installment_method cpa misinformed you on the correct way to elect out of the installment_method he advised you to report the recognized gain from the down payment in year and after receipt of the first earn-out payment in year to amend the year form_1040 to report the total amount of recognized gain on the sale of the stock including all future earn-out payments you followed cpa’s advice that you would effectively elect out of the installment_method by initially reporting the down payment on schedule d instead of form_6252 installment_sale income on your original year form_1040 after you received the first earn-out payment in year and while cpa was preparing an amended_return for year cpa realized that he misinformed you on the correct way to effectively elect out of the installment_method and that you would need a favorable private_letter_ruling to effectively elect out of the installment_method shortly thereafter you hired an appraiser to determine the fair_market_value of the contingent payment obligations on the date of sale after the appraisal was completed preparation of this ruling_request commenced before filing this request for a private_letter_ruling pursuant to your cpa’s advice to stop the running of statutory interest you filed your year form 1040x in year to report the total amount of recognized gain on the sale of the stock you and cpa have submitted affidavits consistent with the above facts law and analysis sec_453 provides that except as otherwise provided income from an installment_sale shall be taken into account under the installment_method sec_453 provides however that the installment_method will not apply to a disposition if the the correct way to elect out of an installment_method that includes contingent payment obligations is to report in the year_of_sale the amount_realized as provided in sec_1_1001-1 of the income_tax regulations see sec_1_1001-1 plr-134319-14 taxpayer elects to not have the installment_method apply to such disposition under sec_453 except as otherwise provided by regulations an election out of the installment_method with respect to a disposition may be made only on or before the due_date prescribed by law including extensions for filing the taxpayer’s return of tax for the taxable_year in which the disposition occurs sec_15a_453-1 provides that the election out of the installment_method must be made in the manner prescribed by the appropriate forms for the taxpayer’s return for the taxable_year of the sale a taxpayer who reports an amount_realized equal to the selling_price including the full face_amount of any installment_obligation on the tax_return filed for the taxable_year in which an installment_sale occurs will be considered to have made an effective election a cash_method taxpayer receiving an obligation with a fair_market_value that is less than the face value must make the election as provided in the appropriate instructions for the return filed for the taxable_year of the sale under sec_15a_453-1 elections after the due_date prescribed by law including extensions for filing the taxpayer’s return will be permitted only in those rare circumstances when the internal_revenue_service concludes that the taxpayer had good cause for failing to make a timely election based on your representations and the affidavits you have shown that you always intended to elect out of the installment_method for the sale of the s corp stock further you promptly filed this ruling_request after you realized that an effective election out had mistakenly not been made we have determined that your request for an extension of time to make the election out of the installment_method does not involve hindsight and that you have established good cause for an extension to file an election see situation of revrul_90_46 1990_1_cb_107 conclusion accordingly based on the facts presented the representations made and provided that your basis in the s corp stock was dollar_figurez we grant you an extension to elect out of the installment_method for the sale of your s corp stock and conclude that you effected that election when you filed your amended year form_1040 in year 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 example we do not express any opinion concerning whether you properly computed the amount_realized or the gain required to be recognized on the sale of the s corp stock you must attach a copy of this letter to any federal tax_return to which it is relevant if you file the amended returns electronically you may satisfy this requirement by plr-134319-14 attaching a statement to each of the amended returns that provides the date and control number of this letter_ruling 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 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 in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting cc


internal_revenue_service number release date index number ----------------------------------------------- --------------------------------------------------------- -------------------------- ----------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------- ---------------------------------------------------- telephone number --------------------- refer reply to cc psi b02 plr-100656-12 date date legend x ---------------------------------------------------------- ------------------------------------ state ------------------- date ------------------- dear ------------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was formed on date under the laws of state x represents that x intended to be an s_corporation effective date however a form_2553 election by a small_business_corporation was not timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an 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 an s_corporation until the taxable_year after the year in which the s election is filed plr-100656-12 sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year based solely on the facts submitted and the representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date accordingly provided that x makes an election to be an s_corporation by filing a complete form_2553 effective date along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for date except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court douglas l hadsell petitioner v commissioner of internal revenue respondent docket no filed date douglas l hadsell pro_se john c meaney and ralph w jones for respondent supplemental memorandum opinion goldberg special_trial_judge this case is before the court on remand from the court_of_appeals for the ninth circuit 107_f3d_750 9th cir vacating and remanding tcmemo_1994_198 unless otherwise indicated this opinion supplements our opinion in hadsell v commissioner tcmemo_1994_198 vacated and remanded 107_f3d_750 9th cir section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies in petitioner’s federal income taxes and additions to tax as follows additions to tax_year deficiency sec_6651 a sec_6654 dollar_figure s dollar_figure dollar_figure big_number dollar_figure dollar_figure big_number dollar_figure dollar_figure after concessions by the parties ’ the issues for decision are whether petitioner is entitled to the filing_status of married_filing_jointly for the purposes of determining the amount of any liability for the taxable_year whether petitioner is entitled to deductions for expenses_incurred while working as a deckhand on a commercial fishing boat whether petitioner is entitled to deductions related to rental real_property whether petitioner is entitled to casualty losses petitioner concedes that he received unemployment_compensation wages and compensation as an independent_contractor in at least the amounts determined by respondent we therefore deem the gross_income and self-employment_tax issues to be conceded by petitioner for the years at issue respondent concedes that there was a mathematical error in the original determination as set forth in the notice_of_deficiency for the taxable_year because petitioner was not given credit equal to one-half of the self-employment_tax he owed for accordingly the deficiency for should be reduced by dollar_figure with corresponding reductions in the sec_6651 and sec_6654 additions to tax for the destruction of a boat and accompanying personal_property whether petitioner is liable for additions to tax pursuant to sec_665l1 a for failing to file timely federal_income_tax returns for the years at issue and whether petitioner is liable for additions to tax pursuant to sec_6654 for failing to pay estimated_taxes the stipulations and exhibits are incorporated herein by this reference for convenience we shall set forth only the facts necessary to clarify the ensuing discussion prior to trial in hadsell v commissioner tcmemo_1994_ hadsell i petitioner served subpoenas duces tecum by mail upon detective mike menzies detective menzies an employee of petitioner’s wife the newport police department zong yan yu and lai fong lee zong yan yu’s aunt and petitioner’s former employer petitioner served the three subpoenas without tendering mileage and witness fees as required by rule sec_147 and sec_148 none of the witnesses appeared at trial on date and the court refused to enforce the subpoenas because petitioner failed to tender the required mileage and witness fees zong yan yu was referred to as zong gan yu hadsell in hadsell v commissioner tcmemo_1994_198 and in 107_f3d_750 9th cir petitioner testified that he subpoenaed detective menzies in order to obtain his tax records which were in the possession of the newport police department petitioner claimed that the newport police department had two boxes of his tax records which could substantiate among other things petitioner’s work- related expenses claimed for the years at issue in the first subpoena petitioner directed that detective menzies who at one time was custodian of the newport police evidence locker appear at trial and bring with him two cardboard boxes with miscelaneous sic papers that you seized and described in your return to search warrant dated january 9th and each and every item made from paper and or paper products including reciepts sic photocopies envelopes photographs letters correspondences tax papers books magazines folders and all other things that you siezed sic made of paper or paper products the second and third subpoenas were served on zong yan yu and lai fong lee in order to establish petitioner’s marriage and petitioner’s wage income at lai fong inn respectively petitioner contended in hadsell i that the court’s failure to enforce the subpoenas despite the fact that he failed to tender the required mileage and witness fees violated hi sec_3 the court was informed at trial in hadsell i on date that detective menzies no longer worked for the newport police department and therefore was no longer the custodian of the records subpoenaed by petitioner constitutional right to a fair trial specifically that it violated his due process right of access to the courts petitioner argued that such fees should be waived in his case because he was indigent and was prevented from earning money because of his incarceration we concluded in hadsell i that the court had no authority to waive subpoena fees and that petitioner was not denied his constitutional rights even though the subpoenas were not enforced see hadsell v commissioner tcmemo_1994_198 we held civil litigants before this court enjoy no constitutional right to have the federal government pay their litigation expenses and that the party who summons a witness is responsible for paying the fees and mileage to which the witness is entitled under rule sec_147 and sec_148 the court_of_appeals for the ninth circuit while not deciding whether rule is unconstitutional as applied to indigent litigants stated hadsell did not have adequate alternatives for proving all of his claims on the one hand the tax_court did not err by denying witness fees to zong gan yu hadsell because hadsell could testify as to the date of their marriage as readily as she could have nor did it err in denying fees to lai fong lee because her testimony was not essential to resolve the questions of whether certain expenses were business deductions or whether hadsell had appropriately filed his tax returns as to the seized tax records on the other hand hadsell claims that they alone could substantiate his claim that he had indeed properly filed tax returns in the years in question without having to declare u s c section unconstitutional as applied to hadsell the tax_court could have attempted to acquire these records in at least two ways by relying on federal rule_of evidence a the court could have on its own accord called detective menzies and ordered him to bring with him hadsell’s tax records that were still in the possession of the newport police department alternatively it could have granted hadsell a continuance with the suggestion that he seek the return of the documents directly from the city of newport either through administrative channels or an action in state court hadsell v commissioner f 3d pincite the court_of_appeals vacated our decision and remanded the case in order for the court to consider its power either to call detective menzies as a witness bringing with him the requested tax documents under federal rule_of evidence a or to continue the hearing to allow hadsell an opportunity to obtain the documents directly id pincite in accordance with the mandate of the court_of_appeals the court issued an order on date ordering newport chief of police james rivers chief rivers to have the newport police evidence officer personally deliver to petitioner’s corrections counselor by date certain boxes of documents seized and described in your return to search warrant’ dated date and any other documents of mr hadsell which may remain with the newport oregon police department which documents this court has been advised are located in the evidence vault of the newport oregon police department and are in the custody of james rivers the newport police evidence officer detective david thalman delivered the papers to petitioner’s corrections counselor on date and later filed a document with the court captioned return of order from newport or police dept with attached inventory of delivered items on date petitioner informed respondent that none of the documents returned by the newport police department applied to his tax_court case and that he believed that the police had failed to turn over all of the documents in their possession in a telephone conference between the parties and the court on date petitioner stated that he had again reviewed the documents delivered by the newport police department and believed that there were some documents relevant to the tax years involved herein to which he wanted to stipulate the parties by way of an order from the court were urged to meet in an attempt to stipulate the documents to be submitted to the court in an effort to determine whether the authorities involved with petitioner’s criminal case still had some of petitioner’s records in their possession respondent at the court’s request obtained an affidavit from mr stephen e dingle who had acted as a special prosecutor for the lincoln county district attorney’s office when prosecuting petitioner’s state criminal case the affidavit filed with the court on date stated that mr dingle had not retained any records relating to petitioner’s criminal prosecution respondent also contacted chief rivers and requested that he double check the police evidence locker to ascertain whether the police had inadvertently retained any of petitioner’s papers chief rivers confirmed that the newport police had delivered all of petitioner’s papers to petitioner’s corrections counselor on date petitioner filed a document which the court treated as a motion to reopen the record in that document petitioner stated the mandate of the court_of_appeals in this case is that detective menzies will be subpoenaed by the court to testify at a trial bingo that is exactly what this petitioner wanted in his first trial and was the basis for the entire appeal there was no other reason for the appeal petitioner was sic detective menzies to appear in person and testify under oath about what he has done with the missing two thirds of petitioner ‘s papers which happen to include the pertinent evidence that petitioner wants presented to this court on date the court issued an order setting the case for further proceedings in accordance with the mandate of the united_states court_of_appeals for the ninth circuit a trial was held on date to permit petitioner to introduce additional evidence relating to his tax_liability for the years at issue the court also made detective menzies and detective steven l etter detective etter of the salem police department available to petitioner at the trial another witness detective david thalman was recovering from open heart surgery and was unable to appear both detective menzies and detective etter testified concerning the papers which had been in the custody of the newport police department the witnesses testified as to the collection custody and eventual delivery of the papers to petitioner’s corrections counselor during the course of the hearing it was established that the papers had originally been seized by the police from a storage room at the port of newport oregon on date as evidence for use in petitioner’s state criminal trial the papers had originally been stored on a boat previously owned by petitioner but had been moved to a storage room around the time the boat was destroyed it is not known who initially removed the records from the boat and put them in the storage room the papers contained in two cardboard boxes were placed in the evidence locker of the newport police on date they were later transferred to a single cardboard box on date and as stated above were delivered to petitioner’s ‘ detective etter had previously worked for the newport police department and had also served as the officer second in charge of the evidence locker -- - corrections counselor on date pursuant to an order of the court at the trial on date petitioner testified that the papers delivered by the newport police included receipts which would substantiate his claimed deductions for the years at issue but that he did not bring the receipts to trial because he didn’t know that that’s what we were going to be dealing with today a recess was called and petitioner was excused to retrieve the documents from the prison law library petitioner returned with a voluminous amount of receipts which he claimed were from the and taxable years the receipts in no particular order were all thrown together ina box petitioner had made no attempt to organize the receipts in any manner even though he conceded that he had received the receipts three or four months or six months prior to the evidentiary hearing the court requested that respondent assign a revenue_agent to meet with petitioner and ascertain whether petitioner had receipts which could substantiate additional business deductions which had not been allowed in hadsell i in order to facilitate such an examination the court instructed petitioner to organize in fact since the documents were part of the records delivered by the newport police department on date petitioner had possession of the records for over months his receipts by tax_year activity and type of deduction claimed petitioner promised to cooperate with the examination percent the court then ordered that the record be held open for days to allow an examination of petitioner’s receipts on date one of respondent’s revenue agents contacted petitioner by phone and explained to petitioner how to organize his receipts in order to facilitate the examination on date the agent visited petitioner and attempted to examine his receipts for the years at issue the agent found that petitioner had failed to organize his receipts in any manner and was totally unprepared for the examination the agent explained to petitioner that he was acting pursuant to a deadline set by the court and suggested that they reschedule the examination so that petitioner could properly prepare petitioner declined to meet with the agent again and told the agent that he would be unable to organize the receipts before the expiration of the tax_court deadline because he was appealing his criminal conviction and needed all of his time to work on the appeal the agent decided to give petitioner time to reconsider his decision and scheduled another call with petitioner for date when the agent phoned on that date however petitioner refused to reschedule the examination and abruptly ended the phone call in an order dated date the court ordered petitioner to meet with a revenue_agent in order to complete the examination of petitioner’s receipts pursuant to that order respondent’s agent again attempted to phone petitioner on date but petitioner refused to take the call petitioner alleged that the agent had treated him rudely during the previous visit and demanded that another agent be assigned to the examination petitioner later informed the court during a conference call on date that he had destroyed his receipts after originally meeting with the agent on date in light of petitioner’s allegations that he had destroyed his receipts the court ordered petitioner to file a status report with the court by date setting forth the facts surrounding petitioner’s destruction of his tax records petitioner refused to comply with the order but stated in later filings with the court that he had destroyed only a portion not all of the receipts the record in this case was closed on date more than full calendar_year after petitioner refused to meet with respondent’s agent the court has made every attempt to accommodate petitioner in this case however the record is clear that petitioner has failed to respond to any of our orders and has abused the judicial process of the court having endeavored to comply with the mandate of the court_of_appeals for the ninth circuit by calling detective menzies as a witness and by providing petitioner with the tax documents previously in the possession of the newport police department we now address again the following issues in turn petitioner’s filing_status respondent calculated deficiencies for each of the years at issue based upon single filing_status while petitioner concedes that he was not married in either or he contends that he was married twice in and is therefore entitled to claim married_filing_jointly status for the taxable_year based on at least one of his marriages petitioner testified that he divorced yu fang wang his first wife on date and married his second wife zong yan yu in china on date zong yan yu did not come to the united_states until date a taxpayer's filing_status is determined as of the close of the taxable_year and a taxpayer legally_separated from his spouse under a decree of divorce shall not be considered married see sec_6013 a petitioner concedes that his marriage to yu fang wang his first wife ended in divorce on date and that he was not married to her at the close of the taxable_year see sec_6013 a a though petitioner contends that he is entitled to claim married_filing_jointly status for the taxable_year based on at least one of his marriages he has also argued that his second marriage which took place in china on date was not legitimate petitioner stated that he married zong yan yu on date but conceded that he was not sure that the marriage was valid because his divorce from yu fang wang did not become final until date in addition petitioner stated in his original petition filed with this court on date lai fong lee’s family bribed the marriage officer for a fake marriage between petitioner and zong yan yu which was against the laws of china petitioner also testified as follows at the trial on date t have a decree now that says we petitioner and zong yan yu were never married in any event sec_6013 provides that no joint_return shall be made if either spouse at any time during the taxable_year 1s a nonresident_alien according to petitioner’s testimony zong yan yu did not reside in the united_states during the taxable_year in addition petitioner conceded that zong yan yu did not execute a joint income_tax return for the taxable_year therefore based on the record we hold that petitioner is not entitled to claim married_filing_jointly -- - status for the taxable_year respondent is sustained on this issue whether petitioner is entitled to deductions for expenses_incurred while working as a dockhand on a commercial fishing boat pursuant to 39_f2d_540 2d cir we are permitted to estimate expenses when we are convinced from the record that the taxpayer has incurred such expenses in hadsell i we found that petitioner was entitled to deduct dollar_figure as business_expenses attributable to his fishing activity for each year of the years at issue at trial on date petitioner failed to adduce any additional evidence substantiating his claimed expenses therefore we do not change our previous finding that petitioner is entitled to deduct dollar_figure as business_expenses attributable to his fishing activity for each year of the years at issue deductions related to rental property petitioner contends that he is entitled to deduct expenses with respect to rental real_property he purchased in and also claim a casualty_loss for items he had stored on the rental property which were sold by the tenants in hadsell i we found that petitioner’s testimony concerning his claimed expenses and casualty losses was vague and unsupported and that we had no basis to allow petitioner to claim either a rental property expense or casualty_loss for the years -- - at issue at trial on date petitioner failed to adduce any additional evidence substantiating his claimed deductions therefore we do not change our previous finding that we have no basis to allow petitioner to claim either rental real_property expenses or casualty losses for the years at issue respondent is sustained on this issue casualty losses for a boat and personal_property that were destroyed at trial in hadsell i petitioner testified concerning a boat he purchased in either or which was later destroyed petitioner also testified that he incurred a casualty_loss for personal_property stored on the boat when it was destroyed petitioner concedes that the boat at issue and any personal_property stored aboard was destroyed in since petitioner’s loss did not occur during the years at issue any casualty_loss deduction to which petitioner might be entitled with respect to either the boat or personal_property stored on the boat when it was destroyed would not be allowable in any of the years at issue in this case additions to tax for failure_to_file a timely return sec_6651 imposes an addition_to_tax for failure_to_file a timely tax_return the addition_to_tax is equal to percent of the amount of the tax required to be shown on the return if the failure_to_file is not for more than month see sec_6651 an additional percent is imposed for each month or fraction thereof in which the failure_to_file continues to a maximum of percent of the tax see id the addition_to_tax is imposed on the net amount due see sec_6651 the addition is applicable unless a taxpayer establishes that the failure_to_file was due to reasonable_cause and not willful neglect see id petitioner testified that an accountant prepared petitioner’s federal and state_income_tax returns for the and taxable years and that he mailed the returns sometime in to support his testimony petitioner submitted copies of his federal and state_income_tax returns for the and taxable years along with a bill dated date from an accountant for the preparation of those returns in addition petitioner filed a motion to extend the time to file his brief on date and attached to the motion a photocopy of a money order dated date made payable to the internal rev service in ogden utah in the amount of dollar_figure petitioner however never attempted to enter the money order into evidence and nothing on the money order indicates what the payment was for or for which taxable_year it applied petitioner’s testimony as to the filing of his returns for the years at issue is also contradictory while refusing to -- - concede that he may have failed to timely file his tax returns petitioner stated at trial in hadsell i well you know for a long time the irs sent me those inguiring letters and i’ve always had a philosophy ignore them and they’1ll go away but they didn’t they were persistent so i made a mistake i wrote to them and eventually the inquiring letters became demanding they wanted money additionally when asked by the court whether he filed a federal or oregon state_income_tax return or whether the timing of his arrest interfered with the filing of such return petitioner replied and you know i can’t answer that upon the basis of the record we find that petitioner has not shown that he timely filed his federal_income_tax returns for the years at issue and therefore hold that petitioner is liable for additions to tax pursuant to sec_6651 respondent is sustained on this issue additions to tax for failure to pay estimated income taxes sec_6654 imposes an addition_to_tax where prepayments of tax either through withholding or estimated quarterly tax_payments during the year do not equal the percentage of total liability required under the statute however the addition_to_tax is not imposed if the taxpayer can show that one of several exceptions applies see sec_6654 it is undisputed that petitioner received both unemployment_compensation and compensation as an independent_contractor for the years at issue and failed to make estimated_tax payments upon the basis of the record petitioner does not qualify for any of the exceptions listed in sec_6654 therefore we hold that he is liable for the additions to tax pursuant to sec_6654 for the and taxable years respondent is sustained on this issue to reflect the foregoing decision will be entered under rule


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-106471-09 date date x ----------------------------------------------------------------------------------------------------- ----------------------- legend state ------------- date date --------------------- ---------------------- dear ----------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as an association_taxable_as_a_corporation for federal tax purposes facts the information submitted states that x was formed in state on date as a limited_partnership x represents that it intended to be classified as an association_taxable_as_a_corporation effective date however x inadvertently failed to timely file a form_8832 entity classification election electing to treat x as an association_taxable_as_a_corporation effective date x further represents that a form_8832 was filed timely to change x’s classification from an association_taxable_as_a_corporation to a disregarded_entity effective date plr-106471-09 law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed if an election specifies an effective date more than days prior to the date on which the election is filed it will be effective days prior to the date it was filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but not more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the standards the commissioner will use to determine whether to grant an automatic_extension of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 plr-106471-09 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly x is granted an extension of sixty days from the date of this letter to elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective date the election to be classified as an association_taxable_as_a_corporation from date should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election if x makes the election for date within days of this letter the previously filed election to be treated as a disregarded_entity as of date would also be a valid classification change therefore x would be a disregarded_entity as of date except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed or implied regarding whether x is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed plr-106471-09 by an appropriate party while this office has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c date office of c h i e f c ounsel number info release date uil conex the honorable cathy mcmorris rodgers u s house of representatives washington dc dear ms rodgers thank you for your recent letter about the irs and department of treasury’s proposed revenue_ruling that addresses the self-employment_tax treatment of payments under the conservation reserve program crp we appreciate your comments the lack of clarity in this area prompted the irs and department of treasury to seek public input on guidance to address this issue the proposed revenue_ruling reflects what we believe is the proper interpretation based on existing statutory and case law we believe that barring specific statutory language exempting crp payments from self-employment_income these payments are subject_to self-employment_tax as income derived from a trade_or_business we have requested comments on the proposed revenue_ruling we will consider all the comments we receive including yours as we finalize the ruling i hope this information is helpful if you would like to discuss this further please contact me or ------------------at ----- ------------- sincerely nancy j marks division counsel associate chief_counsel tax exempt and government entities


internal_revenue_service number info 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 genin-137456-05 date date dear this letter responds to your request to revoke an election under subchapter_s your corporation was granted s_corporation status as of date subsequently you intended to issue a second class of stock during which never came to pass meanwhile you attempted to file a statement revoking the election as of date however the internal_revenue_service failed to receive the statement generally an election can be terminated either by revocation by reason of the corporation ceasing to be a small_business_corporation or by reason of excess passive_investment_income in your situation the irs failed to receive your revocation statement for and the second class of stock was never issued consequently unless you have had passive_investment_income there appears to be nothing precluding you from maintaining s_corporation status from tax_year forward this letter has called your attention to certain general principles of the law it is intended for informational purposes only and does not constitute a ruling please keep this letter with your records and feel free to provide a copy to your representative we hope the information provided proves useful if you have any questions you may contact our office at ----- ------------- sincerely s dianna k miosi chief branch office_of_chief_counsel 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 b01 plr-165828-04 date date ---------------------------------- ----------------------------- legend x ------------------------------------------------- y ------------------------------------------------- country d1 d2 dear --------------------------- ---------------- ---------- ----------------------- this is in response to a letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to treat y as an entity disregarded as separate from its owner for federal tax purposes under sec_301_7701-3 facts according to the information submitted and representations made within the request x is the ultimate parent of an affiliated_group_of_corporations among this affiliated_group is y which is an entity that was formed under the laws of country on d1 due to inadvertence a form_8832 entity classification election to treat y as an entity disregarded as separate from its owner effective d2 was not filed law and analysis sec_301_7701-3 provides guidance on the classification of a foreign plr-165828-04 eligible_entity for federal tax purposes generally unless the entity makes an election to be treated otherwise a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability if a foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 if a foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 further provides that an entity classification election must be filed on form_8832 entity classification election and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely upon the information submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result an extension of days from the date of this letter is granted to elect to treat y as disregarded as an entity separate from its owner for federal tax purposes effective d2 the entity classification election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter except as expressly provided herein no opinion is expressed or implied plr-165828-04 this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to your authorized representative enclosures copy of this letter copy for sec_6110 purposes cc sincerely heather c maloy heather c maloy associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number legend refer reply to cc fip plr-107955-00 date date taxpayer company a state x state y date date date amount b amount c dear this responds your letter of date as supplemented on behalf of taxpayer requesting a ruling granting a waiver under sec_101 of the internal_revenue_code you ask that certain flexible premium universal_life_insurance policies identified in your submissions be treated as life_insurance contracts for federal tax purposes facts the information submitted indicates that taxpayer is a stock_life_insurance_company subject_to subchapter_l of the code and organized under the laws of state x and subject_to the audit jurisdiction of the district_director in state y on date taxpayer entered into an assumption_reinsurance agreement agreement with company a pursuant to which taxpayer assumed all liabilities of company a with respect to certain life_insurance contracts pursuant to that agreement taxpayer undertook the administration of amount b reinsured life_insurance contracts on date of those amount b contracts taxpayer has identified amount c contracts failed policies that fail to qualify as life_insurance contracts under the applicable provisions of sec_101 of the internal_revenue_code the failed policies were issued on one flexible premium universal_life_insurance contract form a copy of which was attached to the initial submission as exhibit a the failed policies were issued prior to date and have a variable premium structure that allows the policyholder to select and vary the amount of premium paid the failed policies reserve the right of the insurer to refuse premiums and to return_premiums with interest if such premiums would disqualify the policy for favorable tax treatment under sec_101 of the internal_revenue_code the attached endorsement provides that the policies are intended to qualify for treatment as a life_insurance_policy under sec_72 and sec_101 of the internal_revenue_code and the insurer reserves the right to endorse the policies with respect to remaining qualified for treatment as a life_insurance_policy under those code sections nevertheless amounts in excess of the guideline premium were accepted under each of the failed policies because taxpayer was to assume the administrative responsibilities for amount b life_insurance contracts issued by company a as of date taxpayer engaged the services of independent contractors to convert those contracts from company a’s administrative system to taxpayer’s system the independent contractors were former employees of the vendor of the computer_software that taxpayer uses for its administrative system the independent contractors wrote a program that extracted data and transferred it to taxpayer’s system taxpayer’s system compares the premiums_paid under a life_insurance_contract with the guideline_premium_limitation for the contract on each monthly anniversary day before bills or reminder notices for premium payments are sent each time a premium payment is received and any time that an adjustment to the contract’s premium limitation is required such as when there is an increase or decrease in the death_benefit of a contract taxpayer represents that if a policyholder attempts to make a premium payment in excess of a contract’s premium limitation its system will not allow the premium payment to be credited under the contract if taxpayer’s system determines that excess premiums have been paid the system will generate a notice to taxpayer’s employees that a refund of excess premium is necessary taxpayer’s procedures require that all excess premiums_paid under a life_insurance_contract must be refunded with interest to the policyholder within days of the end of the contract_year in which received in accordance with sec_101 in addition taxpayer’s system generates audit reports that identify all contracts that do not comply with sec_101 these reports are reviewed to determine the reason for the noncompliance prior to the discovery that the policies in question were out of compliance these audit reports were generated on a quarterly basis with respect to each life_insurance_contract subject_to sec_101 taxpayer’s system includes certain codes indicating whether the contract should be monitored for compliance with the guideline premium test of sec_101 or the cash_value_accumulation_test of sec_101 taxpayer represents that the converted contracts including the failed policies were intended to comply with the guideline premium test by satisfying both the guideline_premium_limitation under sec_101 and f and the applicable_percentage requirements under sec_101 and f c during the conversion the independent contractors inadvertently disabled the code indicating that the contracts should be monitored for compliance with the guideline premium test consequently although the system still determined the premium limitation for each converted contract it did not compare the contract’s premium limitation with the premiums_paid under the contract as a result if a policyholder paid excess premiums under his life_insurance_contract the system would credit the excess premiums under the contract but would not notify taxpayer’s employees that excess premiums had been credited under the contract and would not list the contract on the audit reports taxpayer represents that the independent contractors were not instructed to modify the coding of the contracts during the conversion in any manner if the contractors had not modified this code the failures would not have occurred as a result of the coding error taxpayer’s system allowed the crediting of excess premiums under the failed policies although amount b life_insurance contracts were converted to taxpayer’s system the programming error resulted in the crediting of excess premiums under only amount c life_insurance policies taxpayer represents that immediately after discovering the programming error it corrected the coding of the failed policies so that its system would function as intended so as to prevent the crediting of excess premiums under the failed policies taxpayer also represents that it has not subsequently engaged the services of the independent contractors and that it will not engage them in the future in connection with another conversion it indicates that all of the converted contracts which are in force currently are being monitored under taxpayer’s system for compliance with the requirements of the guideline premium test in addition the audit reports are now generated monthly taxpayer further represents that it has refunded all excess premiums that exceed the premium limitation it also represents that as of date the sum of the premiums_paid with respect to each of the failed policies is equal to or less than the premium limitation for that policy law and analysis sec_101 of the internal_revenue_code excludes from gross_income any amount_paid by reason of the death of the insured under a life_insurance_contract known as a flexible premium contract only if the contract satisfies either the guideline_premium_limitation and the applicable_percentage limitation of sec_101 and ii or the cash_value test of sec_101 sec_101 applies to contracts issued before date pursuant to sec_101 the secretary_of_the_treasury may waive a failure to satisfy the requirements of sec_101 this waiver is granted if a taxpayer establishes that the statutory requirements were not satisfied because of a reasonable error and that reasonable steps are being taken to remedy the error under the facts as submitted the failure of amount c life_insurance contracts to satisfy the requirements of sec_101 was caused by reasonable error the errors were the result of inadvertent human error in the conversion of the company a policies to the system used by taxpayer taxpayer has instituted procedures to reduce or eliminate the likelihood that such error will recur taxpayer also has taken reasonable steps to cure the failure in accordance with sec_101 conclusion accordingly based on the information submitted the failure of amount c contracts to satisfy the requirements of sec_101 is waived pursuant to sec_101 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 sincerely acting associate chief_counsel financial institutions and products by donald j drees jr senior technician reviewer


internal_revenue_service number release date index number 468a ---------------------------- ------------------------------------------------------------ ------------------ ------------------------------ ------------------------- --------------------------------------- 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 b06 plr-155814-09 date date re schedule of deductions re schedule of deductions ------------------------------------------------------------------------------- legend taxpayer parent plant ------------------------------- ein ---------------- ---------------------------- ein ---------------- --------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- location independent study -------------------------------------------------------------------------------------------------------- method fund director ----------- ------------------------------------------ --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ----------------------------- --------------------------------------------------------------------------------- dear ------------------- this letter responds to your request dated -------------------------- for an initial schedule of deduction amounts pursuant to sec_1_468a-8t c of the income_tax regulations taxpayer was previously granted schedules of ruling amounts most recently on -------------------- taxpayer represents the facts and information relating to its requests as follows taxpayer is a wholly-owned subsidiary of parent that elects to be taxed as a corporation for federal_income_tax purposes parent files a consolidated federal_income_tax return with its affiliated corporations including taxpayer taxpayer is the sole owner of the plant plr-155814-09 the plant is situated at location the estimated base cost for decommissioning plant is based on an independent study and the proposed method of decommissioning the plant is method based upon the assumptions derived from the independent study it is estimated that fund assets will earn an average after-tax rate of return ranging from ------ to -------- percent the present_value of the future decommissioning costs with respect to taxpayer’s interest in the plant on ----------------------is estimated to be dollar_figure---------------------- --------------------------------------------------------------------------------------------------------------- in - ------- dollars this base cost of decommissioning plant is escalated at a ---- percent yearly rate resulting in a total future cost of decommissioning taxpayer’s interest in the plant of dollar_figure-------------------- in ------- through ------- dollars under ratemaking assumptions used during the first proceeding before commission the plant would no longer be included in rate base in ------ in the prior schedule of ruling amounts issued under sec_468a of the code as in effect prior to taxpayer represented that the funding_period and level_funding limitation period are --- years --------------- and the estimated_useful_life of the plant is -- --- years -------------- as elected in the initial and subsequent requests for a schedule of ruling amounts taxpayer calculated the qualifying percentage pursuant to sec_1_468a-8 of the regulations as in effect prior to date thus the percentage of the total estimated costs qualifying for deduction in the schedule of ruling amounts under prior_law was ------- percent sec_468a as amended by the energy tax incentives act of the act publaw_109_58 119_stat_594 allows an electing taxpayer to deduct payments made to a nuclear decommissioning reserve fund prior to the changes made by the act deductible contributions were limited to the amount necessary for an electing taxpayer to fund the plant’s post-1983 nuclear decommissioning costs determined as if decommissioning costs accrued ratably over the estimated_useful_life of the plant provided that the taxpayer elected to establish a fund in prior_law also did not allow an electing taxpayer to establish a fund later than to contribute to that fund any amount in excess of that amount necessary to fund the ratable portion of the plant’s nuclear decommissioning costs beginning in the year the fund is established sec_468a now allows a taxpayer to contribute to a nuclear decommissioning fund the entire cost of decommissioning the plant including both the pre-1984 amount that was denied under the law prior to the act as well as any amount attributable to any year after in which a taxpayer had not established a fund under sec_468a sec_468a provides that the deduction for the contribution of the plr-155814-09 previously-excluded amount is allowed ratably over the remaining useful_life of the nuclear plant sec_468a provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within 2½ months after the close of the tax_year this section applies to payments made pursuant to either a schedule of ruling amounts or a schedule of deduction amounts sec_1_468a-1t a provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1t b of the regulations is a taxpayer that has a qualifying interest in any portion of a nuclear power plant a qualifying interest is among other things a direct ownership_interest sec_1_468a-3t c provides rules for determining the estimated_useful_life of a nuclear plant for purposes of sec_468a in general under sec_1_468a-3t c i a if the plant was included in rate base for ratemaking purposes for a period prior to date the date used in the first such ratemaking proceeding as the estimated date on which the nuclear plant will no longer be included in the taxpayer’s rate base is the end of the estimated_useful_life of the nuclear plant sec_1_468a-3t c i b provides that if the nuclear plant is not described in sec_1_468a-3t c i a the last day of the estimated_useful_life of the nuclear plant is determined as of the date the plant is placed_in_service under sec_1_468a-3t c i c any reasonable method may be used in determining the estimated_useful_life of a nuclear power plant that is not described in sec_1_468a-3t c i a sec_1_468a-3t d provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant sec_1_468a-3t d provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-8t a provides that under the provisions of sec_468a as described above a taxpayer may make a special transfer of cash or property to the nuclear decommissioning fund this special transfer is not subject_to the sec_468a limitation the amount of the special transfer is the present_value of the pre-2005 nonqualifying percentage of the estimated future costs of decommissioning the nuclear plant that was disallowed under sec_468a prior to the act sec_1_468a-8t a defines the pre-2005 nonqualifying percentage as equal to percent reduced by the sum of the qualifying percentage used in determining the plr-155814-09 taxpayer’s last schedule of ruling amounts for the fund under sec_468a as it existed prior to the act and the percentage transferred in any previous special transfer sec_1_468a-8t a provides that the taxpayer is not required to transfer the entire amount eligible for the special transfer in one year but must take any prior special transfers into account in calculating the pre-2005 qualifying percentage further pursuant to sec_1_468a-8t c a taxpayer making a special transfer in more than one year must request a new schedule of deduction amounts in connection with each special transfer sec_1_468a-8t b provides that the deduction for the special transfer is allowed ratably over the remaining useful_life of the nuclear plant under sec_1_468a-8t b iii the deduction for property contributed in a special transfer is limited to the lesser_of the fair_market_value of the property or the taxpayer’s basis in the property under sec_1_468a-8t b the taxpayer recognizes no gain_or_loss on the special transfer of property the taxpayer’s basis in the fund is not increased by reason of the special transfer of property and the fund’s basis in the property transferred in the special transfer is the same as the transferee’s basis in that property immediately prior to the special transfer sec_1_468a-8t c provides that taxpayer may not make a special transfer to a qualified nuclear decommissioning fund unless the taxpayer requests from the irs a schedule of deduction amounts in connection with such transfer a request for a schedule of deduction amounts may be made in connection with a request for a schedule of ruling amounts but in such case the calculations for both the schedule of ruling amounts and the schedule of deduction amounts must be separately_stated as stated above prior to the changes made by the act deductible contributions were limited to the lesser_of the amount necessary to fund the plant’s post-1983 nuclear decommissioning costs or the amount necessary to fund the plant’s decommissioning costs for that portion of the plant’s estimated_useful_life for which a fund had been established under that prior_law taxpayer was allowed to contribute --- --------percent of the amounts necessary to fully decommission its share of the plant sec_468a allows a taxpayer to contribute to the nuclear decommissioning fund the pre-1984 amount that was denied under the law prior to the act thus taxpayer is able to contribute the additional --------percent of the amounts necessary to decommission its ownership share of plant the total future cost of decommissioning the plant dollar_figure------------------- in --------------------------dollars the value of that amount on ----------------------is dollar_figure------------------ in ------- dollars we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we conclude that plr-155814-09 because the useful_life of the plant as defined by sec_1_468a-3t c ended in ------- the taxpayer may make a special transfer of dollar_figure-----------------in -------- as set forth below schedule of deduction amounts year ----------- deduction amount ------------------------- the special transfer amount stated above is the maximum amount permitted to be transferred to the fund under sec_468a if taxpayer transfers a lesser amount to the fund the taxpayer may deduct that lesser amount ratably over the period of years described above further in the event that taxpayer transfers a lesser amount for the years ------- in order to make an additional special transfer in a later year including a special transfer of the difference between the special transfer amount stated above and the lesser amount transferred in ------- taxpayer must request a new schedule of deduction amounts and in that request must take the ------ transfer into account and recalculate the pre-2005 qualifying percentage in such request we note that if taxpayer elects to make a special transfer of property for all or a portion of this special transfer the amount of the deduction is the lesser_of the fair_market_value of the property transferred or the basis of the property in the hands of the taxpayer immediately prior to the transfer in either event the deduction of the taxpayer with respect to the property is limited to the taxpayer’s basis in the property sec_1_468a-3t f iii requires that a taxpayer requesting a schedule of deduction amounts under sec_1_468a-8t must also request a revised schedule of ruling amounts for the applicable fund however sec_1_468a-3t f v provides that if a taxpayer is required to request a revised schedule of ruling amounts and each ruling_amount in the revised schedule would equal zero a taxpayer may instead of requesting a revised schedule of ruling amounts begin treating the ruling_amount as equal to zero dollars taxpayer has no schedule of ruling amounts in effect for the current or future years and therefore its annual ruling_amount is zero pursuant to sec_1_468a-3t f v taxpayer will continue to treat its annual ruling_amount as equal to zero dollars and accordingly has not made a request for a revised schedule of ruling amounts except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above specifically no determination is made whether the independent decommissioning study conforms to industry standards and practices plr-155814-09 this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7t a a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch passthroughs special industries


internal_revenue_service department of the treasury index no masnnaton contact person telephone number in reference to date t ep ra t attn may dear this is in response to a letter dated date submitted on your behalf by your authorized representative requesting rulings under sec_401 of the internal_revenue_code code you submitted the following facts and representations in support of your request prior to date company a owned percent of the stock of company b the assets of company b consisted of facility d located in state m company a leased facility d from company b and operated the facility using company a’s own employees in there were approximately union hourly employees and approximately salaried employees of company a connected with the facility d operation in connection with a restructuring of its operations company a decided to sell facility d and other similar businesses as an initial step in selling its interest in company b company a took facility d out of operation in date although the majority of employees were terminated at this time approximately union employees were kept on to maintain facility d until the sale was complete twelve salaried employees were also retained to facilitate the future sale of facility d the following month company a entered into a stock purchase agreement with an unrelated company company c for the purchase of all of the outstanding_stock of -2- company b the transaction closed on or about date and all of company a’s remaining active employees at facility d were terminated the sale agreement did not require company c to hire any former employees of facility d however following the sale company c reopened facility d and hired in and many of company a’s former employees including those who left both before and after the october closure date to staff the facility hired employees prior to company a’s sale of its interest in company b company a’s eligible salaried employees at facility d participated in plan x and all of its eligible hourly union employees participated in plan y plans x and y are cash or deferred arrangements under code sec_401 company a has continued to maintain both plans for the benefit of employees of its remaining operations termination of employment with the employer or an affiliated employer and sale of a subsidiary to other than an affiliated employer with respect to participants who as a result cease to be employees there has been no transfer of assets of plan x or plan y to any plan of company c section of both plan x and plan y provide for distributions on based on the above facts and representations you request the following ruling lump sum distributions of amounts attributable to employer contributions made pursuant to employee deferral elections under code sec_401 may be made under plans x and y to the hired employees because the sale constituted a sale of a subsidiary within the meaning of sec_401gii code sec_401 provides that in order to be a qualified coda amounts contributed to the coda which are attributable to employer contributions made pursuant to an employee’s election may not be distributable to participants or other beneficiaries earlier than certain specified events including separation_from_service or an event described in sec_401 code sec_401 describes the following event the disposition by a corporation of such corporation’s interest in a subsidiary but only with respect to an employee who continues employment with such subsidiary code sec_401 provides that an event shall not be treated as described in subparagraph a with respect to any employee unless the employee receives a lump sum distribution by reason of the event code sec_414 provides that for purposes of sec_401 all employees of all corporations which are members of a controlled_group under sec_1563 determined without regard to sec_1563 and e c are treated as employed by a single employer code sec_401 provides that an event shall not be treated as described in clause ti or iii of subparagraph a unless the transferor_corporation continues to maintain the plan after the disposition sec_1_401_k_-1 of the federal_income_tax regulations the regulations requires that a plan may not distribute on account of the sale of a subsidiary unless the seller continues to maintain the plan sec_1_401_k_-1 of the regulations provides that the distribution must be in connection with the disposition of a subsidiary in this case the employees of company a who worked for facility d were terminated in pursuant to code sec_414 employees of subsidiary b include the employees in connection with the sale of company b a wholly owned subsidiary of company a to company c an unrelated employer certain of these employees were subsequently hired by company c of company a for purposes of applying sec_401 no plan assets were transferred to a plan of company c accordingly we rule that lump sum distributions of amounts attributable to employer contributions made pursuant to employee deferral elections under code sec_401 may be made to the hired employees on account of a sale bya corporation company a of its interest in a subsidiary company b to an unrelated corporation company c as provided in sec_401 and sec_401 the above rulings are based on the assumption that plans x and y are qualified under sec_401 at all times relevant to the transaction this letter is directed only to the taxpayer requested code sec_61 k provides that it may not be used or cited by others as precedent a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours mm john swieca manager employee_plans technical group tax_exempt_and_government_entities_division ce