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-144326-10 date date legend x parent --------------------------------------------------------------------------------------------------- ----------------------- --------------------------------------------------------------------------------------------------- ----------------------- country ---------------------- date ------------------- dear ----------------- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representatives requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be disregarded as an entity separate from its owner under sec_301_7701-3 facts x was formed under the laws of country on date x is wholly-owned by parent parent intended that x be treated as disregarded as an entity separate from its owner effective date however x inadvertently failed to timely file a form_8832 entity classification election law and analysis plr-144326-10 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with a single owner can elect to be classified as an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that unless it elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides 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 made under sec_301 c i 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 has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 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 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 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 plr-144326-10 conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and to elect to be classified as a disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by __________________________________ james a quinn 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 nathanael roman petitioner v commissioner of internal revenue respondent docket no filed date nathanael roman pro_se paul k voelker for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined the following defi- ciencies in additions to and accuracy-related_penalties on petitioner's federal_income_tax year deficiency additions to tax sec_6651 accuracy-related_penalties sec_6662 dollar_figure dollar_figure dollar_figure unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure big_number big_number big_number -- the issues remaining for decision are big_number big_number is petitioner entitled for the years at issue to any deductions claimed for charitable_contributions we hold that he is not is petitioner entitled for and to any schedule c profit or loss from business deductions claimed with respect to tfc engineering we hold that he is not is petitioner entitled for to treat a certain long-term_capital_losses from the sales of stocks as his losses b certain transactions as giving rise to nonbusiness bad_debts and c certain stock as worthless we hold that he is not respondent determined in the notice_of_deficiency notice that petitioner is not entitled to the deduction for wages and salaries of dollar_figure claimed in schedule e supplemental income and loss schedule e of his u s individual_income_tax_return return and that consequently he is not entitled to the total loss of dollar_figure claimed in that schedule but instead has schedule e total income of dollar_figure petitioner concedes that he is not entitled to a schedule e deduction for wages and salaries in the amount of dollar_figure and that he does not have a schedule e total loss of dollar_figure however he claims with respect to his schedule e that in addition to the other expenses claimed in that schedule he is entitled to deduct expenses for a contract labor and b automobile and travel of dollar_figure and dollar_figure respectively and that he has total income of dollar_figure in response to those claims respondent states on brief while respondent does not concede that petitioner is entitled to rental expenses in the specific categories or in the specific amounts now claimed respondent will not dispute that petitioner realized a schedule e rental gain for in the amount of dollar_figure since respondent does not dispute that petitioner has sched- ule e total income of dollar_figure we shall not address petitioner's contentions regarding the deductions to which he claims he is entitled in arriving at that total income amount is petitioner liable for and for the addition_to_tax under sec_6651 we hold that he is is petitioner liable for the years at issue for the accuracy-related_penalty under sec_6662 we hold that he is to the extent stated herein findings of fact3 some of the facts have been stipulated and are so found unless otherwise indicated our findings_of_fact pertain to the years at issue petitioner contends for the first time on brief that when this case was called for trial respondent changed the position which she set forth in the stipulation of facts stipulation that the parties had lodged before trial with respect to certain exhibits of petitioner that were attached to that stipulation and which related to his claims for certain charitable_contributions business_expenses nonbusiness bad_debts and long-term_capital_losses and that respondent therefore violated the terms of that stipulation thereby resulting in an injustice to peti- tioner we disagree the stipulation contained respondent's evidentiary objections and or statements of position with respect to the stipulated exhibits of petitioner respondent expressly stated therein that in stipulating that petitioner was attaching certain exhibits to the stipulation respondent does not stipu- late that petitioner is entitled to any of the claimed items to which the exhibits of petitioner relate certain other portions of the stipulation and the exhibits of petitioner attached thereto were not clear to the court and at the beginning of the trial of this case the court asked respondent to clarify certain statements in the stipulation about respondent's position regarding the exhibits of petitioner that were attached to the stipulation the parties to clarify certain other statements about certain of those exhibits and the parties to address respondent's evidentiary objections to certain of those exhibits the court then ruled on respondent's evidentiary objections and excluded certain portions of the stipulation and the exhibits of petitioner that were attached thereto and received into evidence and made a part of the record in this case the remaining portions of the stipulation and the exhibits that were attached thereto at the time the petition was filed petitioner lived in las cruces new mexico petitioner who was an engineer working for the department of the army during the years at issue filed returns for and on date date and date respectively claimed charitable_contributions claimed charitable_contributions with respect to certain blank checks during and petitioner prepared checks totaling dollar_figure dollar_figure and dollar_figure respectively on which he left the payee lines blank blank checks at the request of one or more individuals whose identity is not disclosed in the record one of the following or similar handwritten notations appeared on the check stubs check stubs for those checks donation lee's travel fund meals lee's travel fund contribution and charitable donation the blank checks were deposited into a bank account tfc account of twenty-first century corporation tfc by ms thelma spiegel ms spiegel ms spiegel inter alia served as the bookkeeper for the collec- tion of tithes and charitable_contributions of agape assemblies inc agape and body of christ church and had the authority to make deposits to and withdrawals from the tfc account hereinafter all dollar amounts are rounded to the nearest dollar agape was an organization described in sec_170 and sec_501 and listed in respondent's publication cumula- tive list of organizations described in sec_170 of the internal_revenue_code_of_1986 publication ms donna dorris ms dorris was the secretary of agape and oversaw the work of ms spiegel ms dorris drew no distinction between agape and tfc because she considered both organizations to be one and the same claimed charitable_contributions with respect to certain additional checks during petitioner wrote a check check to professional reprographics and a check check to r b design printing r b design printing in the amounts of dollar_figure and dollar_figure respectively the following handwritten notations appeared on the check stubs for check and check respectively corrections to poetry text and lee mc's poetry books a receipt from r b design printing indicated that check was used to pay a bill for 70-page poetry books that a customer named mcwilliams placed the order for those books and that nathanael roman received those books petitioner wrote two checks checks and during one check check during and one check check during to ms shirley a ridgway ms ridgway in the amounts of dollar_figure dollar_figure dollar_figure and dollar_figure respectively ms ridgway and petitioner who have known each other for approximately years are good friends the following handwritten notations appeared on the check stubs for checks and respectively tithes mine donation donation reim- bursement and agape assemblies during petitioner wrote a check to citizen's bank check to citizen's bank in the amount of dollar_figure the following handwritten notation appeared on the check stub for that check tfc deposit donation return treatment of claimed charitable_contributions in schedule a of petitioner's and returns petitioner claimed deductions for charitable_contributions totaling dollar_figure dollar_figure and dollar_figure respectively tfc engineering dona ana county new mexico issued petitioner a certificate of business registration for calendar_year for an entity called tfc engineering that certificate stated in pertinent part whereas a business registration application form has been completed on behalf of the above named indi- vidual partnership or corporation and the registra- tion fee of dollar_figure has been paid now therefore the county of dona ana state of new mexico hereby acknowledges receipt of said fee for the calendar_year ending date during and petitioner provided financial support checks and and the check to citizen's bank are collectively referred to as the additional checks to his son matthew roman matthew roman who was as of the fall of a 20-year old college student petitioner and matthew roman's mother gloria j maldonado ms maldonado were divorced sometime in or during and matthew roman generally resided at petitioner's house during the weekends and at ms maldonado's house during the weekdays pursuant to the divorce decree relating to petitioner's divorce from ms maldonado petitioner's obligation to support his son ended when his son turned years old during and petitioner and his son had an agree- ment under which petitioner was to pay matthew roman approxi- mately dollar_figure every several weeks in exchange for inter alia bookkeeping filing and automobile detailing by matthew roman the following handwritten notation appeared on the check stubs for most of the checks that petitioner's son received from petitioner during matthew roman's checks matt's rm bd most of matthew roman's checks were written either to ms maldonado or the payee lines were left blank several of those checks were payable to new mexico state university university of nebraska william t baker d o p a and wal-mart pharmacy and none of them was payable to matthew roman during and petitioner wrote checks to ms ridgway ms ridgway's checks totaling dollar_figure one of the following handwritten notations appeared on the check stubs for each of of those checks rx-7 repair s taillights rx-7 rx-7 chrysler ins rx-7 oil change auto advertisement toyota repair car insurance auto repair s auto tax tune-up auto rx-7 repair and auto supplies one of ms ridgway's checks dated date was for dollar_figure and the following handwritten notation appeared on the check stub for that check business none of the handwritten notations on the check stubs for those checks indicated that it was a payment for services rendered by ms ridgway in schedule c of petitioner's return schedule c petitioner indicated that tfc engineering's principal business was engineering services and that it was the first schedule c filed for tfc engineering the schedule c showed a net_loss of dollar_figure comprised of no gross_income dollar_figure in claimed bad_debts and dollar_figure in claimed wages the return that petitioner filed for did not include a schedule c for tfc engineering claimed stock sale losses nonbusiness bad_debts and worthless_stock claimed stock sales losses from at least the last quarter of through date petitioner as custodian for matthew roman under the uniform_gifts_to_minors_act ugma of new mexico maintained an account vanguard account at vanguard discount brokerage services vanguard the social_security_number that vanguard listed for that account was petitioner's social_security_number is vanguard sent a statement for the last quarter of vanguard statement to petitioner as custodian for matthew roman under the ugma of new mexico that indicated that shares of daisy systems corp stock daisy stock and shares of gibraltar financial corp stock gibral- tar stock had been purchased for dollar_figure and dollar_figure respectively vanguard sent another statement for the last quarter of vanguard statement to petitioner as custodian for matthew roman under the ugma of new mexico that showed that those stocks were still being held hereinafter the vanguard statement and the vanguard statement shall be referred to collectively as the vanguard statements vanguard sent to petitioner as custodian for matthew roman under the ugma of new mexico a form in lieu of form 1099-b for vanguard that indicated that on date the daisy stock and the gibraltar stock were sold for dollar_figure and dollar_figure respectively claimed nonbusiness bad_debts claimed nonbusiness bad_debts of mr parra on date richard l parra mr parra signed a note that stated that he was to repay nathanael roman dollar_figure at an annual percentage interest rate of percent october note mr parra was to repay that note in monthly installments of principal and interest totaling dollar_figure on date mr parra signed another note that stated that he was to repay nathanael roman dollar_figure at an annual percentage interest rate of percent october note mr parra was to repay that note in monthly installments of principal and interest totaling dollar_figure on or about date petitioner borrowed dollar_figure the same principal_amount as the october note from air defense center federal credit_union adcfcu loan the adcfcu loan bore the same annual percentage interest rate as the october note on date petitioner borrowed dollar_figure the same princi- pal amount as the october note from norwest financial new mexico inc norwest loan the norwest loan bore the same annual percentage interest rate as the october note during petitioner repaid the adcfcu loan and the norwest loan by using dollar_figure that he borrowed from white sands federal credit_union white sands loan at an annual percentage interest rate of percent claimed nonbusiness_bad_debt of mr mcwilliams on date robert l mcwilliams mr mcwilliams signed a note mr mcwilliams' note that stated that he was to repay nathanael roman dollar_figure at an annual percentage interest rate of percent in monthly installments of principal and interest totaling dollar_figure mr mcwilliams did not pay any principal or interest on that note when petitioner learned during that mr mcwilliams was unable to pay certain creditors he determined that mr mcwilliams did not intend to pay the princi- pal and interest on mr mcwilliams' note claimed nonbusiness bad_debts of ms parra ms parra and or mr parra and mr ridgway ms parra on date petitioner gave linda parra ms parra mr parra's wife a check for dollar_figure ms parra's check the check stub for that check included the following handwritten notation linda will repay at the rate of dollar_figure per week starting date ms parra did not repay petitioner the amount of ms parra's check ms parra and or mr parra one or more individuals associated with agape whose identity is not disclosed in the record asked petitioner to pay during and that portion of the premium under a group health insurance_policy maintained by agape that was attributable to health coverage for ms parra and or mr parra and their daughter insurance payment petitioner made one insurance payment during and two such payments during neither ms parra and or mr parra nor their daughter repaid petitioner the amounts of those insurance payments the record does not disclose the amounts of those insurance payments during and mr ridgway on date petitioner gave james b ridgway mr ridgway a check for dollar_figure mr ridgway's check that included the following handwritten notation on the check stub for that check auto purchase loan mr ridgway did not repay the amount of mr ridgway's check claimed worthless_stock on date petitioner paid dollar_figure in return for big_number shares of dollar_figure par_value common_stock of celebration products celebration and he received a stock certificate representing those shares on date petitioner paid dollar_figure to pur- chase an additional big_number shares of dollar_figure par_value celebration common_stock however petitioner received a stock certificate representing only big_number of those big_number shares at all relevant times mr parra was a principal officer of celebration during petitioner determined that mr parra was unable to make celebration into a successful business return treatment of claimed stock sale losses nonbusiness bad_debts and worthless_stock in schedule d capital_gains_and_losses of petitioner's return schedule d petitioner claimed the following as short-term_capital_losses promissory note -- robert l parra promissory note -- robert l parra promissory note -- robert l mcwilliams celebration products stock total dollar_figure big_number big_number big_number big_number he claimed no short-term_capital_gains and no long-term_capital_gains or losses in his schedule d because of the dollar_figure limitation imposed by sec_1211 for each taxable_year on the amount of net_capital_loss by which an individual may reduce income petitioner reduced the income reported in his return by dollar_figure of the claimed short-term_capital_losses reported in his schedule d he carried over the remaining dollar_figure of such claimed losses to schedule d of his return and reduced the income reported in that return by dollar_figure of that claimed loss carryover petitioner carried over the remaining dollar_figure of that claimed loss carryover to schedule d of his return and reduced the income reported in that return by dollar_figure of that claimed loss carryover in his returns for the years at issue petitioner did not claim any losses attributable to the sales of the daisy stock and the gibraltar stock the amount of ms parra's check the amount of the insurance payments and the amount of mr ridgway's check opinion petitioner bears the burden of proving that respondent's determinations in the notice are erroneous and that he is enti- tled to the tax treatment that he is claiming for the items in dispute see rule a 290_us_111 petitioner testified with respect to the stock sale losses nonbusiness bad_debts and worthless_stock that he is claiming he did not testify about any other issue in this case we presume that if he had testified truthfully about those other issues his testimony would not have been favorable to his position on them see 9_tc_1156 affd 176_f2d_394 10th cir 6_tc_1158 affd 162_f2d_513 10th cir claimed charitable_contribution deductions petitioner contends that he is entitled to deductions for and for charitable_contributions that he made to or for_the_use_of agape in the amounts of dollar_figure dollar_figure and dollar_figure respectively the parties agree that contributions during the years at issue to or for_the_use_of agape within the meaning of sec_170 are deductible because agape was during those years an organization described in sec_170 and sec_501 and listed in publication the issue we must decide is the factual question whether as petitioner contends peti- tioner contributed the amounts at issue to or for_the_use_of the amounts claimed as charitable_contributions to or for_the_use_of agape in petitioner's returns for the years at issue are greater than the total_amounts of the blank checks and the additional checks for and that are part of the record in this case that record does not establish the reason for those differences although petitioner contends that they relate to cash contributions that he claims he made to agape during those years agape if he did he is entitled to deduct those contributed amounts under sec_170 to support his position petitioner introduced into evidence check stubs containing inter alia the information that ap- peared on the blank checks and the additional checks lists that he prepared for each of the years at issue petitioner's lists of the blank checks and the additional checks as well as of the cash that he claims he contributed to or for_the_use_of agape during each such year and the testimony of ms spiegel and ms dorris we are unwilling to rely on the check stubs for the blank checks because petitioner left blank the payee lines on the checks represented by those stubs10 and those checks were depos- ited into the bank account of tfc11 and petitioner's lists because they are nothing more than petitioner's self-serving uncorroborated statements respondent does not dispute that the handwritten notations on the check stubs for the checks that petitioner wrote during the years at issue appeared on those checks hereinafter for ease of reference we shall discuss the handwritten notations on the check stubs that are in evidence as if they appeared on the checks to which those stubs relate ms dorris testified that it was the policy of agape that the payee lines on those checks be left blank she did not explain the reason for that alleged policy petitioner does not dispute that during the years at issue tfc was not an organization described in sec_170 and sec_501 and that it was not listed in publication there- fore we conclude that he does not dispute that contributions made to or for_the_use_of tfc during those years are not deduct- ible under sec_170 nor are we willing to accept the testimony of ms spiegel and ms dorris to establish that during the years at issue petitioner contributed the amounts in question to or for_the_use_of agape we question ms spiegel's testimony in that regard which we found to be inconsistent in certain material respects although she testified on direct examination that she deposited the blank checks into agape's account she admitted on cross- examination that she deposited those checks into the tfc account in addition although ms spiegel initially testified on cross- examination that she disbursed the funds from the tfc account to agape she later admitted that she disbursed the funds from the tfc account to mr mcwilliams we also found ms dorris' testimony to be unreliable for example she drew no distinction in her testimony between agape and tfc because she considered both organizations to be one and the same to illustrate ms dorris testified that petitioner gave her petitioner's lists to review about six weeks prior to trial that she reviewed those lists that those lists corre- sponded with a ledger of contributions to agape which was not introduced into evidence and that the amounts reflected in those lists were deposited into the tfc account on the instant record we find that petitioner has failed to carry his burden of showing that the amounts of the blank checks that he claims he contributed to agape during each of the years at issue were in fact contributed during each such year to or for_the_use_of that organization within the meaning of sec_170 with respect to check in the amount of dollar_figure the follow- ing handwritten notation appeared on that check corrections to poetry text there is no reliable evidence in the record that corrections to poetry text was related to a project of agape with respect to check in the amount of dollar_figure that was payable to r b design printing the following handwritten notation appeared on that check lee mc's poetry books a receipt from r b design printing indicated that check was used to pay a bill for 70-page poetry books that a customer named mcwilliams placed the order for those books and that nathanael roman received those books ms dorris testified that mr mcwilliams was one of the members of the ministry assum- ing arguendo that mr mcwilliams were a member of the ministry of agape the record does not disclose whether he was acting in that capacity when he incurred the expense at r b design printing that petitioner paid with check with respect to checks and in the respective amounts of dollar_figure dollar_figure dollar_figure and dollar_figure that were payable to ms ridgway the following handwritten notations appeared on those respective checks tithes mine donation donation in her testimony ms spiegel referred to body of christ church except for its name which suggests that body of christ church may have had a ministry the record discloses no facts about that organization reimbursement and agape assemblies as we understand peti- tioner's position he claims that he wrote those checks in order to reimburse ms ridgway for contributions that she made on his behalf to agape during and we do not have an explanation from ms ridgway who testified with respect to another issue in this case about the purposes of those checks nor do we know if she deducted in her returns the funds that petitioner claims she contributed to agape on his behalf with respect to the check to citizen's bank the following handwritten notation appeared on that check tfc deposit donation even petitioner's own notation suggests that peti- tioner made a deposit to a bank account of tfc and not agape at citizen's bank on the instant record we find that petitioner has failed to carry his burden of showing that the additional checks ie checks and and the check to citizen's bank represent amounts that petitioner contributed during and or to or for_the_use_of agape within the meaning of sec_170 summary based on the entire record before us we find that peti- tioner has failed to carry his burden of proving that the amounts of the blank checks and the additional checks as well as any cash that he claims he contributed to or for_the_use_of agape during and or were in fact contributed during each such year to or for_the_use_of that organization within the meaning of sec_170 accordingly we sustain respondent's determinations disallowing the charitable_contributions that petitioner claims for those years claimed schedule c deductions with respect to tfc engineering petitioner claims on brief that tfc engineering was engaged during and in the business of purchasing repairing and reselling automobiles and that that alleged business generated losses during those years of dollar_figure and dollar_figure respectivelydollar_figure respondent disputes petitioner's claimsdollar_figure to support his position with respect to the claimed schedule c losses for tfc engineering petitioner relies on certain docu- mentary and testimonial evidence the documentary_evidence con- although petitioner reported no income in his schedule c with respect to tfc engineering he is claiming herein that he did have income for attributable thereto although peti- tioner deducted certain expenses in his schedule c with respect to tfc engineering he is claiming herein that he in- curred different types and amounts of expenses during with respect thereto in addition although petitioner did not in- clude a schedule c for tfc engineering in his return for he is claiming herein schedule c gross_income and expenses with respect thereto for that year respondent also contends that because the claimed auto- mobile-related activity of tfc engineering was not an activity engaged in for profit during and pursuant to sec_183 petitioner is not entitled to deduct any expenses in excess of income petitioner does not address respondent's contention under sec_183 on the record before us we find that petitioner has failed to establish that the automobile-related activity in which he claims tfc engineering engaged during and is an activity engaged in for profit within the meaning of sec_183 sists of lists and summaries presumably prepared by or on behalf of petitioner petitioner's summaries that purport to show with respect to certain automobiles their respective pur- chase prices repair or other expenses and in certain instanc- es sales prices check stubs of petitioner that appear to correspond to certain alleged purchase_price and expense amounts shown in petitioner's summaries and receipts for certain of the expenses shown in those summaries that indicated that the following customers were responsible for the expenses_incurred customer name number of receipts listing customer name nathanael roman shirley ridgway matthew roman aunt shirley's auto sales robert's auto repair we are unwilling to rely on petitioner's self-serving summaries to establish that during and he was in the business of purchasing repairing and reselling automobiles although certain check stubs of petitioner and receipts for repairs that are in evidence support petitioner's position that during and he paid the repair and other expenses for certain automobiles we are not persuaded by the documentary and other evidence introduced by petitioner on this issue that during those years he owned the automobiles listed in peti- tioner's summaries and that he attempted to and or did sell any of those automobiles for profit during those years the testimonial evidence regarding the claimed schedule c losses for tfc engineering consists of the testimony of ms ridgway and matthew roman ms ridgway testified that around she managed mobile homes and automobile sales for peti- tioner we question ms ridgway's testimony indeed petitioner acknowledges on brief that ms ridgway was mistaken when she testified that she performed those functions for him around petitioner claims that ms ridgway did not manage mobile homes for him until petitioner also claims that ms ridgway first managed automobile sales for him during ms ridgway also testified that she received around dollar_figure during and some undisclosed amount during from tfc engineering for sales and organizing the mobile homes making collections taking care of repairs also leasing the mobile homes--taking care of all those things for you the documentary_evidence shows that during and petitioner wrote checks to ms ridgway totaling dollar_figure of which appear to relate to certain repair and other expenses regarding certain automobiles one of which for dollar_figure contained the handwritten notation business and none of which establishes that those checks were payments for services rendered during those years by ms ridgway to petitioner in the conduct of a business of purchasing repairing and re- selling automobiles in short we are not persuaded by ms ridgway's testimony and the other pertinent evidence that petitioner was engaged in such a business during and nor did we find the testimony of matthew roman petitioner's son particularly helpful to petitioner's position that during and he was engaged in the business of buying repair- ing and reselling automobiles indeed although he testified that during petitioner paid him for bookkeeping filing automobile detailing and long-range business planning matthew roman did not even know the nature of the business in which petitioner was allegedly engaged and for which he allegedly worked during and on cross-examination respondent's counsel asked petitioner's son to describe the type of business in which his father was engaged during petitioner's son replied i believe the -- well at that time the name of his business was tfc engineering and the scope of that is beyond my knowledge based on the entire record before us we find that peti- tioner has failed to satisfy his burden of proving that during and he was engaged under the name tfc engineering or under any other name in a trade_or_business within the meaning of sec_162 of purchasing repairing and reselling automo- biles accordingly petitioner is not entitled to any of the deductions that he claims for those years with respect to such alleged business of tfc engineering claimed stock sale losses nonbusiness bad_debts and worthless_stock claimed stock sale losses petitioner claims that during he realized long-term_capital_losses of dollar_figure and dollar_figure on the respective sales of the daisy stock and the gibraltar stock at trial petitioner presented the vanguard statements and the vanguard for the year in which the daisy stock and the gibraltar stock were sold those documents show that at least during the last quarter of to date those stocks were held in an account at vanguard by nathanael roman as custodian for his son matthew roman under the ugma of new mexico the social_security_number listed on the vanguard statements and the vanguard for the vanguard account was petitioner's social_security_number is the vanguard indicated that on date nathanael roman as custodian for matthew roman under the ugma of new mexico sold the daisy stock and the gibraltar stock no evidence was offered at trial to contradict the vanguard statements and the vanguard although we note that pursuant to the ugma of new mexico petitioner should have delivered the daisy stock and the gibraltar stock to his son when he became on date see n m stat ann sec d michie repealed date under new mexico law in effect during all relevant times a gift made in a manner prescribed in the uniform_gifts_to_minors_act is irrevocable and conveys to the minor indefeasibly vested legal_title to the security n m stat ann sec a michie repealed date a transfer under the ugma properly made under state law is effective to transfer the incidence of income_taxation from the parent to the child except to the extent that custodial funds are used to discharge the support obligation of the parent j t henry associa80_tc_886 the record does not show whether there were any dividends from the daisy stock or the gibraltar stock that petitioner used to support his son while he was a minor ie prior to date when he became based on the entire record before us we find that peti- tioner has failed to satisfy his burden of proving that he owned the daisy stock and the gibraltar stock on date the date on which those stocks were sold accordingly we reject petitioner's claim that during he realized long-term_capital_losses on the sales of those stocks claimed nonbusiness bad_debts sec_166 allows a deduction for a nonbusiness_debt that becomes worthless during the taxable_year a nonbusiness_debt is defined in sec_166 as a debt other than a debt created or acquired in connection with a trade_or_business of the taxpayer or a debt the loss from the worthlessness of which is incurred in the taxpayer's trade_or_business only a bona_fide debt qualifies as debt for purposes of sec_166 a bona_fide debt is a debt that arises from a debtor-creditor relationship based upon a valid and enforceable obligation to pay a fixed or determinable sum of money sec_1_166-1 income_tax regs whether a bona_fide debtor-creditor relationship exists is a question of fact to be determined upon a consideration of all the pertinent facts and circumstances 54_tc_905 an essential consideration is whether there exists a good_faith intent on the part of the alleged creditor to enforce repayment and a good_faith intent on the part of the alleged debtor to make repayment see id the following factors have been taken into account by this court and other courts in determining whether such a good_faith intention of repayment exist whether a note or other evidence_of_indebtedness exists 18_tc_780 affd 205_f2d_353 2d cir whether interest is charged id whether there is a fixed schedule for repayments id whether a demand for repayment has been made 318_f2d_611 9th cir and whether at the time the loan was allegedly made the alleged borrower had the ability to repay it 318_f2d_695 4th cir affg tcmemo_1962_194 in general the determination of whether a debt is worthless is a question of fact and all pertinent evidence must be consid- ered including the value of collateral if any securing the debt and the financial condition of the debtor sec_1_166-2 income_tax regs sec_166 provides that the amount of the deduction for any bad_debt is the adjusted_basis provided in sec_1011 as pertinent here sec_1011 defines the term adjusted_basis as the basis determined under sec_1012 adjusted as provided under sec_1016 and sec_1012 provides that the basis_of_property is its cost claimed nonbusiness bad_debts of mr parra at the conclusion of the trial in this case respondent conceded that the october and the october notes were loans and that petitioner is entitled to treat the respective principal amounts of those notes as nonbusiness bad_debts for as we understand petitioner's position he contends that in addition to the principal amounts conceded by respondent with respect to the october and october notes he is entitled for to treat as a nonbusiness_bad_debt the interest due on the october and the october notesdollar_figure respondent disputes petitioner's contention we agree with respondent the record does not establish that petitioner a cash_basis taxpayer included in income for any year interest payments if any on the october and the october notes consequently petitioner has failed to show that he has any basis in that interest it is not clear from the record whether petitioner deducted the interest that he paid on the adcfcu loan the norwest loan and or the white sands loan under sec_163 as limited by sec_163 in any event we do not understand petitioner to contend that he is entitled for to an interest_expense_deduction with respect to those loans on the record before us we find that petitioner has failed to prove that he is entitled for to treat as a nonbusiness_bad_debt the interest on the october and the october notes claimed nonbusiness_bad_debt of mr mcwilliams petitioner contends that the aggregate amount of principal and interest on mr mcwilliams' note is a bona_fide debt that became worthless during petitioner introduced into evi- dence a note signed by mr mcwilliams on date which stated that mr mcwilliams was to repay nathanael roman dollar_figure at an annual percentage interest rate of percent in monthly installments of principal and interest totaling dollar_figure in addi- tion petitioner testified that he lent mr mcwilliams the amount represented by mr mcwilliams' note during mr mcwilliams was unable to pay certain creditors and he determined that mr mcwilliams was unable to pay the aggregate amount of the principal and interest on mr mcwilliams' note based on petitioner's documentary and testimonial evidence regarding mr mcwilliams' note we find that the aggregate amount of the principal and interest on mr mcwilliams' note is a bona_fide debt within the meaning of sec_166 we must now deter- mine whether petitioner has shown that that debt became worthless during the only evidence presented at trial with respect to the worthlessness of mr mcwilliams' note was petitioner's testimony that during he determined that mr mcwilliams was unable to pay certain creditors more than petitioner's belief that mr mcwilliams' note became worthless during is re- quired to prove that it did become worthless during that year see 56_tc_191 based on our review of the instant record we find that petitioner has failed to carry his burden of proving that mr mcwilliams' note became worthless during accordingly we sustain respondent's determination that petitioner is not enti- tled for that year to treat any amount of mr mcwilliams' note as a nonbusiness_bad_debt claimed nonbusiness bad_debts of ms parra ms parra and or mr parra and mr ridgway petitioner contends that he is entitled for to treat the following as nonbusiness bad_debts under sec_166 the amount of ms parra's check the undisclosed amounts of the insurance payments that petitioner made and the amount of mr ridgway's check the record does not show that there was any interest required to be paid on that petitioner expected or demanded repayment of or that the alleged debtors believed that they were required to repay those alleged loans nor does the record show the financial condition of any of the alleged debtors at the times petitioner allegedly lent them the amounts in question and petitioner determined that the alleged loans became worthless based on our review of the instant record we find that petitioner has failed to carry his burden of proving that the amounts of ms parra's check the insurance payments and mr ridgway's check were bona_fide debts within the meaning of sec_166 and that assuming arguendo that such amounts were bona_fide debts they became worthless during accordingly we reject petitioner's claim that he is entitled for that year to treat such amounts as nonbusiness bad_debts claimed worthless_stock petitioner contends that the big_number shares of celebration common_stock that he purchased on date and date became worthless during and that he is entitled for that year to treat that stock as worthless_stock under sec_165 sec_165 and g permits a capital_loss deduction for worthless_stock for the taxable_year during which such stock becomes worthless our resolution of the question presented here under sec_165 depends on the facts and circumstances relating to the celebration stock at issue see 24_tc_669 affd 242_f2d_748 6th cir the only evidence presented by petitioner about the worth- lessness of the celebration stock is his testimony that he determined during that mr parra was unable to make celebra- tion into a successful business petitioner's belief that the celebration stock at issue became worthless during is not enough to persuade us that that stock did become worthless during that year see aagaard v commissioner supra on the instant record we find that petitioner has failed to satisfy his burden of proving that the celebration stock became worthless during accordingly we sustain respondent's determination that petitioner is not entitled for that year to treat that stock as worthless under sec_165 sec_6651 respondent determined that petitioner is liable for each of the years and for the addition_to_tax under sec_6651 for failing to file timely his return for each of those years although petitioner presented no evidence at trial with respect to those determinations he contends on brief that because he believed that he overpaid his taxes for and and that he was owed a refund for those years he did not have to file returns for and in the and returns that petitioner filed late he reported gross_income of dollar_figure and dollar_figure respectively and claimed head_of_household status and two exemptions totaling dollar_figure and dollar_figure respectively there is no determination in the notice that petitioner is not entitled to the head_of_household status and the two exemptions that he claimed in those returns sec_6012 generally requires that every indi- vidual whose gross_income for the taxable_year equals or exceeds the exemption_amount must file a return the term exemption_amount has the same meaning as provided in sec_151 sec_6012 certain exceptions apply to the general re- quirement set forth in sec_6012 as pertinent here sec_6012 provides that an individual who quali- fies as a head_of_household --a term defined in sec_6012 to have the same meaning as provided in sec_2 b --is not required to file a return if that individual's gross_income for the taxable_year is less than the sum of the exemption_amount and the basic_standard_deduction applicable to such individual the term basic_standard_deduction is defined in sec_6012 to have the same meaning as provided in sec_63 according to the return that petitioner filed late for each of the years and his gross_income exceeded the sum of the exemption_amount and the basic_standard_deduction for each such year he therefore was required to file a return for each of the years and on the instant record we find that petitioner has failed to satisfy his burden of proving that his failure_to_file timely his returns for and was due to reasonable_cause and not willful neglect accordingly we sustain respondent's determina- tions for those years imposing the addition_to_tax under sec_6651 sec_6662 sec_6662 imposes a penalty equal to percent of the underpayment_of_tax attributable to inter alia any substantial_understatement_of_income_tax sec_6662 with respect to individuals an understatement of income_tax is substantial if it exceeds the greater of percent of the tax required to be shown in the return or dollar_figure sec_6662 an understatement of income_tax is equal to the amount of tax required to be shown in the return less the amount shown therein reduced by any rebate within the meaning of sec_6211 sec_6662 the accuracy-related_penalty under sec_6662 does not apply to any portion of an underpayment if it is shown that there was reasonable_cause for and that the taxpayer acted in good_faith with respect to such portion sec_6664 the determination of whether a taxpayer acted with reasonable_cause and in good_faith depends upon the pertinent facts and circum- stances including the taxpayer's efforts to assess his or her proper tax_liability and the knowledge and experience of the taxpayer sec_1_6664-4 income_tax regs respondent determined that petitioner's substantial under- statement of income_tax for and is attributable to the dollar_figure capital_loss deduction and the charitable_contribution_deduction claimed by petitioner for each of those years and for is attributable to those claimed deductions as well as the dollar_figure deduction for wages and salaries that petitioner claimed in his schedule e with respect to the dollar_figure capital_loss deduction that petitioner claimed for each of the years at issue respondent concedes that petitioner is entitled to treat the october and the october notes in the respective principal amounts of dollar_figure and dollar_figure as nonbusiness bad_debts for pursuant to respondent's concession petitioner is entitled to a dollar_figure capital_loss deduction for each of the years at issue sec_1221 sec_1212 consequently there is no substantial under- statement of income_tax for each of those years that is attribut- able to the dollar_figure capital_loss deduction claimed by petitioner for each such year with respect to the charitable_contribution_deduction that petitioner claimed for each of the years at issue petitioner contends that he is entitled to those deductions and that there- fore respondent erred in imposing the accuracy-related_penalty with respect to them we disagree we have sustained herein respondent's determinations disallowing the charitable contribu- tion deductions claimed by petitioner for the years at issue on the record before us we sustain respondent's determinations imposing the accuracy-related_penalty for each such year to the extent that it is attributable to those claimed deductions with respect to the dollar_figure deduction for wages and salaries claimed by petitioner in his schedule e that claimed deduction resulted in a schedule e total loss of dollar_figure that petitioner used to reduce his income for petitioner concedes that he is not entitled to the dollar_figure deduction for wages and salaries and the dollar_figure total loss that he claimed in his schedule e however he contends that in addition to the other deductions that he claimed in that schedule he is entitled to deduct dollar_figure for contract labor expenses and dollar_figure for automobile and travel_expenses and that he has schedule e total income of dollar_figure on the record before us we sustain respondent's determination imposing the accuracy-related_penalty for to the extent that it is attributable to the dollar_figure expense deduction and resulting total loss that petitioner claimed in his schedule e to reflect the foregoing and the concessions of the parties decision will be entered under rule


department of the treasury internal_revenue_service washington d c date number info release date cc tege eoeg et1 - genin-150786-02 uilc memorandum for director internal_revenue_service center kansas city mo attn entity control from subject office of division counsel associate chief_counsel tax exempt and government entities cc tege eoeg et1 - genin-150786-02 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 concerning the following businesses under the railroad retirement act and the railroad unemployment insurance act we have reviewed the opinion of the rrb and based upon the information submitted to the rrb we also conclude that became an employer under the railroad_retirement_tax_act effective date we also conclude that became an employer under the act effective date please take the appropriate action regarding these businesses will e mcleod cc


t c memo united_states tax_court robert j goldberg and bradley a morgan petitioners v commissioner of internal revenue respondent docket no filed date john o kent and dennis n brager for petitioners s katy lin for respondent memorandum opinion goeke judge this matter is before the court on respondent’s motion to dismiss for lack of jurisdiction at issue is whether this court has jurisdiction over items respondent adjusted in the notice_of_deficiency relating to bradley a morgan’s petitioner investment in a partnership we do not decide the issue with respect to the majority of the items because of the uncertainty of whether tefra procedures in sections apply to those items see tax equity and fiscal responsibility act of tefra publaw_97_248 secs a 96_stat_648 however we have jurisdiction over one of the items adjusted regardless of whether tefra applies therefore respondent’s motion will be denied background petitioners are husband and wife their residence at the time of filing the petition was in hermosa beach california respondent issued a notice_of_deficiency for the taxable_year to petitioners on date the deficiency_notice contained adjustments arising from petitioner’s interest in a partnership called alameda investments l l c alameda on its form_1065 u s return of partnership income for alameda listed an ordinary_loss of dollar_figure from trade_or_business activities on petitioner’s schedule_k-1 partner’s share of income credits deductions etc petitioner was identified as the 99-percent owner of alameda a separate schedule_k-1 identified clarion forex advisors xv llc clarion forex as the 1-percent partner the schedule_k-1 for petitioner allocated to her as her distributive_share percent of the partnership’ sec_1unless otherwise indicated all section references are to the internal_revenue_code as amended loss of dollar_figure petitioners claimed the loss of dollar_figure on their form_1040 u s individual_income_tax_return as well as a loss of dollar_figure based on a sale of securities distributed to petitioner by alameda in addition petitioners claimed a dollar_figure deduction for legal accounting consulting and advisory fees respondent issued a notice of final_partnership_administrative_adjustment fpaa for alameda concurrently with the notice_of_deficiency in the fpaa respondent determined that alameda was a sham and that none of the deductions that the partnership claimed on its partnership return were allowable the notice_of_deficiency issued to petitioners stated the following the deduction of dollar_figure shown on your tax_return as your reported share of the loss purportedly sustained by alameda investments llc is disallowed because you have failed to establish that the purported loss was sustained in any amount by either you or any entity in which you held an interest that the transaction purportedly generating the loss in question was entered into for profit within the meaning of sec_165 or that any portion of the loss in question is allowable as a deduction under any other provision of the internal_revenue_code you have also failed to establish that even if loss was sustained and would otherwise be deducible any deduction relating to the loss is not specifically limited or disallowed by any provision of the internal_revenue_code including without limitation sec_165 sec_212 sec_704 or sec_465 2although petitioner’s schedule_k-1 partner’s share of income credits deductions etc identifies her as the percent partner for part of the year her share in the profits and losses is listed as percent it is further determined that the loss deduction claimed on your federal_income_tax return is disallowed because alameda investments llc with reference to which you determined basis in the derivative security sold is a sham and should not be recognized for federal_income_tax purposes it is further determined that the deduction of dollar_figure claimed as a loss for the tax_year is disallowed because you have failed to establish the basis in the partnership_interest in alameda investments llc was greater than zero you have also failed to establish the basis in the derivative securities sold or disposed of was greater than zero dollar_figure it is further determined that the deduction for the loss claimed is disallowed to the extent that the provisions of chapter subchapter_k of the internal_revenue_code were used to calculate basis in the property sold alameda investments llc was formed_or_availed_of in connection with a transaction or transactions in taxable_year a principal purpose of which was to reduce substantially the present_value of your federal tax_liability in a manner that is inconsistent with the intent of subchapter_k of the internal_revenue_code the manner in which you and alameda investments llc accounted for the derivative securities transaction in question violated the intent of subchapter_k accordingly the parties’ accounting for the transaction should be adjusted pursuant to the authority contained in sec_1_701-2 to achieve results that are consistent with the intent of subchapter_k by ignoring the existence of the partnership or treating transactions purportedly engaged in by the partnership as engaged in directly by the purported partners it is further determined in the alternative that the loss claimed on your federal_income_tax return should be decreased to reflect the limitation on your adjusted_basis in your partnership_interest resulting from your contribution of your position s in the securities transaction s to the partnership pursuant to sec_1_752-6t it is further determined in the alternative that the loss claimed on your federal_income_tax return should be decreased in the amount of dollar_figure to limit any loss incurred by you and the partnership in connection with the security transaction to the amount actually at risk in the transaction pursuant to sec_465 it is further determined that no deduction is allowed for any legal accounting consulting and advisory fees claimed in the amount of dollar_figure since you failed to establish that such expenditures were incurred and if incurred are deductible under any provision of the internal_revenue_code including but not limited to sec_183 and sec_212 alameda and petitioners filed separate petitions with this court alameda’s petition was filed at docket no on date this court entered a stipulated decision in the case at docket no petitioners’ petition assigned error to all of the determinations respondent made in his notice_of_deficiency paragraph g of petitioners’ petition stated the commissioner erred in his determination that no deduction is allowed for any legal accounting consulting and advisory fees claimed in the amount of dollar_figure on the grounds that petitioners failed to establish that such expenditures were incurred and if incurred are deductible under any provision of the internal_revenue_code on date respondent moved to dismiss the case herein for lack of jurisdiction upon the ground that the notice_of_deficiency was invalid under sec_6225 on date petitioners notified the court that they did not object to respondent’s motion on date the court issued an order to the parties requesting responses via a written status report to the following why alameda does not fall under the small_partnership_exception of sec_6231 and the parties’ positions regarding the court’s jurisdiction over the losses petitioners claimed on their returns and the deduction petitioners claimed for legal accounting consulting and advisory fees in their separate status reports the parties responded one of the partners in alameda is clarion forex which is a disregarded_entity and therefore disqualifies alameda from the small_partnership_exception and the court does not have jurisdiction over the losses or the deductions petitioners claimed on their return because those losses flow directly from partnership items and since the partnership items had not yet been determined at the partnership level when respondent issued the notice_of_deficiency this court does not have jurisdiction over any of the items in the notice in addition petitioners conceded that they were not allowed a deduction for legal accounting consulting and advisory fees applicability of tefra discussion tefra provisions divide disputes arising from partnership items from those arising from nonpartnership_items 87_tc_783 sec_6231 provides partnership_item -- with respect to a partnership any item required to be taken into account for the partnership’s taxable_year under any provision of subtitle a to the extent regulations prescribed by the secretary provide that for purposes of this subtitle such item is more appropriately determined at the partnership level than at the partner level if the tax treatment of a partnership_item is at issue the statute generally requires the matter to be resolved at the partnership level sec_6221 maxwell v commissioner supra pincite further deficiencies attributable to affected items may not be assessed until the related partnership proceeding is completed see sec_6225 114_tc_519 an affected_item is any item to the extent such item is affected by a partnership_item sec_6231 an affected_item is peculiar to a partner’s own tax posture maxwell v commissioner supra pincite respondent asserts that all the adjustments in the notice_of_deficiency consist of affected items that depend on partnership- level determinations respondent asserts that the adjustments in the notice_of_deficiency relating to petitioners’ share of the partnership loss is a partnership_item under sec_301_6231_a_3_-1 proced admin regs respondent further argues that adjustment for the amount of loss petitioners sustained for their sale of securities depends on a determination of petitioners’ basis in alameda which petitioners used to compute their basis in the securities under sec_732 under sec_301_6231_a_5_-1 proced admin regs the basis of a partner’s interest in a partnership is an affected_item to the extent it is not a partnership_item a partner generally may not compute his affected items before a related partnership-level proceeding is completed 95_tc_1 we lack jurisdiction over affected items in a notice_of_deficiency that was issued before the completion of the related tefra partnership proceedings gaf v commissioner supra pincite since respondent issued the notice_of_deficiency before the decision in the related tefra proceeding was entered respondent concludes that we do not have jurisdiction we do not have sufficient information to determine whether we have jurisdiction over the above-described items the record does not give us enough information to determine whether tefra applies the schedules k-1 show that petitioner and clarion forex were listed as partners of alameda however since there are fewer than five partners of alameda the small-partnership exception to tefra under sec_6231 may apply sec_6231 excepts certain small partnerships from tefra procedures if tefra procedures do not apply they do not restrict the commissioner from determining deficiencies in the income_tax of partners sec_6231 provides b exception for small partnerships -- i in general --the term partnership shall not include any partnership having or fewer partners each of whom is an individual other than a nonresident_alien a c_corporation or an estate of a deceased partner for purposes of the preceding sentence a husband and wife and their estates shall be treated a sec_1 partner ii election to have subchapter apply --a partnership within the meaning of subparagraph a may for any taxable_year elect to have clause i not apply such election shall apply for such taxable_year and all subsequent taxable years unless revoked with the consent of the secretary respondent claims that clarion forex disqualifies alameda from the small_partnership_exception because it is a disregarded_entity under sec_301_7701-3 proced admin regs respondent takes the position that a disregarded_entity is a pass-through partner as defined in sec_6231 see revrul_2004_88 2004_2_cb_165 the small_partnership_exception is not applicable where any partner in the partnership is a pass-through partner see sec_301_6231_a_1_-1 proced admin regs however neither of the parties identified to whom the interest in clarion forex passes through nor do we have sufficient evidence of clarion forex’s status as a disregarded_entity therefore we specifically do not determine whether tefra applies to the adjustments however with respect to the adjustments relating to the deduction for legal accounting consulting and advisory fees sec_6231 provides that the term ‘pass-thru partner’ means a partnership estate_trust s_corporation nominee or other similar person through whom other persons hold an interest in the partnership with respect to which proceedings under this subchapter are conducted we retain jurisdiction regardless of whether tefra applies paragraph g of the petition assigned error to the adjustment in paragraph of the explanation of items in the notice_of_deficiency denying petitioners a deduction under sec_183 or sec_212 for any legal accounting consulting and advisory fees for the taxable_year these items are neither partnership items nor affected items they were claimed by petitioners on their individual return not by the partnership on its partnership return respondent contends that the items referred to in paragraph g of petitioners’ petition are affected items respondent reasons that the deduction was disallowed because alameda and the partnership transaction at issue were shams and that the determination of whether a partnership is a sham is a partnership_item respondent cites 401_f3d_1136 9th cir affg in part and revg in part tcmemo_2003_150 and 331_f3d_972 d c cir affg in part and remanding tcmemo_2002_97 to support his assertion we find that river city ranches which dealt with the penalty-interest provision of sec_6621 is distinguishable the issue of whether the partnership’s transactions were shams directly affected the penalty-interest issue in this case even if the court were to determine that the partnership or the transaction the partnership engaged in was a sham that would not necessarily mean petitioners are not entitled to an individual deduction for legal accounting consulting and advisory fees further andantech is inapplicable because neither this court nor the court_of_appeals for the d c circuit resolved the issue of whether a partner’s individual deductions would be classified as a partnership_item or an affected_item in the event that the transaction at issue were declared to be a sham we find that even if the partnership is a sham we still retain jurisdiction over the deduction for legal accounting consulting and advisory fees the result would be the same even if tefra applied to the partnership the notice_of_deficiency disallows the deduction at the individual level petitioners claimed the deduction on their individual return the deduction was not claimed on the partnership return nor claimed by petitioners as their distributive_share of any deduction on the partnership return the disallowance of the deduction at the individual level did not flow from a deduction disallowed at the partnership level nor is the legality of the deduction at the individual level necessarily affected by a determination at the partnership level petitioners concede that they are not entitled to the deduction for the items to which paragraph g of the petition refers it is irrelevant whether petitioners concede that they are not entitled to the disputed deduction such a concession does not deprive us of jurisdiction see 64_tc_589 thus we conclude that we do have jurisdiction to redetermine petitioners’ deduction for legal accounting consulting and advisory fees therefore respondent’s motion to dismiss for lack of jurisdiction will be denied to reflect the foregoing an appropriate order will be issued


internal_revenue_service number release date index number --------------- ------------------------ ---------------------------------------- --------------------------------------- -------------------------------------- ------------------------------------ legend legend department of the treasury washington dc person to contact ---------------- id no ------------- telephone number --------------------- refer reply to cc fip b01 plr-119705-08 date date taxpayer --------------------------------------------------------------------- ------------------------------------------ company a --------------------------------------------------------------------- ---------------------------- company b --------------------------------------------------------------------- ---------------------------------------------------------- parent trust a_trust b foreign date date date month month year year ---------------------------------------------- ------------------------------ ----------------------------- ------------- ---------------------- -------------------- -------------------------- ------ ----------- ------- ------- plr-119705-08 accountant ---------------- dear ------------ this responds to a letter submitted on behalf of taxpayer requesting a ruling under sec_301_9100-1 of the procedure and administration regulations that an election under sec_856 of the internal_revenue_code to treat taxpayer as a real_estate_investment_trust reit be considered as timely filed facts taxpayer was formed on date to hold the units of trust a which owns and leases office properties in select cities in the united_states u s taxpayer represents that at all times it intended to elect reit status and operate in a manner to qualify as a reit pursuant to sec_856 of the code taxpayer is directly owned by company a company b and more than one hundred unrelated investors company a owns all issued and outstanding common shares of taxpayer company b and the unrelated investors own all issued and outstanding preferred shares of taxpayer parent a foreign_corporation indirectly owns shares of taxpayer the purchase of trust a was part of a larger acquisition the acquisition that occurred on date whereby parent and others jointly acquired all the stock of trust b a u s reit prior to the acquisition trust b had its own u s tax department after the acquisition this tax department led by the vice president of trust b the vp was charged with all relevant u s tax compliance responsibilities for the entities formed as part of the acquisition including taxpayer after trust b’s tax department closed in month of year the vp was no longer employed by trust b or parent parent hired new employees to assist with its u s tax reporting it was intended that taxpayer file a form_7004 application_for automatic_extension of time to file corporate_income_tax return for the tax_year ended date however due to the fact that taxpayer was the only entity for which a reit election had to be made in year and the fact that new employees were responsible for a substantial volume of u s tax compliance matters taxpayer inadvertently failed to file the form_7004 in month of year the vice president of taxation of parent the vp-parent discovered the failure_to_file the form_7004 the vp-parent promptly informed accountant of the failure_to_file the taxpayer’s reit election accountant advised plr-119705-08 parent that a request for relief should be filed once advised of the availability of relief the vp-parent immediately authorized this letter_ruling request parent’s tax department is in the process of preparing the ------- form 1120-reit u s income_tax return for real_estate_investment_trusts for taxpayer taxpayer makes the following additional representations the request for relief was filed by taxpayer before the failure to make the regulatory election was discovered by the service granting the relief will not result in taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than taxpayer would have had if the election had been timely made taking into account the time_value_of_money taxpayer did not seek to alter a return position for which an accuracy- related penalty has been or could have been imposed under sec_6662 of the code at the time taxpayer requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences taxpayer did not choose to not file the election law and analysis sec_856 provides that a corporation trust or association shall not be considered a reit for any taxable_year unless it files with its return for the taxable_year an election to be a reit or has made such election for a previous taxable_year and such election has not be terminated or revoked pursuant to sec_1_856-2 the election shall be made by computing taxable_income as a reit in its return for the first taxable_year for which it desires the election to apply sec_301_9100-1 of the regulations provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 through c i sets forth rules that the internal_revenue_service generally will use to determine whether under the particular facts and plr-119705-08 circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money conclusion based on the information submitted and representations made we conclude that taxpayer has satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to be treated as a reit beginning with the tax_year ended date accordingly the election of reit status taxpayer makes on its year form 1120-reit will be considered as timely made this ruling is limited to the timeliness of the election of reit status this ruling’s application is limited to the facts representations code sections and regulations cited herein 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 particular no opinion is expressed with regard to whether taxpayer qualifies as a reit under subchapter_m of the code moreover no opinion is expressed with regard to whether the tax_liability of taxpayer is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-119705-08 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 s ____________________________ elizabeth a handler chief branch office of associate chief_counsel financial institutions products enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax exempt and government entities contact person identification_number telephone number employer_identification_number division number release date date date uil code legend prize program dear this is in reply to your request for a private_letter_ruling that the monetary prizes you will award to individuals pursuant to your proposed prize program will not be taxable_expenditures within the meaning of sec_4945 and sec_4945 of the internal_revenue_code facts you have been recognized by the internal_revenue_service as an organization described in sec_501 of the code and are classified as a private_operating_foundation described in sec_4942 you were established for charitable scientific educational and religious purposes your specific objectives are to increase and disseminate mathematical knowledge to educate mathematicians and other scientists about new discoveries in the field of mathematics to encourage gifted students to pursue mathematical careers and to recognize extraordinary achievements and advances in mathematical research in addition to your present activities you propose to adopt a new prize program to advance mathematical knowledge and recognize achievement in mathematics under this program you will make monetary awards on an objective and non-discriminatory basis to individuals who are able to solve any of several specific mathematical problems that have resisted solution over the years the prizes would be awarded under the following rules and restrictions a proposed solution to a prize problem would be considered complete when it has been published in a mathematics journal of worldwide repute and the solution has general acceptance in the mathematics community two years after its publication your board_of directors will publicize this program widely anyone who is a not a disqualified_person with respect to you as defined in sec_4946 of the code or is not a current member of your scientific advisory board is eligible to receive an award the awards are not intended to finance any future activities of the recipients and you impose no conditions as to how recipients may expend the awards ruling requested the monetary prizes you will award to individuals under the proposed prize program will not be taxable_expenditures within the meaning of sec_4945 and sec_4945 of the internal_revenue_code law sec_170 of the code includes an organization that is organized and operated exclusively for religious charitable scientific literary or educational_purposes sec_4945 of the code imposes excise_taxes on each taxable_expenditure made by a private_foundation sec_4945 of the code states that the term taxable_expenditure means any amount_paid or incurred by a private_foundation for the purposes described in sec_4945 through d sec_4945 of the code describes a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 sec_4945 of the code refers to any purpose other than one specified in sec_170 in revrul_75_393 1975_2_cb_451 a private_foundation encourages and assists in the development of a particular field of literary criticism the foundation pays its annual net_income to a person who has written the best work of literary criticism during the preceding year the award recipient is determined by a majority vote of a selection committee consisting of the heads of the english departments of three prominent universities the committee reviews all major publications in which eligible works may appear in addition the organization solicits the submission of eligible works by communicating the availability of the award to the general_public in a variety of ways the award is granted in recognition of past outstanding achievement in the literary field and is not intended to finance any activities and no conditions are imposed on the manner in which the recipient may expend the award the ruling concludes that because the awards are granted in recognition of past achievements in the field of literary criticism they are not intended to finance any future activities of an individual grantee and no conditions are imposed on the manner in which the awards may be expended by the recipients they are made for purposes other than those stated in sec_4945 of the code thus they are not taxable_expenditures within the meaning of that provision in revrul_76_460 1976_2_cb_371 a private_foundation sponsors an annual competition among students attending schools specializing in teaching a particular craft the purpose of the competition is to raise the quality standards in the craft courses in the schools a competition committee of the foundation awards grants to the students who they judge to be the best there is no requirement that the selected individuals perform any further activity and there is no restriction as to the use to which the individuals may put the grants the ruling concludes that the grants are made in recognition of past achievements in the craft course they are not intended to finance any future activities of an individual grantee no conditions are imposed on the manner in which the awards may be expended by the recipients therefore because the grants are made for purposes other than those stated in sec_4945 of the code they are not taxable_expenditures within the meaning of that section the ruling also concludes that the grants are made for educational_purposes within the meaning of sec_170 of the code and therefore are not taxable_expenditures within the meaning of sec_4945 in revrul_77_380 1977_2_cb_419 situation grants are made by a private_foundation to individuals in the field of journalism primarily in recognition of past achievement the grants are not intended to finance any future activity of the recipient there are no conditions or requirements to be met subsequent to receiving the grants therefore because the awards are not grants to individuals for travel study or other similar purposes by these individuals the grants are made for purposes other than those stated in sec_4945 of the code and are not taxable_expenditures within the meaning of that section analysis under sec_4945 of the code an amount_paid or incurred by a private_foundation is a taxable_expenditure within the meaning of sec_4945 if it is a grant to an individual for travel study or other similar purposes unless it meets the requirements of sec_4945 thus an amount_paid or incurred by a private_foundation to an individual that is not for the purpose of travel study or for other similar purposes is not a taxable_expenditure under sec_4945 revrul_75_393 supra revrul_76_460 supra and revrul_77_380 supra situation conclude that grants made by a private_foundation in recognition of past achievements that are not intended to finance any future activities of the grant recipient and which impose no conditions on the manner in which the awards may be expended by the recipient are not considered grants made to individuals for travel study or other similar purposes under sec_4945 of the code and therefore are not taxable_expenditures within the meaning of sec_4945 the monetary prizes you will award to individuals under the prize program will be granted in recognition of specific past achievements in the field of mathematics they are not intended to finance any future activities and you impose no conditions on the manner in which the recipients may expend the awards therefore because the prizes you will award are similar to the prizes awarded by the private_foundations in the above revenue rulings they are not described in sec_4945 of the code because they are not made for travel study or other similar purposes therefore the monetary prizes you will award to individuals under the proposed prize program will not be taxable_expenditures within the meaning of sec_4945 under sec_4945 of the code an amount_paid or incurred by a private_foundation is a taxable_expenditure within the meaning of sec_4945 if it is made for any purpose other than one specified in sec_170 relating to religious charitable scientific literary or educational_purposes the monetary prizes you will award to individuals under the prize program will be granted on an objective and nondiscriminatory basis to further your charitable educational and scientific purposes within the meaning of sec_170 of the code therefore they will not be taxable_expenditures within the meaning of sec_4945 ruling the monetary prizes you will award to individuals under the proposed prize program will not be taxable_expenditures within the meaning of sec_4945 and sec_4945 of the internal_revenue_code this ruling is based on the understanding there will be no material changes in the facts upon which it is based this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described this ruling is directed only to the organization that requested it sec_6110 of the code provides it may not be used or cited by others as precedent this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely steven grodnitzky manager exempt_organizations technical group enclosure notice


t c summary opinion united_states tax_court lonnie c and tracey y lakes petitioners v commissioner of internal revenue respondent docket no 28030-07s filed date tracey y lakes pro_se jennifer k martwick and james h brunson iii for respondent ruwe judge this case was brought pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and unless otherwise indicated all section references are to the internal_revenue_code as amended this opinion is not to be treated as precedent for any other case the petition in this case was filed pursuant to two notices of determination concerning collection action s under sec_6320 and or notices of determination the case is before the court on respondent’s motion to dismiss for lack of jurisdiction as supplemented motion to dismiss the only issue is whether petitioners timely filed their petition with the court as prescribed by sec_6330 this case was calendared for hearing on respondent’s above- referenced motion at atlanta georgia on date upon further review of the motion and response it is clear that petitioners did not timely file their petition as prescribed by sec_6330 therefore respondent’s motion to dismiss for lack of jurisdiction will be granted background respondent’s appeals_office sent to petitioners by certified mail two notices of determination dated and postmarked date the first pertained to a proposed levy action with respect to petitioners’ unpaid income_tax liabilities for tax_year the second pertained to the filing of a notice_of_federal_tax_lien with respect to petitioners’ tax_year liability was previously determined by stipulated decision at docket no 12505-05s petitioners’ unpaid income_tax liabilities for tax_year sec_2002 and petitioners’ initial incomplete petition contesting the notices of determination for tax_year sec_2001 sec_2002 and was received by the court on date in an envelope postmarked date petitioners filed an amended petition on date respondent subsequently filed a motion to dismiss for lack of jurisdiction upon the ground that the petition was not timely filed petitioners objected to respondent’s motion to dismiss alleging that their petition was timely filed petitioners however did not deny that the notices of determination were mailed to them on the aforementioned date did not dispute the date on which their initial incomplete petition was mailed and filed with the court and provided no evidence of a timely filing of their petition discussion the tax_court is a court of limited jurisdiction and we may exercise our jurisdiction only to the extent authorized by petitioners’ petition also purports to contest a collection action for the tax_year respondent states that no notice_of_determination was mailed to petitioners with respect to tax_year moreover the record is devoid of any indication that respondent has initiated any collection activities with respect to petitioners’ tax_year congress sec_7442 85_tc_527 our jurisdiction in a collection review proceeding brought pursuant to sec_6320 or sec_6330 generally depends upon the issuance of a valid notice_of_determination and a timely filed petition 123_tc_326 see also 117_tc_122 114_tc_492 when a taxpayer wishes to invoke this court’s jurisdiction to challenge a notice_of_determination regarding a lien or levy action the taxpayer must file his petition with this court within the statutorily provided period sec_6330 provides sec_6330 notice and opportunity for hearing before levy d proceeding after hearing -- judicial review of determination -- the person may within days of a determination under this section appeal such determination to the tax_court and the tax_court shall have jurisdiction with respect to such matter in this case the two notices of determination were dated and mailed on date it follows that the 30-day period to file a petition with this court commenced on date see sec_301_6320-1 sec_301_6330-1 proced admin regs petitioners’ petition was received by this court on date the envelope in which it was received bore a u s postal service postmark date of date with the benefit of the timely-mailing timely-filing provision in sec_7502 petitioners’ petition would be deemed filed with the court as of date which i sec_49 days after the date of the notices of determination because petitioners’ petition was filed more than days after the date of the notices of determination this court lacks jurisdiction over petitioners’ claims in this proceeding see sec_6330 since petitioners’ petition which challenges the notices of determination for tax_year sec_2001 sec_2002 and was not timely filed pursuant to sec_6330 we shall grant respondent’s motion to dismiss for lack of jurisdiction to reflect the foregoing an appropriate order of dismissal for lack of jurisdiction will be entered