department of the treasury internal_revenue_service washington d c 0g jul uniform issue list numbers tek kk ke kk ro ee kk ee kk ok ke th re kr re rk ok 0f-e erti legend individual a individual b decedent a decedent b taxpayer c rr kk ker ee ekek kr rk kk kk ek rk ek kk tk kk kk kk ok kkk ker kkk ak ek rio io kk kkk kkk kk ke kk rk kk ke ok kk kkk kkkkkkkkkkk kkk kkk kkk taxpayer d srk kk kek keke ekee kr rr kr rr kr rk rr kr kk ee rk kk kk ke individual_retirement_arrangement ira x individual_retirement_arrangement ira y individual_retirement_arrangement ira z dear kkkekkk ks i brk kk rr rr kr rr ok rk rk rr or ek kk kk kk kr ik kr rr ik kr rr kkk kek kkk ke kek kkk ke kr kkk ker rk h kr rrr kr rr kr kr rk rk kkk kk kk kr this is in response to a letter dated date as and june supplemented by additional correspondence dated january january january april in that correspondence your authorized representative requested a private_letter_ruling on your behalf regarding certain required distributions of assets from the individual_retirement_arrangements iras previously owned by your parents decedents a and b named above in support of your request your authorized representative also submitted the following facts and representations ne aa individual a owned iras x and y individual b owned ira z individuals a and b were spouses and the parents of taxpayers c a both and d custodial_account established under sec_408 of the code a and b had attained the required_beginning_date as defined in of the internal_revenue_code during the early sec_401 c years of the 1990’s and had commenced making required withdrawals at that time individuals a and b had reciprocal from their iras beneficiary designations individual a named individual b beneficiary of iras x and y individual b named individual a as the beneficiary of ira contingent beneficiary of iras x neither taxpayer c nor d was named as as the or z y a prior to his death individual a had received annuitized distributions from iras x and y based on his single life expectancy with the amount of the annuity recalculated annually the father of taxpayers c and d died in november individual a on date individual b transferred the assets of iras x and commenced receiving distributions from ira z and y to ira z based on her single life expectancy percent of ira z consisted of assets attributable to decedent a and iras x and y individual b in ira z before the transfer gains losses and distributions attributable to these amounts have been accounted for since the transfer the remaining percent of ira z assets belonged to the transferred assets and of date as the terms of ira z provide that absent a specific election to the contrary the amount distributed to the ira owner will be recalculated annually distributions to her were recalculated annually pursuant to the terms of her ira in march individual b amended the beneficiary designation of ira z naming her two children taxpayers c and d equal beneficiaries the mother of taxpayers c and d died in april because individual b made no such election as b taxpayers c and d propose to distribute percent of the total assets remaining in ira 2--the amounts therein attributable to their mother’s decedent b’s ira--on or before date taxpayers c and d also propose to distribute the remaining assets in ira z their father’s decedent a’s january taxpayer c on over the life expectancy of the older beneficiary the percent of total ira assets attributable to taxpayer c was born in taxpayer d was born in ira which was transferred to ira ie based on the preceding facts and representations you request a ruling that distributions of the percent of ira z assets--the amounts attributable to decedent a’s iras--over the life expectancy of taxpayer c based on c’s adjusted age will meet the requirements of sec_401 of the code as applied to ira z by virtue of sec_408 a sec_408 of the code defines an individual retirement sec_408 a_trust which meets the requirements of sec_408 a account as through a prescribed by the treasury secretary rules similar to the rules of sec_40l1 a sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the trust is maintained a required minimum distributions from qualified_plans of the code sets forth the general rules applicable to and the incidental death_benefit requirements of states that under regulations section sec_401 a ii of the code provides in pertinent part that a_trust shall not constitute a qualified_trust unless the plan of which the trust is a part provides that the entire_interest of each employee’ will be distributed beginning not later than the required_beginning_date in accordance with regulations over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the joint life expectancies of such employee and designated_beneficiary with respect to iras sec_401 c of the code provides that the term required_beginning_date means april year immediately following the calendar_year in which the owner of that ira attains age of the calendar sec_401 b i of the code provides that where distributions have begun under subparagraph a ii constitute a qualified_trust unless the plan provides that if a_trust shall not t it the distribution of the employee’s interest has begun in accordance with subparagraph a ii and the employee dies before his entire_interest is distributed to him the remaining portion of such interest will be distributed at least as rapidly as under the method of distribution being used under subparagraph a ii as of the date of the employee’s death sec_1_408-8 of the proposed income_tax regulations q a a-4 b proposed regs provides in pertinent part that the ‘unless indicated otherwise all references in sec_401 a to an employee and his or her beneficiaries should be read to mean the ira owner and his or her beneficiaries wb only beneficiary who may elect to treat the beneficiary’s entire_interest in the trust or the remaining part of such interest if distribution thereof has commenced to the beneficiary as the beneficiary’s own account is the individual’s surviving_spouse if the surviving_spouse makes such an election the distribution would then be subject_to the distribution_requirements of sec_401 a a rather than sec_401 b an election to claim the ira as the surviving spouse's own will be considered to have been made if any amounts in the account transferred in accordance with the requirements of sec_408 a i into an ira for the benefit of such surviving_spouse or been distributed within the appropriate time period applicable to the decedent under sec_401 b the result of such an election is that the surviving_spouse shall then be considered the individual for whose benefit the trust is maintained have been rolled over or have not sec_1 a -1 of the proposed regs q a d-2 a provides in pertinent part that designated beneficiaries are only individuals who are designated under the plan provides that an individual may be designated as the plan either by its terms or affirmative election by the employee or the employee’s surviving_spouse specifying the beneficiary if the plan so provides by an in general it a beneficiary under sec_1 a -1 q a d-3 a of the proposed regs provides of the code for purposes of calculating the distribution period described in that sec_401 a a designated_beneficiary will be determined as required_beginning_date as of that date there is no designated_beneficiary under the plan to receive the employee’s benefit upon the employee’s death the distribution period is limited to the employee's life expectancy or a period not extending beyond the employee’s life for distributions before death the of the employee’s if sec_401 d of the code permits an employee and his or section a -1 q a e-8 a provides in pertinent part that the joint her spouse to recalculate their life expectancies annually life and last survivor expectancy of the employee and spouse is recalculated annually using the employee’s and spouse’s attained age in each distribution calendar_year using the employee’s and spouse’s attained ages as distribution calendar_year employee’s spouse the recalculated life expectancy of the deceased is reduced to zero in the year following the calendar_year of death any calendar_year in which the last applicable life expectancy is reduced to zero the plan must distribute the employee’s entire remaining interest prior to the last day of such year in order to satisfy sec_401 a of the employee’s and spouse’s birthdays in that upon the death of the employee or the in sec_1 a -1 q a e-5 a of the proposed regs provides that if more than one individual is designated as a beneficiary with respect to an ira the designated_beneficiary with the shortest life expectancy will be treated as the designated_beneficiary for purposes of determining the sec_401 distribution period sec_1 a -1 q a e-7ic of the proposed regs states that a plan may adopt a provision that permits the employee or spouse in the case of distributions described in sec_401 a b iii inapplicability of sec_401 d permitted the employee or spouse must elect whether or not life expectancy will be recalculated no later than the time of the first required_distribution under sec_401 a to elect the applicability or if such an election is of the code iv or sec_1 a -1 q a e-8 of the proposed regs provides in pertinent part that the life expectancy of a non-spouse beneficiary may not be recalculated section q a e-8 b provides further guidance on calculating the applicable life expectancy when the employee’s life expectancy is being recalculated and the life of the designated_beneficiary is not recalculated the joint and last survivor expectancy using the employee’s or the surviving spouse’s attained age as of the individual’s birthday during the distribution calendar_year and an adjusted age of the designated_beneficiary beneficiary is his or her attained age in the calendar_year in which the ira’s owner attains age reduced by one for each calendar_year which has elapsed since that calendar_year the adjusted age of the designated such applicable life expectancy is in this case decedent b’s required_beginning_date for ira z had it to zero decedent b’s death in occurred while decedent a and not taxpayers c and d was still the named beneficiary for that ira when decedent a died in reduced his recalculated life expectancy for purposes of ira z for the distribution calendar_year also reduced her recalculated life expectancy for those ira z funds attributable to her to zero in the calendar_year those ira assets attributable to decedent b must be distributed to the current designated beneficiaries taxpayers c and d no later than december the ira z custodian and taxpayers c and d will meet the minimum distribution_requirements of sec_401 d the code and sec_1 a - q a e-8 a by the distribution of the entire remaining balance in ira z attributable to decedent b prior to the last day of the last year in which the sole remaining life expectancy pertaining to that remaining balance was reduced to zero of ira 2’s assets as assets from iras x and y to ira z adjusted for gains losses and required distributions through the date of distribution in calendar_year an amount equal to percent this distribution from ira z the date of the transfer of of january therefore of is regarding the assets in ira z attributable to decedent a then in january of individual b exercised her rights as surviving_spouse and took ownership of those assets by transferring the entire account balances from iras x and y to ira z individual b accomplished her transfers during the calendar_year thus b created an account balance in percent of ira z assets for purposes of the required_distribution rules as of december the required_beginning_date for distributions of the assets transferred in date therefore date above individual b began receiving required distributions from the rollover portion of ira z during distribution in in accordance with the rule given from iras x and y to ira z was b took a discretionary in this case while the proposed_regulations do not specifically answer the question of whether taxpayer c can be considered the designated_beneficiary for purposes of code sec_401 a the absence of final regulations such issues may be resolved by a reasonable interpretation of the proposed_regulations and statutory provisions considered the designated_beneficiary of ira z for purposes of sec_408 a of the code since he was the older of the two beneficiaries named by then individual b before the december distribution date for the inherited portion percent of ira is concluded that taxpayer c may be and a in required accordingly it in march decedent b named taxpayers c and d as co-beneficiaries of assets in ira z this beneficiary designation was made ina timely manner prior to the required_beginning_date for distributions of assets transferred from iras x and y to ira z therefore had she chosen decedent b could have received distributions from ira z over her and taxpayer c’s joint life expectancy taxpayer c being her oldest designated_beneficiary with the minimum_required_distribution rules chose to receive distributions over her single life expectancy recalculated greater than the required minimums or accelerate receipt of her lifetime distributions in effect decedent b received distributions in amounts such distributions would have complied in other words chose to instead taxpayer a decedent b’s election to accelerate distributions does not affect the determination above that b’s timely designating taxpayers c and das her co-beneficiaries resulted in code sec_401 a required distributions being those computed using decedent b’s and taxpayer c’s joint and survivor life expectancy thus although taxpayer c’s life expectancy was not used in computing lifetime distributions to b may be used to determine post-death required distributions to decedent b’s beneficiaries in short the at least as rapidly rule will not be violated if post-death distributions are calculated using the life it 2b expectancy of decedent b’s oldest designated_beneficiary taxpayer c since decedent b could have used taxpayer c’s life expectancy to determine the amount of her required lifetime distributions in this case as noted above decedent b’s life expectancy was thus as of the end of the calendar_year being recalculated following the year of her death her life expectancy for purposes of code sec_401 distributions to decedent b’s designated beneficiaries for the percent of ira z assets transferred to ira z from iras x and y in will be those computed using the adjusted age and life expectancy of taxpayer c her oldest designated_beneficiary therefore required is reduced to zero therefore it is ruled that for calendar years after distributions of the percent of ira z assets--the amounts attributable to decedent a’s iras--over the life expectancy of taxpayer c based on c’s adjusted age as defined under sec_1 a -1 q a e-8 b of the proposed_regulations will meet the requirements of sec_401 virtue of sec_408 a of the code as applied to ira z by this ruling is directed solely to the taxpayer who requested it code sec_6110 provides that it may not be used or cited by others as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely a swieca manager john employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of this letter notice of intention to disclose notice copy of notification letter form to authorized representative ozded


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c december cc tege eoeg et2 conex-149438-09 number info release date uil ----------------- ------------------------------ -------------------------- ---------------------------------------- ---------------------------------------------------- dear ----------- this letter responds to your request dated date for the opinion of the internal_revenue_service as to whether the --------------------------vehicles issued to employees who are on 24-hour call for emergency response to suppress wildfires are qualified nonpersonal use vehicles within the meaning of internal_revenue_code code sec_274 as a general matter apart from the procedure for issuing a formal opinion as described in revproc_2009_1 2009_1_cb_1 the irs is not able to provide binding legal advice applicable to particular taxpayers we have enclosed a copy of revproc_2009_1 for your reference in the event that you decide to request formal guidance such as a letter_ruling you should follow the procedures set forth in revproc_2009_1 in the absence of a request for formal guidance we are only able to provide the following general information which we hope will be helpful to you the code provides that employees must include in their income any compensation they receive for services including employer-provided fringe_benefits code sec_61 an employee’s personal_use of an employer-provided automobile is a fringe benefit because expenses employees incur commuting between home and work are considered personal expenses employees must generally include the value of the personal commuting use of employer-provided automobiles in income however congress provided a limited exception to this rule for qualified nonpersonal use vehicles income_tax regulations provide that percent of the value of the use of a qualified_nonpersonal_use_vehicle is excluded from gross_income as a working_condition_fringe benefit income_tax regulation sec_1_132-5t h code sec_274 defines a qualified_nonpersonal_use_vehicle as any vehicle which by reason of its nature is not likely to be used more than a de_minimis amount for personal purposes conex-149438-09 income_tax regulation sec_1_274-5t provides a list of vehicles that are qualified nonpersonal use vehicles the regulations provide that a clearly marked fire vehicle is a qualified_nonpersonal_use_vehicle a clearly marked fire vehicle is a vehicle owned or leased by a governmental_unit or any agency_or_instrumentality thereof that is required to be used for commuting by a fire fighter who when not on a regular shift is on call at all times provided that any personal_use other than commuting of the vehicle outside the limit of the fire fighter’s obligation to respond to an emergency is prohibited by such governmental_unit a fire vehicle is clearly marked if through painted insignia or words it is readily apparent that the vehicle is a fire vehicle in evaluating whether a particular vehicle is a clearly marked fire vehicle and a qualified_nonpersonal_use_vehicle consideration should be given to the amount of time an employee devotes to suppressing wildfires and the amount of time the employee devotes to other activities this is one factor that the irs considered when it determined in a letter_ruling that certain vehicles provided by a government agency to its employees were not qualified nonpersonal use vehicles plr we have enclosed a copy of the letter_ruling for your information although letter rulings do not provide any precedential authority they do provide a glimpse at the service’s analysis in similar situations if you have any questions or need further assistance in his matter please contact ------ ------------- at -------------------- sincerely lynne camillo branch chief employment_tax branch exempt_organizations employment_tax government entities tax exempt government entities enclosures


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date jan a anne s p- contact person dentification number telephone number tb -by- employer_identification_number dear sir or madam -7alivigs this is in response to your letter dated date in which you requested certain with’ respect tova proposed transfer of all of the assets of bto cand d 'b and c are exempt under sec_501 of the internal_revenue_code and are d is in the process of preparing a form classified as private_foundations under sec_509 application to be filed with the service seeking recognition of exempt status under sec_501 of the code and classification as a private_foundation under sec_509 b is managed and controlled by four trustees three of whom are related by blood with the passage of time family members of the two family branches have developed divergent charitable and philanthropic objectives therefore believes that its charitable objectives can now be best served by the transfer of assets in equal shares to c and d the distribution of assets to c and d will allow the two family branches to pursue their respective independent charitable interests and objectives following the receipt of a favorable determination_letter for d b will transfer percent of bwill then have no assets at some time at its assets to d and percent of its assets to c least one day after the transfer of all of its assets to c and d b will notify the service of its intent to terminate its private_foundation_status pursuant to sec_507 of the code b has not notified the service that it intends to terminate its private_foundation_status nor has b ever received notification that its status as a private_foundation has been terminated furthermore b has not committed willful repeated acts or failures to act or a willful and flagrant act or failure to act giving rise to liability for tax under chapter sec_507 of the code states in part that except for transfers described in sec_507 an organization’s private_foundation_status will be terminated only if the organization notifies the service of its intent to terminate or there have been either willful repeated acts or failures to act or a willful and flagrant act or failure to act giving rise to liability for tax under chapter sec_507 of the code provides that when a private_foundation transfers assets to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization the transferee foundation shall not be treated as a new organization sec_507 of the code imposes a tax on an organization that terminates its private_foundation_status under sec_507 of the code sec_1_507-3 of the income_tax regulations provides that a transferor private_foundation is required to meet its charitable distribution_requirements under sec_4942 of the code even for any taxable_year in which it makes a transfer of its assets to another private_foundation such transfer shall itself be counted toward satisfaction of such requirements to the extent the amount transferred meets the requirements of sec_4942 of the code however where the transferor has disposed of all of its assets the record-keeping requirements of sec_4942 of the code shall not apply during any period in which it it has no assets socton 17so7-tb of of the reguiations provides that ia private_foundation transfers all or part of its assets to one or more other private_foundations pursuant to a transfer described in sec_507 of the code such transferor foundation will not have terminated its foundation status under sec_507 sec_1_507-1 of the regulations provides that neither a transfer of all of the assets of a private_foundation nor a significant disposition of assets as defined in sec_1 c by a private_foundation whether or not any portion of such disposition of assets is made to another private_foundation shall be deemed to result in a termination of the transferor private_foundation under sec_507 of the code unless the transferor private_foundation elects to terminate pursuant to sec_507 or sec_507 is applicable sec_1_507-3 of the regulations provides that in the case of a significant disposition of assets to one or more private_foundations within the meaning of paragraph c of this subsection the transferor organization shall not be treated as a newly created organization sec_1_507-3 of the regulations provides that a transferee organization in the case of a transfer described in sec_507 of the code shall succeed to the aggregate tax_benefit of the transferor organization in an amount equal to the amount of such aggregate tax tf benefit of the transferor organization multiplied by a fraction the numerator of which is the fair_market_value of the assets less encumbrances transferred to such transferee and the denominator of which is the fair_market_value of the assets of the transferor less encumbrances immediately before the transfer transfer fair_market_value is determined at the time of sec_1_507-3 and ii of the regulations provides that in a sec_507 transfer the provisions enumerated in subparagraphs a through g thereof apply to the transferee foundation with respect to the assets transferred to the same extent and in the same manner that they would have applied to the transferor foundation had the transfer described in sec_507 not been effected sec_1_507-3 of the regulations provides that if a transferor private_foundation transfers assets to a private_foundation which is effectively controlled within the meaning of sec_1_482-1a directly or indirectly by the same person or persons who effectively control the transferor private_foundation the transferee foundation will be treated as if it were the transferor foundation for purposes of sec_4940 through and sec_507 through of the code the transferee is treated as the transferor in the proportion which the fair_market_value of the transferor’s assets that were transferred bears to the fair_market_value of all of the assets of the transferor immediately before the transfer sec_1_507-3 of the regulations provides that unless a private_foundation gives notice under sec_507 of the code a transfer of assets described in sec_507 of the code will not constitute a termination of the transferor’s private_foundation_status sec_1_507-4 of the regulations provides that the tax on termination of private_foundation_status under sec_507 of the code does not apply to a transfer of assets pursdant to section sot 2zy ofthe code uitess tite provisions of s07 a becomeapplicable rt sec_4940 of the code imposes a tax on the net_investment_income of private_foundations sec_4941 of the code imposes a tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4942 of the code requires a private_foundation to make specified distributions of income for each taxable_year including the year in which it transfers substantial assets to another private_foundation under sec_507 sec_4942 of the code defines a qualifying_distribution as any amount including that portion of reasonable and necessary administrative expenses paid to accomplish one or more purposes described in sec_170 other than any contribution to i an organization controlled by the foundation or one or more disqualified persons or ii a private_foundation which is not an operating_foundation except as otherwise provided or b any amount_paid to acquire an asset used directly in carrying out one or more purposes described in sec_170 b sec_4942 of the code requires that a grantor private_foundation in order to have a qualifying_distribution for its grant to another private_foundation which is not an operating_foundation under sec_4942 of the code must have adequate_records as required by sec_4942 of the code to show that the grantee private_foundation in fact subsequently made qualifying distributions that were equal to the amount of the grant and that were paid out of the grantee’s own corpus within the meaning of sec_4942 of the code such grantee foundation’s qualifying distributions out of corpus must be expended before the close of the grantee’s first tax_year after its tax_year in which it received the grant sec_4944 of the code imposes tax upon a private_foundation which invests any amount in such a manner as to jeopardize the carrying out of any of its exempt purposes sec_4945 of the code imposes tax upon a private foundation’s making of any taxable_expenditure under sec_4945 sec_4945 of the code defines the term taxable_expenditure to include any amount_paid or incurred by a private_foundation as a grant to an organization unless a the organization is described in subparagraphs or of sec_509 of the code or is an exempt_operating_foundation as defined in sec_4940 of the code or b the private_foundation exercises expenditure_responsibility with to such grant in accordance with sec_4945 of the code the exercise of expenditure_responsibility requires the foundation that makes the transfer to keep detailed records of the way the payment is spent by the recipient foundation sec_4945 of the code provides that expenditure_responsibility referred to in subsection d means that the private_foundation is responsible to exert all reasonable efforts and to establish adequate procedures to see that the grant is spent solely for the purpose for - which-mmade -to-obtein-full-and detailed repertewithtaspect to-such-expenditures and- t0 ees mans make full and detailed reports to the secretary sec_4946 of the code defines the term disqualified_person as a person who is a substantial_contributor to a private_foundation a foundation_manager an owner of more than of a corporation or partnership which is a substantial_contributor to the private_foundation a family_member of persons described above or a corporation partnership trust or estate of which persons described above own more than of the combined voting power sec_53_4945-5 of the foundation and similar excise_taxes regulations refers to the rules relating to the extent to which the expenditure_responsibility_rules contained in sec_4945 and h and this section apply to transfers of assets described in sec_507 sec_53_4945-6 of the regulations provides that a transfer of assets of a private_foundation under sec_507 of the code is not a taxable_expenditure if such transfer is to an organization described in sec_501 other than an organization described in sec_509 or treated as so described under sec_4947 sec_53_4946-1 a of the regulations provides that for purposes of sec_4941 the term disqualified_person does not include any organization described in sec_501 other than an organization described in sec_509 based on the above facts the transfer of all of b’s assets to c and d will allow c and d to continue the charitable activities previously conducted by b therefore the transfer of assets from b to c and d will not endanger the tax exempt status of b c or d under sec_501 under sec_507 of the code in the case of a transfer of assets of any private_foundation to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization the transferee foundation shall not be treated as newly created organization thus the transfer by b to c and d will constitute in the aggregate an adjustment organization or reorganization within the meaning of sec_507 accordingly the transfer by b to c and d will not be treated as a transfer to a newly created organization because b is not terminating its existence and assuming there has been no willful repeated or flagrant act giving rise to liability under chapter no tax will be imposed on b under sec_507 as a result of the transfer of assets from b to c and d because b c and d are effectively controlled by the same persons c and d should be treated as if they were b for purposes of sec_507 through and chapter of the code therefore the rulings requested under sec_4940 sec_4941 sec_4942 and sec_4944 would be provided because these rulings are consistent with the approach in sec_1_507-3 of the regulations which is in effect to disregard the change in form of the organization for purposes of chapter von- because bis transfering at ofts-assets te c-and-b pursuant toa merger andb ’c and dv er are controlled by the same persons c and d will be treated as b the transfer will be treated as not having taken place for expenditure_responsibility purposes under sec_4945 of the code thus the transfer will not be a taxable_expenditure under sec_4945 therefore b need not exercise expenditure_responsibility with regard to the merger subsequent to the merger c and d will be treated as if they were b therefore c and d will succeed to b’s duties to exercise expenditure_responsibility and b would be relieved of any duty to exercise expenditure_responsibility after the merger as a result of the merger c and d will be treated as b for purposes of chapter therefore the distribution_requirements of sec_4942 for the year of transfer should be regarded as satisfied by b c and d if treating b and c as a single organization the aggregate qualifying distributions for such year by b c and d would satisfy its distribution requirement because c and d are treated as taking over b's obligations as of the date of merger it follows that as of that date b will no longer have any such obligations because b c and d are controlled by the same persons for purposes of chapter of the code and sec_507 through of the code c and d will be treated subsequent to the 29a transfer of all of b’s assets as if they were b in proportion which the fair_market_value of the assets less encumbrances transferred bears to the fair_market_value of b ‘s assets less encumbrances immediately before the transfer thus c and d can succeed to b’s excess qualifying distributions carryover for purposes of sec_4942 of the code and in proportions determined in accordance with sec_1_507-3 i of the regulations consistent with succeeding to b's tax_attributes under sec_1_507-3 of the regulations c and d will be treated as if they were b for purposes of chapter including sec_4940 accordingly c and d would be allowed to report all of the net_income subject_to tax under sec_4940 during the year of merger whether earned by b c or d and pay all of the sec_4940 taxes on such income for that year because b as an organization described in sec_501 of the code is not a disqualified_person with respect to c or d the transfer of assets to c and d will not constitute an act of self-dealing within the meaning of sec_4941 of the code because b c and d are exempt under sec_501 and are organized for purposes described in sec_170 and the reason for the transfer is to carry out more efficiently such exempt purposes the transfer would not be a jeopardizing investment under sec_4944 under sec_4940 of the code capital_gains_and_losses are defined as gains and losses from the sale_or_other_disposition of certain property because the asset transfer from b to c and d will lack consideration no sale_or_other_disposition will have occurred thus there will be no gain and the assets transfer will not give rise to tax under sec_4940 of the code further because the transfer of assets to c and d is disregarded because in turn c and d are treated as if they were b for purposes of chapter c’s and d’s basis in the assets transferred to them pursuant to the merger should be the same as the basis of b lab semtgsett a tie ee a because b will dispose_of all of its assets the recordkeeping requirements of sec_4942 will not apply during any period in which it has no assets therefore b’s recordkeeping under sec_4942 will not apply after the merger since b will have disposed of all of its assets under sec_507 of the code the value of b's assets after it has transferred all of its assets to c and d will be zero thus b’s voluntary notice termination of its private_foundation_status pursuant to sec_509 will not result in tax under sec_507 of the code accordingly based on the information furnished we rule as follows the proposed transfer of assets by b to c and d will constitute a significant dispostion of assets within the meaning of sec_1_507-3 of the regulations accordingly the proposed transfer of assets will constitute a transfer pursuant to a reorganization described in sec_507 of the code the proposed transfer of assets by b to c and d will not cause either c or d to be treated as a newly created organization following the transfer of assets b’s status as a private_foundation will not be terminated as a result of the proposed transfer of assets and such transfer will not result in the imposition of tax under sec_507 of the code c and d will succeed proportionately to b’s aggregate tax benefits if any in accordance with sec_1_507-3 of the regulations c and d will not be considered disqualified persons as to b and the proposed transfer of assets by b to c and d will not be treated as an act of self-dealing under sec_4941 of the code accordingly b under sec_4941 of the code will incur no tax as a result of the transfer of assets the proposed transfer of assets by b to c and d will not be considered a grant or taxable_expenditure under sec_4945 of the code accordingly b will incur no tax as a result of the transfer of assets under sec_4945 of the code b will not be required to exercise expenditure_responsibility under sec_4945 in connection with the proposed transfer of assets to c or d the proposed transfer of assets by b to c and d will not result in the imposition of any_tax under sec_4942 the proposed transfer of assets by b to c and d will not constitute an investment and will not give rise to net_investment_income to b therefore the transfer will not subject b to any_tax under sec_4940 or sec_4944 of the code v1 he-propesed transferolassets by b to c and d will nat affect thetax-exempt status ofn ou b c or d under sec_501 of the code and neither b c nor d will be subject_to federal_income_tax under subtitle a of the code with regard to the transfer c and d as the transferees of the net assets of b will receive the benefit of any transitional rules and savings provisions applicable as enumerated in sec_1 a i and ii of the regulations the proposed transfer of assets by b to c and d will satisfy the distribution_requirements of sec_4942 of the code for the year in which the transfer occurs because b is terminating and will have no assets b will not be required to comply with the record keeping requirements of sec_4942 of the code with respect to the proposed transfer ah if b voluntarily terminates its private_foundation_status no sooner than one day after the transfer of all of its assets to c and d and b notifies the service pursuant to sec_507 of the code b will liable for the tax imposed by sec_507 of the code because however b will have no assets upon such termination no tax will due under sec_507 of the code the preparation and filing of any final accounting or other documents required by state law in winding up dissolving and terminating b will not result in a termination_tax under sec_507 of the code this ruling_request does not constitute notice of intent to terminate b’s status as a private_foundation under sec_507 this ruling is issued on the assumption that d is recognized as exempt under sec_501 of the code we are informing the ohio te_ge office of this action please keep a copy of this ruling in your organization's permanent records this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent 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 sincerely gerald v sack manager exempt_organizations technical group oes


internal_revenue_service number release date index number --------------------------- ---------------------------- ---------------------------------- ----------------------------- re --------------------------- -------------------- - legend department of the treasury washington dc person to contact --------------- id no ------------- telephone number --------------------- refer reply to cc psi - plr-142135-04 date may ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- a b_trust ---------------------------------------------------------------------------------------------------------- ------------------- ------------------ ----------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------- trust ------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------- trust ------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------- trust ---------------------------------------------------------------------------------------------------------- ----------------------------------------------------------- trust ------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------- trust ------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------- trust -------------------------------------------------------------------------------------------------------- ---------------------------------------------------------- trust trust trust trust trust -------------------------------------------------------------------- ------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- -------------------------------------------------------------------- ----------------------------------------------------------------- ---------------------------------------------------------------- ---------------------------------------------------------------------- ------- ------- ------- ---------------------- ---------------------- ------------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------------- plr-142135-04 trust trust trust trust trust trust trust ----------------------------------------------------------- trust trust trust ----------------------------------------------------------- trust trust trust ----------------------------------------------------------- year year year date date company dear ------------- this is in response to your letter dated date concerning the generation-skipping_transfer gst status of trusts collectively trusts was formed in year by brothers a and b the shareholders of company are all descendants or their spouses of a and b or trusts created for their benefit the descendants and surviving spouses of the six children of a and b constitute six family groups trusts were created between year and year prior to date and are not subject_to the gst tax pursuant to section b a of the tax_reform_act_of_1986 the act it is represented that there have been no additions constructive or otherwise to any trust after date or a qualified_subchapter_s_trust qsst and owns shares in company the facts and representations submitted are summarized as follows company it is represented that each trust is either an electing_small_business_trust esbt company and its shareholders filed an election to be taxed under subchapter_s sec_2 of the shareholder agreement prohibits the shareholders from making plr-142135-04 of the code effective date as part of the decision to make the s election the shareholders agreed in principle to negotiate and execute a shareholder agreement that addresses changes in the number of beneficial shareholders and prevents the ownership of stock by an ineligible shareholder for purposes of the s election the trustees of trusts executed and entered into the shareholder agreement on behalf of trusts the shareholder agreement is not effective however until a letter_ruling is issued by the internal_revenue_service as specified in section of the shareholder agreement and the company from recognizing a transfer that would cause the s election to terminate such attempted transfers are void each shareholder agrees to provide notice to the board if the shareholder contemplates taking any_action that may jeopardize the s election the shareholder agrees to follow any reasonable direction provided by the board_of directors board_of company to avoid termination of the s election however certain mandatory transfers under the terms of an irrevocable_trust that is a shareholder are not generally subject_to the restrictions in sec_2 of the shareholder agreement representative must provide notice to the board if the transfer of the deceased shareholder’s company stock causes or will cause the termination of the s election causes a change in the number or the identity of persons deemed to be shareholders for purposes of subchapter_s to provide notice to the board if the board determines that this change will cause a termination of the s election then the board must provide notice to the shareholder of its determination will cause the termination of the s election the procedure in section commences notice of an action or anticipated action that will cause the termination of the s election first the affected_shareholder has a 45-day period to make alternative arrangements that do not otherwise violate the shareholder agreement or the certificate of incorporation but which will alleviate the pending termination of the s election if the shareholder makes such arrangements then the procedure in section stops if the shareholder does not make such arrangements then the company and the other shareholders will have the option to purchase the shares that are the source of the threatened or potential termination of the s election the shares are offered to the sec_3 specifies that upon the death of an individual shareholder the personal sec_5 provides that upon the occurrence of any other event that causes or section details the procedure to be followed in the event the company has sec_4 requires a shareholder whose shares are subject_to an event that several sections of the shareholder agreement detail the right to exercise an plr-142135-04 following groups in order until one or more qualified shareholders and or the company purchase all of the affected shares i the affected shareholder’s family group ii the company iii the affected shareholder’s family group for a second time iv the shareholders outside of the affected shareholder’s family group and v the company for a second time together these options are referred to as the purchase options option with each step other mechanical features of exercise purchase_price and terms of effectiveness of the shareholder agreement section provides that the shareholder agreement is not effective or binding upon any shareholder until the later to occur of the following events i agreement is executed by shareholders owning at least two-thirds of all outstanding shares and ii the company and or the holders of at least two-thirds of all outstanding shares shall have received one or more letter rulings from the internal_revenue_service acceptable to the applicants to the effect that the effectiveness of the shareholder agreement would not constitute a modification of the shareholder’s governing trust instrument that would adversely affect the status of the shareholding trust as exempt from the gst tax under chapter of the code and the associated regulations shareholders owning not less than two-thirds of the outstanding shares dissolution or bankruptcy of the company the shareholder agreement is subject_to four consecutive four-year extension terms on an affirmative vote of the holders of not less than two- thirds of the outstanding shares the shareholder agreement will expire upon the earlier of date consent of you have requested a ruling that neither the execution and effectiveness of the shareholder agreement nor the exercise of any purchase option will constitute an addition to any of trusts or cause a change in the substance of any of trusts that will cause any of trusts to lose its gst exempt status under sec_26_2601-1 so that future distributions from such trust will not be subject_to the gst tax under sec_2601 provided that no additions actual or constructive are made to the trust skipping transfer which is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip skipping transfer_tax regulations the gst tax is generally applicable to generation- skipping transfers made after date however under section b a of the act and sec_26_2601-1 the tax does not apply to a transfer from a under section a the act and sec_26_2601-1 of the generation- sec_2601 of the internal_revenue_code imposes a tax on every generation- sec_26_2601-1 provides that a modification of the governing sec_26_2601-1 provides rules for determining when a modification plr-142135-04 trust if the trust was irrevocable on date the rule does not apply to the extent additions actual or constructive were made to the trust after that date judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status the rules contained in sec_26_2601-1 are except as otherwise noted applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes the rules do not generally apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in a beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a generation-skipping_transfer or the creation of a new generation-skipping_transfer a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust represented that no additions have been made to trusts after that date the proposed actions of the trustees of trusts in executing the shareholder agreement on behalf of trusts are administrative actions accordingly based on the facts submitted and the representations made we conclude that neither the execution and effectiveness of the shareholder agreement nor the exercise of any purchase option will constitute an addition to any of trusts or cause a change in the substance of any of trusts that will cause any of trusts to lose its exempt status under sec_26_2601-1 so that future distributions from trusts will not be subject_to the gst tax under sec_2601 provided that no additions actual or constructive are made to trusts in this case trusts were irrevocable on date it is except as expressly provided herein no opinion is expressed or implied this ruling is directed only to the taxpayers requesting it sec_6110 plr-142135-04 concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter further we express no opinion as to whether company was or is an s_corporation additionally we express no opinion as to whether the trusts are qualified shareholders provides that it may not be used or cited as precedent representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination letter is being sent to the taxpayers in accordance with the power_of_attorney on file with this office a copy of this the rulings contained in this letter are based upon information and sincerely lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter cc


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-106558-05 uilc date april to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities subject railroad_retirement_tax_act 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 that the following business is not a covered employer 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 us by the rrb we also conclude that the ------------------------------------------------------------- ----------------------------------------- is not a covered employer under the jurisdiction of the railroad_retirement_tax_act please take the appropriate action regarding this business cc ---------------------------- ------------------------------------------------------------------------------------------------- _____________________________ janine cook


tcmemo_2015_72 united_states tax_court barry p cooper petitioner and the government of the united_states virgin islands intervenor v commissioner of internal revenue respondent sandra g cooper petitioner and the government of the united_states virgin islands intervenor v commissioner of internal revenue respondent docket nos filed date ps husband and wife are u s citizens asserting each was a bona_fide_resident of the virgin islands during and ps filed joint territorial income_tax returns with the virgin islands bureau of internal revenue vibir claiming entitlement to income_tax benefits under sec_932 they did not file joint income_tax returns with the internal_revenue_service irs the irs received copies of ps’ returns from the vibir after examining these returns the irs determined ps did not qualify for the sec_932 gross_income exclusion treating ps as nonfilers the irs mailed separate notices of deficiency to ps one to p-h for and and another to p-w for more than years after ps filed their territorial tax returns ps assert that because they believed in good_faith that they were bona_fide residents of the virgin islands at the time they filed territorial income_tax returns with the vibir the filing of those returns with and the payment of tax to the vibir met their federal_income_tax filing and payment obligations without regard to objective facts indicating their residence ps each filed a motion for summary_judgment maintaining the irs’ notices of deficiency were untimely mailed ie the notices were mailed after the expiration of the sec_6501 period of limitations hence the irs’ assessment of tax was time barred held the assertion that the period of limitations expired before the irs’ mailing of a notice_of_deficiency is an affirmative defense which ps must prove held further because ps failed to make a proper showing that they were bona_fide residents of the virgin islands during and ps’ motions for summary_judgment will be denied and a trial will be required joseph a diruzzo iii for petitioners barry j hart christopher m bruno geoffrey p eaton peter n hiebert and tamika m archer for intervenor ladd christman brown jr james g hartford and jacob russin for respondent memorandum opinion jacobs judge these cases consolidated for trial briefing and opinion are before the court on petitioners’ motions for summary_judgment filed date pursuant to rule the specific question to be decided is whether petitioners barry cooper and sandra cooper qualify as bona_fide residents of the u s virgin islands virgin islands during and for purposes of determining whether the sec_6501 period of limitations on assessment and collection expired before the date respondent internal_revenue_service or irs mailed petitioners separate notices of deficiency for the reasons set forth infra we will deny petitioners’ motions unless otherwise indicated all section references are to the internal_revenue_code code in effect for and and all rule references are to the tax_court rules_of_practice and procedure at the time petitioners filed their respective petitions they resided in florida background the following includes undisputed facts in the record barry cooper petitioner husband was married to sandra cooper petitioner wife during and they are u s citizens and assert that each was a bona_fide_resident of the virgin islands during and petitioners filed a joint territorial income_tax return with the virgin islands bureau of internal revenue vibir for on date and an amended joint territorial income_tax return for on date they filed a joint territorial income_tax return for with the vibir on date asserting that their filings with the vibir and the payment of tax to the virgin islands satisfied their federal tax filing and payment obligations pursuant to sec_932 petitioners did not file a or federal_income_tax return with or pay income_tax to the irs the irs received copies of petitioners’ and returns from the vibir and after examining these returns the irs determined that petitioners did petitioners also filed a joint territorial income_tax return with the vibir for although the irs determined a deficiency in tax and additions to tax for that year is not before us because petitioner husband seeks redetermination only with respect to and and petitioner wife seeks redetermination only with respect to the virgin islands uses the same income_tax return form ie form_1040 u s individual_income_tax_return used by the united_states the vibir forwarded copies of the first two pages of form_1040 schedule c profit or loss from business schedule c-ez net profit from business form_w-2 wage and tax statement and form w-2vi u s virgin islands wage and tax statement to the irs the record contains an irs account transcript which states that the irs received petitioners’ territorial income_tax return on date and that an examination of that return commenced on date the record does not reveal the date on which the irs received copies of petitioners’ and territorial income_tax returns from the vibir nor does the record reveal the continued not qualify for the sec_932 gross_income exclusion treating petitioner husband as a nonfiler on date the irs mailed him a notice_of_deficiency in which it determined the following deficiencies in federal_income_tax and additions to tax_year deficiency sec_6651 additions to tax sec_6651 sec_6654 dollar_figure big_number dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure attached to the notice_of_deficiency was a form 4549-a income_tax discrepancy adjustments which set forth the basis for the aforementioned income_tax deficiencies and additions to tax it has been determined that during the taxable years ended date and tax_year sec_2002 and you were not a bona_fide_resident of the united_states virgin islands usvi it is also determined that you participated in a tax_avoidance scheme similar to that described in notice_2004_45 meritless position based on sec_932 and sec_934 which involved improperly claiming to be a resident of the usvi and superficially recasting income_from_sources_within_the_united_states as income from sources within the usvi or effectively connected to a trade_or_business within the usvi in order to inappropriately and continued date the irs commenced examining petitioners’ and territorial income_tax returns invalidly claim a tax_credit of under the united_states virgin islands economic development program edp credit in the irs issued notice_2004_45 2004_2_cb_33 in which it stated that it intended to challenge highly questionable and in most cases meritless positions of certain u s citizens who claimed to be residents of the virgin islands in order to avoid u s taxation by claiming substantial tax benefits arising from the tax policies enacted by the government of the virgin islands see 135_tc_222 notice_2004_45 c b pincite states that the highly questionable positions being challenged are promoted to taxpayers in a variety of forms however they are frequently promoted in the following manner promoters typically approach a taxpayer taxpayer living and working in the united_states and advise taxpayer to i purport to become a usvi resident by establishing certain contacts with the usvi ii purport to terminate his or her existing employment relationship with his or her employer employer and iii purport to become a partner of a virgin islands limited_liability partnership v i llp that is treated as a partnership for u s tax purposes v i llp then purports to enter into a contract with employer to provide employer with substantially the same services that were provided by taxpayer prior to the creation of this arrangement typically after entering into the arrangement taxpayer continues to provide substantially the same services for employer that he or she provided before entering into the arrangement but taxpayer is nominally a partner of v i llp instead of an employee of employer under this arrangement employer makes payments to v i llp for taxpayer’s services and no longer treats the payments as wages paid to taxpayer subject_to the withholding and payment of employment_taxes and reporting on taxpayer’s form_w-2 v i llp in turn makes payments to taxpayer for his or her services to employer v i llp typically treats these payments for tax_accounting purposes either as guaranteed payments for services or as continued on date the irs mailed petitioner wife a notice_of_deficiency determining the following deficiency in federal_income_tax and additions to tax_year deficiency sec_6651 additions to tax sec_6651 sec_6654 dollar_figure dollar_figure dollar_figure dollar_figure attached to the notice_of_deficiency was a form 4549-a which set forth in language identical to that included in the notice_of_deficiency sent to petitioner husband the basis for the income_tax deficiencies and additions to tax with respect to petitioner wife petitioners each filed a petition with this court on date petitioners contend that both were bona_fide residents of the virgin islands during and and as this court held in 140_tc_273 that they were required under the code and the regulations promulgated thereunder as well as by the irs’ instructions and tax forms to file their income_tax returns for and with the vibir petitioners assert those filings continued distributions of taxpayer’s allocable share of partnership income under this arrangement the promoter may be a general_partner in v i llp and may retain a percentage of the fees received from employer on date the court granted the irs’ motion to consolidate petitioner husband’s and petitioner wife’s cases satisfied their federal_income_tax return filing obligations on the other hand the irs asserts that although petitioners filed income_tax returns with the vibir those returns were virgin islands territorial returns not federal_income_tax returns on date petitioners each filed a motion for summary_judgment in which each asserts that because each believed he she was a bona_fide_resident of the virgin islands during and the irs is required to accept their belief consequently petitioners maintain the respective notices of deficiency were untimely and the sec_6501 period of limitations bars assessment of tax by the irs for and discussion i introduction this is the third case involving the timeliness of notices of deficiency to u s citizens who filed income_tax returns with the vibir rather than to the irs in 140_tc_273 we had to decide whether the filing of an income_tax return with the vibir by an individual whom the irs conceded in this opinion we are deciding only the issue of petitioners’ residency even though the irs received portions of petitioners’ form sec_1040 that were filed with the vibir we need not and do not herein determine whether those documents are returns filed with the irs under sec_6501 resolution of that issue is reserved for the future was a bona_fide_resident of the virgin islands commenced the running of the 3-year period of limitations for federal tax purposes ie whether the filing of an income_tax return with the vibir started the clock running on the irs we therein held that it did and that because the irs issued a notice_of_deficiency more than three years after the taxpayer had filed with the vibir the irs’ deficiency determination was untimely and accordingly granted the taxpayer’s motion for summary_judgment in estate of sanders v commissioner t c ___ date we had to grapple with the question of who is a bona_fide_resident of the virgin islands during certain of the years at issue in that matter neither the code nor the regulations promulgated thereunder provided a definition of a bona_fide_resident of the virgin islands in that case the irs disputed the estate’s assertion that the decedent was a bona_fide_resident of the virgin islands but at trial the estate provided evidence establishing that he was consequently we found as we did in appleton that the notice_of_deficiency was untimely sec_937 now provides a test for determining whether a taxpayer is a bona_fide_resident of the virgin islands by creating a two-part residency test however sec_937 is inapplicable for and see estate of sanders v commissioner t c ___ ___ slip op pincite n date in the motions now before us petitioners assert that they did not have to file tax returns with the irs because they believed in good_faith that they were bona_fide residents of the virgin islands at the time they filed territorial income_tax returns with the vibir they have not however presented objective evidence to corroborate their purported belief ii summary_judgment summary_judgment is appropriate if the pleadings and other materials show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir the moving party bears the burden of showing that there is no genuine dispute of material fact and the court views all factual materials and inferences in the light most favorable to the nonmoving party 85_tc_812 rule d provides that where the moving party properly makes and supports a motion for summary_judgment an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but rather must set forth specific facts by affidavits or otherwise showing that there is a genuine dispute for trial for purposes of deciding petitioners’ motions for summary_judgment we must assume that but for the running of the period of limitations there would be a deficiency in petitioners’ federal_income_tax with respect to and iii the virgin islands the virgin islands although a part of the united_states are a separate and distinct taxing jurisdiction the territory is classified as an unincorporated territory by u s c sec a is not part of one of the states or the district of columbia and generally is not a part of the united_states for tax purposes see sec_7701 in an attempt to harmonize the dual nature of the virgin islands congress established the mirror_tax system as the tax law of the virgin islands act of date ch sec_1 42_stat_123 codified as amended pincite u s c sec_1397 under the mirror_tax system the virgin islands uses the code with virgin islands effectively substituted for any reference to the united_states and vice versa see 820_f2d_618 3d cir as the law has developed the provisions of the code have been made applicable to the virgin islands so long as the specific section to be applied is ‘not manifestly inapplicable or incompatible’ with a separate territorial income_tax 430_f2d_973 3d cir quoting u s c sec 1421i d the provisions applicable for and under which individuals file territorial income_tax returns and pay tax in the virgin islands were enacted as part of the tax_reform_act_of_1986 tra publaw_99_514 100_stat_2596 and amended in the technical_and_miscellaneous_revenue_act_of_1988 publaw_100_647 102_stat_3530 virgin islands residents generally were exempted from federal_income_tax obligations if they met the requirements of sec_932 sec_932 coordination of united_states and virgin islands income taxes c treatment of virgin islands residents -- application of subsection --this subsection shall apply to an individual for the taxable_year if-- a such individual is a bona_fide_resident of the virgin islands at the close of the taxable_year or b such individual files a joint_return for the taxable_year with an individual described in subparagraph a filing requirement --each individual to whom this subsection applies for the taxable_year shall file an income_tax return for the taxable_year with the virgin islands extent of income_tax_liability --in the case of an individual to whom this subsection applies in a taxable_year for purposes of so much of this title other than this section and sec_7654 as relates to the taxes imposed by this chapter the virgin islands shall be treated as including the united_states residents of the virgin islands --in the case of an individual-- a who is a bona_fide_resident of the virgin islands at the close of the taxable_year b who on his return of income_tax to the virgin islands reports income from all sources and identifies the source of each item shown on such return and c who fully pays his tax_liability referred to in sec_934 to the virgin islands with respect to such income for purposes of calculating income_tax_liability to the united_states gross_income shall not include any amount included in gross_income on such return and allocable deductions and credits shall not be taken into account if a bona_fide_resident of the virgin islands fails to meet the provisions of sec_932 and he she is compelled to file a federal_income_tax return any_tax collected by the irs must be covered over to the virgin islands u s c sec u s citizens or residents other than those who are bona_fide residents of the virgin islands who have income derived from sources within the virgin islands or effectively connected to a virgin islands trade_or_business for a sec_932 is not included in the mirror code and is not an element of the virgin islands territorial tax system see s rept no pincite u s c c a n taxable_year are explicitly required to file returns with both the united_states and the virgin islands sec_932 to ensure the fair implementation of sec_932 the united_states and the virgin islands entered into the tax implementation agreement between the united_states of america and the virgin islands tia date 1989_1_cb_347 to permit the exchange of information and mutual assistance with respect to taxes in order to prevent the evasion or avoidance of united_states or virgin islands taxes id the tia applies to all taxes imposed by the code all taxes imposed by the mirror code and all local_income_taxes imposed by the virgin islands as authorized by the tra see id art c b pincite as more thoroughly discussed in estate of sanders v commissioner t c at __ slip op pincite the tia requires the virgin islands to routinely provide the united_states information with respect to audit changes that disclose information of interest to the u s government it also requires the vibir to permit the irs to examine virgin islands tax returns iv federal tax filing_requirements u s citizens such as petitioners are subject_to federal reporting requirements and taxation on their worldwide income as set forth in the code see eg 265_us_47 estate of sanders v commissioner t c at __ slip op pincite appleton v commissioner t c pincite a number of code sections govern an individual’s filing_requirements sec_6012 requires that every individual having for the taxable_year gross_income which equals or exceeds the exemption_amount with certain exceptions not applicable in this matter file an income_tax return however the interplay of sec_932 and mirror code sec_6012 affect this general_rule for individuals who claim to be bona_fide residents of the virgin islands see appleton v commissioner t c pincite although individuals having gross_income for a taxable_year which equals or exceeds the exemption_amount are required to file federal_income_tax returns sec_932 directs bona_fide residents of the virgin islands to file income_tax returns with the virgin islands via the vibir and sec_932 flush language exempts both u s source income and virgin islands source income from u s taxation if all of the requirements of sec_932 are met but if any requirement of sec_932 is left unsatisfied then an individual falls back into the federal_income_tax reporting and payment system because that income would no longer be excluded for purposes of calculating his her u s tax_liability appleton v commissioner t c pincite in reviewing petitioners’ position we begin by turning to sec_7654 which provides that the secretary shall prescribe such regulations as may be necessary to carry out the provisions of sec_932 including prescribing the information which individuals to whom sec_932 applies are to furnish to the secretary appleton v commissioner t c pincite but the secretary failed to prescribe such regulations for and consequently we must look to other sections of the code regulations and instructions published by the irs for guidance as to the proper place for petitioners to file their and income_tax returns id pursuant to sec_6091 flush language a u s citizen whose principal_place_of_abode is outside the united_states is required to file his her income_tax return at such place as the secretary may by regulations designate under this authority the secretary promulgated sec_1_6091-1 income_tax regs providing in general that if an income_tax return is required to be filed and the place for filing the return is not designated by the code the return is to be filed at the place prescribed by regulations sec_1_6091-3 income_tax regs instructs individual citizen s of a possession_of_the_united_states who have no legal residence or place of business in any internal_revenue_district in the united_states to file their income_tax returns as designated on the income_tax return forms or the instructions issued thereto the vibir directs individuals to file their territorial income_tax returns on the same form_1040 that u s taxpayers use when filing their federal_income_tax returns the instructions to form_1040 for and stated that permanent residents of the virgin islands should use v i bureau of internal revenue as the place to file their tax returns v sec_6501 period of limitations as we noted in appleton v commissioner t c pincite the regulations and instructions issued by the irs regarding income_tax return filings are sec_1_6091-3 income_tax regs requires that certain tax returns be filed with the director of internal operations internal_revenue_service washington dc or the district_director or the director of the service_center depending on the appropriate officer designated on the return form or in the instructions issued with respect to the form these tax returns include the income_tax return of an individual citizen_of_the_united_states whose principal_place_of_abode for the period with respect to which the return is filed is outside the united_states and an individual citizen of a possession_of_the_united_states whether or not a u s citizen who has no legal residence or principal_place_of_business in any internal_revenue_district sec_1_6091-3 and c income_tax regs a taxpayer’s principal_place_of_abode will be considered to be outside the united_states if his her legal residence is outside the united_states or if his her tax_return bears a foreign address sec_1_6091-3 income_tax regs it appears that when the inhabitant rule was replaced by sec_932 the irs failed to update the instructions to form_1040 and continued to use the terms permanent resident of the virgin islands and nonpermanent resident of the virgin islands despite their obsolescence significant because the running of the period of limitations on assessment commences only when a tax_return has been properly filed sec_6501 provides that except as otherwise provided the amount of any_tax imposed by the code shall be assessed within three years after the return was filed sec_6501 further provides that the term ‘return’ means the return required to be filed by the taxpayer thus for a return to commence the running of the period of limitations the return must be properly filed and the return required to be filed by the taxpayer we therefore must determine whether the form sec_1040 petitioners filed with the vibir were properly filed with that entity and if so whether they were the returns required to be filed vi proper filing in 281_us_245 the supreme court noted that u nder the established general_rule a statute_of_limitations runs against the united_states only when they assent and upon the conditions prescribed the supreme court concluded that there must be meticulous compliance by the taxpayer with all named conditions in order to secure the benefit of the limitation id see allnut v commissioner 523_f3d_406 n 4th cir aff’g tcmemo_2002_311 relying on pilliod lumber co we stated in 96_tc_802 that to meticulously comply a taxpayer must file his return where sec_6091 or the regulations promulgated thereunder require the return to be filed accordingly this court as well as others has held on several occasions that filing a return with the wrong irs representative does not constitute filing for purposes of commencing the limitations_period estate of sanders v commissioner t c at ___ slip op pincite appleton v commissioner t c pincite winnett v commissioner t c pincite see 523_f3d_406 holding that taxpayer’s hand delivery of returns to wrong individual does not constitute a filing see also congelliere v commissioner tcmemo_1990_265 holding that a return incorrectly filed with a service_center rather than the district_director is disregarded for purposes of determining when the 60-day period for issuing the notice_of_deficiency for the termination year begins to run in appleton the parties stipulated that the taxpayer was a bona_fide_resident of the virgin islands in applying the aforementioned principles we held that he properly filed his income_tax return by filing it with the vibir and consequently met his federal tax filing obligation we stated the instructions to form_1040 are explicit the form is to be filed with the vibir we rejected the irs’ argument that the instructions to form_1040 when read in conjunction with publication tax guide for individuals with income from u s possessions require that the taxpayer should be treated as a taxpayer living abroad who must file a protective return with the internal_revenue_service center in philadelphia pennsylvania appleton v commissioner t c pincite to the contrary we noted that no irs document existed explicitly directing a bona_fide_resident of the virgin islands to file a protective return id we concluded that a meticulous taxpayer researching his her filing obligations would have discovered the instructions to form_1040 publication as well as field_service_advisory date and upon a review of these documents the taxpayer would believe that no filing other than with the vibir was necessary id pincite n vii determining bona_fide residency our holding in appleton applied to an individual whom the irs conceded was a bona_fide_resident of the virgin islands we did not explore the factors which had to be established in determining that an individual was a bona_fide_resident of the virgin islands the term bona_fide_resident of the virgin islands was not defined by the code until see estate of sanders v commissioner t c ___ slip op pincite the secretary did not promulgate final regulations for determining whether a taxpayer is a bona_fide_resident of the virgin islands until see id at ___ slip op pincite consequently a taxpayer attempting to determine his her residency status when filing returns for and would find no guidance in the code or the regulations in estate of sanders we addressed the question of bona_fide residency in that case the estate presented facts which objectively demonstrated that the decedent was a bona_fide_resident of the virgin islands the record therein established that the decedent had a physical presence in the virgin islands he was a partner and worked for a virgin islands business he banked in the virgin islands and held a virgin islands address he was married in the virgin islands and listed his virgin islands address on his marriage license he identified himself as a virgin islands resident and paid virgin islands taxes and he had virgin islands certified public accountants prepare his tax returns we concluded that the decedent was a bona_fide_resident of the virgin islands and that as a result he properly filed his income_tax returns for the years at issue with the vibir and the sec_6501 period of limitations had expired before the irs mailed the decedent the notice_of_deficiency here no specific facts demonstrate petitioners’ residency status in the virgin islands for and rather petitioners assert that we must accept as a matter of law that they were bona_fide residents of the virgin islands during and because of their purported good_faith belief intervenor expands on petitioners’ assertion maintaining that sec_932 requires every individual with virgin islands source income to make an initial determination as to whether he she is a u s or virgin islands resident intervenor posits that if the individual determines that he she is a virgin islands resident and in good_faith files with the vibir the irs must either accept that determination or challenge it within the three-year period of limitations intervenor concludes that in these cases the irs’ failure to challenge petitioners’ filing with the vibir within three years of the filing of the income_tax returns time bars the irs’ issuance of a notice_of_deficiency not unexpectedly the irs disagrees sec_932 does not provide that a taxpayer’s subjective belief that he she is a bona_fide_resident of the virgin islands is sufficient to place him her into that section’s single filing regime more is required sec_932 provides that sec_932 applies to an individual if a he she is a bona_fide_resident of the virgin islands or b if an individual files a joint_return with such a person as the claims_court pointed out in celanese corp v united_states cl_ct the difficulty with plaintiff’s argument in support of its motion for summary_judgment is that it asks the court to find con- clusively facts with respect to plaintiff’s motive and intent without trial questions of motive and intent are not ordinarily resolvable upon motion for summary judgement and in the absence of opportu- nity for cross-examination see 737_f2d_238 2d cir 311_f2d_175 2d cir 224_f2d_1 5th cir intervenor asserts that if individuals such as petitioners are required to prove that they are bona_fide residents of the virgin islands as opposed to simply asserting that they believed in good_faith that they were such individuals would be unable to rely on the protections of sec_6501 instead according to intervenor such individuals will have to prove their case in tax_court and win on the merits although we are cognizant of intervenor’s concerns requiring individuals such as petitioners to prove that they were bona_fide residents of the virgin islands is not equivalent to forcing them to win their case on the merits ie prove that they qualify for the sec_932 income exclusion the assertion that a notice_of_deficiency is untimely by virtue of the running of the sec_6501 period of limitations is an affirmative defense that must be proven by the claimant rule sec_39 sec_142 101_tc_374 aff’d without published opinion 40_f3d_385 5th cir daniels v commissioner tcmemo_2012_355 and in the matter before us the period of limitations will have expired only if petitioners can prove they were bona_fide residents of the virgin islands at the close of and viii determining bona_fide residency in estate of sanders v commissioner t c at ___ slip op pincite we reviewed the factors we rely upon in determining whether a taxpayer is a bona_fide_resident of the virgin islands residency as we noted varies according to context 461_us_321 in sochureck v commissioner 300_f2d_34 7th cir rev’g and remanding 36_tc_131 the court_of_appeals looked pincite factors to determine whether a taxpayer’s claimed residency was bona_fide the factors are intention of the taxpayer establishment of home in the foreign_country for an indefinite period participation in activities physical presence in the foreign_country nature of extent of and reasons for absences from his temporary foreign home assumption of economic burdens and payment of taxes to the foreign_country status of resident contrasted to transient_or_sojourner treatment accorded his income_tax status by his employer marital status and residence of his family nature and duration of employment and good_faith in making a trip abroad see id the factors can be grouped into four broad categories intent physical presence social family and professional relationships and the taxpayer’s own representations 715_f3d_455 3d cir considering the sochureck factors as grouped into these categories for purposes of determining bona_fide residency under sec_932 ix conclusion petitioners failed to make a proper showing on the issue as to whether they qualify as bona_fide residents of the virgin islands for and consequently because petitioners have not met their burden of showing that summary adjudication is warranted petitioners’ motions for summary_judgment will be denied a trial will be required to determine whether the sec_6501 period of limitations had expired before the irs mailed petitioners separate notices of deficiencydollar_figure an appropriate order will be issued because of our holding we need not determine at this time any other issue raised by the irs


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 b1 plr-161432-05 date date ------------------ legend x -------------------------------------------------- date dear ------------------ ------------------- this responds to a letter dated date submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts x was incorporated on date the shareholder of x desired that x elect s_corporation treatment effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under ' b however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no ' a election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and ' b shall not apply x did not timely file an election to be treated as an s_corporation under ' a x has however established reasonable_cause for not making a timely s election and is entitled to relief under ' b conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 effective date with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes the code provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer s requesting it sec_6110 of sincerely audrey w ellis audrey w ellis senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures cc copy of this letter copy for sec_6110 purposes


office_of_chief_counsel department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c date cc ita conex-117530-05 number info release date uil r - the honorable saxby chambliss united_states senate washington dc attention candice ashton dear senator chambliss i am responding to your letter dated date on behalf of your constituent ------------------------- he makes the payments on a higher education loan but the loan is in his mother’s name he believes that neither he nor his mother can deduct the interest --------------- cannot deduct the interest because he is not required to pay the loan however when he makes the payments on behalf of his mother the loan company and the irs treat her as the payor thus his mother can deduct the interest assuming the loan satisfies the other requirements as a qualified_education_loan sec_1 b and b of the income_tax regulations i hope this information is helpful if you have any questions please call me or ------------------------------------------------------- if you prefer you can write us pincite constitution avenue nw cc ita room washington dc sincerely thomas d moffitt branch chief office of associate chief_counsel income_tax and accounting -


number release date id office uilc cca-310138-09 -------------- from ------------------- sent thu am to ------------------------- cc ------------------- subject re irc and tefra -------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------- the form 872-i should be signed by a manager of the tefra entity rather than by the tmp if it is an llc the tmp of a tefra entity has no power to bind the entity itself unless he is a manger general_partner under state law the tmp of a state law partnership will always be a general_partner but the tmp of an llc may not be a manager under state law