internal_revenue_service number release date index number ---------------------------- ------------------------------------------------------------ ------------------------------------------ ------------------------------- ------------------------------- department of the treasury washington dc person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc corp b06 plr-136494-08 date date ty ty legend distributing -------------------------------------------------------------------------- ------------------------------------------------------- ------------------------ controlled business y newco -------------------------------------------------- ------------------------ -------------------------------------- ---------------------------------------------- ------------------------------- -------------------------------------- business z newco ------------------------------------------------------------------ -------------------------------------------------------------------------- ---------------------------------------------- sub1 ------------------------------------------------------------ -------------------------------------------------------------------------- ------------------------------------- sub2 ------------------------------------------------------------ -------------------------------------------------------------- --------------------------------------------------- sub3 ----------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------- plr-136494-08 sub4 ------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------- sub5 ------------------------------------------------------------ ------------------------------------------------------------- ------------------------------------------ sub6 ----------------------------------------------------------- ------------------------------------------------------------- --------------------------------------------- sub7 ------------------------------------------------------------ ------------------------------------------------------------- ------------------------- sub8 ----------------------------------------------------------- -------------------------------------------------------------------------- ---------------------------------------------------------------- sub9 ------------------------------------------------------------ -------------------------------------------------------------------------- ------------------------------------------------------ sub10 ------------------------------------------------------------ ------------------------------------------------------------------- --------------------------------------------------------------------- sub11 ----------------------------------------------------------- -------------------------------------------------------------------------- ---------------------------------------------------------------- sub12 ------------------------------------------------------------ ------------------------------------------------------------------ -------------------------------------------------- sub13 ------------------------------------------------------------ ------------------------------------------------------------------ ----------------------------------------------------- f-sub1 ------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------- plr-136494-08 f-sub2 ------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------ f-sub3 ------------------------------------------------ ------------------------------------------------------------------------------ ----------------------------------------- f-sub4 ------------------------------------------------ ----------------------------------------------------------------- -------------------------------------------------------------- f-sub5 -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------ ------------------------------------------------------------------------------ llc1 ------------------------------------------------ ------------------------------------------------------------------------------------ ---------------------------------------------------- llc2 ----------------------------------------------------------- ------------------------------------------------------------------------------------------ -------------------------------------------------------------- llc3 ----------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------ llc4 ----------------------------------------------- ------------------------------------------------------------------------------------------ ----------------------------------------------------------------- individual a individual b state v country w ---------------- --------------------------- ------------------- ---------- business x ------------------------------------- business y ------------------------------------------ plr-136494-08 business z a b c d e f g h date1 ---------------------------------------------- -------- ---- ---------- ---------- ---------- ---------- ---------- ----------------- ------------------------------ dear ---------------------------- this is in response to a letter dated date submitted on your behalf by your authorized representatives requesting rulings on the federal_income_tax consequences of a proposed transaction the information submitted for consideration is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by the appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover this office has not reviewed any information pertaining to and has made no determination regarding whether the distributions as defined below i satisfies the business_purpose requirement of sec_1_355-2 ii is being used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation the controlled_corporation or both see sec_355 of the internal_revenue_code the code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 plr-136494-08 summary of facts distributing directly and indirectly owns the stock of multiple domestic and foreign subsidiaries collectively hereafter referred to as the distributing affiliated_group and is the common parent of an affiliated_group_of_corporations that with its eligible members files a consolidated federal_income_tax return hereafter referred to as the distributing consolidated_group the distributing affiliated_group is engaged in business x business y and business z businesses among others as of date1 distributing had approximately a stockholders of record whom owned various classes of distributing’s common and preferred_stock although the various classes of distributing stock are widely held there is no public market for the stock distributing stockholders consist of the distributing affiliated group’s officers employees and certain non-employee directors who own their stock individually through the distributing affiliated group’s restricted_stock_plan and or as part of the distributing affiliated group’s employee_stock_ownership_plan and trust the esop as of date1 the b common_stock shareholders and or shareholder groups of distributing consisted of individual a individual b the esop and other distributing affiliated group’s officers employees and certain non-employee directors distributing owns all of the outstanding_stock of sub1 controlled sub2 sub3 sub4 sub5 sub6 and sub7 and owns c of the single class of outstanding_stock of sub8 and d of the single class of outstanding_stock of sub9 sub1 owns all of the outstanding_stock of sub10 and f-sub1 a country w corporation and owns e of the single class of outstanding_stock of sub11 and f of the single class of outstanding_stock of sub12 sub1 also owns all of the membership interests of llc1 and llc2 each single member limited_liability companies smllc disregarded for federal tax purposes sub12 owns all of the outstanding_stock of sub13 llc1 owns all of the membership interests of llc3 a smllc disregarded for federal tax purposes f-sub1 owns all of the issued outstanding common_stock of f-sub2 a country w corporation f-sub2 owns g of the single class of outstanding_stock of f-sub3 a country w corporation sub8 owns all of the outstanding_stock of f-sub4 a country w corporation sub9 owns all of the outstanding_stock of f-sub5 a country w corporation and all of the membership interest of llc4 a smllc disregarded for federal tax purposes the legal entities engaged in business x business include sub1 and certain of its directly and indirectly wholly owned subsidiaries including llc1 llc2 llc3 f-sub1 and f-sub2 plr-136494-08 the legal entities engaged in business y business include sub9 sub10 sub11 sub12 sub13 llc4 f-sub and f-sub5 the legal entities engaged in business z business include sub1 sub2 sub3 sub4 sub5 sub6 sub7 sub8 llc2 llc3 f-sub2 and f-sub4 financial information has been submitted indicating that the business x business as conducted by sub1 the business y business as conducted by sub10 sub11 and sub12 and the business z business as conducted by sub1 llc1 llc2 and llc3 each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years distributing affiliated group’s management has determined that the consolidation and overall separation of the business y and business z businesses from the business x business will serve a number of corporate business purposes proposed transaction the following transactions collectively the proposed transaction is intended to facilitate the consolidation and overall separation of the business y and business z businesses from the business x business certain members of the distributing consolidated_group participating in the proposed transaction will satisfy all intercompany balances outstanding prior to the distribution of controlled stock sub1 will form a wholly owned state v corporation business y newco sub1 will contribute all of the stock of various entities that are engaged in the business y business sub10 sub11 and sub12 to business y newco in actual or constructive exchange for additional shares of business y newco stock sub1 will distribute all of the stock of business y newco to its sole shareholder distributing collectively the business y newco distribution sub1 through llc2 a disregarded_entity will form a new wholly owned state v corporation business z newco sub1 will transfer the business z business_assets that it owns directly and the business z assets from llc2 and llc3 that it owns indirectly as well as certain operating liabilities associated with the business z business_assets to business z newco in actual or constructive exchange for additional shares of business z newco stock sub1 will distribute all of the stock of business z newco to its sole shareholder distributing collectively the business z newco distribution distributing will contribute the stock of the various entities conducting the business y and business z businesses including business y newco business plr-136494-08 z newco sub2 sub3 sub4 sub5 sub6 sub7 sub8 and sub9 to controlled in actual or constructive exchange for additional shares of controlled stock the controlled contribution and controlled will assume approximately dollar_figureh of distributing debt allocable to the business y and business z businesses the debt assumption controlled will contribute the stock of business y newco to sub9 and the stock of business z newco sub2 sub3 sub4 sub5 sub6 and sub7 to sub8 in actual or constructive exchange for additional shares of sub9 and sub8 stock respectively the realignment contributions f-sub5 will acquire the g interest of f-sub3 from f-sub2 this transaction will be a taxable purchase of the f-sub3 interests the first taxable purchase f-sub4 will acquire certain business z business_assets held by f-sub2 this acquisition will be a taxable purchase of the business z business_assets the second taxable purchase distributing will distribute all of the stock of controlled to certain of its shareholders in exchange for some or all of their shares of distributing stock the controlled distribution representations the following representations as required by revproc_96_30 as modified by rev_proc are made with respect to the following business y newco distribution a the indebtedness if any owed by business y newco to sub1 immediately after the business y newco distribution will not constitute stock_or_securities b no part of the consideration to be distributed by sub1 to distributing will be received by distributing as a creditor employee or in any capacity other than that of a shareholder of sub1 c neither business y newco nor any entity conducting the business y business which will be contributed to business y newco was acquired during the five year period ending on the date of the business y newco distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part d in applying sec_355 regarding the active_conduct_of_a_trade_or_business sub1 and business y newco will treat all members of their respective plr-136494-08 separate affiliated groups the sub1 sag and business y newco sag respectively as defined in sec_355 as one corporation e each of sub10 sub11 and sub12 immediately after the business y newco distribution will be affiliated with business y newco in a manner that satisfies sec_1504 without regard to sec_1504 f the five years of financial information submitted on behalf of the business x business directly conducted by sub1 is representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted g the five years of financial information submitted on behalf of the business y business conducted by sub12 is representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted h following the business y newco distribution sub1 and sub12 will each continue independently and with its separate employees the active_conduct of its business conducted by sub1 and sub12 respectively prior to the proposed transaction i j the business y newco distribution will be carried out to facilitate the controlled distribution the business y newco distribution is motivated in whole or in substantial part by this business_purpose the business y newco distribution is not used principally as a device for the distribution of the earnings_and_profits of sub1 or business y newco or both k for purposes of sec_355 immediately after the business y newco distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of sub1 stock entitled to vote or or more of the total value of shares of all classes of sub1 stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the business y newco distribution l for purposes of sec_355 immediately after the business y newco distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of business y newco stock entitled to vote or or more of the total value of shares of all classes of business y newco stock that was either i acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the business plr-136494-08 y newco distribution or ii attributable to distributions on sub1 stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the business y newco distribution m the business y newco distribution is not part of a plan or series of related transactions within the meaning of reg sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a or greater interest within the meaning of sec_355 in sub1 or business y newco including any predecessor or successor of any such corporation n the total fair_market_value of the assets transferred to business y newco by sub1 will equal or exceed the aggregate adjusted_basis of the transferred assets o the total fair_market_value of the assets transferred to business y newco by sub1 will exceed the sum of the total liabilities assumed if any within the meaning of sec_357 by business y newco p the total adjusted_basis of the assets transferred to business y newco by sub1 will exceed the total liabilities assumed if any within the meaning of sec_357 by business y newco q the liabilities if any assumed within the meaning of sec_357 by business y newco and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred r sub1 neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the proposed transaction s except for indebtedness that may be created in the ordinary course of business or in connection with the ancillary agreements no indebtedness will exist between sub1 and business y newco at the time of or subsequent to the business y newco distribution t immediately before the business y newco distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see reg sec_1_1502-13 and sec_1 in effect before the publication of t d 1995_2_cb_147 and as currently in effect reg sec_1_1502-13 as published by t d further any excess_loss_account of a member in the stock of another member that is required to be taken into account by reg sec_1_1502-19 will be included in income as appropriate plr-136494-08 u payments made in connection with all continuing transactions if any between sub1 and business y newco will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length w v neither sub1 nor business y newco is an investment_company as defined in sec_368 and iv immediately after the business y newco distribution taking into account sec_355 either i neither sub1 nor business y newco will be a disqualified_investment_corporation within the meaning of sec_355 or ii no person will hold a or more interest within the meaning of sec_355 in the stock of sub1 or business y newco that such person did not hold immediately before the business y newco distribution x sub1 and business y newco will each pay their own expenses if any incurred in connection with the proposed transaction business z newco distribution y the indebtedness if any owed by business z newco to sub1 immediately after the business z newco distribution will not constitute stock_or_securities z no part of the consideration to be distributed by sub1 to distributing will be received by distributing as a creditor employee or in any capacity other than that of a shareholder of sub1 aa neither business z newco nor the business z business_assets which will be transferred to business z newco were acquired during the five year period ending on the date of the business z newco distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part other than in the ordinary course of conducting business z bb in applying sec_355 regarding the active_conduct_of_a_trade_or_business sub1 and business z newco will treat all members of their respective separate affiliated groups the sub1 sag and business z newco sag respectively as defined in sec_355 as one corporation cc the five years of financial information submitted on behalf of the business x business directly conducted by sub1 is representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted dd the five years of financial information submitted on behalf of the business z business that will be transferred to business z newco is representative of its present operations and with regard to such operations there have been no plr-136494-08 substantial operational changes since the date of the last financial statements submitted ee following the business z newco distribution sub1 and business z newco will each continue independently and with its separate employees the active_conduct of its business conducted prior to the proposed transaction ff the business z newco distribution will be carried out to facilitate the controlled distribution the business z newco distribution is motivated in whole or in substantial part by this business_purpose gg the business z newco distribution is not used principally as a device for the distribution of the earnings_and_profits of sub1 or business z newco or both hh for purposes of sec_355 immediately after the business z newco distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of sub1 stock entitled to vote or or more of the total value of shares of all classes of sub1 stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the business z newco distribution ii for purposes of sec_355 immediately after the business z newco distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of business z newco stock entitled to vote or or more of the total value of shares of all classes of business z newco stock that was either i acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the business z newco distribution or ii attributable to distributions on sub1 stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the business z newco distribution jj the business z newco distribution is not part of a plan or series of related transactions within the meaning of reg sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a or greater interest within the meaning of sec_355 in sub1 or business z newco including any predecessor or successor of any such corporation kk the total fair_market_value of the assets transferred to business z newco by sub1 will equal or exceed the aggregate adjusted_basis of the transferred assets plr-136494-08 ll the total fair_market_value of the assets transferred to business z newco by sub1 will exceed the sum of the total liabilities assumed within the meaning of sec_357 by business z newco mm the total adjusted_basis of the assets transferred to business z newco by sub1 will exceed the total liabilities assumed within the meaning of sec_357 by business z newco nn the liabilities assumed within the meaning of sec_357 by business z newco and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred oo sub1 neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the proposed transaction pp except for indebtedness that may be created in the ordinary course of business or in connection with the ancillary agreements no indebtedness will exist between sub1 and business z newco at the time of or subsequent to the business z newco distribution qq immediately before the business z newco distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see reg sec_1_1502-13 and sec_1 in effect before the publication of t d 1995_2_cb_147 and as currently in effect reg sec_1_1502-13 as published by t d further any excess_loss_account of a member in the stock of another member that is required to be taken into account by reg sec_1_1502-19 will be included in income as appropriate rr payments made in connection with all continuing transactions if any between sub1 and business z newco will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length ss neither sub1 nor business z newco is an investment_company as defined in sec_368 and iv tt immediately after the business z newco distribution taking into account sec_355 either i neither sub1 nor business z newco will be a disqualified_investment_corporation within the meaning of sec_355 or ii no person will hold a or more interest within the meaning of sec_355 in the stock of sub1 or business z newco that such person did not hold immediately before the business z newco distribution plr-136494-08 uu sub1 and business z newco will each pay their own expenses if any incurred in connection with the proposed transaction controlled contribution and controlled distribution vv the indebtedness if any owed by controlled to distributing immediately after the controlled distribution will not constitute stock_or_securities ww the fair_market_value of the controlled stock to be received by certain distributing shareholders in the controlled distribution will approximately equal the fair_market_value of the distributing stock to be surrendered by such distributing shareholders in the exchange xx no part of the consideration to be distributed by distributing to certain distributing shareholders will be received by such distributing shareholders as a creditor employee or in any capacity other than that of a shareholder of distributing yy neither sub12 business z newco nor any of the business z business_assets transferred to business z newco were acquired during the five year period ending on the date of the controlled distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part other than in the ordinary course of conducting business z zz in applying sec_355 regarding the active_conduct_of_a_trade_or_business distributing and controlled will treat all members of their respective separate affiliated groups the distributing sag and controlled sag respectively as defined in sec_355 as one corporation aaa sub1 is and immediately after the controlled distribution will be affiliated with distributing in a manner that satisfies sec_1504 without regard to sec_1504 bbb each of sub12 and business z newco will be immediately after the controlled distribution affiliated with controlled in a manner that satisfies sec_1504 without regard to sec_1504 ccc the five years of financial information submitted on behalf of the business x business conducted by sub1 is representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted ddd the five years of financial information submitted on behalf of sub12 and business z newco is representative each of their present operations and with plr-136494-08 regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted eee following the controlled distribution sub1 member of the distributing sag and members of the controlled sag will each continue independently and with its separate employees the active_conduct of its business x business conducted by sub1 or the business y and business z businesses conducted by members of the controlled sag prior to the proposed transaction fff the controlled distribution will be carried out for the following corporate business purposes i allow the distributing affiliated group’s management to focus on their respective business lines ii allow distributing to maintain its credit rating and iii provide direct access to capital for the business y and business z businesses the controlled distribution is motivated in whole or in substantial part by one or more of these business purposes ggg the controlled distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both hhh for purposes of sec_355 immediately after the controlled distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of distributing stock entitled to vote or or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the controlled distribution iii for purposes of sec_355 immediately after the controlled distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of controlled stock entitled to vote or or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the controlled distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the controlled distribution jjj the controlled distribution is not part of a plan or series of related transactions within the meaning of reg sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a or greater interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation plr-136494-08 kkk the total fair_market_value of the assets transferred to controlled by distributing will equal or exceed the aggregate adjusted_basis of the transferred assets lll the total fair_market_value of the assets transferred to controlled by distributing will exceed the sum of the total liabilities assumed within the meaning of sec_357 by controlled mmm the total adjusted_basis of the assets transferred to controlled by distributing will exceed the total liabilities assumed within the meaning of sec_357 by controlled nnn the liabilities assumed within the meaning of sec_357 by controlled and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred ooo distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the proposed transaction ppp except for indebtedness that may be created in the ordinary course of business or in connection with the ancillary agreements no indebtedness will exist between distributing and controlled at the time of or subsequent to the controlled distribution qqq immediately before the controlled distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see reg sec_1_1502-13 and sec_1 in effect before the publication of t d 1995_2_cb_147 and as currently in effect reg sec_1_1502-13 as published by t d further any excess_loss_account of a member in the stock of another member that is required to be taken into account by reg sec_1_1502-19 will be included in income as appropriate rrr payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length sss neither distributing nor controlled is an investment_company as defined in sec_368 and iv ttt immediately after the controlled distribution taking into account sec_355 either i neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 or ii no person will hold a or more interest within the meaning of sec_355 in the stock of distributing or controlled that such person did not hold immediately before the controlled distribution plr-136494-08 uuu distributing and controlled will each pay their own expenses if any incurred in connection with the proposed transaction vvv the classes of distributing stock that track certain operations each is stock of distributing for federal_income_tax purposes rulings based solely on the information submitted and the representations set forth above we rule as follows with respect to business y newco distribution the contribution of the stock of sub10 sub11 and sub12 collectively the business y corporations by sub1 to business y newco followed by the distribution of business y newco stock to distributing will be a reorganization within the meaning of sec_368 sub1 and business y newco will each be a_party_to_a_reorganization within the meaning of sec_368 sub1 will recognize no gain_or_loss on the contribution of the business y corporations solely in exchange for shares of business y newco a business y newco will recognize no gain_or_loss on the contribution of the business y corporations sec_1032 business y newco’s basis in the stock of the business y corporations received from sub1 will equal the basis of such stock in the hands of sub1 immediately before their contribution to business y newco sec_362 business y newco’s holding_period in the stock of the business y corporations received from sub1 will include the period during which sub1 held such stock sec_1223 sub1 will recognize no gain_or_loss on the business y newco distribution sec_361 distributing will recognize no gain_or_loss and will include no amount of income on the receipt of the business y newco stock in the business y newco distribution sec_355 distributing’s holding_period of the stock of business y newco received in the business y newco distribution will include the holding_period of the stock of sub1 on which the business y newco distribution is made provided that the plr-136494-08 sub1 stock is held as a capital_asset on the date of the business y newco distribution sec_1223 business z newco distribution the transfer of the business z business_assets to business z newco followed by the distribution of the business z newco stock to distributing will be a reorganization within the meaning of sec_368 sub1 and business z newco will each be a_party_to_a_reorganization within the meaning of sec_368 sub1 will recognize no gain_or_loss on the transfer of the business z business_assets to business z newco in exchange for shares of -------------- newco and the assumption by business z newco of certain operating liabilities associated with the business z business_assets transferred sec_357 and sec_361 business z newco will recognize no gain_or_loss on the transfer of the business z business_assets sec_1032 business z newco’s basis in the assets received from sub1 will equal the basis of such assets in the hands of sub1 immediately before their transfer to business z newco sec_362 business z newco’s holding_period in the assets received from sub1 will include the period during which sub1 held such assets sec_1223 sub1 will recognize no gain_or_loss on the business z newco distribution sec_361 distributing will recognize no gain_or_loss and will include no amount of income on the receipt of the business z newco stock in the business z newco distribution sec_355 distributing’s holding_period of the stock of business z newco received in the business z newco distribution will include the holding_period of the stock of sub1 on which the business z newco distribution is made provided that the sub1 stock is held as a capital_asset on the date of the business z newco distribution sec_1223 business y newco distribution and business z newco distribution distributing’s basis in the stock of business y newco and business z newco received in the business y newco distribution and business z newco distribution respectively will equal the basis of the sub1 stock held by plr-136494-08 distributing immediately before the business y newco distribution and business z newco distribution allocated between the sub1 stock the business y newco stock and the business z newco stock in proportion to the fair_market_value of each in accordance with sec_358 sec_358 and sec_358 and sec_1_358-2 sub1 business y newco and business z newco will allocate their earnings_and_profits in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 controlled contribution and controlled distribution the controlled contribution followed by the controlled distribution will be a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 distributing will recognize no gain_or_loss on the controlled contribution and the debt assumption sec_357 and sec_361 controlled will recognize no gain_or_loss on the controlled contribution sec_1032 controlled’s basis in the assets received from distributing in the controlled contribution will equal the basis of such assets in the hands of distributing immediately before their contribution to controlled sec_362 controlled’s holding_period in the assets received from distributing in the controlled contribution will include the period during which distributing held such assets sec_1223 distributing will recognize no gain_or_loss on the controlled distribution sec_361 the distributing shareholders will recognize no gain_or_loss and will include no amount of income on the exchange of a portion or all of their distributing stock in the controlled distribution sec_355 distributing shareholder’s basis in the stock of controlled received in the controlled distribution will equal the basis of the distributing stock that such shareholder surrenders in exchange therefore sec_358 distributing shareholder’s holding_period of the stock of controlled received in the controlled distribution will include the holding_period of the distributing stock that such shareholder surrenders in exchange therefore provided that the distributing plr-136494-08 shareholder held such distributing stock as a capital_asset on the date of the controlled distribution sec_1223 distributing and controlled will allocate their earnings_and_profits in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 caveat except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely alfred c bishop jr branch chief branch corporate


internal_revenue_service department of the treasury number info release date index no washington dc person to contact elliot m rogers id no telephone number refer reply to cc ita - cor-100149-01 date date dear commissioner rossotti has asked me to respond to your letter dated date concerning certain issues you have with the internal_revenue_service we want to assure you that we carefully reviewed your letter and the documents you enclosed as you know revenue_officer and we have discussed this matter with him has been assigned to your case you state that you clearly do not owe any taxes for the years in question this is incorrect our review shows that the irs determined deficiencies in your federal_income_tax for penalty for you disagreed and filed a petition in the along with an addition_to_tax and an accuracy-related in the court denied your motion for summary judgement as to all issues a hearing was then held on the remaining issues in in response to your argument the court decided that neither the theory of judicial estoppel nor the period of limitations barred the assessment and collection of the deficiency in income_tax for against you on all other issues relating to backpay withholding credits business_expenses addition_to_tax and accuracy-related_penalty the court also held you then appealed reasserting all of the claims raised in the exception of the claim for deducting reimbursable business_expenses in with the stated has demonstrated no error in the tax court’s factual findings and review of that the record also shows that the legal issues were properly resolved the court discussed your arguments rejected them and affirmed the tax court’s decision thus all tax issues in your case have been resolved in favor of the government the you have been advised in writing that the irs has undertaken collection action because of your failure to pay the amount owed revenue_officer has told us that he has already met with you to discuss various collection alternatives future contacts by you with the irs on this matter should be directed to revenue_officer sincerely associate chief_counsel income_tax accounting by robert a berkovsky chief branch


department of the treasury internal_revenue_service washington d c aug é tax_exempt_and_government_entities_division uniform issue list set ep rat pr legend taxpayer a ira x amount b bank c dear this is in response to your letter dated date as supplemented by correspondence dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution from ira x totaling amount b taxpayer a asserts that her failure to complete a rollover of amount b within the 60-day period prescribed by sec_408 of the code was due to a mental condition which impaired her ability to make adequate financial and personal decisions taxpayer a’s deceased husband who passed away on date helped her establish ira x in prior to his death taxpayer a’s husband handled their financial affairs taxpayer a is disabled and unable to conduct financial transactions taxpayer a has very limited english language speaking and comprehension ability and requires help from family members for transportation legal financial and health matters on date the individual_retirement_account certificate of deposit ira x with bank c matured on date taxpayer a went to bank c and told a representative of bank c that she wished to renew the certificate of deposit but wanted to get a higher rate of return the representative explained that the renewal rates were low and suggested that she should consult with other banks for better returns ira x was closed on date and a check in amount b was issued to taxpayer a taxpayer a not knowing what to do with the check put it in a kitchen drawer until a family_member discovered the uncashed check in early date after the sixty day rollover period expired taxpayer a submitted information from her physician attesting to her mental impairment based on the facts and representations you request a ruling that the internal_revenue_service the service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount b sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if-- i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover was due to a mental condition which impaired her ability to make adequate financial and personal decisions therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount b from ira x taxpayer a is granted a period of days from the issuance of this ruling letter to contribute an amount not to exceed amount b into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution willbe considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact please address all correspondence to se t ep ra t1 sincerely yours cop ltax will carlton a watkins manager employee_plans technical group


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l number release date date cc el gl br2 gl-504993-00 uiln memorandum for associate area_counsel sb_se area newark from kathryn a zuba chief branch collection bankruptcy summonses subject reinstatement of terminated offer_in_compromise this memorandum responds to your request for advice dated date this document is not to be cited as precedent the facts relevant to your inquiry as we understand them are as follows the service accepted an offer_in_compromise from the taxpayers in the offer_in_compromise contained the standard language in which the taxpayers promised to comply with all provisions of the internal_revenue_code relating to the filing of returns and payment of taxes for five years following the acceptance of the offer see form_656 offer_in_compromise item d in march of the office of appeals became aware that the taxpayers have not paid the tax reported as due on their income_tax return without coordinating the case with the collection function the office of appeals sent to the taxpayers a 30-day termination letter the letter informed the taxpayers that by failing to pay their taxes the taxpayers defaulted on their offer_in_compromise and that unless the taxpayers cured the default by their offer_in_compromise would be terminated and the compromised liability reinstated the taxpayers did not pay their taxes by and the office of appeals sent them a letter informing them of the termination of their offer_in_compromise approximately at the same time and without knowledge that the case was referred to appeals the delinquency tda was also assigned to a revenue_officer ro on and before the ro took any_action on the tda the taxpayer husband called the ro to resolve the delinquency the taxpayer was referred to the ro by another person in the service the taxpayer informed the ro that he needed until to pay his liability subsequently the ro and the taxpayer exchanged a number of messages and had several conversations regarding the taxpayers’ ability to secure a loan to full pay the tax although the ro was aware that the service had previously accepted an offer in gl-504993-00 compromise from the taxpayers he was unaware of the pending termination letter that was issued by the office of appeals on the taxpayer contacted the ro to inform him that he has received a letter from the office of appeals stating that the taxpayers’ offer was terminated as a result the ro contacted the office of appeals the office of appeals agreed to allow the taxpayers until to cure the default of their offer the taxpayers full paid their liability on on the taxpayers’ case was referred to the office_of_the_taxpayer_advocate to determine the status of the taxpayers’ offer_in_compromise law analysis a compromise_agreement is generally recognized as a contract see 372_f2d_352 3d cir 303_f2d_1 5th cir as such compromise agreements are subject_to judicial interpretation using generally accepted contract principles upon breach of a contract the non-breaching party may cease performance and sue for damages or seek other remedies allowed by law see 973_f2d_1548 fed cir in the offer_in_compromise context the offer agreement provides the service’s rights and remedies in case of a default by the taxpayer form_656 offer_in_compromise provides that upon breach by the taxpayer the service may without notice to the taxpayer take action to collect either the unpaid compromise amount or the full amount of the underlying liability see form_656 item o although no notice is required before the service takes action on a defaulted offer the service generally provides the taxpayer with a notice and an opportunity to cure the default before the offer is terminated see generally irm the collection function has the responsibility of making termination recommendations on defaulted offers in compromise irm generally a defaulted offer is assigned to a revenue office either as a tda or a tdi with an oic designation irm the ro has broad authority to attempt to secure compliance from the taxpayer for example the ro can give the taxpayer up to 6_month to pay a delinquent liability after the delinquency investigation is completed the ro makes a recommendation regarding the offer_in_compromise if the offer is to be terminated the ro must prepare a termination letter for the signature of an authorized service’s official irm in a case of an offer originally accepted by the office of appeals the ro’s recommendation along with the case file is transferred to appeals for review and the see 372_f2d_352 3d cir stating that government is not required to issue warning shot before taking action on defaulted compromise agreements gl-504993-00 issuance of the termination letter irm irm once an offer_in_compromise is terminated however it may not be reinstated litigating hazards other considerations in the instant case the office of appeals sent the termination letter to the taxpayers informing them that their offer was terminated on or about as always we hope this advice is helpful if you have any questions or concerns please contact the attorney assigned to this matter pincite-3620 reinstatement essentially forms a new agreement between the taxpayer and the service as such it must be executed in accordance with the accepted principles of contract law and comply with sec_7122 and the underlying treasury regulations


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b1-plr-121680-03 date august legend x y state d1 dear this letter responds to the letter dated date and related correspondence written on behalf of x requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election to treat its wholly owned subsidiary y as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code facts according to the information submitted x and y were incorporated under the laws of state on d1 y transferred all of its stock to x in an effort to restructure the business x intended to file an election to treat y as a qsub as of d1 but x inadvertently failed to timely file the election effective d1 law and analysis sec_1361 defines a qsub as a domestic_corporation that is not an ineligible_corporation if percent of the stock of the corporation is owned by an s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations provides that the election will be effective on the date specified on the election form or on the date the qsub election is plr-121680-03 filed if no date is specified the effective date specified on the election cannot be more than two months and days prior to the date of filing and cannot be more than months after the date of filing sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election sec_301_9100-1 defines a regulatory election to mean an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 accordingly x is granted an extension of time of sixty days from the date of this letter to elect to treat y as a qsub effective as of d1 the election should be made by filing form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center a copy of this letter should be attached to the election except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code specifically no opinion is expressed concerning whether x is a valid s_corporation or whether y is a valid qsub this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to x sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service index nos number release date plr-112236-98 date x plan dear this is in response to your letter of date and subsequent correspondence requesting a ruling on behalf of x regarding the tax consequences of the plan the plan was effective the plan_year of the plan is the calendar_year the plan covers certain self-employed key agents who provide services to x who have earnings_of at least for two of the preceding plan years the participants elect before the beginning of a plan_year to have a certain percentage of their commissions credited to a bookkeeping account under the plan in addition x also credits to this account a matching amount based upon the amount of a participant’s deferrals benefits under the plan are payable upon a participant’s retirement disability or death upon retirement benefits may be paid in a lump sum or ten annual installments as elected by the participant at the time of deferral upon death or disability benefits are paid within thirty days following receipt of proof of the death or disability of the participant the plan also permits payments to a participant before the normal payment_date if the participant suffers an unforeseeable_emergency the plan constitutes a mere promise of x to make benefit payments in the future and participants are general unsecured creditors of x with respect to benefits payable pursuant to the plan under the plan a participant’s‘ rights to benefit payments are not subject in any manner to anticipation alienation sale transfer assignment pledge encumbrance attachment or garnishment by creditors of the participant or the participant’s beneficiary sec_83 of the code provides that the excess if any of the fair_market_value of property transferred in_connection_with_the_performance_of_services over the amount_paid if any for the property is includible in the gross_income of the person who performed the services for the first taxable_year in which the property becomes transferable or is not subject_to a substantial_risk_of_forfeiture sec_1_83-3 provides that for purposes of sec_83 the term property includes real and personal_property other than money or an unfunded and unsecured promise to pay money or property in the future property also includes a beneficial_interest in assets including money transferred or set_aside from claims of the transferor’s creditors for example in a_trust or escrow account sec_451 of the code and sec_1_451-1 provide that an item_of_gross_income is includible in gross_income for the taxable_year in which actually or constructively received by a taxpayer using the cash_receipts_and_disbursements_method of accounting under sec_1_451-2 income is constructively received in the taxable_year during which it is credited to the taxpayer’s account set apart for him or otherwise made available so that the taxpayer may draw on it at any time however income is not constructively received if the taxpayer’s control of its receipt is subject_to substantial limitations or restrictions various revenue rulings have considered the tax consequences of nonqualified_deferred_compensation arrangements revrul_60_31 situations 1960_1_cb_174 holds that a mere promise to pay not represented by notes or secured in any way does not constitute receipt of income within the meaning of the cash_receipts_and_disbursements_method of accounting see also revrul_69_650 1969_2_cb_106 and revrul_69_649 1969_2_cb_106 under the economic_benefit_doctrine an employee has currently includible income from an economic or financial benefit received as compensation though not in cash form economic benefit applies when assets are unconditionally and irrevocably paid into a fund or trust to be used for the employee’s sole benefit 16_tc_244 aff’d per curiam 194_f2d_541 6th cir revrul_60_31 situation in revrul_68_99 1968_1_cb_193 an employee does not receive income as a result of the employer’s purchase of an insurance_contract to provide a source of funds for deferred_compensation because the insurance_contract is the employer’s asset see also revrul_72_25 1972_1_cb_127 sec_1402 of the code defines net_earnings_from_self-employment as gross_income derived from any trade_or_business less allowable deductions sec_1_1402_a_-1 of the regulations indicates that gross_income derived from a trade_or_business includes gross_income received in the case of an individual reporting income on the cash_receipts_and_disbursements_method in the taxable_year from a trade_or_business even though such income may be attributable in whole or in part to services rendered in a prior taxable_year based upon your submissions and the authorities as stated above we conclude as follows neither the creation of the plan nor the crediting of contributions or earnings under the plan will constitute the transfer of property to participants for purposes of sec_83 of the internal_revenue_code or sec_1_83-3 of the regulations a participant will not be required to include in gross_income amounts credited to his accounts under the plan nor any interest credited nor appreciation in the value of such account until such amounts are actually paid or made available to such participant or such participant’s beneficiaries in accordance with the terms of the plan x will be entitled to deduct the amounts paid or made available pursuant to the plan under sec_404 of the code in the taxable_year in which such amounts are includible in the gross_income of the recipient provided such amounts otherwise meet the requirements for deductibility under sec_162 all amounts distributed under the plan will be earnings for purposes of the tax on self-employment_income in the year such amounts are actually paid or otherwise made available this ruling is directed only to the taxpayer who requested it and applies only to the plan submitted on date as revised in a submission dated date sec_6110 of the code provides that it may not be used or cited as precedent except as specifically ruled upon above no opinion is expressed as to the federal tax consequences of the transaction described above under any other provision of the code moreover if the plan is substantially amended this ruling may not remain in effect sincerely chief_counsel robert d patchell assistant chief branch one office of the associate employee_benefits and exempt_organizations enclosure copy of letter copy for sec_6110 purposes


dl pas int ih treasury noat-ia ee ae sc dallas tx date date person to contact xx date badge number contact telephone number contact address employer_identification_number pax enempe and gon ernvient entieles dinision release number release date legend org organization name address address org address certified mail dear this is a final notice of adverse determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective january 20xx the following reason s you are not organized and operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you are not and have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 contributions to your organization are no longer deductible effective january 20xx since your exempt status has been revoked you are required to file form_1120 u s_corporation income_tax return for all years beginning on or after january 20xx income_tax returns for subsequent years are to be filed with the appropriate service_center identified in the instructions for those returns it is further determined that your failure_to_file a written appeal constitutes a failure to exhaust your available administrative remedies however if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment to secure a petition form write to the following address please understand that filing a petition for e declaratory judament under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely nanette m downing director eo examinations enclosures publication tax_exempt_and_government_entities_division org address department of the treasury internal_revenue_service charles lindbergh blvd garden city new york date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication publication report of examination sincerely sunita lough director eo examinations letter catalog number 34809f foren 886a name of taxpayer org schedule no or exhibit of year petiod ended 20xx explanation of items department of the ‘l'reasury - internal_revenue_service ein legend org organizationname xx date issues whether the org qualifies for exemption under sec_501 of the internal_revenue_code because the organization has no operations and does not meet the operational_test as a charitable_organization under internal_revenue_code irc c facts the org ceased operation sometime in 20xx there have been no activities nor any income generated or expenditures paid_by this entity since that time the organization has no assets left to distribute they have not file either a form_990 or 990ez since the 20xx tax_year the treasurer of the organization has stated in a letter dated january 20xx that there is has been no activity since the 20xx tax_year as well as there are no assets associated with this organization law requirements for exemption under sec_50 e final-reg tax-regs sec_1_501_c_3_-1 organizational and operational tests in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational tesf itis not exempt the term exempt_purpose or purposes as used in this section means any purpose or purposes specified in sec_501 as defined and elaborated in paragraph d of this section d exempt purposes-- in general i an organization may be exempt as an organization described in sec_501 if it is organized and operated exclusively for one or more of the following purposes a religious b charitable c scientific d testing for public safety e literary educational or g prevention of cruelty to children or animals final-reg tax-regs sec_1_501_c_3_-1 operational_test -- primary activities an organization will be regarded as operated exclusively for one or more exempt purposes form 886-arev department of the treasury - internal_revenue_service page qepartment of the treasury - internal_revenue_service explanation of items form 886a name of taxpayer org ein schedule no or exhibit of year period ended 20xx only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 conclusions the government contends that the org failed to meet the operational_test under regulations sec_1_501_c_3_-1 it failed to establish that it is operated exclusively for public and charitable purposes based on the above information it was determined that the organization does not meet the operational_test under sec_501 because it conducts no charitable activities therefore revocation of its exempt status is proposed effective january 1st 20xx form 886-a crev department of the treasury - internal_revenue_service page


department of the treasury internal_revenue_service washington d c date cc intl wta-n-109937-99 uilc number release date memorandum for tina byrd national administrator ifasp and john conley appeals officer isp coordinator for commercial banking from subject cynthia j mattson assistant chief_counsel international update on brazilian foreign_tax_credit litigation -- 107_tc_301 rev’d and remanded 163_f3d_1363 d c cir this memorandum updates my date and date memorandums regarding brazilian foreign_tax_credit litigation in the service won the central bank restructured debt foreign_tax_credit disallowance issue in the tax_court litigation of the riggs case on the theory that the purported central bank withholding_tax payments were noncompulsory amounts and not a tax to brazil recently the d c circuit reversed this holding through an application of the act of state doctrine and remanded the case to the tax_court for a determination of the alternative payment and subsidy theories relied upon by the service for disallowance of the credits associated with brazilian restructured debt we do not agree with the d c circuit’s opinion and further litigation will be required to resolve the central bank restructured debt issue pending the outcome of further litigation we recommend that the service continue to pursue the central bank restructured debt issue present in other cases at the administrative level additional recommendations regarding other brazilian foreign_tax_credit issues are set forth below riggs a domestic_corporation claimed foreign tax_credits for brazilian taxes on net loan interest payments that riggs received from brazilian borrowers under the net loans the borrowers including the central bank of brazil assumed responsibility for paying the tax on riggs’ behalf although the brazilian supreme court had held that under article of the brazilian constitution tax-immune brazilian governmental entities like the central bank were not liable to pay withholding_tax on their net loan interest remittances to foreign lenders beginning in the central bank purportedly paid withholding_tax on its brazilian restructured debt this event was marked by the brazilian minister of finance’s endorsement of a ruling of the brazilian irs to the central bank regarding the central bank’s liability the ruling stated that despite the central bank’s tax-immune status the bank was required to pay withholding_tax on net loan interest payments made to foreign lenders because the loan amounts on deposit at the central bank could be re-lent to other borrowers who might not be tax immune the minister of finance in the document agreeing with the ruling directed the central bank to implement the payment of income_tax on or before the last business_day of the month after the month in which the withholding occurs the ruling and the minister’s order were not published in deciding that the foreign tax_credits should be disallowed on the theory that the purported payments were noncompulsory the tax_court rejected riggs’ argument that the act of state doctrine required deference to the brazilian ruling and the brazilian minister of finance’s order the tax_court held that riggs had failed to show that the ruling was anything more than an administrative advisory opinion which did not reflect the applicable brazilian law because it relied on a novel theory regarding potential non-exempt borrowers and because an examination of brazilian law confirmed that the central bank was immune from tax the d c circuit however held that the minister of finance’s order to pay the tax was entitled to deference under the act of state doctrine and remanded for a determination of whether the brazilian taxes were actually paid_by the central bank and whether riggs’ foreign tax_credits must be reduced by the amount of the subsidy represented by the brazilian pecuniary benefit program in addition to the central bank restructured debt issue in riggs the case also involved the disallowance of claimed foreign tax_credits attributable to riggs’ net loans to non-tax-immune borrowers in brazil the service argued that riggs’ credits should be disallowed in full on the basis that riggs had no enforceable legal liability for the brazilian withholding_tax on the interest from such loans the legal liability issue and in the alternative the credits should be disallowed in part by the application of the indirect subsidy regulations to the pecuniary benefit the subsidy issue consistent with past cases the tax_court held for riggs on the legal liability issue and for the service on the subsidy issue see 89_tc_765 norwest corp v commissioner tcmemo_1992_282 affd 69_f3d_1404 8th cir cert_denied 517_us_1203 continental illinois corp v commissioner tcmemo_1988_318 affd without published opinion sub nom 919_f2d_1492 11th cir aff’d in part and rev’d in part 998_f2d_513 7th cir cert_denied 510_us_1041 see also 36_fedclaims_30 appeal docketed fed cir date subsidy issue only given the rulings in favor of the service in the 7th and 8th circuits to hold differently in this case would be to undermine the uniform application of the tax system among the citizenry in riggs neither party appealed these two issues in pursuing the resolution of cases at the administrative level with respect to net loans to tax-immune entities such as the net loans giving rise to the central bank restructured debt issue described above we recommend that the service continue to pursue the disallowance of the full amount of foreign tax_credits claimed based on the noncompulsory and payment issues and in part based on the subsidy issue framed in the riggs litigation in addition credits should be disallowed with respect to net loan interest payments on deposit at the central bank under resolution see 107_tc_301 with respect to loans other than tax-immune debt ie loans other than net loans to governmental entities such as the central bank we recommend that the service concede the legal liability issue and require that taxpayers concede the subsidy issue this recommendation is consistent with the outcome of the litigation of these issues in every court to date to our knowledge the subsidy issue does not extend beyond date at which time brazil reduced the subsidy to zero finally any foreign tax_credits claimed with respect to brazil should be verified through receipts darfs and not borrower letters see 998_f2d_513 7th cir cert_denied 510_us_1041 norwest corp v commissioner tcmemo_1995_453 70_tcm_779 if you have any questions please call ___________________ cynthia j mattson assistant chief_counsel international


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 fip b01 plr-121335-12 date date legend legend taxpayer subsidiary lp company parent llc llc group office tower --------------------------------------- ----------------------- ------------------------------- ----------------------- --------------------------------------------------- -------------------------------------------------------- ------------------------------------ -------------------------------------------- ------------------------- ---------------------- -------------------- accounting firm --------- state a state b state c ------------ -------- ------------- plr-121335-12 country a year date date date date date date date date date a b c d ---------- ------- ----------------------- --------------------- --------------------- -------------------------- ---------------------- ----------------------- --------------------- ------------------ --------------------------- --- -- --- --- dear ------------ - this responds to a letter dated date and subsequent correspondence submitted on behalf of taxpayer and subsidiary taxpayer requests an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make an election under sec_856 of the internal_revenue_code to be treated as a real_estate_investment_trust reit for the taxable_year ending on date in addition taxpayer and subsidiary request an extension of time under sec_301_9100-1 and sec_301_9100-3 to file an election for subsidiary to be treated as a taxable_reit_subsidiary of taxpayer under sec_856 effective as of date plr-121335-12 facts taxpayer was formed as a state a corporation on date to serve as a reporting entity through which unrelated investors own and lease to unrelated tenants space in an office tower located in state b office tower subsidiary a subsidiary of taxpayer was formed on or before date to perform all impermissible tenant services necessary at office tower such as the provision of services to the fitness center located at office tower on date taxpayer and subsidiary jointly filed form_8875 taxable_reit_subsidiary election to elect to treat subsidiary as a taxable_reit_subsidiary of taxpayer to take effect on date taxpayer's first taxable_year ended on date taxpayer was required to file its initial income_tax return for it first taxable_year by date taxpayer intended to file a form_7004 application_for automatic_extension of time to file certain business income_tax information and other returns by date to extend the filing deadline of its form 1120-reit u s tax_return for real_estate_investment_trusts for the year tax_year from date to date but for the reasons set forth below inadvertently missed the form_7004 filing deadline lp owns all of taxpayer's issued and outstanding common shares lp is a state c limited_partnership that was formed to pool the interests of unrelated investors that desired to invest in office tower a consortium of unrelated institutional investors outside investors and company own a percent and b percent respectively of lp more than unrelated investors own all of taxpayer's issued and outstanding preferred shares taxpayer issued the preferred units to the unrelated investors within one year of its formation in accordance with the requirements of sec_856 and sec_856 taxpayer and company own c percent and d percent respectively of llc a state c limited_liability_company which owns all of the interest in llc company the general_partner of lp is an indirect subsidiary of parent the top- tier publicly-traded parent_corporation of group group's tax department was responsible for the u s tax reporting for the entities in the office tower holding structure including taxpayer group's tax department which has personnel in country a and the u s is comprised of seven group employees holding country a chartered accountant u s attorney and u s plr-121335-12 certified_public_accountant designations with extensive u s tax experience these employees are responsible for a variety of tax matters including a substantial volume of u s tax compliance a confluence of factors however led to the group's tax department's inadvertent failure_to_file taxpayer's form_7004 by date to extend taxpayer's year form 1120-reit filing deadline to date group and the outside investors originally agreed to file taxpayer's year form 1120-reit by date prior to date however group's tax department determined that taxpayer would not have any taxable_income in year the parties agreed to forego the date internal deadline and to file taxpayer's year form 1120-reit by date as part of the tax department's normal course of operations group however inadvertently failed to add taxpayer to the list of entities for which the group's tax department was required to file form_7004 year was the first year for which taxpayer was required to file an income_tax return therefore taxpayer did not appear on the prior year's list of entities for which the group's tax department was required to file form_7004 it did not occur to group's tax department until after date that a form_7004 had to be filed for taxpayer there were a number of personnel changes during the period from date to date within group's tax department a one employee unexpectedly resigned b another employee went on disability leave and b a third employee went on maternity leave the employee on maternity leave also was involved in the acquisition of office tower the other group tax department personnel were not directly involved in that acquisition and therefore were not familiar with the new structure with almost half of the group tax department personnel temporarily absent those remaining had to deal with a more significant work load and inadvertently missed the filing of the extension for taxpayer the vice president of taxation of parent the head of group's tax department discovered the missed filing of form_7004 for taxpayer on date and promptly informed representative of accounting firm accounting firm advised parent that a request for relief should be filed with the internal_revenue_service the vice president of taxation of parent immediately authorized this submission the group tax department is in the process of preparing all of the required_year u s tax returns including the form 1120-reit return for taxpayer and will file all of them by date taxpayer represents it was always taxpayer's intention to be treated as a reit and it has been conducting reit testing since the first quarter of year and has met all the reit requirements for the taxable_year ended date including taking care to have plr-121335-12 at least interest holders before the end of the second taxation year in satisfaction of the sec_856 requirement furthermore with respect to the election under sec_856 of the code taxpayer makes the following additional representations the request for relief was filed by taxpayer before the failure to make the regulatory election was discovered by the service granting the relief will not result in taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than taxpayer would have had if the election had been timely made taking into account the time_value_of_money taxpayer did not seek to alter a return position for which an accuracy- related penalty has been or could have been imposed under sec_6662 of the code at the time taxpayer requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences taxpayer did not choose to not file the election moreover with respect to the election under sec_856 of the code taxpayer and subsidiary make the following additional representations the request for relief was filed by taxpayer and subsidiary before the failure to make the regulatory election was discovered by the service granting the relief will not result in taxpayer or subsidiary having a lower tax_liability in the aggregate for all years to which the regulatory election applies than that they would have had if the election had been timely made taking into account the time_value_of_money taxpayer and subsidiary did not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of the code at the time they requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences taxpayer and subsidiary did not choose to not file the election plr-121335-12 in addition affidavits on behalf of taxpayer and subsidiary were provided with the submission as required by sec_301_9100-3 of the regulations law and analysis sec_856 of the code provides that a corporation trust or association shall not be considered a reit for any taxable_year unless it files with its return for the taxable_year an election to be a reit or has made such election for a previous taxable_year and such election has not been terminated or revoked pursuant to sec_1 b the election shall be made by computing taxable_income as a reit in its return for the first taxable_year for which it desires the election to apply sec_856 of the code provides that a reit and a corporation other than a reit may jointly elect to treat such corporation as a taxable_reit_subsidiary to be eligible for treatment as a taxable_reit_subsidiary sec_856 provides that the reit must directly or indirectly own stock in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition the election and the revocation may be made without the consent of the secretary in announcement 2001_1_cb_716 the internal_revenue_service service announced the availability of form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for tax years beginning after for eligible entities to elect treatment as a taxable_reit_subsidiary the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the tax_year the instructions further provide that the effective date of the election cannot be more than months and days prior to the date of filing the elections or more than months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service officers of both the reit and the taxable_reit_subsidiary must jointly sign the form which is filed with the irs service_center in ogden utah sec_301_9100-1 of the income_tax regulations provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 through c i sets forth rules that the internal_revenue_service generally will use to determine whether under the particular facts and plr-121335-12 circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money conclusion based on the information submitted and representations made we conclude that taxpayer has satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to be treated as a reit for its taxable_year ending date accordingly taxpayer is granted a reasonable extension of time of days to make an election under sec_856 to be treated as a reit for its taxable_year ending date moreover we conclude that taxpayer and subsidiary have shown good cause for granting a reasonable extension of time to elect to have subsidiary treated as a taxable_reit_subsidiary under sec_856 of the code we further conclude that date which is the date on which taxpayer and subsidiary intended the election to be effective is the effective date of the election this ruling is limited to the timeliness of the filing of taxpayer's election under sec_856 of the code and taxpayer's and subsidiary's election under sec_856 of the code this ruling’s application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether taxpayer otherwise qualifies as a reit or whether subsidiary otherwise qualifies as a taxable_reit_subsidiary of taxpayer under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of taxpayer or subsidiary is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect plr-121335-12 except as specifically provided otherwise no opinion is expressed on the federal_income_tax consequences of the transaction described above this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the terms of a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely diana imholtz diana imholtz chief branch associate chief_counsel financial institutions products enclosures copy of this letter copy for sec_6110 purposes