internal_revenue_service number release date index number ---------------------- ----------------------------- ---------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc ita b01 plr-161356-05 date date legend legend joint account -------------------------------------- year ------- year ------- year ------- dollar_figurea -------------------------------- dollar_figureb ------------ dollar_figurec ----------- dollar_figured ----------- dollar_figuree ----------- dear mr ---------- this letter responds to your correspondence dated -------------------------- requesting a ruling that an amount you received pursuant to a release and settlement agreement settlement agreement is taxable as long-term_capital_gain in the year of its receipt in -------------- your request was forwarded to our office for response background you and your spouse established three accounts with a stockbroker and the firms at which the stockbroker worked while he managed your accounts hereinafter collectively referred to as stockbroker two of the three accounts were individual retirement plr-161356-05 accounts iras one for you and one for your spouse the two iras and the amounts allocable to them under the agreement are not part of this ruling_request and this ruling does not apply to them the remaining account was a taxable investment account held in your joint names hereinafter joint account in year you sustained a loss of dollar_figurea with respect to the termination of the joint account that you treated as a long-term_capital_loss on your year federal_income_tax return this loss combined with the carryover of prior capital losses with respect to the same account less the amounts you deducted in years prior to year was a total capital_loss_carryover of dollar_figureb to year you believed your stockbroker caused the losses by mishandling your account and you contacted the stockbroker numerous times trying to recoup your losses to put an end to this dispute you signed the settlement agreement under which the stockbroker paid you dollar_figurec in year the dollar_figurec was allocated proportionally among the three accounts based upon their fair market values at closing the agreement earmarked dollar_figured for the iras effectuated by journal entries the remaining dollar_figuree due under the settlement agreement was paid to you in cash in year although the agreement itself did not earmark this amount you believe it is a partial recovery_of the long-term_capital_losses that were claimed with respect to the joint account on your prior returns law and analysis whether the recovery is includable in gross_income sec_61 of the code provides that except as otherwise provided gross_income means all income from whatever source derived thus gross_income includes all receipts except those not subject_to tax sec_111 of the code provides that gross_income does not include income attributable to the recovery during the taxable_year of any amount deducted in a prior taxable_year to the extent that amount did not reduce the amount of tax imposed in the prior year sec_111 known as the tax_benefit_rule may apply to exclude part or all of a recovery from gross_income although the rule is couched in terms of the amount that is excludable from income by implication the rule affirms that the amount not excluded is included in gross_income the rule comes into play when a taxpayer recovers in a subsequent year all or part of an amount the taxpayer deducted in an earlier year the amount of the recovery excluded in the subsequent year is that amount that did not plr-161356-05 reduce tax in a prior year the rule strives to achieve the same tax effect over two different years as that obtained if both transactions had occurred in the same taxable_year sec_111 of the code provides that an increase in a carryover which has not expired before the beginning of the taxable_year in which the recovery or adjustment takes place shall be treated as reducing the tax imposed this provision deems a taxpayer to have received a tax_benefit with respect to a carryover that can still be used you deducted part of your capital losses attributable to your joint account in year and prior years and carried over the unused portion of these losses at the beginning of year the unused portion of the losses from the joint account was dollar_figureb in the same year you received dollar_figuree under the settlement agreement allocable to the joint account which amount we agree was a recovery_of dollar_figuree of your previous capital losses however since your capital_loss carryovers were increased by the dollar_figuree and the carryovers had not expired in year the dollar_figuree is considered as having produced a reduction in your tax because of this tax_benefit under sec_111 of the code the dollar_figuree recovery is not excludable from your gross_income in year as discussed next however this amount is capital_gain that may be used to absorb your loss carryover whether the taxable recovery is ordinary_income or capital_gain sec_1211 of the code provides that for taxpayers other than corporations capital losses for a year are allowed only to the extent of that year's capital_gains plus dollar_figure dollar_figure if married_filing_separately excess losses are carried over to later years under sec_1212 in general the character of settlement proceeds is determined under the principles developed by the supreme court in the case of 344_us_6 which held that a taxpayer who was required to pay a liability attributable to capital_gain realized on the liquidation of stock in a prior year must treat the payment as a capital_loss the supreme court held that two transactions one occurring subsequent to the other and each integrally related should be treated as parts of the same transaction so that the subsequent event should relate back and be given the same character as the prior transaction this relation-back doctrine is premised on the idea that the tax consequences should be roughly the same as if the prior and the subsequent transactions had occurred at the same time revrul_79_278 1979_2_cb_302 concerns the character of a payment received in settlement of a lawsuit with respect to an earlier capital_loss in the taxpayer incurred a short-term_capital_loss on the sale of stock in corporation m in the taxpayer sued m alleging that the loss resulted from violations of securities laws by m the case was settled in and the taxpayer received a payment from m in citing arrowsmith and 65_tc_182 which applied the plr-161356-05 arrowsmith principle to an item_of_income rather than expense revrul_79_278 holds that the settlement recovery is considered a short-term_capital_gain the reasoning of arrowsmith and revrul_79_278 applies in your case under your facts the earlier transactions were the capital losses in your joint account and the subsequent transaction was the year dollar_figuree payment received under the settlement agreement the year transaction derived its context and its meaning from the backdrop of the prior transactions had the year transaction occurred in the year or years you sustained the prior losses your prior long-term_capital_losses would have been that much less accordingly the dollar_figuree payment in year is long-term_capital_gain not ordinary_income and your year capital losses including the amounts carried over from prior years are deductible against the dollar_figuree in year under sec_1211 of the code your capital_loss carryovers to years after year are reduced accordingly you have already filed your tax_return for year because this request for a private_letter_ruling was submitted before you did so however your request was timely and you may file a claim_for_refund amending your year return to be consistent with this letter_ruling you should attach a copy of this letter_ruling to your refund claim see revproc_2007_1 sec_5 2007_1_irb_1 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely thomas albert luxner branch chief branch income_tax accounting


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-161920-05 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities subject railroad_retirement_tax_act status --------------------------------------------------------- in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act on ------------------- ------------------------------------------------- ---------------------------------------------------- --------------------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that the ------------------------------------------------------------- became an employer under the railroad_retirement_tax_act on ------------------- please take the appropriate action regarding this business cc ---------------------------- ---------------------------------------- ------------------------------------ ------------------------------------------ _____________________________ janine cook


number release date internal_revenue_service index number 860d ------------------------------ --------------------- ------------------------------------------------------------ --------------------- -------------------------------------- ----------------------------------- 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 b03 plr-102720-17 date date legend trustee ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------- -------------------------------------------------------------------------------- trust group a_trust group b_trust group c state state year year year company exchange date a ----------------------------------- --------------------------- -------------------------------- -------------- -------------- ------- ------- ------- -------------------------------- ------------------------------------- ------------------------ ---- plr-102720-17 b c d month --------------- -- ---- ---------------- dear --------------------- this letter is in reply to a letter dated date in which trustee solely in its capacity as trustee or indenture trustee of real_estate mortgage investment conduits remics identified in appendix a each a taxpayer and collectively the taxpayers requests certain rulings in connection with each taxpayer’s qualification as a remic under sec_860a-860g of the internal_revenue_code specifically you have asked for the following rulings in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreements as defined below none of i the execution of the settlement agreement as defined below ii the methodology for determining and the right to receive an allocable share as defined below of the settlement payment as defined below or iii the receipt of an allocable share of the settlement payment will cause such taxpayer to fail to meet the requirements of sec_860d in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreements the receipt of an allocable share of the settlement payment will be treated as a payment received on qualified mortgages within the meaning of sec_1_860g-2 of the income_tax regulations in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreements the distribution of an allocable share amount in accordance with the applicable governing agreements and the settlement agreement will not cause any regular_interest in such taxpayer to fail to qualify as a regular_interest as defined in sec_860g or the sole class of residual_interest in such taxpayer to fail to qualify as a residual_interest as defined in sec_860g plr-102720-17 in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreements the receipt of an allocable share amount will not be treated as a prohibited_transaction within the meaning of sec_860f or as a contribution that is subject_to the tax imposed under sec_860g facts background trustee acts as trustee or indenture trustee for a residential mortgage-backed securitization rmbs trusts each rmbs trust comprises one or more taxpayers each of which has elected to be treated as a remic within the meaning of sec_860d each of the a rmbs trusts for which trustee acts as trustee is evidenced by a separate pooling and servicing agreement psa or an indenture indenture and related sale and servicing agreement ssa in addition each taxpayer may have entered into applicable psas indentures ssas mortgage loan purchase agreements and other related agreements each a governing agreement and collectively the governing agreements under the governing agreements trustee serves as trustee or indenture trustee for each of the taxpayers the laws of state govern the rights and obligations of the parties to the governing agreements including trustee the annual_accounting_period for each taxpayer is the calendar_year and each taxpayer utilizes the accrual_method of accounting for maintaining its accounting books and filing its u s federal_income_tax return company is a bank_holding_company whose shares of common_stock are traded on exchange company and its subsidiaries collectively bank constitute a banking and financial services organization taxpayers function as residential mortgage loan securitization vehicles taxpayers were established during the period of year through year for the primary purpose of raising financing in the securitization market with respect to pools of residential real_estate mortgage loans originated or acquired by bank the sponsor of the mortgage securitizations the aggregate principal balance of mortgage loans that were securitized through taxpayers was approximately dollar_figureb the securitization process for each taxpayer generally occurred as follows one or more bank entities the seller sold portfolios of residential mortgage loans the mortgage loans to another bank entity the depositor for rmbs trusts governed by psas the depositor conveyed the mortgage loans to the related trustee to be held in trust for rmbs trusts governed by an indenture and ssa the depositor conveyed the mortgage loans to a state plr-102720-17 statutory trust for the benefit of the noteholders and the owner trustee on behalf of the statutory trust assigned to the indenture trustee all of the statutory trust’s right title and interest in and to the mortgage loans several classes of rmbs trust certificates or notes representing various entitlements to the underlying mortgage pool’s cash flows then were issued and sold through an underwriter or underwriters to investors investors in certain instances all or part of a class of issued certificates or notes may have been retained by bank for a period for each rmbs trust a master servicer servicer or both including applicable subservicers servicer was charged with responsibility for among other things collecting debt service payments on the mortgage loans taking any necessary enforcement action against borrowers and remitting payments on a monthly basis for distribution to the investors in each securitization an election was made to treat the mortgage loans and certain related assets held by the applicable trust as one or more remics under the code the governing agreement for each taxpayer and securitization contains a series of representations and warranties made for the benefit of each rmbs trust in general these include representations that the mortgage loans had certain characteristics such as loan-to-value ratio property condition and mortgagor credit metrics that the mortgage loans were underwritten in all material respects in accordance with certain underwriting guidelines that the mortgage loans conform in all material respects to their descriptions in the investor disclosure documents and that the origination underwriting and collection practices of the seller and each servicer have been lawful and customary in the mortgage lending and servicing business the dispute in a letter dated date to bank a group of institutional investors institutional investors alleged that a significant number of the mortgage loans with respect to which the institutional investors held investment certificates or notes had been sold or deposited into the rmbs trusts based on false and or fraudulent representations and warranties by the mortgage originators the seller and or the depositor these assertions were based in part on the alleged excessive early default and foreclosure rates on and in respect to the mortgage loans bank and the institutional investors engaged in extensive negotiations over a period of c years in an effort to reach a settlement relating to the alleged breaches of the governing agreements the negotiations resulted in a settlement the settlement plr-102720-17 memorialized in a settlement agreement the settlement agreement between the institutional investors and bank the settlement agreement defines accepting trustee as a trustee that has accepted the settlement agreement on behalf of an rmbs trust or on behalf of one or more separate mortgage loan groups contained within an rmbs trust trustee is an accepting trustee under the settlement agreement the settlement agreement defines settlement_trust as each rmbs trust including each taxpayer for which the applicable settlement trustee accepted and signed the settlement agreement with respect to all mortgage loans held by the trust and in the case where the applicable settlement trustee accepted and signed the settlement agreement on behalf of one or more but not all of the mortgage loan groups contained within an rmbs trust each such separate mortgage loan group for which the applicable settlement trustee accepted and signed the settlement agreement under the settlement agreement any rmbs trust or specific mortgage loan group contained within an rmbs trust for which the settlement agreement was not accepted is referred to as a non-settling trust each rmbs trust and each non- settling trust is treated as a separate trust for purposes of determining payment under the settlement agreement settling trusts and non-settling trusts belong to one of three trust groups in the settlement agreement trust group a_trust group b and trust group c trustee accepted and signed the settlement agreement subject_to among other conditions final court approval on behalf of the taxpayers the settlement agreement received approval in month of year the settlement agreement the settlement agreement provides for a settlement payment to be allocated among all of the settlement trusts the settlement payment and a release of claims against bank that arise under or are based upon the governing agreements or that relate to the origination sale delivery servicing and or administration of mortgage loans to or in each taxpayer the settlement agreement contains certain releases regarding the servicing of mortgage loans within the settlement trusts the settlement payment will be allocated among the settlement trusts in accordance with an agreed allocation formula that is based on the past and expected future losses associated with the mortgage loans held in all of the rmbs trusts an independent financial advisor the expert retained by the accepting trustees will perform any calculations required in connection with the allocation formula and those plr-102720-17 allocation calculations will be treated as final and accepted by the parties absent bad faith or manifest error the settlement payment allocations are determined by reference to the amount of net losses_incurred by each settlement_trust and each non-settling trust the expert will calculate the amount of net losses for each settlement_trust and for each non-settling trust that have been incurred and are estimated to be incurred from each trust’s inception to its expected termination the expert will determine the net_loss for each settlement_trust and non-settling trust that is a member of trust group a_trust group b or trust group c individual trust loss for each settlement_trust and each non-settling trust that is a member of trust group a or trust group b the adjusted individual trust loss adjusted individual trust loss is its individual trust loss for each settlement_trust and each non-settling trust that is a member of trust group c the adjusted individual trust loss equals the applicable_individual trust loss less ---- of the net losses associated with certain solvent mortgage loan originators that sold mortgage loans to bank for inclusion in trust group c the originators that sold such mortgage loans to bank may bear ultimate primary liability for the net losses attributable to representation and warranty breaches with respect to such mortgage loans as a result bank’s liability for net losses with respect to such acquired mortgage loans is viewed for purposes of the allocation formula as a secondary liability and the adjusted individual trust loss for each settlement_trust and each non-settling trust in trust group c is reduced to reflect bank’s lesser responsibility for such losses the expert will calculate the sum total of the adjusted individual trust losses for all settlement trusts and non-settling trusts total adjusted trust losses the expert will then calculate the adjusted individual trust loss for each settlement_trust and each non-settling trust divided by the total adjusted trust losses trust allocated settlement percentage the expert will calculate the allocable share of the settlement payment for each settlement_trust and for each non-settling trust by multiplying the amount of the settlement payment by the trust allocated settlement percentage for each settlement_trust and non-settling trust allocable share within d days of the completion of the expert’s calculation of each settlement trust’s allocable share and at the direction of trustee bank will wire each settlement trust’s allocable share into the related settlement trust’s collection or distribution account for further distribution to investors in accordance with the distribution provisions of the applicable governing agreements each taxpayer represents that the distribution provisions of the settlement agreement do not alter the rights or obligations of the taxpayer or remic interests plr-102720-17 therein and that the distribution of allocable shares to investors is consistent with the distribution provisions contained in the governing agreements that provide for the distribution of subsequent recoveries or unscheduled principal amounts received the settlement agreement requires that the distribution of a settlement trust’s allocable share to its investors be consistent with the applicable provisions contained in the settlement trust’s governing agreement that provide for the distribution of subsequent recoveries or unscheduled principal amounts received as the case may be the settlement agreement provides that each settlement trust’s distribution of allocable share amounts to investors be characterized as distributions of principal in respect of remic regular_interest classes entitled to receive such distributions distributions to the investors who hold regular_interest classes entitled to receive principal will be made either in the order of seniority of such classes or on a pro-rata basis in accordance with applicable senior-subordinate principal distribution priority rules in the event a settlement trust’s distribution waterfall provisions and its current allocable share amount available for distribution would combine to result in a distribution of any amount on or in respect of any trust’s residual_interest class whether on the date of the distribution of an allocable share or on any subsequent distribution date that is not the final distribution date under the applicable governing agreement such amount shall not be paid on or distributed to such residual class instead the amount would be retained in the applicable settlement trust’s distribution account and on the next distribution date would be distributed to the applicable regular_interest investors entitled to receive a principal distribution of subsequent recoveries or unscheduled payments of principal consistent with the governing agreements the settlement agreement requires the accepting trustee for each settlement_trust to apply an aggregate notional amount equal to the amount of the settlement trust’s allocable share in the reverse order of previously allocated losses to increase and restore the balance of each applicable class of principal entitled remic regular_interest classes to which such losses have been previously allocated but in each case by not more than the amount of such losses previously allocated to that remic regular_interest class pursuant to governing agreements investors will not be entitled to payment in respect of interest on the amount of such increases for any interest_accrual_period relating to the distribution date on which such increase occurs or any prior distribution date this requirement in the settlement agreement is intended only to increase and restore the balances of the regular_interest class securities and does not affect the distribution of the settlement payment law and analysis issue and qualified mortgages permitted_investments and payments received on qualified mortgages plr-102720-17 sec_860d provides that the terms real_estate_mortgage_investment_conduit and remic mean any entity that meets several requirements including that as of the close of the third month beginning after the startup_day and at all times thereafter substantially_all of the assets of the entity consist of qualified mortgages and permitted_investments sec_860g defines qualified_mortgage to include any obligation including any participation or certificate of beneficial_ownership therein which is principally secured_by an interest_in_real_property and which i is transferred to the remic on the startup_day in exchange for regular or residual interests in the remic ii is purchased by the remic within the 3-month period beginning on the startup_day if except as provided in regulations such purchase is pursuant to a fixed-price contract in effect on the startup_day or iii represents an increase in the principal_amount under the original terms of an obligation described in clause i or ii if such increase - i is attributable to an advance made to the obligor pursuant to the original terms of a reverse_mortgage_loan or other obligation ii occurs after the startup_day and iii is purchased by the remic pursuant to a fixed price contract in effect on the startup_day sec_860g defines permitted_investments to mean any cash_flow_investment qualified_reserve_asset or foreclosure_property sec_860g defines cash_flow_investment to mean any investment of amounts received under qualified mortgages for a temporary period before distribution to holders of interests in the remic sec_1_860d-1 provides that for purposes of the asset test of sec_860d substantially_all of a qualified entity’s assets are qualified mortgages and permitted_investments if the qualified_entity owns no more than a de_minimis amount of other assets sec_1_860d-1 sets forth a safe_harbor_rule which provides that the amount of assets other than qualified mortgages and permitted_investments is de_minimis if the aggregate of the adjusted bases of those assets is less than one percent of the aggregate of the adjusted bases of all of the remic’s assets sec_1_860g-2 states that in determining what is a cash_flow_investment the term payments received on qualified mortgages includes among other_payments payments by a sponsor or prior owner in lieu of the sponsor’s or prior owner’s repurchase of a defective obligation as defined in sec_1_860g-2 that was transferred to the remic in breach of a customary warranty sec_1_860g-2 defines a defective obligation as a mortgage subject_to certain defects including that the mortgage does not conform to a customary representation or warranty given by the sponsor or prior owner of the mortgage regarding the characteristics of the mortgage or the characteristics of the pool of mortgages of which the mortgage is a part plr-102720-17 each taxpayer’s right to receive its allocable share under the settlement agreement arises from the mortgage loans the allocable share for each taxpayer is a contract claim that stems directly from the rights held by trustee on behalf of each taxpayer and its status as a remic therefore a taxpayer’s right to receive an allocable share is not an asset that is newly acquired by a remic after its startup date the execution of the settlement agreement the methodology used to determine a taxpayer’s allocable share and the receipt of the allocable share by a taxpayer arise from each taxpayer’s interest in the mortgage loans and its status as a remic and therefore will not cause any taxpayer to fail to meet the requirements under sec_860d the allocable share under the settlement agreement is the result of a dispute between the institutional investors and bank regarding whether the mortgage loans conveyed to each taxpayer violated customary representations and warranties under the respective governing agreements for purposes of the remic rules a defective obligation includes mortgages that do not conform to a customary representation or warranty given by the sponsor or prior owner of the mortgage regarding the characteristics of the mortgage or the characteristics of the pool of mortgages of which the mortgage is a part each taxpayer’s right to the allocable share under the settlement agreement is akin to a payment received by such taxpayer from a sponsor or prior owner in lieu of the sponsor or prior owner’s repurchase of such a defective obligation therefore pursuant to sec_1_860g-2 the allocable share will be considered a payment received on a qualified_mortgage pursuant to sec_1 860g- g ii issue regular and residual interests sec_860g defines a regular_interest in a remic to mean any interest in a remic which is issued on the startup_day with fixed terms and which is designated as a regular_interest if a such interest unconditionally entitles the holder to receive a specified principal_amount or other similar amount and b interest payments or other similar amount if any with respect to such interest at or before maturity i are payable based on a fixed rate or to the extent provided in regulations at a variable rate or ii consist of a specified portion of the interest payments on qualified mortgages and such portion does not vary during the period such interest is outstanding sec_860g defines a residual_interest in a remic to mean an interest in a remic which is issued on the startup_day which is not a regular_interest and which is designated as a residual_interest sec_860g defines the term startup_day to mean the day on which the remic issues all of its regular and residual interests plr-102720-17 sec_1_860g-1 provides that for purposes of sec_860g a remic designates an interest as a regular_interest by providing to the internal_revenue_service the information specified in sec_1_860d-1 in the time and manner specified in sec_1_860d-1 sec_1_860g-1 provides that a residual_interest is an interest in a remic that is issued on the startup_day and that is designated as a residual_interest by providing the information specified in sec_1_860d-1 at the time and in the manner provided in sec_1_860d-1 a residual_interest need not entitle the holder to any distributions from the remic sec_1_860g-1 provides that for purposes of sec_860g a regular_interest in a remic has fixed terms on the startup_day if on the startup_day the remic’s organizational documents irrevocably specify i the principal_amount or other similar amount of the regular_interest ii the interest rate or rates used to compute any interest payments or other similar amounts on the regular_interest and iii the latest possible maturity_date of the interest a remic regular_interest must be issued on the startup date with fixed terms a remic residual_interest is an interest in the remic issued on the startup date that is not a regular_interest taxpayers represent that the distribution provisions of the settlement agreement do not alter the rights or obligations of any of the taxpayers or the investors’ interests therein and that the distribution of allocable shares to investors is consistent with the distribution provisions contained in the governing agreements that provide for the distribution of subsequent recoveries or unscheduled principal amounts received taxpayers treat distributions that are made pursuant to these provisions as distributions of underlying mortgage loan principal collections the settlement agreement also provides that should a principal payment become payable to a class of remic residual interests on a distribution date that is not the final distribution date under the applicable governing agreement such payment will be maintained in the distribution account and trustee shall distribute the retained amount on the next distribution date to the applicable regular_interest investors entitled to receive a principal distribution of subsequent recoveries or unscheduled payments of principal accordingly the distribution of an allocable share to investors will not cause any regular_interest in a taxpayer to fail to qualify as a regular_interest or the sole class of residual_interest in the taxpayer to fail to qualify as a residual_interest issue tax on contributions after startup date and prohibited_transaction except as provided in sec_860g sec_860g imposes on any amount that is contributed to a remic after the startup_day a tax equal to percent of the amount contributed sec_860g provides that the tax on contributions after the startup date shall not apply to any contribution which is made in cash and is a a contribution to facilitate a cleanup call as defined in regulations or a qualified_liquidation b a payment in the nature of a guarantee c a contribution during the month period beginning on the startup_day d a contribution to a qualified_reserve_fund plr-102720-17 by any holder of a residual_interest in the remic or e any other contribution permitted in regulations sec_860f imposes a tax equal to percent of the net_income_derived_from_prohibited_transactions sec_860f defines prohibited_transaction to mean one of the following a disposition of any qualified_mortgage transferred to the remic other than a disposition pursuant to i the substitution of a qualified_replacement_mortgage for a qualified_mortgage or the repurchase in lieu of substitution of a defective obligation ii a disposition incident to the foreclosure default or imminent default of the mortgage iii the bankruptcy or insolvency of the remic or iv a qualified_liquidation b the receipt of any income attributable to any asset which is neither a qualified_mortgage nor a permitted_investment c the receipt by the remic of any amount representing a fee or other compensation_for services or d gain from the disposition of any cash_flow_investment other than pursuant to any qualified_liquidation as discussed above the receipt of the allocable share by a taxpayer arises from the mortgage loans and each taxpayer’s status as a remic the allocable share arises in connection with each taxpayer’s interest in the mortgage loans and is neither a contribution of cash to the remic nor is it listed as a prohibited_transaction in sec_860f as a result the receipt of the allocable share by a taxpayer will not be treated as a prohibited_transaction within the meaning of sec_860f or as a contribution subject_to tax under sec_860g conclusion we hereby rule as follows in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement none of i the execution of the settlement agreement ii the methodology for determining and the right to receive an allocable share of the settlement payment or iii the receipt of an allocable share of the settlement payment will cause the taxpayer to fail to meet the requirements of sec_860d in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share of the settlement payment will be treated as a payment received on qualified mortgages within the meaning of sec_1 860g- g ii in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement plr-102720-17 the distribution of an allocable share amount in accordance with the applicable governing agreement and the settlement agreement will not cause any regular_interest in such taxpayer to fail to qualify as a regular_interest as defined in sec_860g or the sole class of residual_interest in such taxpayer to fail to qualify as a residual_interest as defined in sec_860g in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share amount will not be treated as a prohibited_transaction within the meaning of sec_860f or as a contribution that is subject_to the tax imposed under sec_860g this ruling’s application is limited to the facts representations code sections and regulations cited herein except as specifically ruled upon above no opinion is expressed concerning any federal_income_tax consequences related to the facts herein under any other provisions of the code specifically we do not rule whether any taxpayer qualifies as a remic under sec_860a-860g or whether any mortgage loan qualifies as a qualified_mortgage as defined in sec_860g this ruling is directed only to the taxpayers that requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the provisions of a power_of_attorney on file we are sending a copy of this ruling letter to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely __________________________ julanne allen assistant branch chief branch office of the associate chief_counsel financial institutions and products enclosure copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division mar uniform issue list tep rat legend taxpayer a ira x financial_institution a financial_institution b date date amount m dear this is in response to your request dated date as supplemented by correspondence dated date and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a maintained an individual_retirement_account ira ira x with financial_institution a taxpayer a age received a distribution of amount m taxpayer a asserts that his failure to accomplish a rollover of amount m within the 60-day period prescribed by sec_408 of the code was due to financial_institution b’s error in failing to follow taxpayer a’s instructions asserts that on date taxpayer a taxpayer a represents that he maintains ira x at financial_institution a on date he took a distribution of amount m from ira x which he intended to roll over to an ira within the statutorily required 60-day period amount m was electronically transferred from ira x to his financial_institution a individual_account and then to an individual_account with financial_institution b on date taxpayer a contacted financial_institution b and requested that amount m be transferred from his business account to his personal account and then transferred to ira x with financial_institution a however financial_institution b only transferred amount m from the business account to the personal account financial_institution b failed to complete the final step of the transaction because of a lack of electronic link between the relevant accounts and failed to inform taxpayer a of the problem taxpayer a first learned at a year-end review that the date ira x transfer was taxable taxpayer a contacted financial_institution a and was informed that because the 60-day period had expired nothing could be done to correct the error based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount m contained in sec_408 of the code 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 60' 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 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 that the secretary may waive the day requirement under sec_408 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 only distributions that occurred after date are eligible for the waiver under sec_408 revproc_2003_16 r b 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 you submitted is consistent with your assertion that your failure to accomplish a timely rollover was caused by an error committed by financial_institution b in failing to follow your instructions to transfer amount m back to ira x therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount m from ira x you are granted a period of days from the issuance of this letter_ruling to contribute amount m 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 amount m will be considered a rollover_contribution within the meaning of 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 expresses no opinion as to whether ira x satisfied the requirements of sec_408 of the code 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 have any questions please contact phone at or fax at l d by sincerely yours pu be samba -- laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


id office uilc cca_2009062208535842 ---------------------------- number release date from ------------------ sent monday date am to -------------------- cc ------------------ subject re cca on transfers and joint accounts hi i believe that the parties did sign an agreement indicating that this was a joint_tenancy with right_of_survivorship however the pa law regarding interests in joint tenancies in bank accounts is somewhat unique according to pa law while the parties are alive each party has an interest in the account in the amount that they put in the account and we look to state law to determine property interests this is not a common_law joint_tenancy it is a state statutory joint_tenancy


internal_revenue_service number release date index number -------------------- ------------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi plr-135258-16 date date legend decedent spouse date date dear ---------------- -------------------- -------------------- -------------------- ---------------------- this letter responds to your personal representative’s letter of date and subsequent correspondence requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date the estate discovered its failure to elect portability after the due_date for making the election plr-135258-16 decedent’s estate represents that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of the decedent’s death and that during his lifetime decedent made no taxable_gifts decedent’s estate requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-135258-16 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2 a of the estate_tax regulations provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely filed form_706 under sec_20_2010-2 the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted sec_20_2010-2 further provides that an extension of time to elect portability may be available under the procedures applicable under sec_301_9100-1 and sec_301_9100-3 for estates not required to file an estate_tax_return under sec_6018 sec_20_2010-2 provides that the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner 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 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a plr-135258-16 specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date decedent’s estate represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void see sec_20_2010-2 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-135258-16 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel passthroughs special industries by leslie h finlow leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division uniform issue list mar xxxxxxkxkk xxxxxkxkkxkk xxkxxkxxkxkk legend taxpayer a amount c plan x financial advisor b account f company e company g dear he kk kek kk kk kee this is in response to your letter dated date and supplemented with correspondence dated date and date in which you request a waiver of the 60-day rollover requirement contained in sec_402 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 received a check in the amount of amount c from plan on april x a code sec_401 arrangement maintained by taxpayer a’s former employer on may roll over amount c into an individual_retirement_arrangement ira documentation submitted with your request indicates that financial advisor b on may deposited amount c into account f taxpayer a with the assistance of financial advisor b attempted to kk page ' taxpayer a’s accountant explained to him that the form 1099-r during early taxpayer a received a form 1099-r from company g that showed that a distribution in the amount of amount c was made to taxpayer a during calendar_year represented a taxable_distribution in the amount of amount c from plan x taxpayer a contacted financial advisor b about the distribution and account f financial advisor b then discovered that the application form used by him to establish account f was an application to open a regular brokerage account and not a rollover traditional_ira as taxpayer a requested financial advisor b contacted company e to correct the mistake but company e refused to correct the error or withdraw the form 1099-r taxpayer a and financial advisor b were not aware that amount c had not been contributed to an ira until taxpayer a’s accountant informed taxpayer a that amount c represents a taxable_distribution taxpayer a relied on financial advisor b to establish his rollover ira financial advisor b asserts that he was the person responsible for making the rollover of amount c and that he mistakenly thought that account f was a qualified account taxpayer a has asserted that no funds have been withdrawn from account f since this account was established and that amount c continues to be held in account f based on the foregoing facts and representations the following ruling has been requested that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount c from plan x sec_402 of the code provides that except as otherwise provided in this section any amount actually distributed to any distributee by any employees’ trust described in sec_401 of the code which is exempt from tax under sec_501 a shall be taxable to the distributee in the taxable_year of the distributee in which distributed in the manner provided under sec_72 relating to annuities sec_402 of the code provides rules governing rollovers of amounts from exempt trusts to eligible retirement plans including iras code sec_402 provides generally that if any portion of an eligible_rollover_distribution from a qualified_trust is paid to the employee in an eligible_rollover_distribution and the employee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent so transferred shall not be includible in gross_income for the taxable_year in which paid code sec_402 provides that the maximum amount of an eligible_rollover_distribution to which paragraph applies shall not exceed the portion of such distribution which is inctudible in gross_income determined without regard to paragraph kak page code sec_402 defines eligible_rollover_distribution as any distribution to the employee of all or a portion of the balance_to_the_credit of the employee in a qualified_trust except that such term shall not include a any distribution which is one of a series of substantially_equal_periodic_payments not less frequently than annually made - i for the life or life expectancy of the employee or the joint lives or joint life expectancies of the employee and the employee’s designated_beneficiary or ii for a specified period of years or more b any distribution to the extent such distribution is required under sec_401 and c any distribution which is made upon hardship of the employee code sec_402 defines eligible_retirement_plan as i an individual_retirement_account described in sec_408 ii an individual_retirement_annuity described in sec_408 other than an endowment_contract iii a qualified_trust iv an annuity plan described in sec_403 v an eligible_deferred_compensation_plan described in sec_457 maintained by an eligible_employer as described in sec_457 and vi an annuity_contract described in sec_403 code sec_402 provides that sec_402 shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed code sec_402 provides that the secretary may waive the 60-day requirement under subparagraph a where the failure to waive such requirement would be against equity and good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 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 sae page the information presented by the taxpayer a demonstrates that an error was made by financial advisor b when he used the wrong application form which resulted in-amount c being deposited into account f a regular brokerage account and not a rollover ira as taxpayer a intended the error committed by financial advisor b resulted in the failure of taxpayer a to satisfy the requirement that amount c be rolled over to an ira within days of the date taxpayer a received the distribution from plan x further you have asserted that no withdrawals have been made from account f since it was established and that amount c continues to be held in account f therefore pursuant to sec_402 the service hereby waives the 60-day rollover requirement with respect to the distribution of amount c from plan x taxpayer a is granted a period of days from the date of this ruling to contribute amount c to an ira provided all other requirements of sec_402 of the code except the day requirement are met with respect to this contribution we conclude that 60-day rollover requirement is waived and that amount c will be considered a valid rollover_contribution within the meaning of sec_402 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code this ruling assumes that plan x meets the qualification requirement of code sec_401 at all times relevant to this transaction 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 ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you have any questions regarding this ruling please contact se t ep ra t2 at kkk sincerely signed joyce b floyd joyce e floyd manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose form_437


internal_revenue_service number release date index number department of the treasury washington dc person to contact telephone number refer reply to cc corp 1-plr-135510-02 date date legend distributing controlled_corporation m business x business y applicable federal rules state a f dear this letter responds to your letter dated date in which you requested rulings regarding the federal_income_tax consequences of certain transactions you submitted additional information in letters dated august and date the relevant information is summarized below plr-135510-02 distributing a state a corporation is the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return distributing has issued and outstanding two classes of voting common_stock distributing class a stock and distributing class b stock distributing class a stock is publicly traded and distributing class b stock is privately held the distributing class a stock entitles shareholders to one vote per share while the distributing class b stock entitles shareholders to f votes per share the distributing class b stock is subject_to certain limitations on transfer but is convertible at any time to distributing class a stock on a share-for-share basis the distributing class a and class b stock are identical in all other material respects distributing is a holding_company that is engaged in business x though corporation m and its subsidiaries controlled which is also a state a corporation is engaged in business y controlled currently has one class of common_stock outstanding controlled common_stock all of which is owned by distributing we have received financial information indicating that distributing through its ownership of corporation m and controlled each has had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years distributing has proposed separating distributing and controlled in order to qualify corporation m as a small_business supplier under the applicable federal rules for government procurement corporation m presently does not qualify as a small_business supplier under the applicable federal rules because its affiliation with controlled has caused corporation m to exceed the maximum number of employees for corporation m’s industry we have received information indicating that corporation m’s failure to qualify as a small_business supplier has harmed business x and that the separation of distributing and controlled would enhance the success of business x by enabling corporation m to immediately qualify as a small_business supplier under the applicable federal rules to accomplish the separation of distributing and controlled distributing has proposed the following transactions step controlled will amend its certificate of incorporation to authorize the issuance of shares of controlled class a stock and controlled class b stock the terms of the controlled class a and class b stock will be substantially_similar to the terms of the distributing class a and class b stock respectively immediately before step distributing will exchange its controlled common_stock for all of controlled’s controlled class a and class b stock the recapitalization plr-135510-02 step distributing will distribute to its shareholders on a pro_rata basis all of the controlled class a and class b stock the spin-off each distributing shareholder will receive one share of controlled class a stock with respect to each share of distributing class a stock held by the shareholder and one share of controlled class b stock with respect to each share of distributing class b stock held by the shareholder the following representations have been made with respect to the recapitalization a b c d e at the time of the recapitalization there will be no outstanding_stock options warrants convertible securities or any other right that is convertible into any class of stock_or_securities of controlled controlled has no plan or intention to redeem or otherwise acquire any of the stock to be issued in the proposed transaction controlled will continue to conduct its business operations after the recapitalization controlled and distributing will each pay their own expenses if any incurred in connection with the recapitalization the fair_market_value of the stock to be received by distributing will be equal to the fair_market_value of the stock surrendered in the exchange the following representations have been made with respect to the spin-off a controlled and distributing will each pay their own expenses if any incurred in connection with the transaction b c d no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a distributing shareholder the five years of financial information submitted on behalf of the active businesses of corporation m and controlled is representative of each business's present operations with regard to each corporation there have been no substantial operational changes since the date of the last financial statements submitted immediately after the distribution at least of the fair_market_value of the gross assets of distributing will consist of the stock of corporation m which is actively engaged in the conduct of business x plr-135510-02 e f g h i j k l m following the spin-off corporation m and controlled will each continue the active_conduct of its business independently and with its separate employees the distribution of the stock of controlled is carried out for the corporate business_purpose of qualifying corporation m as a small_business the distribution of the stock of controlled is motivated in whole or substantial part by this corporate business_purpose there is no plan or intention by any shareholder who owns five percent or more of the stock of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any remaining shareholder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in either distributing or controlled after the transaction there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business payments made in connection with all continuing transactions 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 no two parties to the transaction are investment companies as defined in sec_368 and iv no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution of the controlled stock except that controlled will continue to be responsible for its share of benefits under a non- qualified_retirement_plan immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1 as in effect before the publication of t d 1995_32_irb_6 and sec_1_1502-13 as published by t d further distributing’s excess_loss_account if any with respect to the controlled stock will be included in income immediately before the distribution see sec_1_1502-19 plr-135510-02 n neither distributing nor corporation m will cause corporation m to lose its status as a small_business supplier under the applicable federal rules during the three-year period following the spin-off based solely on the information submitted and the representations set forth above we hold as follows the exchange by distributing of its controlled common_stock for controlled class a stock and controlled class b stock will qualify as a reorganization under sec_368 controlled will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing on the exchange of its controlled common_stock for controlled class a stock and controlled class b stock sec_354 the basis of the controlled class a and class b stock received in the recapitalization will equal the basis of the controlled common_stock surrendered in exchange therefor sec_358 the holding_period of the controlled class a stock and controlled class b stock received in the recapitalization will include the period during which distributing held the controlled common_stock surrendered in the exchange provided that the surrendered stock is held as a capital_asset on the date of the exchange sec_1223 no gain_or_loss will be recognized by and no amount will be included in the income of the distributing shareholders on their receipt of controlled stock sec_355 no gain_or_loss will be recognized by distributing on the distribution of controlled stock to distributing shareholders sec_355 the aggregate basis in distributing and controlled stock held by each distributing shareholder will equal the aggregate basis of such shareholder’s distributing stock immediately before the distribution allocated in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 b and c the holding_period of the controlled stock received by each distributing shareholder will include the holding_period for the distributing stock with respect to which the distribution is made provided that the distributing stock is held as a capital_asset on the date of the distribution sec_1223 plr-135510-02 the earnings_and_profits of distributing and controlled will be allocated and adjusted as provided in sec_312 and sec_1_312-10 and sec_1_1502-33 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as part of the examination process except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant sincerely _____________________________ michael j wilder senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service department of the treasury number release date index no p o box ben franklin station washington dc person to contact telephone number refer reply to cc psi -- plr-115463-00 date date legend company state member a member b a b c dear this letter responds to company’s letter dated date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations for company to elect to be treated as a corporation for federal tax purposes facts company a state limited_liability_company was formed on a by member a and member b on b company intended to file form_8832 entity classification election to plr-115463-00 elect to be treated as a corporation for federal tax purposes effective c however company failed to file timely the election law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in such section an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides in part that unless a domestic eligible_entity elects otherwise it is a partnership if it has two or more members sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election with the applicable service_center sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i if the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting the relief will not prejudice the interests of the government sec_301_9100-2 and sec_301_9100-3 provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusions plr-115463-00 based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly company is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center to have its election effective c a copy of this letter should be attached to the election a copy is enclosed for that purpose except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provisions of the code pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to company this ruling is directed only at the taxpayer who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely yours paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number taxpayer_identification_number tax_exempt_and_government_entities_division release number release date date date uil legend e i d m i n o w u o t t o t executors q a o o n a n o n o o n o u o i o q n x i k k n i dear we have considered your ruling_request dated date you are requesting a ruling under sec_4941 of the code with regard to a settlement agreement affecting certain testamentary bequests to a private_foundation described in sec_501 and sec_509 facts aandb are the surviving children of c c a resident of state died on date d is a limited_partnership in which each of a b and c held certain partnership interests at the time of c’s death the assets held by c at c’s death included a x general_partnership interest in d and a y limited_partnership_interest in d collectively the interests’ e is a private_foundation described in sec_501 and sec_509 of the code the two executors of c’s estate also serve as the two co-trustees of e prior to c’s death a b and c executed an agreement granting each of a and b the right upon c’s death to purchase one-half of c’s limited_partnership interests in d at a price equal to the value of those interests as of the date of c’s death as determined by an independent qualified_appraiser subject_to increase or decrease equal to the final_determination of the value of those interests in the federal estate_tax proceedings for c’s estate the first option’ c’s will as submitted for probate in the court with jurisdiction over c’s estate bequeathed c’s general_partnership interest in d outright to e the will further directed the executors to offer subject_to the terms and conditions of the partnership_agreement of d in writing to each of a and b the option to purchase for cash up to one-half of c’s limited_partnership interests in d that c owned at c’s death at its value as finally fixed and determined for federal estate_tax purposes after independent appraisal the second option’ in addition c’s will provided that the residue of c’s estate after satisfaction of certain specific bequests set forth in c’s will and after satisfaction of debts administrative expenses and taxes attributable to c’s estate would pass to e subsequent to submission to the court of c’s will for probate a series of arbitration and court proceedings were launched involving a b the executors and the trustees each of the first option the second option and the bequests to e was challenged as part of the various proceedings in addition the executors filed claims against a and b for alleged overdistributions from d to a and b after approximately z years of litigation and arbitration proceedings regarding the interests the attorney_general of state intervened in an attempt to help resolve the parties’ disputes with the help of the attorney_general of state a b the executors and the trustees entered into a settlement agreement effective as of date under the settlement agreement a and b will purchase all of the interests at a price set forth in the settlement agreement this price is equal to the value of the interests as reported by c’s estate for federal estate_tax purposes in addition a and b will pay a designated amount in settlement of all additional claims made by the executors against a and b with regard to the interests ruling requested the attorney_general of state consented to the settlement agreement on date the court with jurisdiction over c’s estate issued an order approving the settlement agreement the execution delivery and performance of the settlement agreement and the consummation by the parties of the transactions contemplated therein will not constitute acts of direct or indirect self-dealing under sec_4941 and none of the parties to the settlement agreement including their executors trustees directors officers owners employees agents and attorneys will be liable for tax under sec_4941 for such actions law sec_4941 imposes certain excise_taxes on direct and indirect acts of self-dealing between a disqualified_person and a private_foundation and also imposes a separate excise_tax on the participation by any foundation_manager in an act of self-dealing between a disqualified_person and a private_foundation knowing it is such an act unless such participation is not willful and is due to reasonable_cause sec_4941 provides that for purposes of sec_4942 the term self-dealing means any direct or indirect sale_or_exchange or leasing of property between a private_foundation and a disqualified_person sec_4941 defines self-dealing to include any direct or indirect transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation sec_4946 provides that the term disqualified person’ with respect to a private_foundation includes a substantial_contributor to the foundation a family_member of a substantial_contributor including children and foundation managers including trustees and individuals with similar powers or responsibilities sec_53_4946-1 of the foundation and similar excise_tax regulations with reference to sec_507 of the code defines the term substantial_contributor as any person who contributed or bequeathed an aggregate amount of more than dollar_figure to the private_foundation if such amount is more than percent of the total contributions and bequests received by the private_foundation in the year of such contribution and in the case of a_trust the creator of the trust in 572_fsupp_9 e d ark aff'd 718_f2d_290 cir cert den 466_us_962 the court held that purchase by a decedent’s son who was also executor of the estate of estate property earmarked for a private_foundation was indirect self-dealing in 87_tc_1016 the court held that because a foundation which was a beneficiary of an estate had an expectancy interest in the estate sale of estate property otherwise passing from the estate to the foundation constituted acts of indirect self- dealing under sec_4941 self-dealing under sec_4941 may occur by virtue of the transfer of property held in an estate to which a private_foundation has an interest or expectancy 572_fsupp_9 e d ark aff'd 718_f2d_290 8th cir cert den 466_us_962 reis 87_tc_1016 absent the litigation and arbitration proceedings e arguably had an analysis expectancy under the terms of c’s will as submitted for probate either in the interests themselves or with regard to the limited_partnership interests in an amount of money equal in value to the option_price on final resolution of the litigation and arbitration proceedings in fact e’s ultimate expectancy with regard to the interests depended although the parties to the settlement agreement could have awaited the end of those proceedings doing so may have taken many more years cost a considerable amount in legal fees and ultimately resulted in less property for e instead the parties chose to settle the dispute all parties to the settlement agreement were represented by independent counsel and there is no suggestion of collusion to benefit any particular party the attorney_general of state participated in facilitating the settlement agreement and consented to its terms the court with appropriate jurisdiction over c's estate has approved the settlement agreement entering into the settlement agreement will eliminate the risk that e’s expectancy with regard to the interests might be reduced if the litigation and arbitration proceedings continued will preclude the need to expend additional charitable funds pursuing the litigation and will allow e to access the property passing to it from c’s estate and begin to use that property in furtherance of its charitable activities because the settlement agreement was the product of arm’s-length negotiations including the participation and consent of the attorney_general of state and approval of the court with jurisdiction over c’s estate e’s expectancy in c’s estate with regard to the interests is established by the settlement agreement all parties acting in performance of the settlement agreement are viewed as merely carrying out their legal rights and obligations with regard to the interests ruling accordingly based on the facts and circumstances discussed above we rule that the execution delivery and performance of the settlement agreement and the consummation by the parties of the transactions contemplated therein does not give rise to self-dealing under sec_4941 and no tax under sec_4941 is due with regard to the transactions described in the settlement agreement this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice 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 by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolve questions concerning federal tax_liabilities this ruling should be kept in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely matthew l giuliano manager exempt_organizations guidance group enclosure notice


internal_revenue_service number release date index numbers ------------------------------------- --------------------------------- ------------------------------------------------------------ -------------------- ------------------------------------------------ --------------------------------------------------- ------------------------------- department of the treasury washington dc person to contact ------------------------------------------------- telephone number -------------------- refer reply to cc psi b03 - plr-142934-13 date date legend sub ------------------------------------------------- ------------------------------------- x ------------------------------------------------- ---------------------------------- --------------------------------------------------------------------- ------------------------------------- ----------- -------------------------- y z country a dear ------------ this letter responds to a letter dated date and subsequent correspondence submitted on behalf of sub requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes facts plr-142934-13 the information submitted discloses that sub was formed under the laws of country after a corporate_reorganization sub is wholly owned by x which is equally owned by y and an unrelated foreign third party y’s ultimate owner is z the common parent_corporation of an affiliated_group that files a u s consolidated_return sub failed to file timely a form_8832 entity classification election to be classified as a disregarded_entity for federal tax purposes effective a law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 entity classification election with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register plr-142934-13 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied consequently sub is granted an extension of time of one hundred twenty days from the date of this letter to elect under sec_301_7701-3 to be treated as a disregarded_entity effective a sub must file form_8832 within the extension period with the appropriate service_center with a copy of this letter attached this ruling is contingent on sub and its owner filing within days of the date of this letter all required federal_income_tax and information returns including amended returns for all open years consistent with the requested relief these returns must include but are not limited to form_8858 information_return of u s persons with respect to foreign disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it according to sec_6110 of the code this ruling may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to sub’s authorized representatives plr-142934-13 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by s holly porter chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-112301-02 date date x a d1 d2 year1 dear this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x as x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 and began doing business on d2 of year a as the president of x represents that x was intended to be an s_corporation beginning d2 of year however no form_2553 election by a small_business_corporation was filed with the internal_revenue_service sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d2 of year within days following the date of this letter then such plr-112301-02 election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x sincerely yours j thomas hines chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes