internal_revenue_service sign breast index no krkkkek keke ke ekkeke kek keke ee krekkkrkkkkkkkek keke kekk kek ekkkkekkekeekrkekkekekkkekkkek rrekkekkekkkekeee rrr kkk ker er ek ke kek ere attn keke kkk ree kk kk keke kke ke kkkkkkkkekkkkkkkekkeek kkkkkkkkekeekkkekek re rr ri ri ri irr ir re tsn fg legend state a county b company m or ke kaka kkeeekeek kkk keke rk kkk kkk kee keke eek rak kkk re rr eere ke eir keke re ker rrr rrr ek rk kekkkke kek organization n organi zation q krrr err frr rrr r eker rhe kek ire ir eer ree ee kkekkkkkkkkkkek organization p rrr organization q frr rr rrr h ree h kerr re ee rr ere re kkk rrr ee organization ro plan x wr rrr rrr rrr ike rr rrr ee erk rk ere kee ek rk kk kek ek rr kerr kee k kee kk ke re re kkk plan y ork kk kr keke kkk kk kkk eee ker ere kerr e ere io rr rio ra rk plan z rk rrr err rk kk eek kek kkk kek kkk rk kkk ere ree rrr kk ek eere eker erk dear for io kr rr kkk kk this is in response to your letter dated october as supplemented by correspondence dated date november submitted by your authorized representative on your behalf with respect to the applicability of sec_403 of the internal_revenue_code to plan x which was and date the following facts and representations have been submitted on your behalf organization n c of the code is exempt from taxation under section as are its members organization o of kekkekkkeekkkekkekkekkekkkkekkkek is also an entity that an agency of organization p a political_subdivision of county b organization o and organization p transferred and organization p is state a personal_property to organization n after which organization n leased real_property from organizations and p employees from organization p became employees of organization n all employees from organization o and certain in prior to the transfer organization o employees were of the code a plan described under section participants in plan y b contributions and seven-year graded_vesting for such contributions established plan x to provide retirement benefits to employees plan x operates on a calendar_year basis plan y provided for matching organization n effective july it plan x provides for a salary reduction agreement under the a reduction in salary by the agreement provides that the frequency which each employee may agree to either a percentage of pay or a dollar amount agreement provides that only compensation earned after the effective date of the agreement shall be taken into consideration with which the agreement may be entered into or amended and the ability to revoke such agreement shall be determined under the rules applicable to qualified cash or deferred arrangements the agreement shall continue indefinitely until amended or terminated by either party subject_to certain conditions by giving at least thirty days written notice prior to the date of such amendment or termination ie irrevocable with respect to compensation earned while the agreement is in effect sec_2_1 of plan x provides that each employee of if employed on that date organization n is eligible to participate in the plan on july on such date the date of their employment plan x defines an employee as any individual employed by the employer as independent contractors and leased employees as described under sec_414 of the code and if not employed section dollar_figure of a common_law_employee with the exception of section dollar_figure of plan x defines employer as organization n and any other organization which member of the same controlled_group of organizations as is a rrr kekkkkkekkrkkekkkkkekekeek is m and of the code a non-profit as determined pursuant to sec_414 b is one that organization n's board_of directors organization n c organization within the meaning of sec_501 code has authorized to participate and takes appropriate action to adopt the plan and become a signatory to an annuity_contract and or custodial agreement employer to include organization q and organization r both of which are described under sec_501 code and are support organizations of organization n in addition section dollar_figure of plan x defines is an entity that of the of the sec_3 a of plan x permits participants to elect by entering into a salary reduction agreement to have elective contributions made to the plan on their behalf section dollar_figure of plan x defines elective contributions as contributions made by the employer pursuant to sec_3 a of the plan which meet the requirements of sec_402 and sec_403 of the code sec_4 b of plan x provides that the amount of elective contributions for any taxable_year under the plan and all other plans of organization n shall not exceed the dollar limit in effect at the beginning of such taxable_year under sec_402 of the code in the event a participant has excess elective contributions sec_4 b of plan x requires that excess elective contributions adjusted to reflect any credited investment experience up to the date of distribution will be distributed no later than april designates elective contributions as excess elective contributions for such taxable_year to any participant who sec_4 c of plan x provides that elective contributions are also subject_to the exclusion_allowance limitations contained in sec_403 sec_4 a of plan x provides that the total annual_additions as defined in sec_415 of the code made on behalf of the participant for any year will not exceed the limits imposed by sec_415 of the code of the code sections dollar_figure of plan x provides that elective contributions made under the plan are nonforfeitable at all times employees of organization who were covered by plan y and plan x received transfers attributable to former ra of ss kekkkekrkekekkekekkekkkkkkkekk ek a participant's account section dollar_figure defines the matching who become employees of organization n plan y provided matching_contributions and seven-year graded_vesting for such contributions account as the portion of established on behalf of an employee to hold the amount of employer contributions under plan y and the proportionate share of adjustment to market_value attributable to the matching account section dollar_figure of plan x continues the seven year graded_vesting for matching_contributions under plan y that are transferred to plan x contributions made with respect to elective contributions attributable to a participant's service on and after july a plan which is intended to satisfy the requirements of sec_401 k of the code and which is maintained by organization n shall be maintained in plan z employer and section dollar_figure of plan x provides that funding will be through mutual_fund shares held by a custodian or annuity_contracts issued by an insurance_company provides that the mutual funds held by the custodian and or annuity_contracts issued by an insurance_company acquired pursuant to plan x must conform with the provisions of the plan as well as providing investments that conform to sec_403 of the code and the regulations issued thereunder section dollar_figure section dollar_figure of plan x provides that participants may designate which annuity_contracts or which investment vehicles they choose to invest in currently in excess of ninety-nine and nine-tenths per cent of the participants in plan x enter into individual annuity_contracts with company m the participants enter into individual custodial agreements with company m the remaining less than one-tenth of one per cent of under section dollar_figure of plan x organization n may permit participants to borrow amounts from their plan assets provided that the terms and conditions of the loans are consistent with the annuity_contract custodial agreement sec_72 z and section dollar_figure of plan of the code under section dollar_figure of plan x upon the occurrence of financial hardship a participant may make an application a krrkerkkkrkrkrkkekrekkkkeekkekekrkeeek to withdraw all or part of the value of his account attributable to elective contributions but not earnings on such elective contributions and amounts held in the rollover account section dollar_figure of plan x provides a procedure for determining the existence of an immediate and heavy financial need ie a distribution is necessary to satisfy an immediate and heavy financial need a financial hardship and that section dollar_figure of plan x provides for an in-service distribution option with respect to participant's account balances as attained age fifty-nine and one-half for participants who have of date section dollar_figure of plan x provides that amounts attributable to elective contributions are distributed to the participant or the participant's beneficiary after retirement death attainment of age fifty-nine and one- half termination of employment or financial hardship addition section dollar_figure of plan x provides for the distribution of benefits upon the occurrence of total and permanent disability accordance with the payout options in the annuity_contract and or custodial agreement benefits are distributable in in section dollar_figure of plan x provides that the distribution provisions of the plan shall be interpreted and applied in of accordance with the requirements of sec_401 the code and incorporates such requirements by reference into the plan under section dollar_figure of plan x rollover assets may be in addition the plan will accept of the code and such rollover is contributed or transferred directly to the plan if such amounts are a qualifying_distribution determined pursuant to sec_403 within sixty days of the date the assets were distributed to the employee rollovers from qualifying conduit individual_retirement_arrangements rollovers will be credited to an account established on behalf of the employee section dollar_figure of plan x provides that a participant eligible for a distribution under the plan may elect to have any portion of his account balance rolled over directly to a sec_403 tax-sheltered annuity plan or an individual_retirement_arrangement described under sec_408 of the off kekkkrkekekekkkekkekkkrkkrkk keke k code section dollar_figure of plan x provides that none of the benefits under the plan shall be subject_to the claim of any creditor of the participant or beneficiary and neither the participant nor the beneficiary shall have any right to alienate commute anticipate or assign any of the benefits under the plan dollar_figure of plan x section dollar_figure of the plan provides the benefits provided to the participant are subject_to the rights afforded to an alternate_payee under a qualified_domestic_relations_order under sec_414 of the code section dollar_figure of plan x provides that contributions under the plan may be used only for the exclusive benefit of participants and their beneficiaries notwithstanding the provisions of section based upon the foregoing facts and representations you request the following rulings elective_deferral contributions to plan x shall be treated under sec_403 of the code as amounts contributed by organization n and elective_deferral contributions to plan x earnings thereon shall not be taxable in the year contributed to the extent that such contributions satisfy the applicable limits under sec_402 instead will be taxable under sec_72 code in the year in which such amounts are received by the participant and of the code b of the and but with respect to ruling_request one sec_403 b that amounts contributed by of the code provides in part an employer to purchase an annuity_contract for an employee are excludable from the gross_income of the employee in the year contributed to the extent of the applicable_exclusion allowance provided the employee performs services for an employer which is exempt from tax under sec_501 a of the code as an organization described in sec_501 educational_institution as defined in sec_170 b a subdivision of any one or more of the foregoing is not subject_to sec_403 a state or an agency_or_instrumentality of the annuity_contract or the employee performs services for a of the code which is a state a political of the code the keke kkrrkkekkekkekkkkkekkkeeke employee's rights under the contract are nonforfeitable except for failure to pay future premiums contract is purchased under a plan which meets the nondiscrimination requirements of paragraph except in the case of the case of provides a salary reduction agreement the contract meets the requirements of sec_401 a a contract purchased by a church and a contract purchased under a plan which such in sec_403 of the code provides further that the employee shall include in his gross_income the amounts actually distributed under such contract in the year distributed as provided in sec_72 of the code sec_403 of the code requires that arrangements pursuant to sec_403 of the code must satisfy requirements similar to the requirements of sec_401 with respect to benefits accruing after date addition this section provides that in taxable years ending after such date for distributions in made after december 401i a regarding direct rollovers are met the requirements of section sec_401 of the code generally provides that of the calendar_year following benefits commence by april the later of the calendar_year in which the employee attains age employee retires and specifies required_minimum_distribution rules for the payment of benefits from retirement plans or the calendar_year in which the sec_403 of the code provides generally that sec_403 annuity_contract distributions attributable to contributions made pursuant to a salary reduction agreement within the meaning of sec_402 g c may be paid only when the employee attains age within the meaning of sec_72 or in the case of hardship separates from service dies becomes disabled sec_403 e of the code provides that in the a contract purchased under a plan which provides a case of salary reduction agreement the contract must meet the requirements of sec_401 a sec_401 a requires a sec_403 arrangement which provides for ofs kkk ekkekkkkekkekekekekkkkreeerk elective_deferrals to limit such deferrals under the arrangement in combination with any other qualified_plans an employer maintaining such plan or arrangements of providing for elective_deferrals to the limitation in effect under sec_402 in such calendar_year for taxable years beginning sec_402 of the code provides generally that the elective_deferrals of any individual for any taxable_year shall be included in such individual's gross_income to the extent the amount of such deferrals exceeds dollar_figure sec_402 of the code provides that the limitation under paragraph to an amount in excess of dollar_figure dollar_figure for taxable years by the amount of any employer after december contributions for the taxable_year described in sec_402 g cc shall be increased but not sec_402 of the code provides that the term elective_deferrals includes in part with respect to any taxable_year annuity_contract under sec_403 under a salary reduction agreement any employer_contribution to purchase an sec_415 of the code provides in relevant that an annuity_contract described in sec_403 b part shall not be considered described in sec_403 unless it satisfies the sec_415 limits annuity_contract described in sec_403 the preceding sentence applies only to the portion of the annuity_contract exceeding the sec_415 limitations and the amount of the contribution for such portion shall reduce the exclusion_allowance as provided in sec_403 b in the case of an in this case you represent that organization n an employer described in sec_501 of the code has established plan x as its sec_403 program for its employees fully vested and nonforfeitable at all times not meet the requirement of contract all contributions and the earnings thereon are plan x does a sec_403 annuity plan x satisfies the limits under sec_403 b kkkkkkkekkekekrkkkkkkekkkkekeee that amounts attributable to elective of the code deferrals shall not be distributable earlier than upon the attainment of age separation_from_service death disability or hardship in addition plan x satisfies the sec_403 requirements and limits contributions in accordance with sec_403 and of the code accordingly based on the foregoing law and facts we further we conclude with respect to conclude with respect to ruling_request one that elective_deferral contributions to plan x shall be treated under sec_403 of the code as amounts contributed by organization n ruling_request two that elective_deferral contributions to plan x year contributed to the extent that such contributions satisfy the applicable limits under sec_402 b under sec_72 amounts are received by the participant and earnings thereon shall not be taxable in the and of the code but instead will be taxable of the code in the year in which such this ruling is contingent upon the adoption of the amendments to plan x dated date amendments are adopted as stipulated in your correspondence and date november and will have no effect unless such proposed this ruling is limited to the form of plan x as amended excluding any form defects that may violate the nondiscrimination requirements of sec_403 code this ruling does not extend to any operational vio- lations of sec_403 by plan x now or in the future of the this ruling is directed only to the taxpayer who requested it it may not be used or cited by others as precedent sec_6110 of the code provides that ool kkkekkkekkekr kkk kkkekkkkkkkekekee a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours signed joyce b flozd joyce e floyd manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of this letter notice of intention to disclose o2zo2


internal_revenue_service index numbers number release date cc dom p si 6--plr-103216-99 date legend taxpayer parent city building a b c d e f g h i plr-103216-99 dear this letter is in response to a letter dated date and a subsequent submission from your authorized representative requesting a letter_ruling under sec_38 and sec_47 of internal_revenue_code in regard to the rehabilitation of a building taxpayer represents that the facts are as follows taxpayer is a member of the parent’s affiliated_group parent files a consolidated federal_income_tax return and is under the jurisdiction of the district_director in city taxpayer owns the building which is a a story structure placed_in_service in b it is basically a rectangular shaped building with a central light and air well this light and air well is designed solely to bring light and air into the center of the building is completely surrounded by external walls of the building encloses space that is not designated for occupancy or use by people other than possibly for maintenance or emergency and runs from floor c to floor a the lower floors of the building are completely enclosed throughout the total space of the building from the external walls inward taxpayer has applied for registration of the building on the national register of historic places and expects the application to be approved taxpayer is renovating the building for numerous business purposes including life safety building maintenance and building improvements the major items of rehabilitation include roof replacement construction of a new exit stair construction of new restrooms that comply with the americans with disabilities act ada installation of a fire alarm system and a fire sprinkler system replacement of heating ventilation and air conditioning system electrical upgrades construction of full floors in the light and air well from floor i to floor a and window replacement seventy-five percent or more of the existing internal structural framework will be retained the fill-in of the light and air well will provide the space to house the new exit stair mechanical shafts and the electrical and communications rooms to be located on various floors the remainder of the space will be finished out to provide additional rentable floor space the current adjusted_basis of the building including tenant improvements is less than dollar_figured the rehabilitation_expenditures are estimated to range from dollar_figuree to dollar_figuref the rehabilitation is planned to take place in phases over a time period in excess of g plr-103216-99 months but less than h months distinct phases have been identified by the architects and written plans describing all phases of the rehabilitation process have been included with the request_for_ruling the rehabilitation_expenditures will be depreciated as nonresidential_real_property over a year period using the straight_line method_of_depreciation the building is not tax-exempt_use_property within the meaning of sec_168 of the code sec_38 of the code provides for a general_business_credit composed of in part the current_year_business_credit sec_38 provides that the current_year_business_credit includes the investment_credit determined under sec_46 for purposes of sec_38 sec_46 provides that the amount of the investment_credit for any taxable_year is the sum of the rehabilitation_credit energy_credit and reforestation_credit for purposes of sec_46 of the code sec_47 provides that the rehabilitation_credit for any taxable_year is the sum of percent of the qualified_rehabilitation_expenditures with respect to any qualified_rehabilitated_building other than a certified_historic_structure and percent of the qualified_rehabilitation_expenditures with respect to any certified_historic_structure sec_47 of the code defines the term qualified_rehabilitated_building as meaning any building and its structural_components if i such building has been substantially_rehabilitated ii such building was placed_in_service before the beginning of the rehabilitation iii in the case of any building other than a certified_historic_structure in the rehabilitation proce sec_50 percent or more of the existing external walls of such building are retained in place as external walls percent or more of the existing external walls of such building are retained in place as internal or external walls and percent or more of the existing internal structural framework of such building is retained in place and iv depreciation is allowable with respect to such building sec_47 of the code provides that for purposes of sec_47 a building is treated as having been substantially_rehabilitated if the qualified_rehabilitation_expenditures during the 24-month period selected by the taxpayer at the time and in the manner prescribed by regulation and ending with or within the taxable_year exceed the greater of the adjusted_basis of the building and its structural_components or dollar_figure sec_47 of the code provides a special rule for phased rehabilitation if the rehabilitation is expected to be completed in phases set forth in written architectural plans and specifications completed before the rehabilitation begins plr-103216-99 in such a case 60-month period is substituted for 24-month period in sec_47 sec_47 of the code defines qualified_rehabilitation_expenditures as any amount properly chargeable to capital_account for property for which depreciation is allowable under sec_168 and is nonresidential_real_property residential_rental_property or real_property with a class_life of more than years and in connection with the rehabilitation of a qualified_rehabilitated_building sec_47 of the code excludes any expenditure attributable to the enlargement of an existing_building from the definition of qualified_rehabilitation_expenditures sec_1_48-12 of the income_tax regulations provides that in general a building is enlarged to the extent that the total volume of the building is increased the total volume of a building is in general equal to the product of the floor area of the base of the building and the height from the underside of the lowest floor including the basement to the average height of the finished roof for this purpose floor area is measured from the exterior faces of external walls other than shared walls that are external walls and from the centerline of shared walls that are external walls sec_1_48-12 further provides that an increase in floor space resulting from interior remodeling is not an enlargement of a building sec_1_48-12 of the regulations defines external wall as including any wall that has one face exposed to the weather earth or an abutting wall of an adjacent building further this regulation provides that in general the term external wall includes only those external walls that form part of the outline or perimeter of the building or that surround an uncovered courtyard the walls of an uncovered internal shaft designed solely to bring light or air into the center of a building that are completely surrounded by external walls of the building and that enclose space not designated for occupancy or other use by people other than for maintenance or emergency are not considered external walls thus for purposes of sec_1 b ii the walls of a light well that is in the center of a building and not usable by people other than for maintenance or emergency are not external walls sec_1_48-12 of the regulations provides in part that an external wall is retained in place notwithstanding that the existing doors and windows in the wall are modified eliminated or replaced sec_47 of the code provides that the term qualified_rehabilitation_expenditure does not include any expenditure attributable to the rehabilitation of a certified_historic_structure or a building in a registered_historic_district unless the rehabilitation is a certified_rehabilitation for this purpose sec_47 defines the term certified_rehabilitation as meaning any rehabilitation of a certified historic plr-103216-99 structure that the secretary of the interior has certified to the secretary as being consistent with the historic character of such property or the district in which such property is located the term certified_historic_structure is defined in sec_47 of the code and sec_1_48-12 of the regulations as meaning any building and its structural_components that is listed in the national register of historic places national register accordingly based solely on the representations and relevant law set forth above we rule that the 60-month period special rule for phased rehabilitation provided in sec_47 of the code applies in determining whether the building has been substantially_rehabilitated within the meaning of sec_47 all rehabilitation_expenditures relating to the building that are described in the ruling_request and properly chargeable to capital_account qualify as qualified_rehabilitation_expenditures for purposes of sec_47 of the code provided the rehabilitation is certified by the secretary of the interior as a certified_rehabilitation within the meaning of sec_47 of the code taxpayer is eligible for the rehabilitation_credit under sec_47 with respect to the qualified_rehabilitation_expenditures made to the building as a certified_historic_structure no opinion is expressed or implied regarding the application of any other provisions of the code or regulations this letter_ruling 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 a copy of this ruling should be attached to the federal_income_tax return of the taxpayer for the taxable_year in which the rehabilitation tax_credit is properly taken plr-103216-99 in accordance with the power_of_attorney on file a copy of this letter_ruling is being sent to your authorized representatives a copy of this letter_ruling is also being sent to the district_director sincerely yours kathleen reed kathleen reed senior technician reviewer branch counsel office of assistant chief passthroughs and special industries enclosures copy for purposes copy for federal tax_return


internal_revenue_service national_office technical_advice_memorandum date number release date third party communication none date of communication not applicable index uil no case-mis no tam-100640-12 chief excise_tax operations sbse excise taxpayer's name taxpayer's address taxpayer's identification no years involved date of conference -------------------------------------------- -------------------------------------------------------- ---------------- ----------------------- date legend taxpayer -------------------------------------------- approved refinery ------------------------------------------------- approved_terminal --------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- issues is taxpayer’s dyeing of undyed diesel_fuel a nontaxable_use of undyed diesel_fuel for which a payment is allowed under sec_6427 of the internal_revenue_code code is taxpayer the ultimate_purchaser of the undyed diesel_fuel described in issue conclusion tam-100640-12 taxpayer’s dyeing of undyed diesel_fuel is not a nontaxable_use of undyed diesel_fuel a payment is not allowed for such activity under sec_6427 of the code taxpayer is not the ultimate_purchaser of the undyed diesel_fuel described in issue facts taxpayer operates a refinery approved refinery at which it produces undyed diesel_fuel during the tax periods at issue taxpayer did not have the equipment to dye diesel_fuel at approved refinery taxpayer removed undyed diesel_fuel from approved refinery and transported the fuel by truck and railcar to an approved_terminal approved_terminal where taxpayer was a position_holder taxpayer dyed the undyed diesel_fuel at issue upon removal at the approved terminal’s rack and sold the product to third- party customers tax was imposed under sec_4081 on taxpayer’s removals of undyed diesel_fuel from the approved refinery rack taxpayer asserts that dyeing undyed diesel_fuel is an off-highway_business_use of the undyed diesel_fuel and taxpayer as the ultimate_purchaser of such fuel is entitled to a payment under sec_6427 with respect to the tax imposed on the undyed diesel_fuel law sec_4081 generally imposes a tax on i the removal of a taxable_fuel from any refinery ii the removal of a taxable_fuel from any terminal iii the entry into the united_states of any taxable_fuel for consumption use warehousing and iv the sale of a taxable_fuel to any person who is not registered under sec_4101 unless there was a prior taxable removal or entry of such fuel under clause i ii or iii sec_6427 of the code generally provides that if any diesel_fuel on which tax has been imposed by sec_4081 is used by any person in a nontaxable_use the secretary shall pay without interest to the ultimate_purchaser of such fuel an amount related to the aggregate amount of the tax imposed on such fuel under sec_4081 sec_6427 defines nontaxable_use as including off-highway_business_use sec_6421 generally defines off-highway_business_use as any use by a person in a trade_or_business of such person or in an income producing activity otherwise than as a fuel in a highway vehicle that is registered or required to be registered for use on public highways sec_48_4081-1 of the manufacturers and retailers excise_tax regulations defines diesel_fuel in general to mean any liquid that without further processing or tam-100640-12 blending is suitable for use as a fuel in a diesel-powered highway vehicle or diesel- powered train a liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel- powered train a liquid may possess this practical and commercial fitness even though the specified use is not the liquid’s predominant use however a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel- powered train sec_48_6427-8 provides that generally a claim for an income_tax_credit or payment with respect to diesel_fuel is allowed under sec_6427 only if among other conditions tax was imposed on the diesel_fuel under sec_4081 the claimant produced or bought the diesel_fuel and did not sell it in the united_states and the fuel was used in a nontaxable_use analysis taxpayer removed undyed diesel_fuel from approved refinery and transported the fuel by truck and railcar to approved_terminal where taxpayer dyed the diesel_fuel upon removal and sale of the fuel at the terminal rack taxpayer claims that it used the undyed diesel_fuel in a nontaxable_use within the meaning of sec_6427 when it added dye to the fuel and further that taxpayer is the ultimate_purchaser of such fuel taxpayer does not use the undyed diesel_fuel other than as a fuel in a registered highway vehicle when it adds dye to the fuel the diesel_fuel is not consumed and it has not lost its identity as diesel_fuel the resulting dyed_diesel_fuel is still diesel_fuel as defined in sec_48_4081-1 taxpayer argues that the internal_revenue_service irs treats dyed_diesel_fuel as a product separate from undyed diesel_fuel in the irs’s exstars excise summary terminal activity reporting system reporting system on form 720-to terminal_operator report among other things exstars requires terminal operators to report to the irs removals of all products from their terminals by prescribed product codes for example the instructions for form 720-to lists diesel_fuel low sulfur dyed as product code and diesel_fuel low sulfur undyed as product code thus taxpayer argues the undyed diesel_fuel has lost its identity as such that is it is used when it is dyed we disagree exstars allows the irs to track the movement of various fuel products to help determine tax_liability although undyed diesel_fuel and dyed_diesel_fuel may have different product codes for exstars purposes they are still diesel_fuel for definitional purposes under sec_48_4081-1 for example for exstars purposes diesel_fuel low sulfur undyed has a different product code than diesel_fuel low sulfur tam-100640-12 undyed product codes and respectively but if one is added to the other the resulting product is still diesel_fuel as defined in sec_48_4081-1 taxpayer did not use the undyed diesel_fuel when it added dye it sold the diesel_fuel at the rack of approved_terminal accordingly taxpayer is not the ultimate_purchaser of the diesel_fuel caveat a copy of this technical_advice_memorandum is to be given to the taxpayer sec_6110 of the code provides that it may not be used or cited as precedent


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 1-plr-112283-03 date date legend x d1 dear this responds to your letter dated date requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on d1 the shareholders of x intended that x be treated as an s_corporation effective on d1 but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective d1 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed plr-112283-03 sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not timely file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court lori a singleton-clarke petitioner v commissioner of internal revenue respondent docket no 27975-07s filed date lori a singleton-clarke pro_se brian s jones for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a federal_income_tax deficiency of dollar_figure for after concessions the sole remaining issue for decision is whether petitioner is entitled to deduct dollar_figure in education expenses she paid in in connection with pursuing a master of business administration degree with a specialization in health care management mba hcm background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in maryland when she filed her petition i petitioner’s job history petitioner earned a bachelor of science degree in nursing bsn from new york university in petitioner became a registered nurse rn and for the next years worked in various capacities for a number of hospitals medical centers and long- term care facilities from to she worked initially as an acute bedside clinical nurse and later as a team leader supervising nurses providing acute bedside care from to she held various nursing management positions of increasing responsibility eventually serving as a director of nursing for a 150-bed subacute long-term care facility responsible for management of nurses plus technicians from to petitioner worked sequentially at three different hospitals though her titles were different her tasks activities and responsibilities were nearly identical concentrating in a nonsupervisory capacity as a quality control coordinator overall in her years of work petitioner has earned six significant awards including three citations of merit from the governor of maryland the three jobs from to were a step down in pay and in status and a purposeful decrease in responsibilities because petitioner wanted more time to focus on some personal matters however because the three jobs and their associated hiring requirements are central considerations in this case they are detailed below a civista medical center from to petitioner worked for civista medical center civista a 108-bed acute care community-based hospital in maryland her job title was quality improvement coordinator and her responsibilities were to coordinate the quality improvement and risk management activities for the hospital in this role petitioner developed and analyzed quality and risk management reports and she investigated complaints from and implemented improvements for patients visitors nurses and doctors she reported to the director of quality management to qualify for the job the minimum education and experience requirements were a bachelor of science degree in nursing or equivalent education and experience one year experience in quality assurance risk management or nursing management preferred the position also required candidates to be currently licensed as a rn in the state of maryland civista underwent a change in leadership causing petitioner to switch to a new employer children’s national medical center children’s in washington d c with a new title but continuing essentially the same duties she performed at civista b children’s national medical center from to petitioner worked for children’s her job title was center outcomes coordinator her responsibilities were similar to the ones she had at civista developing a systemic approach to measuring and improving outcomes for patients physicians and employees the job requirements stated bachelor’s in nursing or health related field required master’s in public health preferred two years quality improvement experience in a hospital setting and three years clinical experience preferred petitioner’s 2-hour commute to children’s proved to be onerous she made a lateral switch to st mary’s hospital st mary’s to shorten the commute resulting in another decrease in pay c st mary’s hospital petitioner began working at st mary’s on date her title is performance management coordinator and again similar to her responsibilities at civista and children’s her duties focus on coordinating planning and implementing the hospital’s performance improvement activities she reports to the director of quality control who in turn reports to the vice president for quality the job qualifications of a performance management coordinator at st mary’s are in pertinent part registered nurse licensure required b s health care administration required--masters preferred registration in the state of maryland mahq and national nahq associations previous experience in clinical health care including direct experience in performance improvement experience with risk management and or utilization review desired ii the mba hcm petitioner began taking courses at the university of phoenix in date graduating in date with an mba hcm she chose the university of phoenix because the institution allowed students to complete the program via online courses which was a major priority for petitioner petitioner enrolled in the program to become more effective in her then-present duties she realized that nursing had evolved greatly in the years since she earned her bachelor’s degree and she felt disadvantaged working with highly educated doctors petitioner believed that although an mba was not required for her job the degree would give her greater credibility and the courses would make her more effective in her present and future role as a quality control coordinator the university of phoenix mba hcm provides students with the business management skills needed to manage successfully in today’s health care delivery systems the program features courses in health care organizations health care finance quality and database management health care infrastructure and health care strategic management petitioner did well in her course work graduating with a dollar_figure grade point average petitioner paid the entire cost of the program none of her employers had a reimbursement policy for the mba hcm program iii the notice_of_deficiency petitioner timely filed her federal_income_tax return using the services of a paid preparer respondent examined the return and in a notice_of_deficiency determined a deficiency in federal_income_tax of dollar_figure respondent disallowed dollar_figure of petitioner’s dollar_figure in noncash and cash charitable_contributions which petitioner conceded respondent also disallowed all of petitioner’s miscellaneous_itemized_deductions consisting of dollar_figure in tax_return preparation fees and dollar_figure in unreimbursed employee business_expenses for education expenses respondent later conceded the tax_return preparation fees leaving the education expenses as the sole point of contention i burden_of_proof discussion in general the court presumes that the commissioner’s determination set forth in a notice_of_deficiency is correct and the taxpayer bears the burden of showing that the determination is in error rule a 290_us_111 under sec_7491 the burden may shift to the commissioner regarding factual matters if the taxpayer produces credible_evidence and meets the other requirements of the section petitioner did not argue that she satisfied the elements for a burden shift but even if she did the consideration of a burden is moot here because no factual issues are in dispute in other words sec_7491 is inapplicable because we decide this case entirely by application of the law to undisputed facts ii deductions in general_deductions are a matter of legislative grace and taxpayers must satisfy the statutory requirements for claiming the deductions 503_us_79 292_us_435 taxpayers may deduct ordinary and necessary expenses that they pay in connection with operating a trade_or_business sec_162 122_tc_305 generally the performance of services as an employee constitutes a trade_or_business 54_tc_374 to be ordinary the expense must be of a common or frequent occurrence in the type of business involved 308_us_488 to be necessary an expense must be appropriate and helpful to the taxpayer’s business welch v helvering supra pincite the expenditure must be directly connected with or pertaining to the taxpayer’s trade_or_business sec_1_162-1 income_tax regs for such expenses to be deductible the taxpayer must not have the right to obtain reimbursement from his employer see 788_f2d_1406 9th cir affg tcmemo_1984_533 sec_262 disallows deductions for personal living or family_expenses sec_1_162-5 income_tax regs expenses for education the regulation interpreting sec_162 trade_or_business_expenses governs whether a taxpayer may deduct education expenses the validity of this longstanding regulation is not in dispute the regulation provides that a taxpayer may deduct education expenses as ordinary and necessary business_expenses if the education-- maintains or improves skills required by the individual in his employment or other trade_or_business or meets the express requirements of the individual’s employer or the requirements of applicable law or regulations imposed as a condition to the retention by the individual of an established employment relationship status or rate of compensation sec_1_162-5 and income_tax regs conversely the regulation provides that if the education qualifies the individual for a new trade_or_business then the education expenses are not deductible because the education is a personal_expense or constitutes an accumulation of personal capital sec_1_162-5 income_tax regs whether the education qualifies the taxpayer for a new trade_or_business is an objective inquiry analyzing the tasks and activities the taxpayer was able to perform before the education in comparison to those the taxpayer was qualified to perform afterward 62_tc_270 52_tc_1106 affd per curiam 443_f2d_29 9th cir in other words the relevant standard is whether the education objectively qualifies the taxpayer for a new trade_or_business 78_tc_550 glenn v commissioner supra accordingly the taxpayer’s subjective intent in undertaking the education is not relevant and likewise it is not material whether the taxpayer does in fact become employed in a new trade_or_business 66_tc_492 56_tc_1357 iii application of the law to petitioner’s factual situation a petitioner’s new job at st mary’s respondent contends that without receiving the mba hcm in date petitioner would not have obtained her final job the one she started in date at st mary’s because the st mary’s job description in addition to requiring an rn license which petitioner already possessed required at least a bachelor of science in health care administration which petitioner had not previously earned though the titles of the jobs varied petitioner’s three jobs since were nearly identical requiring serving as a quality control coordinator at acute care hospitals and medical centers we believe that st mary’s would have gladly hired petitioner as a performance management coordinator even without the mba hcm all three quality control positions required an rn license or a bachelor’s in nursing with clinical or risk management experience credentials which petitioner possessed the first two employers civista and children’s had hired petitioner without the mba hcm further petitioner was a multiple award winner having received recognition three times from the governor of maryland and from three other prominent organizations moreover petitioner had worked her way up to serving as a director of nursing responsible for nurses plus additional technicians clearly indicating high competence all three quality control positions while important were a step down in status and pay from her former duties for all of these reasons we find that the mba hcm may have been a helpful addition to her qualifications but was not an essential prerequisite for petitioner to secure the position at st mary’s b whether an mba qualifies taxpayers for any new trade_or_business the final remaining inquiry then is whether as an objective matter the mba hcm qualifies petitioner for any new trade_or_business not just the particular job at st mary’s that she acquired respondent contends that the mba hcm does qualify petitioner for a new trade_or_business because in respondent’s words under the regulation the tasks and activities she was qualified for before she obtained the degree are different than those which she is qualified to perform afterwards we disagree an mba degree is different from a degree that serves as foundational qualification to attain a professional license for instance this court had denied deductions for law school expenses because a law degree qualifies a taxpayer for the new trade_or_business of being a lawyer see eg bodley v commissioner supra 54_tc_398 an mba is a more general course of study that does not lead to a professional license or certification allemeier v commissioner tcmemo_2005_207 this court has had differing outcomes when deciding whether a taxpayer may deduct education expenses related to pursing an mba depending on the facts and circumstances of each case the decisive factor generally is whether the taxpayer was already established in their trade_or_business for example in the following two cases we held that the taxpayers were not entitled to deduct their mba expenses in 90_tc_460 affd without published opinion 869_f2d_1491 6th cir the taxpayer had not established a trade_or_business after graduating with an undergraduate degree in date he worked during the summer but then promptly commenced his mba coursework in date similarly in schneider v commissioner tcmemo_1983_753 the taxpayer after graduating from west point served honorably in the army for years before resigning from active_duty with the rank of captain and immediately starting in harvard’s mba program although the taxpayer established outstanding management experience in the army he had never worked in business and therefore we decided his work as an army officer is a different trade_or_business from the consulting business for which his course of study at harvard prepared him id in contrast in sherman v commissioner tcmemo_1977_ we held that another former army officer was entitled to deduct the expense of his harvard mba the difference is that the former officer in sherman had worked for years as a civilian employee after resigning his army commission and before matriculating to harvard moreover the duties of the taxpayer in sherman during hi sec_2 years of civilian work included formulating and monitoring management plans and reviewing and evaluating policies involving purchasing inventory control and personnel management these were the types of subject matters taught in the mba program two other cases also illustrate situations where an mba did not lead to a new trade_or_business in allemeier v commissioner supra before beginning an mba program the taxpayer had already worked years for a pediatric orthodontic laboratory during which time his responsibilities expanded to include designing marketing strategies for additional products organizing informational seminars and traveling extensively to conventions to lead seminars this court held that the taxpayer’s trade_or_business did not significantly change because the mba merely improved preexisting skills for the same general duties he was already performing before enrolling in the mba program likewise in blair v commissioner tcmemo_1980_488 the taxpayer initially completed year of undergraduate coursework she then spent the next years concentrating on raising a family while also working for small companies gaining the equivalent of years’ experience in mostly clerical and secretarial duties she also acquired some familiarity with bookkeeping payroll and personnel matters over the next years the taxpayer earned a bachelor of arts degree in english and then she was hired by a large international corporation where she worked for a little more than year as a personnel representative before commencing her mba the corporation promoted the taxpayer to personnel manager within months after starting the 2-year mba program this court held that under any realistic interpretation petitioner’s new duties as a personnel manager did not constitute a new trade_or_business because she was already engaged in the same type of work with the only major difference being that as a personnel manager she made decisions while as a personnel representative she made only recommendations id neither the difference in duties nor the new title was enough to constitute a new trade_or_business analyzing petitioner’s situation her facts and circumstances far more closely resemble the cases that allowed a deduction for pursuing an mba petitioner is unlike the student in link v commissioner supra who went straight from his undergraduate degree into an mba program and the officer in schneider v commissioner supra who went straight from the army into an mba program petitioner is considerably closer in circumstance to the taxpayers in sherman v commissioner supra allemeier v commissioner tcmemo_2005_207 and blair v commissioner supra who had years years and year respectively of experience performing tasks and activities in their chosen professions before beginning their mba programs the facts in favor of petitioner are even stronger than those in the three cases above where the taxpayers prevailed petitioner worked for year as a quality control coordinator and had more than years of directly related work experience gaining vast clinical and managerial knowledge in acute and subacute health care settings before beginning the university of phoenix mba hcm program in summary the mba hcm may have improved petitioner’s preexisting skill set but objectively she was already performing the tasks and activities of her trade_or_business before commencing the mba for all of the above reasons we find that petitioner’s mba hcm did not qualify her for a new trade_or_business and we hold therefore that petitioner may deduct her education expenses for to reflect our disposition of the issues decision will be entered under rule


internal_revenue_service number release date index number ------------------------------------ ------------------------------- --------------------- --------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-111213-08 date date legend x ----------------------------------------------------------- a ------------------- --------------------------------- country country date date date date date date year year entity entity stock exchange --------------------- -------- ------------------- ------------------ ------------------ ------------------ ---------------------- ---------- ------- ------- ------------------------------- ---------------------- -------------------------------------- plr-111213-08 y -------- dear ---------------- this letter is in response to a letter dated date submitted on behalf of x requesting a ruling that x is not a publicly_traded_partnership for purposes of sec_7704 of the internal_revenue_code facts x was originally organized as an entity under the laws of country a a country entity acquired all of the outstanding ordinary shares of x on date and continues to own all of x’s ordinary shares prior to date x was a per_se_corporation within the meaning of sec_301_7701-2 of the procedure and administration regulations on date x re-registered as an entity under the laws of country subsequently x filed an election on form_8832 entity classification election to be treated as a partnership for federal tax purposes effective date the election was part of a larger restructuring undertaken by a and related entities in addition to its ordinary shares x has outstanding b shares which are non-voting non-cumulative preference shares that are widely held prior to date the b shares were listed and traded on stock exchange on date x de-listed its b shares from stock exchange holders of b shares have the right to sell their shares to x for y per b share on or around date of each year from year to year additionally on date x implemented an off-market repurchase program pursuant to which the owners of the b shares may sell their shares to x twice per month for y per b share x has the right to repurchase all outstanding b shares without the consent of the b shareholders in year for y per b share x intends to exercise this right to redeem all of the b shares in year other than these rights described there is no right or obligation on the part of either x or the b shareholders to redeem or sell the b shares x represents that no b shares have been issued since the initial offering of b shares and that x will not issue any interests on or after date other than ordinary shares issued to a x further represents that no partner or person related to any partner within the meaning of sec_267 or sec_707 provides contemporaneous opportunities to acquire interests in similar or related partnerships that represent substantially identical investments finally x represents that no person regularly makes available to the public bid or offer quotes with respect to interests in x and no person stands ready to effectuate buy or sell transactions at the quoted prices law and analysis plr-111213-08 sec_7704 provides that except as provided in sec_7704 a publicly_traded_partnership will be treated as a corporation sec_7704 provides that for purposes of sec_7704 the term publicly_traded_partnership means any partnership if interests in such partnership are traded on an established_securities_market or interests in such partnership are readily_tradable on a secondary market or the substantial equivalent thereof sec_1_7704-1 provides that transfers pursuant to a closed end redemption plan are disregarded in determining whether interests in a partnership are readily_tradable on a secondary market or the substantial equivalent thereof sec_1_7704-1 provides that for purposes of sec_1_7704-1 a redemption or repurchase_agreement as defined in sec_1_7704-1 is a closed end redemption plan only if i the partnership does not issue any interest after the initial offering other than the issuance of additional interests prior to date and ii no partner or person related to any partner within the meaning of sec_267 or sec_707 provides contemporaneous opportunities to acquire interests in similar or related partnerships that represent substantially identical investments sec_1_7704-1 provides that for purposes of sec_7704 and sec_1_7704-1 a redemption or repurchase_agreement means a plan of redemption or repurchase maintained by a partnership whereby the partners may tender their partnership interests for purchase by the partnership another partner or a person related to another partner within the meaning of sec_267 or sec_707 no interests in x are traded on an established_securities_market the repurchase program described above and the rights of b shareholders to sell their b shares to x on or around date each year from year to year qualify as closed end redemption plans within the meaning of sec_1_7704-1 therefore redemptions of b shares by x pursuant to those plans should be disregarded in determining whether interests in x are readily_tradable on a secondary market or the substantial equivalent thereof conclusions based solely on the facts submitted and the representations made we conclude that x is not a publicly_traded_partnership within the within the meaning of sec_7704 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 plr-111213-08 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely dianna k miosi dianna k miosi chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court ricardo garcia pacheco and ana milian petitioners v commissioner of internal revenue respondent docket no 16574-08s filed date ricardo garcia pacheco and anna milian pro sese leslie a hale for respondent gerber judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a dollar_figure income_tax deficiency and a dollar_figure sec_6662 accuracy-related_penalty for petitioners’ tax_year the deficiency is attributable to the disallowance of certain business_expense deductions after concessions by the parties three issues remain for our consideration whether ricardo garcia pacheco petitioner is entitled to deductions for finder’s fees gifts paid to individuals who provided leads for future real_estate transactions whether petitioner is entitled to deductions for advertising expenses in his real_estate business and whether petitioners are liable for an accuracy-related_penalty under sec_6662 background petitioners resided in california at the time their petition was filed petitioner is a real_estate broker and operated a real_estate sales business during during he earned commissions from the sales of approximately residences he reported gross_income in excess of dollar_figure for petitioner specialized in houses that had been the subject of foreclosure by the u s department of veterans affairs and sold the homes to buyers in the spanish-speaking community in petitioner’s community it was customary to conduct business by means of a handshake and payments were usually made in cash each time he concluded a sale petitioner would ask buyers to let others in the community know about his business many of petitioner’s real_estate transactions emanated from referrals by past customers each time such a real_estate_transaction closed petitioner would give the referring former customer a referral fee which he called a gift in an amount ranging from dollar_figure to dollar_figure petitioner did not keep specific records of these payments petitioner used two forms of advertising to promote his real_estate business on occasion he and his wife would distribute pamphlets door-to-door advertising his business activity during petitioner paid dollar_figure on two separate occasions to have big_number pamphlets printed and prepared for distribution another method of advertising was for petitioner to appear on spanish-speaking radio programs petitioner would pay dollar_figure in cash to someone at the radio station and in turn he was made the subject of a 30-minute on-the-air interview about his real_estate sales activity petitioner was interviewed on the radio three times during discussion2 respondent disallowed dollar_figure of petitioner’s claimed business_expense deductions including gifts--dollar_figure commissions--dollar_figure and advertising--dollar_figure at trial respondent conceded the dollar_figure commissions deduction on the basis of petitioner’s documentation petitioner however did not provide documentary_evidence concerning the other two items petitioner explained that the custom of doing business in cash in his community limited his ability to provide documentation a taxpayer is entitled to deduct the ordinary and necessary expenses_incurred in carrying_on_a_trade_or_business sec_162 taxpayers are generally required to maintain records of their business activity but this court may if not statutorily prohibited from so doing approximate or estimate the amounts of deductions or expenses even though adequate_records may not have been maintained sec_274 sec_6001 85_tc_731 39_f2d_540 2d cir although petitioner deducted dollar_figure as gifts to former customers for bringing in new customers it is well established that these amounts are referral fees and not gifts petitioner 2neither party raised any question regarding the burden_of_proof under sec_7491 petitioner has the burden_of_proof as to his entitlement to the claimed deductions and respondent has the burden of production regarding the sec_6662 penalty see sec_7491 c did not pay the referral fee until after a referred transaction closed it was apparently well known that petitioner made such payments and the referrals provided a reliable source of business neither the referrals nor the corresponding payments were made out of disinterested generosity accordingly the recordkeeping requirement of sec_274 applicable to gifts does not apply to these payments the problem is petitioner’s lack of adequate recordkeeping to support the amounts claimed in the light of petitioner’s testimony which we found credible we hold that petitioner is entitled to deduct dollar_figure for referral fee expenses for and that respondent’s disallowance of the remaining referral fee expenses is sustained with respect to petitioner’s claimed dollar_figure advertising expense deduction we have likewise encountered a lack of adequate recordkeeping the expenditures_for advertising would obviously be an ordinary and necessary business_expense however on this record we find that dollar_figure was expended for pamphlets and dollar_figure for radio broadcast advertising accordingly we hold that petitioner is entitled to deduct dollar_figure for advertising expenses for and that respondent’s disallowance of the remaining advertising expenses is sustained finally respondent determined an accuracy-related_penalty with respect to the income_tax deficiency sec_6662 and b and provides for a 20-percent penalty on any part of an underpayment attributable to negligence or a substantial_understatement_of_income_tax here the question centers on whether petitioners were negligent with respect to the adjustments respondent determined negligence includes a failure to make a reasonable attempt to comply with among other provisions the requirement to keep adequate books_and_records there is no doubt that petitioners are liable for the sec_6662 penalty with respect to the entire underpayment for the failure to keep any records or to properly report all income although petitioners have pointed out that business is conducted informally and in cash in their community there is no reason or explanation for the failure to obtain receipts and or to maintain records of the business activity petitioner is successful in his real_estate business and the types of expenditures he deducted are to be expected however there must be some manner for the government to verify this business activity petitioner is admonished to keep adequate_records to avoid future controversy to reflect the foregoing and concessions of the parties decision will be entered under rule


significant index no department of the treasury internal_revenue_service washington d c q tax_exempt_and_government_entities_division nov i set ep pat al this letter constitutes notice that with respect to the corporation plan we have granted _a conditional waiver of the minimum_funding_standard for the plan_year ending si effective as of the close of business the corporation plan merged into the merged plan __-_-- this conditional waiver for the plan_year ending ro granted in accordance with sec_412 of the internal_revenue_code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the waived amount is the contribution which would otherwise be required to reduce the balance in the funding_standard_account to zero as of the end of the plan_year for which this conditional waiver has been granted has been the company has anil to ae year and has experienced net losses in each of its last six fiscal years on date the company and three of its wholly owned subsidiaries filed voluntary petitions for reorganization under chapter of the federal bankruptcy laws on date two months later than originally planned the company emerged from bankruptcy through a plan in which its debt and interest costs were substantially reduced in addition the company continued implementing a plant rationalization and overhead reduction program as well as certain lean manufacturing and strategic sourcing initiatives the company is a manufacturer of product bankruptcy the cost of its primary raw material spiked upward to an amount approximately twice that of historical levels and has remained at that increased amount the resultant increased expense in raw materials along with the costs associated with the two month delay in the company’s emergence from bankruptcy has resulted in a short -term liquidity crisis for the company shortly before its emergence from the company has a substantial market presence in the sale and manufacture of product and forecasts a return to profitability in fiscal cash flows in fiscal hb even after the impact of the required pension payments including the amortization of the waived amounts and a return to positive as of he vatue of the assets of the corporation plan was equal to of the plan’s current_liability because the prospects for recovery are uncertain and because the plan is under-funded we are granting this waiver subject_to the following conditions the contributions required to satisfy the minimum_funding_standard for the merged plan for the plan years nin a shall be timely made within the meaning of sec_412 of the code without waivers being granted for such years -_-_-- anc the waiver of the minimum_funding_standard for the corporation plan for the plan_year ended rn shall be secured within sixty days of the date of this letter in a manner acceptable to the pension_benefit_guaranty_corporation pbgc the pbgc shall be reimbursed by the company for any costs associated with getting the security in place such as appraisals outside legal work etc if these conditions are not satisfied this waiver is retroactively null and void you agreed to these conditions in a letter dated date which was transmitted by facsimile your attention is called to sec_412 of the code and sec_304 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits to change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived_funding_deficiency remains unamortized please note that any amendment to a profit sharing plan or any other retirement plans covering employees covered by this plan maintained by the company to increase the liabilities of those plans would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan by the company covering employees covered by this plan would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa 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 the date of this when filing form_5500 for the plan_year ending po letter should be entered on schedule b actuarial information a copy of this letter is being sent to your authorized representative in accordance with a power_of_attorney form on file a copy of this letter is also being sent to the manager employee_plans classification in be furnished to the enrolled_actuary for the plan acopy of this letter should if you have any questions on this ruling letter please contact sincerely carol d gold director employee_plans


department of the treasury internal_revenue_service washington d c date dec employer_identification_number a d i d i h o u o h dear sir or madam contact person identification_number telephone number fax number - tco this is in reply to your request for rulings with respect to the federal_income_tax consequences of the pledge by a to b of an option to purchase a's common_stock the option and subsequent transfer to and exercise by an unrelated sec_501 c organization under sec_170 sec_511 sec_4940 sec_4941 and sec_4942 of the internal_revenue_code_of_1986 facts ais a for-profit corporation a's common_stock is publicly held and listed on the national association of securities dealers automatic quotation nasdaq stock exchange ais the common parent of an affiliated_group_of_corporations filing consolidated federal_income_tax returns a together with its affiliates including joint ventures operates hospitals and related health care entities b is a delaware non-stock non-profit corporation that is exempt from federat income_tax under sec_501 a of the code and is an organization described in sec_501 c of the code the service has recognized b as a private_foundation as defined in sec_509 of the code a is a substantial_contributor to b and as such is a disqualified_person with respect to b pursuant to sec_4946 of the code b makes gifts to charitable organizations selected by its directors it is anticipated that the majority of the gifts will be made to charitable organizations that are located in the communities in which a's hospitals are located and that are dedicated to improving those communities and to fostering community activities 36l as of date a pledged the option to b which provides b with an option to purchase big_number shares of a’s common_stock at a par_value of x_per share the common_stock at an option_price of y per share representing the closing price of a share of common_stock on the nasdaq stock exchange on the date the pledge was made the option is subject_to the condition that a and b receive the rulings requested the option is exercisable in whole or in part at any time and from time to time during the period commencing on the date when the last of the rulings from the service is received and ending on date b may transfer and assign the option or any portion thereof only to one or more unrelated charitable organizations described in sec_170 and sec_501 of the code the transferee s may not transfer or assign the option or any portion thereof without the written consent of a itis expected that b will transfer the option to one or more unrelated charitable organizations and that the unrelated charitable_organization transferee s will pay to b a price for the option equal to the difference between the fair_market_value of the common_stock subject_to the option on the date of the transfer and the exercise price of the option less an agreed upon discount these terms will be negotiated at arm's-iength it is further expected that the unrelated charitable_organization transferee s will thereafter exercise the option before its expiration the business_purpose of the pledge of the option is to further the charitable purposes of b and other charitable organizations rulings requested the following are the requested rulings the pledge of the option by a to b does not constitute an act of self-dealing between a private_foundation and a disqualified_person under the provisions of sec_4941 of the code the exercise of the option by an unrelated charitable_organization to whom the option will be transferred will not constitute an act of self dealing between b and a disqualified_person under sec_4941 of the code after a transfer of the option by b to an unrelated charitable_organization a will be entitled to a charitable_contribution_deduction under sec_170 of the code upon the exercise of the option in an amount equal to the difference between the exercise price and the fair_market_value of the common_stock on the date of exercise subject_to the limitations on the amount of a charitable_contribution_deduction of a corporation under sec_170 of the code the option will be excluded from the assets taken into account in computing the amount of the minimum_investment_return of b for purposes of determining the tax on failure to distribute income under sec_4942 of the code b's proceeds from the sale of the option to an unrelated organization exempt under sec_501 of the code are excluded from the computation of b's net_investment_income under sec_4940 of the code gain on b's sale of the option to unrelated sec_501 c organizations will not be subject_to the tax on unrelated_business_taxable_income imposed by sec_511 of the code law and analysi sec_1 the pledge of the option by a to b does not constitute an act of self-dealing between a private_foundation and a disqualified_person under the provisions of sec_4941 of the code sec_4941 of the code imposes a tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 of the code provides that the term self-dealing includes any lending of money or other extension of credit between a private_foundation and a disqualified_person however sec_53 d -2 c of the income_tax regulations exempts the pledge of the option by providing that emphasis added the making of a promise pledge or similar arrangement to a private_foundation by a disqualified_person whether evidenced by an oral or written_agreement a promissory note or other instrument of indebtedness to the extent motivated by charitable intent and unsupported by consideration is not an extension of credit within the meaning of this paragraph before the date of maturity the pledge of the option was given without any consideration to further the charitable purposes of b and other unrelated charitable organizations therefore the pledge of the option by a to b does not constitute self-dealing the exercise of the option by an unrelated charitable_organization to whom the option will be transferred will not constitute an act of self-dealing between b anda disqualified_person under sec_4941 of the code the transferee of the option must be an unrelated charitable_organization described in sec_170 and sec_501 of the code for purposes of sec_4941 of the code the term disqualified_person does not include any organization which is described in sec_501 of the code sec_53_4946-1 of the regulations the term self-dealing does not include a transaction between a private_foundation and a disqualified_person where the disqualified person's status arises only as a result of the transaction sec_53 d -1 a of the regulations the transferee unrelated charity will not be controlled by b as control is defined in sec_53 d - b of the regulations therefore the exercise of the option by the unrelated charitable_organization transferee will not constitute an act of self-dealing between aand b after a transfer of the option by b to an unrelated charitable_organization a will be entitled to a charitable_contribution_deduction under sec_170 of the code upon the exercise of the option in an amount equal to the difference between the exercise price and the fair_market_value of the common_stock on the date of exercise subject_to the limitations on the amount of a charitable_contribution_deduction of a corporation under sec_170 of the code sec_170 of the code provides subject_to certain limitations a deduction for contributions and gifts to or for_the_use_of organizations described in sec_170 of the code payment of which is made within the taxable_year sec_1 170a-l a of the regulations provides a deduction for any charitable_contribution actually paid during the taxable_year irrespective of the date on which the contribution is pledged revrul_68_174 1968_1_cb_81 concludes that a debenture bond or a promissory note issued and delivered by the obligor to a charitable_organization represents a mere promise to pay at a future date and is nota payment for purposes of deducting a contribution under sec_170 of the code sec_170 of the code provides that the total deduction allowed a corporation cannot exceed ten percent of the corporation's taxable_income computed without regard to certain deductions sec_1 170a- c of the regulations provides that if a contribution is made in property other than money the amount of the contribution is the fair_market_value of the property at the time of the contribution the fair_market_value is the price at which the property would change hands between a willing buyer and a willing seller neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts revrul_75_348 c b holds that a corporation that pledges to sell shares of common_stock at a specified price to an educational_organization is entitled to a charitable_contribution_deduction in the taxable_year the pledge is exercised for the excess of the fair_market_value of the shares on the date of the exercise over the exercise price and no gain will be recognized when the pledge is exercised revrul_82_197 1982_1_cb_72 concludes that an individual who grants an option on real_property to a charitable_organization is allowed a charitable deduction for the year in which the organization exercises the option in the amount of the excess of the fair_market_value of the property on the date the option was exercised over the exercise price accordingly a will be entitled to a deduction in an amount equal to the difference between the exercise price and the fair_market_value of the common_stock subject_to the option on the date of the exercise of the option subject_to the limitations of sec_170 of the code the option will be excluded from the assets taken into account in computing the amount of the minimum_investment_return of b for purposes of determining the tax on failure to distribute income under sec_4942 of the code sec_4942 of the code imposes a tax on the undistributed_income_of_a_private_foundation the undistributed_income is defined in part as the amount by which qualified distributions are less than a minimum_investment_return of five percent of the aggregate fair_market_value of all assets of the foundation other than specifically excluded assets sec_53 4942a-2 c iv of the regulations provides that any pledge to the foundation of money or property whether or not the pledge may be legally enforced is not to be included in determining the minimum_investment_return accordingly the option is excludable from the assets taken into account in computing the amount of the minimum_investment_return of b for purposes of determining the tax on failure to distribute income under sec_4942 of the cade b's proceeds from the sale of the option to an unrelated organization exempt under sec_501 of the code are excluded from the computation of b's net_investment_income under sec_4940 of the code sec_4940 of the code imposes a tax on the net_investment_income of tax exempt private_foundations net_investment_income is gross_investment_income and capital_gains less attributable expenses sec_4940 of the code for this purpose capital_gains includes only gains and losses from the sale_or_other_disposition of property used for the production of interest dividends rents and royalties and property used for the production of unrelated_business_income under sec_511 of the code unless the gain was taxed under such section sec_4940 of the code sec_53_4940-1 of the regulations provides among other things that property will be treated as held for investment purposes even if immediately disposed of if it is property of a type which generally produces interest dividends rents royalties or capital_gains through appreciation in zemurry foundation v united_states 755_f2d_404 sth cir the fifth circuit held that gain from the sale of timberland was not subject_to the tax imposed on net_investment_income under sec_4940 of the code it held that the teguiation could not subject_to the tax capital_gains derived from the property of the type that generally produced income through appreciation and not from interest dividends rents or royalties stock_options are not property susceptible to use to produce interest dividends rents or royalties accordingly b's proceeds from the sale of the option to an unrelated organization exempt under sec_501 of the code are excluded from the computation of b’s net_investment_income under sec_4940 of the code bos gain on b's sale of the option to unrelated sec_501 organizations will not be subject_to the tax on unrelated_business_taxable_income impose by sec_511 a of the code sec_511 a of the code imposes a tax on unrelated_business_taxable_income earned by sec_501 organizations under sec_512 of the code the term unrelated_business_taxable_income means gross_income derived from any unrelated_trade_or_business regularly carried on by it less directly connected deductions as modified by sec_512 of the code an unrelated_trade_or_business is among other things the conduct of a business which is not substantially related aside from the need to raise money or make profit to the organization's exempt_purpose sec_512 of the code provides that all gains or losses from the sale exchange or other_disposition of property are excluded from the computation of unrelated_business_taxable_income other than property that is a stock_in_trade or inventory or b held_for_sale to customers in the ordinary course of a trade_or_business b will not hold the option either as stock_in_trade inventory or for sale in the ordinary course of business thus the gain on the sale of the option will be excluded from the computation of unrelated_business_taxable_income accordingly gain on b's sale of the option to unrelated organizations described in sec_501 of the code will not be subject_to the tax on unrelated_business_taxable_income imposed by sec_511 of the code therefore we rule has follows ruling sec_1 the pledge of the option by a to b does not constitute an act of self-dealing between a private_foundation and a disqualified_person under the provisions of sec_4941 of the code the exercise of the option by an unrelated charitable_organization to whom the option will be transferred will not constitute an act of self dealing between b and a disqualified_person under sec_4941 of the code after a transfer of the option by b to an unrelated charitable_organization a will be entitled to a charitable_contribution_deduction under sec_170 of the code upon the exercise of the option in an amount equal to the difference between the exercise price and the fair_market_value of the common_stock on the date of exercise subject_to the limitations on the amount of a charitable_contribution_deduction of a corporation under sec_170 of the code the option will be excluded from the assets taken into account in computing the amount of the minimum_investment_return of b for purposes of determining the tax on failure to distribute income under sec_4942 of the code be b's proceeds from the sale of the option to an unrelated organization exempt under sec_501 of the code are excluded from the computation of b's net_investment_income under sec_4940 of the code gain on b's sale of the option to unrelated sec_501 organizations will not be subject_to the tax on unrelated_business_taxable_income imposed by sec_511 of the code this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent the rulings in this letter only apply the specifically indicated sections of the code and regulations to the facts that you have represented in this letter we do not rule on the applicability of any other sections of the code and regulations to your case because this letter could help resolve any future questions about your income_tax responsibility please keep a copy of this ruling in your permanent records sincerely yours ale ware ty et ah tage marvin friedlander chief exempt_organizations technicat branch je


internal_revenue_service department of the treasury index number u i l no washington dc person to contact telephone number refer reply to cc dom p si plr-115848-99 date december number release date legend company state shareholder a dear this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated in state on a company has one shareholder shareholder it is represented that company has intended to be an s_corporation since its incorporation believing itself to be an s_corporation company has operated accordingly since a after the end of its taxable_year beginning on a however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on a sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 explains when an s election will be effective generally if an s election is made within the first two and one half months of a corporation's taxable_year then that corporation will be treated as an s_corporation for the year in which the election plr-115848-99 is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on a however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of a with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------------- ---------------------- ---------------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-125893-05 date june ------------------ --------------------------- legend x -------------------------------------------------- state d1 d2 dear ----------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code -------------------------- ---------------------- facts according to the information submitted x was incorporated on d1 under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d2 but the election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a plr-125893-05 corporation’s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not file a timely election to be treated as an s_corporation under sec_1362 effective d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely upon the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d2 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center 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 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 dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc