t c memo united_states tax_court rodney j and lorraina s huang petitioners v commissioner of internal revenue respondent docket no filed date rodney j and lorraina s huang pro_se david a winsten for respondent memorandum findings_of_fact and opinion cohen chief_judge respondent determined deficiencies of dollar_figure and dollar_figure in petitioners’ federal income taxes for and respectively and penalties of dollar_figure and dollar_figure under sec_6662 for and respectively unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure the issues for decision are whether petitioners are entitled to deduct expenses claimed on schedules a c and e of their form sec_1040 for the years in issue and whether they are liable for the penalties determined by respondent findings_of_fact petitioners resided in hawaii at the time that they filed their petition during and petitioners maintained journals of their expenditures by cash and by check including but not limited to expenditures_for meals at restaurants for groceries for items at department stores and at drugstores for unidentified supplies and for medical_expenses the recorded expenditures were transferred to a monthly summary on the monthly summary the majority of the expenditures including auto expense electricity entertainment laundry dollar_figure per month rent supplies telephone and water were claimed to be deductible the monthly allocations recorded for and were as follows month date date date date date date date date date date date date date date date date date date date date date date date date total deductible total personal dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure on their federal tax returns for and petitioners reported among other things the following items items wages losses from schedule c losses from schedule e dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure on schedule a for petitioners claimed dollar_figure in unreimbursed employee_expenses including dollar_figure vehicle expense dollar_figure parking fees tolls and local transportation dollar_figure travel_expenses while away from home and dollar_figure meals and entertainment petitioners’ schedules c reported that they were in a telecommunications business known as today’s enterprises petitioners reported no gross_receipts from this business during or but claimed the following expenses items advertising car and truck expenses office expense dollar_figure dollar_figure dollar_figure -- -- dollar_figure dollar_figure rent vehicles machinery and equipment other business property -- supplies travel meals and entertainment enter of line 24b subject_to limitations subtract line 24c from line 24b utilities other expenses equipment publications tentative profit loss dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure big_number dollar_figure dollar_figure -- dollar_figure dollar_figure dollar_figure -- big_number dollar_figure dollar_figure dollar_figure -- the amounts claimed as losses on schedules e attached to petitioners’ returns for dollar_figure and dollar_figure represented dollar_figure per month in and dollar_figure per month in allegedly owed to petitioners by today’s enterprises for rent beginning date petitioners claimed the loss as rent not received because today’s enterprises had no income at least as to the same amount was deducted as rent on petitioners’ schedule c the rents claimed were for petitioners’ personal_residence respondent determined that petitioners’ deductible losses were dollar_figure for and dollar_figure for the remaining deductions claimed were disallowed because petitioners had not established that they paid_or_incurred the expenses during the years in issue or that the expenses were ordinary and necessary business_expenses opinion petitioners contend that they commenced a business in date and that all of the deductions claimed on their returns were correct they assert that their representations must be accepted and that the internal_revenue_service irs has illegally disallowed their deductions notwithstanding the court’s attempt to direct their testimony to specific items they simply persist in insisting that the court require the irs to rescind and abate the notice_of_deficiency petitioners did not present any documents supporting their contentions that items listed in their journals were deductible petitioners have the burden of proving that respondent’s determination is erroneous rule a 503_us_79 512_f2d_882 9th cir affg tcmemo_1972_133 their assertion that their return was correct as filed has no evidentiary weight see 71_tc_633 sec_262 provides as follows sec_262 personal_living_and_family_expenses a general_rule --except as otherwise expressly provided in this chapter no deduction shall be allowed for personal living or family_expenses b treatment of certain phone expenses --for purposes of subsection a in the case of an individual any charge including taxes thereon for basic local_telephone_service with respect to the lst telephone line provided to any residence of the taxpayer shall be treated as a personal_expense the tax returns that they filed and the journals that petitioners presented create a strong inference that petitioners have improperly deducted many household and living_expenses they have failed to present evidence that would overcome this inference sec_274 requires with respect to entertainment_expenses that taxpayers substantiate among other things the business_purpose of each expense and the business relationship to the taxpayer of persons entertained although they deducted thousands of dollars each year for entertainment petitioners have failed to substantiate any of those expenses as required by sec_274 the amounts claimed apparently included in many instances three meals a day for petitioners and their dependent son although they claim that they were entertaining potential customers this claim is inherently improbable petitioner rodney j huang testified that the total monthly rent for petitioners’ residence was dollar_figure and that he allocated dollar_figure to business_expense for in the amount claimed was dollar_figure per month the records of personal items each month during the years in issue however showed less than the alleged personal portion of the rent moreover in addition to recording alleged business rent on schedule c for petitioners claimed a rental loss on schedule e because they did not recover the rent from the business thus the rent was deducted twice on that return in any event a cash_basis taxpayer cannot deduct as a loss income that was not received or previously reported see eg 313_us_28 390_f2d_598 9th cir affg tcmemo_1966_62 petitioners’ claims regarding rent expense are patently untenable in addition petitioners have not made the showing required to deduct expenses relating to business use of their home sec_280a provides in pertinent part as follows a general_rule --except as otherwise provided in this section in the case of a taxpayer who is an individual or an s_corporation no deduction otherwise allowable under this chapter shall be allowed with respect to the use of a dwelling_unit which is used by the taxpayer during the taxable_year as a residence c exceptions for certain business or rental use limitation on deductions for such use certain business use --subsection a shall not apply to any item to the extent such item is allocable to a portion of the dwelling_unit which is exclusively used on a regular basis-- a as the principal_place_of_business for any trade_or_business of the taxpayer b as a place of business which is used by patients clients or customers in meeting or dealing with the taxpayer in the normal course of his trade_or_business or c in the case of a separate structure which is not attached to the dwelling_unit in connection with the taxpayer’s trade_or_business in the case of an employee the preceding sentence shall apply only if the exclusive use referred to in the preceding sentence is for the convenience of his employer limitation on deductions --in the case of a use described in paragraph or and in the case of a use described in paragraph where the dwelling_unit is used by the taxpayer during the taxable_year as a residence the deductions allowed under this chapter for the taxable_year by reason of being attributed to such use shall not exceed the excess of-- a the gross_income derived from such use for the taxable_year over b the sum of-- i the deductions allocable to such use which are allowable under this chapter for the taxable_year whether or not such unit or portion thereof was so used and ii the deductions allocable to the trade_or_business or rental_activity in which such use occurs but which are not allocable to such use for such taxable_year petitioners have failed to satisfy any of the requirements of sec_280a specifically they have failed to show that any portion of their residence was used exclusively for business moreover because their alleged business had no income they cannot deduct any of the costs of maintaining their home with respect to the employee business_expenses claimed on schedule a for petitioners presented neither explanation nor substantiation the amounts claimed are again inherently unreasonable further it appears that some of the items claimed on schedule a were duplicated on schedule c petitioners claimed on schedules a and c for total meals and entertainment_expenses of dollar_figure which is approximately percent of their total reported income for that year petitioners in claimed vehicle expenses relating to alleged business use of two cars for a total of dollar_figure but they did not provide any evidence of how the cars were used either in mr huang’s employment or in petitioners’ telecommunications business sec_6662 provides among other things for a penalty equal to percent of the portion of an underpayment attributable to negligence negligence is defined in sec_6662 as follows c negligence --for purposes of this section the term negligence includes any failure to make a reasonable attempt to comply with the provisions of this title and the term disregard includes any careless reckless or intentional disregard mr huang testified that petitioners did not consult any_tax preparer accountant or lawyer with respect to the claims made on their returns on consideration of the record in this case respondent’s determination of the penalties must be sustained decision will be entered for respondent


infernal revenue service_department of the treasury index number washington dc person to contact telephone number refer reply to cc dom corp plr-119393-98 date february parent sub purchaser sellers target corp company official business a plr-119393-98 authorized representatives date a date b date c x dear this letter responds to your authorized representatives’ letter dated date requesting an extension of time under sec_301_9100-1 and sec_301 of the procedure and administration regulations to file an election the extension is being requested for purchaser as the common parent of the consolidated_group of which the purchasing_corporation is a member and as the united_states_shareholder of the controlled foreign purchasing_corporation to file an election under sec_338 of the internal_revenue_code and sec_1_338-1 and sec_1_338-1 of the income_tax regulations with respect to the purchaser's acquisition of the stock of target sometimes hereinafter referred to as the election on date a additional information was received in letters dated date and date the material information submitted for consideration is summarized below parent is the common parent of a consolidated_group that has a calendar taxable_year and uses the accrual_method of accounting purchaser is a wholly owned target was subsidiary of sub which in turn is a wholly owned subsidiary of parent wholly owned by sellers sellers are foreign individuals and or entities whose exact identity and country of citizenship and residency is recorded in the above redacted legend -- they are not united_states_shareholders as defined in sec_951 target's only asset was a x_ interest ie a minority interest that is less than in corp sub purchaser target and corp are foreign_corporations the exact country is recorded in the above redacted legend -- they are not united_states_shareholders as defined in sec_951 sub and purchaser were newly formed by parent for purposes of acquiring target and its interest in corp and parent and target are engaged in business a through their subsidiaries prior to the below described acquisition sellers and target did not file u s income_tax returns and they were not subject_to u s income_taxation was not a controlled_foreign_corporation within the meaning of sec_957 a further target plr-119393-98 passive_foreign_investment_company for which an election under sec_1295 was in effect a foreign_investment_company or a foreign_corporation the stock ownership of which is described in sec_552 or required under sec_1_6012-2 to file a u s income_tax return sec_1_338-1 and sec_338 it is represented that corp was not a target_affiliate within the meaning of on date a purchaser acquired from sellers for cash in fully taxable acquisitions of the stock of target it is represented that the acquisition of target constituted a qualified_stock_purchase within the meaning of sec_338 and that purchaser was not related to sellers within the meaning of sec_338 the period of limitations on assessments under sec_6501 has not expired for purchaser's or target's taxable_year s in which the acquisition occurred the taxable years in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed the election was due on date b however for various reasons the election was not filed on date c which is after the due_date for the election company official and authorized representatives discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the election sec_338 permits certain stock purchases to be treated as asset purchases if the purchasing_corporation makes or is treated as having made a sec_338 election under sec_338 and the acquisition is a qualified_stock_purchase sec_338 defines a qualified_stock_purchase as any transaction or series of transaction in which stock meeting the requirements of sec_1504 of one corporation is acquired by another corporation by purchase during the month acquisition period sec_1_338-1 and v provide that for purposes of sec_1_338-1 ie qualifying for the special rule when a foreign purchasing_corporation or deemed purchasing_corporation must file an election which is a later filing_date than the ordinary filing_date required by sec_338 a foreign_corporation is considered subject_to united_states tax ie not eligible for the special rule if itis a cfc sec_338 provides that the term purchase means any acquisition of stock but only if the basis of the stock in the hands of the purchasing_corporation is not determined in whole or in part by reference to the adjusted_basis of such stock in the hands of the person from whom acquired or under sec_1014 relating to property_acquired_from_a_decedent the stock is not acquired in an exchange to which sec_351 sec_354 sec_355 or sec_356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain_or_loss realized on the transaction and the stock is not acquired from a person the plr-119393-98 ownership of whose stock would under sec_318 be attributed to the person acquiring such stock sec_1_338-1 provides that a purchasing_corporation makes a sec_338 election for target by filing a statement of sec_338 election on form 8023-a or form_8023 as applicable in accordance with the instructions on the form the sec_338 election must be filed not later than the 15th day of the ninth month beginning after the month in which the acquisition_date occurs a sec_338 election is irrevocable sec_1_338-1 provides that the united_states_shareholders as defined in sec_951 of a foreign purchasing_corporation that is a controlled_foreign_corporation as defined in sec_957 taking into account sec_953 may file a statement of sec_338 election on behalf of the purchasing_corporation if the purchasing_corporation is not required under sec_1_6012-2 other than sec_1_6012-2 to file a united_states income_tax return for its taxable_year that includes the acquisition_date form 8023-a and form_8023 as applicable must be filed as described in the form and its instructions and also must be attached to form_5471 information_return with respect to foreign_corporation filed with respect to the purchasing_corporation by each united_states_shareholder for the purchasing_corporation sec_1_1502-77 provides that the common parent for all purposes other than for several purposes not relevant here shall be the sole agent for each subsidiary in the group duly authorized to act in its own name in all matters relating to the tax_liability of the consolidated_return_year see also form 8023-a form_8023 and the instructions thereto under sec_301_9100-1 c the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i provided the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue sec_301_9100-1 through procedure notice or announcement provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not plr-119393-98 meet the requirements of sec_301_9100-2 requests for relief under sec_301 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the times for filing the election was fixed by the regulations ie sec_1_338-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for purchaser to file the election provided purchaser shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by company official and authorized representatives explain the circumstances that resulted in the failure_to_file a valid election the information establishes that tax professionals were responsible for the election that purchaser relied on the tax professionals to timely make the election and that the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations that have been made we conclude that purchaser acted reasonably and in good_faith in failing to timely file the election the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly we grant an extension of time under sec_301_9100-1 until days from the date_of_issuance of this letter for purchaser as the common parent of the consolidated_group of which the purchasing_corporation is a member and as the united_states_shareholder of the controlled foreign purchasing_corporation to file the election with respect to the acquisition of the stock of target as described above the above extension of time is conditioned on the taxpayers’ purchaser's target's and sellers’ to the extent they have any us tax_liability tax_liability being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the district director's office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if lower sec_301_9100-3 it is determined that the taxpayers’ liability is purchaser should file the elections in accordance with sec_1_338-1 that is a new election on form 8023-a or form_8023 must be executed on or after the date of this letter which grants an extension and filed in accordance with the instructions on the election form together with the information that is required to be attached to the adl by plr-119393-98 election form a copy of this letter should be attached to the election form purchaser must file or amend its return along with the target_corporation if and as applicable to report the acquisition as a sec_338 transaction and to attach a copy of this letter the election form and the information required therewith see sec_1_338-1 and sec_1 that is the old target must file a separate final return if and as applicable and the new target must be included in purchaser's return by being listed on form_5471 information_return with respect to a foreign_corporation for the first year following the acquisition see announcement 1998_2_irb_38 and sec_1_338-1 with regard to which election form to use no opinion is expressed as to whether purchaser's acquisition of target stock qualifies as a qualified_stock_purchase whether the acquisition of target stock qualifies for sec_338 treatment and if the acquisition of target stock qualifies for sec_338 treatment as to the amount of gain_or_loss recognized if any by target on the deemed asset sales in addition no opinion is expressed as to the tax effects or consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayer its employees and representatives however the district_director should verify all essential facts addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply in acopy of this letter is being sent to the authorized representative you so designated on your power_of_attorney this letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel corporate richard todd counsel to the assistant chief_counsel corporate


t c memo united_states tax_court christopher d and kristie m farran petitioners v commissioner of internal revenue respondent docket no filed date christopher d and kristie m farran pro sese melissa j hedtke for respondent memorandum findings_of_fact and opinion kroupa judge respondent determined a dollar_figure deficiency in petitioners’ federal_income_tax for after concessions we are asked to decide two issues first we are asked to decide whether petitioner christopher farran mr farran was away from home when he worked as an airline mechanic for northwest airline sec_1see infra note for the concessions each party made nwa in detroit chicago and boston to determine whether petitioners are entitled to deduct expenses for his vehicle meals_and_lodging while mr farran was away from farmington minnesota in the minneapolis area where he normally lived we conclude that he was not away from home second we are asked to decide whether petitioners substantiated various other expenses we conclude that petitioners have substantiated and are entitled to deduct some of these other expenses findings_of_fact some of the facts have been stipulated and are so found petitioners resided in dallas georgia at the time they filed the petition mr farran’s employment with nwa mr farran was an airline mechanic for nwa beginning in and continuing through mr farran worked in minneapolis until nwa sent layoff notices to some of its employees when it experienced financial difficulties the employees receiving the notices could either choose to accept the layoff or exercise their seniority seniority depended on the length of time an employee worked for nwa regardless of where the airline facility was located an employee with higher seniority could bump an employee with less seniority and take that employee’s position the employee with less seniority could then take the layoff or find another employee with less seniority to bump this seniority bumping arrangement was in place across the country so that an nwa mechanic looking to keep his or her job at nwa had to look at several different cities to find a less senior employee to bump most employees exercised their seniority in the way that would give them positions in cities as close as possible to their families mr farran first received a bump notice in late mr farran chose to exercise his seniority and bump another employee rather than accept the layoff mr farran was able to bump to a position in the relatively close location of duluth but was then bumped again to detroit where he started in date mr farran worked in detroit until date and then was bumped again this time exercising his seniority to take a position in chicago mr farran worked for nwa in chicago from february through date mr farran was then bumped a final time and exercised his seniority to take a position in boston where he worked from february through date mr farran ceased working for nwa on date mr farran was unemployed after he left nwa until date mr farran searched for a job during those months and took courses at dakota county technical college including courses in hydraulics industrial electronics and motor controls these courses expanded mr farran’s skills as an airline mechanic and built on the knowledge mr farran already had mr farran received a certificate or some other type of credential for completing the program mr farran drove back and forth from petitioners’ home in farmington minnesota to the college on the days his classes met mr farran ultimately accepted a position with gulfstream aerospace in atlanta georgia starting date mr farran worked for gulfstream aerospace until date mr farran’s positions in detroit chicago and boston had no specific end dates the timing of a return to the minneapolis area would depend on nwa’s needs for mechanics in that city as well as the choices of other mechanics also subject_to the seniority system mr farran’s family stayed in minnesota at the family residence while mr farran was working for nwa in detroit chicago and boston and mr farran returned periodically to visit them while mr farran was working in detroit chicago and boston he found that hotels were quite expensive and determined it would be impossible to get an apartment he decided it would be impractical to move his family to these locations and mostly lived in his car mr farran kept a calendar for in minnesota on which he and his wife periodically noted amounts mr farran incurred for hotels mileage and food petitioners maintained internet access at the minnesota residence for the whole year mr farran used the internet when he was in minnesota to search for a job and to monitor investments but no other family_member used it mr farran also incurred some other costs such as for resume paper in his job search mr farran also had a cellular phone during that he acknowledged using for personal calls mr farran’s family moved to georgia at a date not evident in the record and lived in georgia at the time of trial mr farran used some of his own tools in his work for nwa mr farran also wore a uniform while he worked for nwa he generally wore one shirt per day and cleaned his clothing in a washing machine mr farran estimated that he worked approximately days per month for nwa petitioner kristie farran mrs farran was a substitute teacher during mr and mrs farran donated a pontiac sunbird with a kelley blue_book value of dollar_figure to volunteers of america inc in date volunteers of america later sold this vehicle in as is condition for dollar_figure mr and mrs farran contributed some items to goodwill and also bought items for their children’s school during petitioners’ return petitioners claimed certain expenses on schedule a itemized_deductions on the return for respondent examined the return and issued petitioners a deficiency_notice in which he disallowed many of the expenses of the expenses still in dispute petitioners assert they are entitled to claimed noncash charitable_contributions as well as unreimbursed employee business_expenses the unreimbursed employee business_expenses petitioners claimed include expenses for mr farran’s vehicle lodging and meals while in detroit chicago and boston as well as expenses for internet access uniform cleaning tools depreciation of tools personal_property_taxes job searching supplies parking publications cellular telephone and education mileage petitioners timely filed a petition opinion the parties resolved many of the disputed expenses before trial we are asked to determine whether petitioners are entitled to deduct the remaining expenses we begin by considering whether mr farran was away from home when he incurred expenses for his vehicle meals_and_lodging in detroit chicago and boston 2respondent concedes that petitioners are entitled to deduct state and local_taxes real_estate_taxes a portion of personal_property_taxes home mortgage interest tax preparation fees a portion of job search expenses including job search mileage expenses job union mileage expenses certain amounts for tools and union dues petitioners concede that they are not entitled to deduct cash contributions to charity and a portion of uniform cleaning expenses travel_expenses while away from home we begin by briefly outlining the rules for deducting travel_expenses a taxpayer may deduct reasonable and necessary travel_expenses such as vehicle expenses meals_and_lodging incurred while away from home in the pursuit of a trade_or_business sec_162 sec_262 a taxpayer must show that he or she was away from home when he or she incurred the expense that the expense is reasonable and necessary and that the expense was incurred in pursuit of a trade_or_business 326_us_465 the determination of whether the taxpayer has satisfied these requirements is a question of fact id the purpose of the deduction for expenses_incurred away from home is to alleviate the burden on the taxpayer whose business needs require him or her to maintain two homes and therefore incur duplicate living_expenses 49_tc_557 the duplicate costs are not deductible where the taxpayer maintains two homes for personal reasons sec_262 commissioner v flowers supra pincite a taxpayer may deduct the expenses he or she incurred while away from home sec_162 the word home for purposes of 3all section references are to the internal_revenue_code in effect for and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated sec_162 has a special meaning it generally refers to the area of a taxpayer’s principal place of employment not the taxpayer’s personal_residence 72_tc_190 affd 662_f2d_253 4th cir kroll v commissioner supra pincite there is an exception to the general_rule that a taxpayer’s tax_home is his or her principal place of employment 358_us_59 the taxpayer’s tax_home may be the taxpayer’s personal_residence if the taxpayer’s employment away from home is temporary id mitchell v commissioner tcmemo_1999_283 on the other hand the exception does not apply and the taxpayer’s tax_home remains the principal place of employment if the employment away from home is indefinite kroll v commissioner supra pincite it is presumed that a taxpayer will generally choose to live near his or her place of employment 603_f2d_1292 8th cir a taxpayer must however have a principal place of employment and accept temporary work in another location to be away from home kroll v commissioner supra a person who has no principal_place_of_business nor a place he or she resides permanently is an itinerant and has no tax_home from which he or she can be away 752_f2d_337 8th cir affg tcmemo_1984_63 edwards v commissioner tcmemo_1987_396 all the facts and circumstances are considered in determining whether a taxpayer has a tax_home see revrul_73_ 1973_2_cb_37 describing objective factors the commissioner considers in determining whether a taxpayer has a tax_home the taxpayer must generally have some business justification to maintain the first residence beyond purely personal reasons to be entitled to deduct expenses_incurred while temporarily away from that home 638_f2d_248 1st cir 67_tc_824 55_tc_783 where a taxpayer has no business connections with the area of primary residence there is no compelling reason to maintain that residence and incur substantial continuous and duplicative expenses elsewhere see 143_f3d_497 9th cir affg tcmemo_1995_559 deamer v commissioner supra hantzis v commissioner supra in that situation the expenses_incurred while temporarily away from that residence are not deductible hantzis v commissioner supra bochner v commissioner supra tucker v commissioner supra see mcneill v commissioner tcmemo_2003_65 aldea v commmissioner tcmemo_2000_136 once mr farran was bumped from minneapolis he had no job to return to there his choices were to be laid off and have no work or to bump other employees and move to different cities to continue working nwa gave mr farran no end date for his positions in detroit chicago and boston nwa no longer required mr farran to perform any services whatsoever in the minneapolis area once he was bumped mr farran searched for work in the minneapolis area and took classes to further his education but was unsuccessful in finding a position in the minneapolis area in fact he ultimately accepted a position in dallas georgia although mrs farran and the family remained in the family residence with occasional visits from mr farran while mr farran worked in detroit chicago and boston this fact alone does not dictate that mr farran’s tax_home was in farmington minnesota where the family residence was located unlike traveling salespersons who may be required to return to the home city occasionally between business trips mr farran’s business ties to minneapolis ceased when he was bumped the court understands that the nwa mechanics’ lives were unsettled and disrupted mechanics did not know how long they would have a job in once specific location they only knew the system was based on seniority they could bump less senior employees and they could be bumped by more senior employees while we acknowledge that mr farran would have liked to return to the minneapolis area to work for nwa mr farran did not know when such a return would be possible due to the seniority system the likelihood of mr farran’s return to a position in minneapolis depended on nwa’s needs for mechanics there as well as the choices of more senior mechanics mr farran did not know how long he would be in detroit chicago or boston or where he might go next it was not foreseeable that he would be able to return to minneapolis at any time due to the seniority system thus we conclude there was no business reason for petitioners to maintain a home in the minneapolis area petitioners kept the family residence in the minneapolis area for purely personal reasons petitioners have failed to prove that mr farran had a tax_home in accordingly mr farran was not away from home in detroit chicago and boston and the expenses he incurred while there are not deductible substantiation of expenses we next turn to the substantiation issues to determine whether petitioners are entitled to deduct any remaining expenses we begin by noting the fundamental principle that the commissioner’s determinations are generally presumed correct and 4even if we had found that mr farran’s tax_home during was farmington minnesota mr farran may not be treated as temporarily away from home while he worked in detroit because the position lasted over a year see sec_162 5it is unclear from the record whether petitioners are also claiming travel_expenses with respect to mr farran’s position with gulfstream aerospace in georgia petitioners have introduced no testimony or evidence with regard to mr farran’s employment in georgia and we must therefore conclude that petitioners have failed to prove that mr farran was away from home when he incurred travel_expenses in georgia the taxpayer bears the burden of proving that these determinations are erroneous rule a 503_us_79 290_us_111 moreover deductions are a matter of legislative grace and the taxpayer has the burden to prove he or she is entitled to any deduction claimed rule a 308_us_488 292_us_435 welch v helvering supra this includes the burden of substantiation 65_tc_87 affd per curiam 540_f2d_821 5th cir a taxpayer must substantiate amounts claimed as deductions by maintaining the records necessary to establish he or she is entitled to the deductions sec_6001 hradesky v commissioner supra the taxpayer shall keep such permanent records or books of account as are sufficient to establish the amounts of deductions claimed on the return sec_6001 sec_1_6001-1 e income_tax regs the court need not accept a taxpayer’s self-serving testimony when the taxpayer fails to present corroborative evidence beam v commissioner t c memo 6petitioners do not claim the burden_of_proof shifts to respondent under sec_7491 petitioners also did not establish they satisfy the requirements of sec_7491 we therefore find that the burden_of_proof remains with petitioners citing 87_tc_74 affd without published opinion 956_f2d_1166 9th cir unreimbursed employee business_expenses we shall now consider whether petitioners are entitled to deduct the claimed expenses beginning with the unreimbursed employee business_expenses petitioners claimed on schedule a in general all ordinary and necessary expenses paid_or_incurred in carrying_on_a_trade_or_business during the taxable_year are deductible but personal living or family_expenses are not deductible sec_162 sec_262 services performed by an employee constitute a trade_or_business 91_tc_352 sec_1_162-17 income_tax regs if a taxpayer establishes that he or she paid_or_incurred a deductible business_expense but does not establish the amount of the deduction we may approximate the amount of the allowable deduction bearing heavily against the taxpayer whose inexactitude is of his or her own making 39_f2d_540 2d cir for the cohan_rule to apply however a basis must exist on which this court can make an approximation 85_tc_731 without such a basis any allowance would amount to unguided largesse 245_f2d_559 5th cir certain business_expenses may not be estimated because of the strict substantiation requirements of sec_274 see sec_280f 50_tc_823 affd per curiam 412_f2d_201 2d cir for such expenses only certain types of documentary_evidence will suffice job search expenses we now examine those expenses not subject_to the strict substantiation requirements beginning with job search expenses petitioners claimed dollar_figure for job search expenses during the parties stipulated that mr farran incurred dollar_figure of job search expenses petitioners introduced a bank statement receipts and two bills to support their claim to the additional_amount for job search expenses many of the documents petitioners submitted are illegible however and do not establish that these amounts were actually incurred in connection with mr farran’s job search we therefore conclude that petitioners are entitled to deduct only the dollar_figure of agreed upon job search expenses internet access expenses petitioners claimed dollar_figure for internet access expenses during we have characterized internet expenses as utility expenses verma v commissioner tcmemo_2001_132 strict substantiation therefore does not apply and we may estimate the business portion of utility expenses under the cohan_rule see pistoresi v commissioner tcmemo_1999_39 the parties stipulated that petitioners paid dollar_figure for microsoft online service in mr farran testified that he used the internet during to search for a new job while he was unemployed and also to monitor his investments mr farran also testified that mrs farran and their children did not use the internet and he did not use it for other personal purposes we found mr farran’s testimony on this issue credible and we are convinced that a portion of mr farran’s internet use during the time he was unemployed was to search for a job in his field we are permitted to estimate the portion of this expense attributable to job searching under the cohan_rule we estimate that percent of mr farran’s internet use during the months he was unemployed in was to search for a job accordingly we conclude that petitioners are entitled to deduct dollar_figure of internet access charges as job search expenses for cleaning expenses for uniforms petitioners claimed dollar_figure for cleaning expenses for mr farran’s nwa uniforms expenses for uniforms are deductible if the uniforms are of a type specifically required as a condition_of_employment the uniforms are not adaptable to general use as ordinary clothing and the uniforms are not worn as ordinary clothing 30_tc_757 beckey v commissioner tcmemo_1994_514 we are satisfied that petitioners incurred deductible expenses to clean mr farran’s uniforms mr farran gave unclear testimony however regarding how he calculated the cleaning costs petitioners introduced a document on the letterhead of his cpa that purports to indicate how the sum was calculated but it suggests an excessive_amount cleanings for shirts and pants and for jackets per month mr farran estimated he worked days per month and wore one shirt per day at trial mr farran conceded that petitioners are not entitled to deduct cleaning expenses for uniforms for the months he was unemployed we may estimate the amount of deductible cleaning expenses under the cohan_rule we adopt the unit cost of dollar_figure listed on petitioners’ exhibit as the cost to wash or dry one load of laundry we find that approximately eight loads of laundry for each of the months mr farran worked is a reasonable number to yield clean shirts and pants and jackets per month petitioners are therefore entitled to deduct dollar_figure of uniform cleaning expenses in tool expenses petitioners claimed dollar_figure for tools mr farran used as an airline mechanic and the parties stipulated that petitioners are entitled to deduct dollar_figure a taxpayer is entitled to deduct expenses for tools if they are ordinary and necessary business_expenses sec_162 petitioners have offered no documentation or testimony regarding the dollar_figure of tool expenses claimed beyond what respondent allowed we conclude that petitioners are not entitled to deduct any additional_amount for tools other than the dollar_figure agreed upon amount depreciation expenses petitioners claimed dollar_figure for depreciation of tools mr farran used at his job the cost of tools with useful lives greater than a year is recoverable by depreciation sec_167 sec_168 117_tc_294 clemons v commissioner tcmemo_1979_273 mr farran testified that he did not have any receipts for the depreciated tools but identified them as sockets and wrenches he thought would last for years the only documentary_evidence petitioners introduced to support their claimed deduction was a depreciation schedule for the tools that indicates mr farran acquired the tools on date petitioners did not introduce any receipts to show the tools’ purchase_price or purchase date petitioners have not substantiated that they are entitled to a depreciation deduction further we are unable to estimate any amount for depreciation under the cohan_rule because the evidence petitioners introduced is inadequate petitioners are therefore not entitled to deduct any amount for depreciation personal_property_taxes petitioners claimed dollar_figure of personal_property_taxes for and respondent concedes that petitioners are entitled to deduct dollar_figure of these taxes petitioners have presented no argument or evidence regarding the additional dollar_figure in personal_property_taxes we conclude that petitioners are not entitled to deduct the additional dollar_figure in personal_property_taxes for supplies petitioners claimed dollar_figure for supplies in petitioners introduced several receipts to support their claimed expenses for supplies several of the receipts petitioners introduced however appear to be for traveling expenses such as hotels parking and tolls not supplies moreover the receipts that do not appear to be for traveling expenses are illegible petitioners introduced no testimony to explain what supplies petitioners needed for their jobs and what specific supplies petitioners sought to deduct we conclude that petitioners have failed to substantiate their expenses for supplies and are not entitled to deduct any amount for supplies in parking petitioners claimed dollar_figure for parking in petitioners submitted a receipt for dollar_figure for parking at boston logan international airport dated date to support their deduction for supplies it is unclear whether they want to also assert that the dollar_figure was part of the dollar_figure claimed for parking if this amount is for parking it is unclear whether the amount_paid was a nondeductible commuting cost without more of an explanation petitioners are not entitled to deduct any amount for parking expenses in publications petitioners claimed dollar_figure for professional publications in mr farran testified that this amount represented books that he needed for his classes at dakota county technical college petitioners have introduced no documentation or substantiation of this expense however we conclude that petitioners are not entitled to deduct the dollar_figure for professional publications expenses subject_to strict substantiation requirements we now consider those expenses that are subject_to the additional strict substantiation requirements under sec_274 expenses subject_to strict substantiation may not be estimated under the cohan_rule sanford v commissioner t c pincite cellular phone expenses petitioners claimed dollar_figure for cellular phone expenses for cellular phones are included in the definition of listed_property for purposes of sec_274 and are thus subject_to the strict substantiation requirements gaylord v commissioner tcmemo_2003_273 a taxpayer must establish the amount of business use and the amount of total use for the property nitschke v commissioner tcmemo_2000_230 sec_1_274-5t temporary income_tax regs fed reg date although the parties stipulated that petitioners paid dollar_figure for cellular phone service during petitioners did not prove that nwa required mr farran to have a cellular phone moreover mr farran also admitted at trial that he used his cellular phone in to make personal calls as well as for business reasons petitioners also did not offer any evidence indicating how much mr farran used his cellular phone in for business use and how much for personal_use petitioners failed to establish that they incurred any expenses to use mr farran’s cellular phone for business purposes in addition to those they would have incurred had mr farran used it only for personal purposes petitioners are therefore not entitled to deduct any cellular phone expenses for education mileage petitioners claimed dollar_figure of education mileage expenses for education expenses are generally deductible as ordinary and necessary business_expenses if either of two alternative conditions are satisfied sec_1_162-5 income_tax regs the education must either maintain or improve skills the taxpayer needs for his or her trade_or_business or the education must meet express requirements set forth by law or regulation or the taxpayer’s employer as a condition to the taxpayer’s retention of his or her employment id even if the education meets one of these alternatives there is an exception to the deductibility of education expenses education expenses are not deductible if the education allows the taxpayer to meet the minimum educational requirements for his or her job or to qualify the taxpayer for a new trade_or_business 62_tc_699 sec_1_162-5 income_tax regs mr farran testified that the dollar_figure petitioners claimed represented mileage expenses_incurred when mr farran traveled from his home in farmington minnesota to his classes at dakota county technical college passenger automobiles are listed_property under sec_280f and strict substantiation is therefore required sec_274 no deduction is allowed for any travel expense unless the taxpayer corroborates by adequate_records or by sufficient evidence corroborating the taxpayer’s own statement the amount of the expense the mileage for each business use of the automobile and the total mileage for all use of the automobile during the taxable_period the date of the business use and the business_purpose for the use sec_1 5t b temporary income_tax regs fed reg date adequate_records include the maintenance of an account book diary log statement of expense trip sheets and or other documentary_evidence which in combination are sufficient to establish each element of expenditure or use sec_1 5t c i temporary income_tax regs fed reg date taxpayers may use a standard mileage rate established by the internal_revenue_service in lieu of substantiating the actual amount of the expenditure see sec_1_274-5 income_tax regs the standard mileage rate is generally multiplied by the number of business miles traveled see revproc_2002_61 2002_ 2_cb_616 in effect for transportation_expenses incurred during the use of the standard mileage rate establishes only the amount deemed expended with respect to the business use of a passenger_automobile sec_1_274-5 income_tax regs the taxpayer must still establish the actual mileage the time and the business_purpose of each use nicely v commissioner tcmemo_2006_172 sec_1_274-5 income_tax regs petitioners introduced a transcript from dakota county technical college indicating that mr farran took a variety of courses in including hydraulics industrial electronics and motor controls mr farran testified that he did not receive a degree from dakota county technical college but testified that he received essentially a certificate mr farran testified that the courses expanded his current skills and built on what he already knew petitioners also introduced a calendar indicating the days during the year that mr farran drove back and forth to dakota county technical college mr farran testified that petitioners computed the deduction by determining the mileage between their home and dakota county technical college and then found the corresponding amount of allowable expenses by applying the mileage rate formula for we are satisfied that mr farran took courses at dakota county technical college to improve his skills as an aircraft mechanic we are also satisfied that mr farran substantiated the mileage and met the strict substantiation requirements relating to vehicle expenses through petitioners’ careful recordkeeping on their calendar we conclude that petitioners are entitled to deduct dollar_figure for education mileage expenses charitable_contributions we finally consider petitioners’ charitable_contributions petitioners conceded at trial that they are not entitled to the cash contributions they claimed on their return for petitioners claimed they contributed_property worth dollar_figure to charitable organizations in charitable_contributions a taxpayer makes are generally deductible under sec_170 no deduction is allowed however for any contribution of dollar_figure or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by a qualified donee organization sec_170 the deduction for a contribution of property equals the fair_market_value of the property on the date contributed sec_1_170a-1 income_tax regs the fair_market_value of property 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 a reasonable knowledge of relevant facts sec_1_170a-1 income_tax regs a taxpayer claiming a charitable_contribution is generally required to maintain for each contribution a canceled check a receipt from the donee charitable_organization showing the name of the organization and the date and amount of the contribution or other reliable written records showing the name of the donee 7there are now stricter requirements for contributions of money sec_170 no deduction for a contribution of money in any amount is allowed unless the donor maintains a bank record or written communication from the donee showing the name of the donee organization the date of the contribution and the amount of the contribution id this new provision is effective for contributions made in tax years beginning after date pension_protection_act of publaw_109_280 sec 120_stat_1080 and the date and amount of the contribution sec_1 170a- a income_tax regs petitioners claim they contributed_property to three charitable organizations in we shall address each claimed contribution in turn first petitioners claim they contributed a pontiac sunbird with a value of dollar_figure to volunteers of america inc petitioners introduced a donation receipt from volunteers of america inc signed by a representative of the organization that substantiates petitioners indeed donated a pontiac sunbird and that petitioners received no goods or services in exchange for the donation petitioners also introduced a page of the kelley blue_book for january-date indicating that the suggested retail for their vehicle was dollar_figure at the time they donated it respondent introduced evidence indicating that volunteers of america inc sold the pontiac sunbird less than months after it was donated in as is condition for dollar_figure we have carefully examined the evidence presented on this issue we discount the evidence that the charitable_organization subsequently sold the vehicle for dollar_figure for several reasons 8if a charity sells the donated vehicle without any significant intervening use or material improvement the deduction is now limited to the gross_proceeds of the sale sec_170 this provision is effective for charitable_contributions made after date american jobs creation continued first there is no evidence that the charity’s sale of the vehicle was at arm’s length for example the charity could have sold the vehicle to a needy person for a small amount to further the charity’s charitable goals second there is no evidence that the vehicle was in the same condition when the charity sold it as when petitioners donated it certain parts of the vehicle may have been sold separately diminishing its value or the vehicle may have been in an accident on the other hand the kelley blue_book evidence that the vehicle was listed at dollar_figure is a reliable indicator of the vehicle’s fair_market_value at the time petitioners donated it after carefully considering the evidence each side presented we conclude that the vehicle was worth dollar_figure at the time petitioners donated it and petitioners have therefore substantiated their charitable_contribution of property worth dollar_figure to volunteers of america inc we next turn to petitioners’ claimed contribution of property worth dollar_figure to goodwill industries petitioners introduced a goodwill easter seals document indicating that they donated household clothing and other items on date and that petitioners received no goods or services in exchange the receipt does not list the specific items petitioners contributed mr farran testified that he added the dollar_figure value continued act of publaw_108_357 118_stat_1632 to the receipt himself petitioners did not introduce any evidence indicating the specific items petitioners contributed the estimated value of the items or the quality of the items while we are convinced that petitioners donated some items to goodwill in petitioners have failed to provide any evidence of the items they donated or their estimated values petitioners are therefore not entitled to deduct any amount for contributions of property to goodwill industries in finally petitioners claim they donated some property to their childrens’ school in petitioners’ tax_return for does not indicate what amount petitioners deducted for property they donated to their childrens’ school petitioners submitted various receipts indicating the purchase of items such as ice cream baggies and peanut butter mr farran testified that the donations were made for items used at least partly by petitioners’ children such as ice cream for their daughter’s school birthday celebration these amounts are nondeductible personal expenditures further petitioners have failed to substantiate adequately these claimed donations petitioners introduced a letter from the elementary_school indicating that petitioners donated some items to their children’s classrooms dollar values of the items donated are not provided in the letter and the letter is dated date not contemporaneously with the contributions moreover the other records petitioners submitted consist primarily of illegible receipts for personal items the proof petitioners provided is not sufficient to support petitioners’ claimed deduction for contributions to their children’s school we conclude that petitioners are not entitled to deduct any amount for contributions of property to the school to reflect the foregoing and the concessions of the parties decision will be entered under rule


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc corp plr-110290-01 date date number release date index numbers parent purchaser llc target date a date b date c date d date e company official authorized representative this responds to your date letter submitted on behalf of parent requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations for parent to file an election the extension is requested for parent to file an election under sec_338 of the internal_revenue_code and sec_1_338-1 of the income_tax regulations with respect to the acquisition of the stock of target on date a sometimes hereinafter referred to as the election all citations in this letter to regulations under sec_338 are to the regulations as in effect on date a the information provided in this request and in later correspondence is summarized below parent is the common parent of a consolidated_group that has a fiscal_year plr-110290-01 ending date b and uses the accrual_method of accounting on date c purchaser a wholly owned subsidiary of parent formed llc a disregarded_entity pursuant to sec_301_7701-3 and sec_301_7701-2 on date a purchaser through llc purchased all the stock of target a foreign_corporation from unrelated foreign third parties sellers in a fully taxable transaction prior to the acquisition target and sellers did not file u s income_tax returns and they were not subject_to u s income_taxation further target was not a controlled_foreign_corporation within the meaning of sec_957 a passive_foreign_investment_company for which an election under sec_1295 was in effect a foreign_investment_company or foreign_corporation the stock ownership of which is described in sec_552 or required under sec_1_6012-2 to file a u s income_tax return it is represented that the acquisition of the stock of target qualified as a qualified_stock_purchase as defined under sec_338 the period of limitations on assessments under sec_6501 has not expired for parent’s or target’s taxable_year in which the acquisition occurred the taxable_year in which the election should have been filed or any taxable_year that would have been affected by the election had it been timely filed parent intended to file the election that was due on date d however for various reasons the election was not filed in date e which was after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the election sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election and the acquisition is a qualified_stock_purchase under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 plr-110290-01 in this case the time for filing the election is fixed by the regulations ie sec_1_338-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for parent to file the election provided parent shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by company official and authorized representative explain the circumstances that resulted in the failure_to_file the election the information establishes that tax professionals were responsible for the election that parent relied on the tax professionals to timely make the election and that the government will not be prejudiced if relief is granted see sec_301 b v based on the facts and information submitted including the representations that have been made we conclude that parent acted reasonably and in good_faith in failing to timely file the election the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly we grant an extension of time under sec_301_9100-1 until days from the date_of_issuance of this letter for parent to file the election with respect to the acquisition of the stock of the target as described above the above extension of time is conditioned on the filing within days of the issuance of this letter of all returns and amended returns if any necessary to report the transaction in accordance with the election and the taxpayers’ parent’s consolidated group’s target’s and sellers’ united_states tax_liability if any not being lower in the aggregate for all years to which the election applies than it would have been if the election had been made timely taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made by the director's office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers' liability is lower sec_301_9100-3 parent should file the election in accordance with sec_1_338-1 that is a new election on form_8023 must be executed on or after the date of this letter which grants an extension and filed in accordance with the instructions on the election form a copy of this letter should be attached to the election form parent and target must file or amend their returns as applicable reporting the acquisition as a sec_338 transaction and attach thereto a copy of this letter and a copy of the election form no opinion is expressed as to whether the acquisition of the target stock qualifies as a qualified_stock_purchase whether the acquisition of the target stock qualifies for sec_338 treatment and any other tax consequences arising from the election plr-110290-01 in addition no opinion is expressed as to the tax effects or consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayer its employees and representatives this office has not verified any of the facts or representations submitted in support of the request for a ruling verification of the information representations and other data may be required as part of the audit process in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply under the power_of_attorney on file in this office a copy of this letter is being sent to parent’s authorized representative this letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours associate chief_counsel corporate by ken cohen senior technician reviewer branch


tcmemo_2011_218 united_states tax_court christopher ames beach petitioner v commissioner of internal revenue respondent docket no filed date christopher ames beach pro_se meredith l stuart and audrey m morris for respondent memorandum findings_of_fact and opinion kroupa judge this case arises from a stand-alone petition for relief from joint_and_several_liability under section and relates to a deficiency_notice issued by respondent to 1all section references are to the internal_revenue_code_of_1986 as amended and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated petitioner and his former wife for the deficiency arose from a claimed casualty_loss and expenses reported on schedule e supplemental income and loss attributable solely to separate_property of petitioner specifically two rental properties the issue for decision is whether petitioner is barred from obtaining any relief from joint_and_several_liability under sec_6015 we hold he is barred from obtaining relief from joint_and_several_liability findings_of_fact some of the facts have been stipulated and are so found we incorporate the stipulation of facts and the accompanying exhibits by this reference petitioner and his former wife leslie a beach mrs beach were married in and were divorced in they filed a joint_return for although they were separated at the time of filing that return was later examined and a deficiency_notice was issued petitioner filed a petition with this court at docket no 27187-07s in response to the deficiency_notice mrs beach was not a party to the deficiency case during that litigation appeals officer janosek ao janosek met solely with petitioner regarding possible resolution of the deficiency case for as the examination related to petitioner’s separately owned rental properties ao janosek accepted the documentation petitioner provided substantiating in part amounts claimed for ao janosek mailed a decision document to petitioner for docket no 27187-07s conceding a part of the deficiency but sustaining disallowance of a number of the schedule e expenses and the casualty_loss for lack of substantiation the decision document reflected a proposal for petitioner to stipulate a dollar_figure deficiency and a dollar_figure accuracy-related_penalty petitioner agreed with ao janosek’s proposal and signed the decision document at docket no 27187-07s returning it to ao janosek the decision document at docket no 27187-07s was entered by the court on date mrs beach filed a request for innocent spouse relief in date approximately three months before the decision was entered the relief request was also assigned to ao janosek who sent a letter to petitioner informing him that mrs beach was seeking innocent spouse relief petitioner contested mrs beach’s request for relief petitioner again met with ao janosek to discuss mrs beach’s relief request ao janosek determined after meeting with mrs beach and petitioner that mrs beach qualified for innocent spouse relief under sec_6015 and c petitioner attempted to contest again that mrs beach qualified by filing his own request for innocent spouse relief he submitted his own questionnaire as a requesting spouse for mrs beach submitted a questionnaire for a nonrequesting spouse regarding petitioner’s request asserting that the deficiency was entirely attributable to petitioner’s separate_property respondent issued a final appeals determination_letter to petitioner denying his request for innocent spouse relief for petitioner filed a petition disputing the appeals determination that he did not qualify for innocent spouse relief for under sec_6015 c or f opinion petitioner seeks to be relieved from joint_and_several_liability for the deficiency petitioner seeks to avoid arises from disallowed schedule e expenses deductions and a casualty_loss reported on schedule a itemized_deductions from rental properties that were petitioner’s separate properties respondent argues that res_judicata bars petitioner’s claim for relief res_judicata requires that when a court of competent jurisdiction enters a final judgment on the merits of a cause of action the parties to the action are bound by that decision as to all matters that were or could have been litigated and decided in the proceedings 333_us_591 the doctrine promotes judicial economy by precluding repetitious lawsuits gustafson v commissioner 97_tc_85 federal income taxes are determined annually with each year a separate cause of action res_judicata is applied to bar subsequent proceedings involving the same tax_year commissioner v sunnen supra pincite res_judicata would generally bar a party to a prior proceeding for the same tax_year from seeking relief from joint_and_several_liability regardless of whether the claim had been raised in the prior proceeding 116_tc_272 petitioner now brings this action to seek relief under sec_6015 for after resolving the deficiency action for accordingly petitioner’s claim for relief under sec_6015 would be barred by the common_law doctrine_of res_judicata the common_law doctrine_of res_judicata however is limited by sec_6015 res_judicata bars a taxpayer from requesting relief from joint_and_several_liability only if such relief was an issue in the prior proceeding or the court decides that the taxpayer participated meaningfully in the prior proceeding sec_6015 see 134_tc_156 vetrano v commissioner supra pincite sec_1_6015-1 income_tax regs put more simply a taxpayer that participated meaningfully in a prior proceeding is barred from electing relief under sec_6015 for the same taxable_year after the decision of the court has become final see vetrano v commissioner supra pincite accordingly petitioner will be barred from electing relief under sec_6015 if he participated meaningfully in the prior proceeding we now turn our attention to this issue petitioner bears the burden of proving that he did not participate meaningfully in the prior proceeding see deihl v commissioner supra pincite petitioner failed to present any legal arguments or briefs to prove by a preponderance_of_the_evidence that he did not participate meaningfully in the prior proceeding respondent contends that petitioner did in fact participate meaningfully in the prior proceeding we agree we have previously indicated that signing court documents participating in settlement negotiations exercising exclusive control_over the handling of a proceeding and having the opportunity to raise an innocent spouse claim are all probative of meaningful participation under sec_6015 see deihl v commissioner supra pincite 121_tc_43 huynh v commissioner tcmemo_2006_180 affd 276_fedappx_634 9th cir it is difficult for us to fathom what participating meaningfully would mean if petitioner did not do it in the prior proceeding petitioner was the sole party and therefore exercised exclusive control_over the handling of the prior proceeding he was the one who provided the documents to ao janosek in his consideration of the return for the same year at issue here he provided whatever substantiation was available for the schedule e expenses he negotiated a settlement with ao janosek regarding the casualty_loss deduction and schedule e expenses and signed the decision document at docket no 27187-07s moreover he could have raised the issue of relief under sec_6015 but failed to do so we find petitioner participated meaningfully in the prior proceeding within the meaning of sec_6015 we hold therefore that petitioner is barred under sec_6015 from obtaining relief from joint_and_several_liability for under sec_6015 we have considered all arguments the parties made in reaching our holdings and to the extent not mentioned we find them to be irrelevant or without merit to reflect the foregoing decision will be entered for respondent


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-152072-05 date date ------------------ --------------------- ------------------------ legend legend x -------------------------------------------------- country d dear --------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-152072-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-152072-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely enclosures heather c maloy associate chief_counsel passthroughs and special industries copy of this letter copy for ' purposes cc


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc dom p si plr-113239-98 date date index nos number release date legend trustees grantor_trust date company granddaughter statute date court date dear we received the letter dated and later submissions on behalf of trustees requesting rulings concerning the income and generation-skipping_transfer gst tax consequences of the proposed creation and funding of a revocable charitable subtrust this letter responds to that request the facts and representations submitted are as follows grantor created trust on date for the benefit of her family and charities trust was irrevocable on date and it is represented that there have been no actual or constructive additions since that date any increase in value of the corpus of trust since date has been the result of accumulation of income and appreciation of corpus the assets of trust consist primarily of a minority interest block of stock in company a privately-held corporation the remaining assets of trust consist of a cash reserve and cash_equivalent investments section dollar_figure of trust provides that the trust created under the trust agreement is in all respects irrevocable and neither grantor nor any other contributor to the trust estate nor any other person is to have any power to modify amend or revoke the trust in any respect section dollar_figure of trust provides that the payment of any benefits whether of income principal or otherwise shall be vested in the sole discretion of the trustees from time to time amounts of net_income capital_gains or other proceeds or amounts of principal not paid out to a beneficiary shall be accumulated and added to principal section dollar_figure of trust further provides that payments among the members of a class of individual beneficiaries and charitable beneficiaries need not be equal either at the time of payment or at any future time and may be made to none to one to all or to any number of members of the class in any proportions both as between beneficiaries of the same class and as between individual beneficiaries and charitable beneficiaries all as determined by the trustees in their sole discretion section dollar_figure of trust provides that payments of income principal or otherwise at any time may be made to any one or more members of the lowest numbered of the classes of individual beneficiaries described in sec_3 which has one or more representative members then living and eligible to receive benefits and or to any one or more members of the class of charitable beneficiaries described in sec_3 the individual beneficiaries currently eligible to receive distributions from trust include the living issue of granddaughter all spouses of the then living issue of granddaughter and all spouses of the then deceased issue of granddaughter provided that in the case of any such spouse that such spouse was living with and married to such deceased issue at the time of such issue’s death in the event that none of such persons is living at any time trust identifies and defines the membership of certain classes of other individual beneficiaries who shall thereupon be eligible to receive distributions it is represented that none of the children of granddaughter is married and there are no deceased children of granddaughter having living spouses sec_3 provides the potential charitable beneficiaries of trust the potential charitable beneficiaries are defined as such one or more of a group as may be selected by the trustees in their sole discretion from time to time consisting only of corporations associations and institutions which are organized and operated exclusively for religious charitable literary and educational_purposes and projects and which are described both in sec_501 of the internal_revenue_code as the same exists at the execution of trust or as it or a successor section may be amended from time to time and in statute as such statute exists at the execution of trust or as it or a successor section may be amended from time to time provided that no charitable_beneficiary shall acquire any enforceable rights to receive income or principal or any vested interest therein against the trustees by virtue of this sec_3 or otherwise any payment actually determined on and made by the trustees to any charitable_beneficiary shall be for its general tax-exempt purposes but without other restriction as to use sec_3 of trust provides that the beneficiaries potentially eligible subject_to the trustees’ determination for any payments of income principal or otherwise shall include at any time all charitable beneficiaries as defined in sec_3 and all members of the class of individual beneficiaries then eligible under sec_3 sec_3 of trust provides that the discretionary powers of distribution of income and principal shall be broad enough to permit complete distribution of all the trust assets at any time and in the event final distribution should be determined on by the trustees or legally required under paragraph 01or otherwise distribution shall be made by the trustees to any or all members of the class of individual beneficiaries and charitable beneficiaries then eligible under the other provisions of article as determined by the trustees in their sole discretion section dollar_figure of trust provides that it is grantor’s intent that trust subject_to the remaining provisions of this paragraph shall endure in perpetuity any trust assets governed by a statute or rule_of law of the situs of the trust or the situs of tangible_property if any which cannot as a matter of law be governed by the law of the situs of the trust from time to time under which statute or rule duration of the trust as set forth in the trust agreement or any suspension of the power of alienation legally adjudged to occur under trust would render the trust invalid shall be distributed on the last date on which said assets can validly remain in trust and in the event such governing statute or rule depends upon specified lives in being grantor’s intent would be to name the lives of all persons described as potential individual beneficiaries in classes one to six inclusive sec_3 as they would be determined at the date of the execution of trust and if a number of such lives less than all must be used they should be selected in order of least age taking the youngest first section dollar_figure of trust provides that the individual trustees have the power to appoint one or more individual trustees or a corporate trustee or one or more individual trustees and a corporate trustee as the case may be to act with the trustee or trustees then acting sec_5 of trust provides that the trustees have the power to divide trust determining values and designating particular assets for grantor’s beneficiaries to assign like or unlike properties to different beneficiaries or trusts to create or hold undivided interests in any property of trust and to make distributions and payments in cash or in_kind or in both sec_5 of trust provides that the trustees have the power to merge the assets of the trust with those of any other trust by whomsoever created maintained for the same potential beneficiaries upon the same terms it is represented that since the inception of trust the trustees have made no distributions from trust to any individual beneficiary the trustees have exercised their discretion to make distributions to various charitable beneficiaries the trustees propose to create a revocable charitable subtrust to be administered exclusively for the benefit of potential charitable beneficiaries and to transfer a portion of stock held by trust to charitable subtrust it is represented that the dispositive provisions of charitable subtrust are the same in all material respects as the dispositive provisions of trust with two exceptions individual beneficiaries are excluded from the class of beneficiaries eligible to receive distributions from charitable subtrust and the class of charitable organizations eligible to receive distributions from charitable subtrust is more narrowly defined than the class of organizations included within the definition of charitable beneficiaries under trust it is represented that the administrative provisions of charitable subtrust differ in numerous respects from the administrative provisions of trust by reason of the different nature and purpose of charitable subtrust the differences are as follows charitable subtrust may be amended with the written consent of the trustees of trust and charitable subtrust may be revoked in whole or in part by the trustees of trust charitable subtrust permits additional contributions by the trustees of trust but does not permit additional contributions by any other person or entity and the trustees of charitable subtrust are authorized to create organizations which are exempt from taxation under sec_501 of the internal_revenue_code to which distributions may be made from charitable subtrust the original trustees of charitable subtrust will be the same as the current trustees of trust charitable subtrust provides that co-trustees and successor trustees of charitable subtrust shall be appointed by the trustees of trust in addition the trustees of trust have the power to remove any trustee of charitable subtrust on date trustees petitioned court for an order authorizing the trustees of trust to create charitable subtrust subject_to the trustees’ receipt of a favorable private_letter_ruling concerning the funding of charitable subtrust on date court issued such an order the following rulings are requested trust shall be treated as the owner of the charitable subtrust under subchapter_j of chapter of subtitle a of the code the creation and funding of the charitable subtrust shall not cause trust the charitable subtrust or any assets of trust or the charitable subtrust to be subject_to the generation-skipping_transfer_tax under chapter of subtitle b of the internal_revenue_code sec_2601 et seq and if the charitable subtrust is revoked or otherwise terminated in such a manner that the assets of the charitable subtrust are restored to trust that event shall not be treated as an addition to trust income_tax ruling - ruling_request based on the information provided and the representations made we conclude that the funding of the charitable subtrust by trust will not result in any federal_income_tax consequences to trust and all items of income deductions and credits against tax of the charitable subtrust funded by trust will be included in computing taxable_income and credits of trust generation-skipping_transfer_tax rulings ruling_request sec_2 sec_2601 of the code imposes a tax on every generation-skipping_transfer made by the transferor to a skip_person sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides that the tax does not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date the rule_of the preceding sentence does not apply to a pro_rata portion of any generation-skipping_transfer under an irrevocable_trust if additions are made to the trust after date sec_26_2601-1 provides that except as provided in sec_26 b ii b or c any trust in existence on date is considered an irrevocable_trust sec_2611 defines the term generation-skipping_transfer as a taxable_distribution a taxable_termination and a direct_skip sec_26_2611-1 provides that a generation-skipping_transfer is an event that is either a direct_skip a taxable_distribution or a taxable_termination the determination as to whether an event is a generation-skipping_transfer is made by reference to the most recent transfer subject_to the estate and gift_tax sec_2612 defines the term direct_skip to mean a transfer subject_to a tax imposed by chapter or of an interest in property to a skip_person sec_2613 defines the term skip_person to mean - - a natural_person assigned to a generation that is two or more generations below the generation assignment of the transferor or a a_trust - - if all interests in the trust are held by skip persons or b if - - i there is no person holding an interest in the trust and ii at no time after the transfer may a distribution including distributions on termination be made from the trust to a non-skip_person trust is a generation-skipping_trust because it provides for distributions to more than one generation of beneficiaries below grantor’s generation because however the trust was irrevocable on date and there have been no additions to it since that date it is exempt from the gst tax pursuant to sec_26_2601-1 an amendment to a_trust which was irrevocable on date and thus is exempt from the gst tax will cause the trust to lose its exemption if the amendment modifies or otherwise changes the quality value or timing of any of the powers beneficial interests rights or expectancies originally provided under the terms of the trust based on the information submitted and the representations made we conclude that the proposed modification of trust will not modify or otherwise change the quality value or timing of any of the powers beneficial interests rights or expectancies originally provided under the terms of trust thus the proposed modification will not affect the exempt status of trust for purposes of chapter accordingly the creation and funding of the charitable subtrust shall not cause trust the charitable subtrust or any assets of trust or the charitable subtrust to be subject_to the gst tax under chapter of subtitle b of the code in addition we conclude that if the charitable subtrust is revoked or otherwise terminated in such a manner that the assets of the charitable subtrust are restored to trust that event will not constitute a post-date addition to trust for purposes of the gst tax imposed by sec_2601 except as specifically ruled above we express or imply no opinion concerning the federal tax consequences of the transactions described above under the cited provisions or under any other provision of the code further whether trust is entitled to a deduction under sec_642 for charitable payments made by the charitable subtrust is to be determined by the original terms of trust concerning payments to charitable organizations this ruling is based on the facts and applicable law in effect on the date of this letter if there is a change in material fact or law local or federal before the transactions considered in this ruling take effect the ruling will have no force or effect if the taxpayer is in doubt whether there has been a change in material fact or law a request for reconsideration of this ruling should be submitted to this office this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely christine e ellison christine e ellison chief branch office of assistant chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes