department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n employer_identification_number number release date date u i l numbers legend x a dear ------------------ code submitted by x's legal_representative x was recognized as being exempt from federal_income_tax under sec_101 of the revenue act of which corresponds to sec_501 of the internal_revenue_code_of_1986 it was organized to improve business conditions and promote the a manufacturing industry x promotes the common interests of its members through educational programs trade shows and annual conferences x also promotes voluntary safety requirements in the industry shows both members and nonmembers exhibit at x’s trade shows which are designed for the display and demonstration of a products the products must be displayed as an integral part of the equipment for which the product was designed either by displaying the product itself or through visual presentations where it is not practical to display the actual product x establishes all policies standards and rules regarding the show and as a result is generally perceived by the exhibitors as having ultimate responsibility for the show show services and for the exhibitor’s successful show experience in the past x designated an official trade_show contractor or contractors to perform services for the benefit of exhibitors at the exhibitors’ expense including services such as drayage machinery moving and erecting rigging rental of furniture booth and floral decorating drinking water telephone service x fulfills its purposes by a number of activities including the regular operation of trade this is in response to x's request for a ruling under sec_513 of the internal revenue electrical plumbing carpentry and sign making because of its size equipment is normally shipped to the trade_show for unloading and set up or occasionally sent by rail to the vicinity of the trade_show site and then trucked to the trade_show site under the arrangement with the trade_show contractors x did not itself execute contracts with the show contractors but merely directed exhibitors to work with particular contractors for trade_show services exhibitors entered into contracts with the trade_show contractors to perform work necessary to exhibit at the show according to the rules and standards set by x but did not enter into contracts with x for anything other than exhibit space since x did not contract directly with the show contractors or subcontractors x had virtually no control_over the quality or efficiency of the work provided by the show contractors if exhibitors became dissatisfied with contractor services x was and is perceived as the responsible_party since x manages operates and promotes the trade_show because there is no privity of contract between x and the trade_show contractors x has advised the exhibitors that it is not responsible for the conduct of the show contractors or their employers or subcontractors and that it assumes no responsibility for the show contractor’s failure despite the disavowal exhibitors present their grievances or disputes to x with the expectation that x will resolve them in order to protect the integrity of the show and to make the experience enjoyable for exhibitors x generally obliges in any way it can to address the grievances or resolve disputes since the contracts are between the exhibitors and one or more trade contractors x generally has no recourse while x can designate new official show contractors for future shows choosing new vendors after the show is over is inadequate relief to the exhibitor who had spent money to exhibit at the trade_show the trade_show and perhaps more importantly the perception of quality or thereof on the part of trade_show attendees can potentially have a negative effect on x and consequently on the trade_show as a whole the trade_show is intended to promote the industry as a whole if the show does not run smoothly or if the show does not run smoothly for a number of exhibitors the exhibitors will suffer from the attendees’ poor perception caused by the show contractors’ failure to perform as intended not only will an inferior show reflect poorly on exhibitors in the long run an inadequately run show may reflect poorly on the industry as a whole the industry by providing the services at its trade shows presently made available through trade_show contractors x will provide the services through y a single member llc whom exhibitors would contract directly with for activities and services that were previously the legal duties and obligations of an unrelated third party contractor y will not elect to be treated as separate from x with x being recognized as y’s sole member on form_8832 as a result y will be treated as a disregarded_entity under sec_301 of the procedure and administration regulations and pursuant to announcement as y’s sole owner x will have actual control and ultimate responsibility for the show through the llc y’s structure will offer x protection for its assets from legal liabilities that may arise from performing activities associated with the show its articles provide that no part of the net_earnings will inure to the benefit of any manager officer or a member of the company or to any private individual x states that even though y is not itself a tax-exempt_organization under sec_501 its organization and operation are x states that the quality or lack thereof of a show along with the exhibitors’ experience at y is organized and required to operate consistent with sec_501 of the code and x seeks to assume control_over the quality of its tradeshow and to successfully promote expressly limited to be consistent with the code section and its activity will consist of engaging in what is otherwise qualified trade_show activity in service to x only y would conduct all aspects of the show including activities that were in the past carried out by the show contractor such as drayage machinery moving and erecting rigging rental of furniture booth and floral decorating drinking water telephone service electrical plumbing carpentry and sign making y will enter into an arm’s length contract with a third party primary contractor with particular trade_show expertise to provide services that are needed to conduct the trade_show in a high quality manner the contract between y and the trade_show contractor is a fee for services contract with the compensation to the show contractor for trade_show services based on the profitability of the trade_show a fee arrangement based on the trade_show income minus expenses serves to protect the interest of y the arrangement is intended to provide a protective mechanism for y and importantly because it is the sole member of y a protective mechanism for x as well x has requested the following rulings income resulting from activity conducted by the single member llc y should not be considered unrelated_business_income because y is a disregarded_entity and because of the exception contained in sec_513 of the code as an alternative to ruling_request x requests a ruling as follows if the exception under sec_513 of the code does not apply to the activity conducted by y then the activity of y should be considered related to the tax-exempt purposes of x and therefore does not constitute unrelated_business_income as defined in sec_513 sec_501 of the code provides for the exemption from federal_income_tax of business_leagues chambers_of_commerce real-estate boards or boards_of_trade not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_511 of the code imposes a tax on the unrelated_business_taxable_income defined in sec_513 of organizations exempt from tax under sec_501 sec_512 of the code defines the term unrelated_business_taxable_income to mean the gross_income with certain modifications derived by any organization from any unrelated_trade_or_business defined in sec_513 regularly carried on by it sec_513 of the code provides that the term unrelated_trade_or_business means in the case of any organization subject_to the tax imposed by sec_511 any trade_or_business the conduct of which is not substantially related to the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis for its exemption sec_513 of the code provides in part that the term unrelated_trade_or_business does not include qualified convention and trade_show activities of an organization described in sec_513 sec_513 of the code defines the term convention_and_trade_show_activity as any activity of a kind traditionally conducted at conventions annual meetings or trade shows a convention_and_trade_show_activity includes but is not limited to any activity one of the purposes of which is to attract persons in an industry generally without regard to membership in the sponsoring_organization as well as members of the public to the show for the purpose of displaying industry products or to stimulate interest in and demand for industry products or services or to educate persons engaged in the industry in the development of new products and services or new rules and regulations affecting the industry sec_513 of the code defines the term qualified_convention_and_trade_show_activity as a convention_and_trade_show_activity carried out by a qualifying_organization described in sec_513 in conjunction with an international national state regional or local convention annual meeting or show conducted by an organization described in sec_513 if one of the purposes of such organization in sponsoring the activity is the promotion and stimulation of interest in and demand for the products and services of that industry in general or to educate persons in attendance regarding new developments or products and services related to the exempt_activities of the organization and the show is designed to achieve such purpose through the character of the exhibits and the extent of the industry products displayed sec_513 of the code defines the term qualifying_organization as an organization described in sec_501 or which regularly conducts as one of its substantial exempt purposes a show which stimulates interest in and demand for the products of a particular industry or segment of such industry or which educates persons in attendance regarding new developments or products and services related to the exempt_activities of the organization sec_1_513-3 of the regulations provides in part that convention and trade_show activities carried on by a qualifying_organization in connection with a qualified convention or trade_show will not be treated as unrelated_trade_or_business consequently income from qualified convention and trade_show activities derived by a qualifying_organization that sponsors the qualified convention or trade_show will not be subject_to the tax imposed by sec_511 of the code sec_1_513-3 of the regulations provides in part that a convention or trade_show activity as defined in sec_513 of the code and sec_1_513-3 will not be considered unrelated_trade_or_business if it is conducted by a qualifying_organization sec_1_513-3 of the regulations provides in part that the term qualified convention or trade_show means a show that is conducted by a qualifying_organization at least one purpose of the sponsoring_organization in conducting the show is the education of its members sec_301_7701-1 of the procedure and administration regulations provides that whether an organization is an entity separate from its owners for federal tax purposes is a matter of federal tax law and does not depend on whether the organization is recognized as an entity under local law sec_301_7701-1 provides that under sec_301_7701-2 and sec_301_7701-3 certain organizations that have a single owner can choose to be recognized or disregarded as entities separate from their owners sec_301_7701-2 provides that a business_entity is any entity recognized for federal tax purposes including an entity with a single owner that may be disregarded as an entity separate from its owner under sec_301_7701-3 that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code a business_entity with two or more owners is classified for federal tax purposes as either a corporation or a partnership a business_entity with only one owner is classified as a corporation or is disregarded if the entity is disregarded its activities are treated in the same manner as a sole_proprietorship branch or division of the owner sec_301_7701-2 provides in general that a business_entity that has a single owner and is not a corporation under sec_301_7701-2 is disregarded as an entity separate from its owner sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two owners can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides generally that in the absence of an election otherwise a domestic eligible_entity is a a partnership if it has at least two members or b disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides generally that an an eligible_entity may elect to be classified other than as provided under paragraph b of this section or to change its classification by filing form_8832 entity classification election announcement states that when an entity that is wholly owned by a single owner is disregarded as separate from its owner its operations are treated as a branch or division of the owner therefore an owner that is exempt from taxation under sec_501 of the code must include as its own information pertaining to the finances and operations of the disregarded_entity in its annual information_return the unrelated_business_taxable_income of an organization exempt from tax under sec_501 of the code is subject_to tax under sec_511 unrelated_business_taxable_income is defined in sec_512 as the gross_income with certain modifications derived by the organization from any unrelated_trade_or_business that it regularly caries on an unrelated_trade_or_business is defined as any trade_or_business the conduct of which is not substantially related to the exercise or performance of the charitable educational or other purpose or function constituting the basis for the organization’s exemption under sec_513 the qualified convention and trade_show activities of the organization as described in sec_513 are excluded from the term unrelated business or trade x conducts trade shows on a regular basis as part of its activities at the trade shows a products are exhibited in order to educate the public about the industry and to promote the industry x is a qualifying_organization within the meaning of sec_513 of the code x’s qualified trade_show activities are those carried out by it in conjunction with the trade shows for the purpose of promoting and stimulating interest in and demand for industry products or of educating the public about the industry x seeks to assume control_over the exhibits to ensure that the shows as demonstrated in the character of the exhibits and the extent of the industry products displayed continue to help it achieve its exempt purposes as sponsor of the trade shows exhibitors look to x to resolve problems with the trade_show contractors who have been designated as such by x however lacking any privity of contract x’s means of resolving the problems with the contractors is limited x has determined that it can better conduct its trade shows by being in a position where it can legally enforce the contracts with the contractors rather than providing the services directly x will use y insulating itself from legal liability y’s activities will be limited to qualified trade_show activities in service to x only if x performed as described the services previously provided by third party contractors the activities would be excluded from the definition of an unrelated business or trade under sec_513 of the code as qualified trade_show activity providing the services in the manner described would assist x in retaining exhibitors attracting future exhibitors and enhancing the visitors’ enjoyment of the exhibits and creating a positive image of the industry it would also provide x with the means to enforce contracts so as to minimize the disruptions caused by a contractor’s failure to provide the services needed to properly display products and to conduct demonstrations while y is not exempt from tax under sec_501 of the code and is not itself a qualifying_organization as a single member limited_liability_company wholly owned by x that is being treated as a disregarded_entity the activities of y will be treated as those of x therefore y’s performance of services that would be considered qualified trade_show activities for x would be considered the same for y the fee arrangement with the contractors is intended to encourage them to provide quality service at the trade shows if x received income directly from a qualified trade_show activity it would not be considered unrelated_business_income sec_1_513-3 of the regulations in the hands of y a disregarded_entity income derived from the same activities would not be considered unrelated_business_income accordingly based on the facts presented we rule as follows income resulting from activity conducted by the single member llc y will not be considered unrelated_business_income because y is a disregarded_entity and because of the exception contained in sec_513 of the code since we have ruled that the income received by y would not be considered unrelated_business_income we have not ruled on the alternative this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent because this letter could help resolve any future questions about tax consequences of x’s activities x should keep a copy of this ruling in its permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely joseph chasin manager exempt_organizations technical group


department of the treasury internal_revenue_service attn mandatory review mc dal commerce st dallas tx date date tax exempt and government entities pivision number release date eo legend ul org organization name xx date address address org address employer_identification_number person to contact id number contact numbers certified mail - return receipt requested dear in a determination_letter dated january 19xx you were held to be exempt from federal_income_tax under sec_501 of the internal_revenue_code the code based on recent information received we have determined you have not operated in accordance with the provisions of sec_501 of the code accordingly your exemption from federal_income_tax is revoked effective january 20xx this is a final adverse determination_letter with regard to your status under sec_501 of the code we previously provided you a report of examination explaining why we believe revocation of your exempt status is necessary at that time we informed you of your right to contact the taxpayer_advocate as well as your appeal rights on august 20xx you signed form 6018-a consent to proposed action agreeing to the revocation of your exempt status under sec_501 of the code you have filed taxable returns on form s 1120-pc u s property and casualty insurance_company income_tax return for the year s ended december 20xx 20xx with us appropriate service_center indicated in the instructions for the return for future periods you are required to file form 1120-pc with the you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please contact the person whose name and telephone number are shown at the beginning of this letter sincerely vicki l hansen acting director eo examinations department of the treasury internal_revenue_service commerce street dallas tx - tax exempt and government entities may division legend org organization name xx date address address org address dear taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax we have enclosed a copy of our report of examination explaining why we believe an adjustment of your organization’s exempt status is necessary these if you request a conference with appeals we will forward your written_statement of protest to the appeals_office and they will contact you for your convenience an envelope is enclosed if you and appeals do not agree on some or all of the issues after your appeals_conference the appeals_office will advise you of its final_decision we have also enclosed publication exempt_organization appeal procedures for unagreed issues and publication the examination process publications include information on your rights as a taxpayer including administrative appeal procedures within the internal_revenue_service if you elect not to request appeals consideration but instead accept our findings please sign and return the enclosed form 6018-a consent to proposed adverse action we will then send you a final letter modifying or revoking your exempt status under sec_501 if we do not hear from you within days from the date of this letter we will process your case on the basis of the recommendations shown in the report of examination and send a final letter advising of our determination in either situation outlined in the paragraph above execution of form 6018-a or failure to respond within days you are required to file federal_income_tax returns for the tax period s shown above for all years still open under the statute_of_limitations and for all later years file the federal tax_return for the tax period s shown above with this agent within days from the date of this letter unless a request for an extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation sincerely marsha a ramirez director eo examinations enclosures publication publication form 6018-a report of examination envelope form_886 a department of the treasury - internal_revenue_service explanation of items name of taxpayer org schedule no or exhibit year period ended 20xx 20xx legend org organization name co-2 co-3 co-4 co-1 issues xx date xyz state motto motto co-5 4th g companie sec_1 does org qualify for tax exempt status under internal_revenue_code irc sec_501 for the years beginning january 20xx if org does not qualify for tax exempt status for years beginning january 20xx what are the tax consequences if the tax exempt status is revoked how will it affect future years facts org org was formed in 19xx in the state of xyz org is operated as a mutual motto company by its policyholders according to information secured org received a letter from the internal_revenue_service stating that they qualified for tax exempt status under internal_revenue_code section irc c with a ruling date of january 19xx originally org was formed as a county motto company later they changed to a state - motto company allowing them to issue policies throughout the state of xyz org provided property and casualty motto on a direct basis information secured during the examination included examples of the policies issued and an application form the types of policies and coverage of each include e e e e e farm coverage policy covers dwelling farm barns farm buildings improvements and betterments personal_property live stock and machinery farm personal liability coverage covers personal liability dwelling coverage basic broad form covers residence personal_property additional living costs dwelling coverage- renters covers personal_property of renters personal liability coverage covers personal liability the application form showed the ability to insure house personal_property additional costs mobile homes barns garages machine sheds grain bins hay grain in bins and equipment such as tractors and bailers form 886-a crev department of the treasury - internal_revenue_service page -1- department of the treasury - internal_revenue_service form_886 a name of taxpayer org schedule no or exhibit year period ended 20xx 20xx explanation of items org was also involved in reinsurance contracts details of these contracts follow protective facultative pro_rata reinsurance contract co-1 co-2 co-3 co-4 division on behalf of co-4 syndicate reinsure the company's surplus liability coverage- pro_rata share- property business maximum cession- dollar_figure minimum retention- dollar_figure brokerage paid_by reinsurer- e e e e interests and liabilities agreement as respects the property facultative pr rata reinsurance contract co-1 co-2 co-3 co-4 division on behalf of co-4 syndicate obligatory reinsurance treaty extended coverage quota share reinsurance treaty special casualty excess of loss reinsurance e e qbligatory reinsurance treaty e e e coverage property- lines with a maximum cession of dollar_figure minimum retention dollar_figure coverage casualty- quota share covering bodily injury property damage liability and medical payments on homeowners farmowners and farmers comprehensive liability maximum cession dollar_figure ceding commission occurrence limit- reinsurer’s liability in respect to any one loss occurrence shall not exceed an amount equal to of the annual ceded premium earned brokerage paid_by reinsurers e e e e extended coverage quota share reinsurance treaty e e e e coverage- quota share reinsurance on extended coverages only maximum cession dollar_figure ceding commission flat brokerage paid_by reinsurers e special casualty excess of loss reinsurance form 886-a cev department of the treasury - internal_revenue_service page -2- form_886 a department of the treasury - internal_revenue_service explanation of items name of taxpayer org schedule no or exhibit year period ended 20xx 20xx e e e coverage- of dollar_figure in excess of dollar_figure combined net_loss per occurrence covering bodily injury and property damage liability including medical payments rte ceded premiums calculated per underwriting manual provided by co-5 brokerage paid_by reinsurers premiums and policy fees are assessed against the members a portion of the premiums are reinsured with through the reinsurance agreement above any claims that are filed are filed with org org is responsible for paying the claims under the reinsurance agreements org will be reimbursed for the amounts the reinsurers are liable for form_990 was filed for the 20xx 20xx tax years the following is a breakdown of the gross_receipts received by org for the years ending december 20xx 20xx and the percentage of gross premiums to gross_receipts for the same year per notice 20xx-42 org 20xx 20xx total premiums assessments interest_income dividend income total gross_receipts percentage- gross premium reinsurance income to gross_receipts on the form_990 for years ending december 20xx 20xx org included under other income reimbursements from reinsurers for claims this amount is not considered part of gross_receipts but rather a deduction on losses_incurred and therefore not included in the chart above the total amount of commissions received from the reinsurer was netted against the amount of reinsurance payments properly and not reported as part of gross_receipts on forms or in the chart above an election under sec_831 has never been filed as of the writing of this report there has never been a filing of the election either with the filing of the forms or separately form 886-acrev department of the treasury - internal_revenue_service page -3- department of the treasury - internal_revenue_service form_886 a name of taxpayer org schedule no or exhibit year period ended 20xx 20xx explanation of items no tax_return has been filed for the 20xx tax_year as of this writing law and analysi sec_1 does org qualify for tax exempt status under internal_revenue_code irc sec_501 for the years beginning january 20xx internal_revenue_code sec_501 exempts from federal_income_tax motto companies as defined in sec_816 other than life including interinsurers and reciprocal underwriters if- i i the gross_receipts for the taxable_year do not exceed dollar_figure and il more than percent of such gross_receipts consist of premiums or ii in the case of a mutual motto company- l the gross_receipts of which for the taxable_year do not exceed dollar_figure and ii more than percent of such gross_receipts consist of premiums clause ii shall not apply to a company if any employee of the company or a member of the employee's family as defined in sec_2032 is an employee of another company exempt from taxation by reason of this paragraph or would be so exempt but for this sentence sec clarification of exemption from tax for small property and casualty insurance_companies of the pension funding equity act of p l amended sec_501 to change the definition of small property and casualty motto companies motto companies other than life motto companies exempt from income taxes to a company whose gross_receipts for the taxable_year do not exceed dollar_figure and over half such gross_receipts consist of premiums currently whose net written premiums or if greater direct written premiums for the taxable_year do not exceed dollar_figure or a mutual motto company a whose gross_receipts for the taxable_year do not exceed dollar_figure and more than percent of which consist of premiums and b none of whose employees or member of the employee’s family is an employee of another company exempt from tax under sec_501 these changes were applicable after december 20xx notice_2006_42 irb provides guidance as to the meaning of gross_receipts for purposes of sec_501 of the internal_revenue_code this notice advises taxpayers that the service will include amounts received from the following sources during the taxable_year in gross_receipts for purposes of sec_501 form 886-a rev department of the treasury - internal_revenue_service page -4- department of the treasury - internal_revenue_service form_886 a name of taxpayer org schedule no or exhibit year period ended 20xx 20xx explanation of items a premiums including deposits and assessments without reduction for return_premiums or premiums_paid for reinsurance b items described in sec_834 gross_investment_income of a non-life motto company and c other items that are properly included in the taxpayer’s gross_income under subchapter_b of chapter subtitle a of the code thus gross_receipts include both tax-free interest and the gain but not the entire amount_realized from the sale_or_exchange of capital assets because those items are described in sec_834 gross_receipts do not however include amounts other than premium income or gross_investment_income unless those amounts are otherwise included in gross_income accordingly the term gross_receipts does not include contributions to capital excluded from gross_income under sec_118 or salvage or reinsurance recovered accounted for as offsets to losses_incurred under sec_832 sec_834 of the internal_revenue_code includes under gross_receipts the gains from the sale or exchanges of capital assets to the extent provided in subchapter_p sec_1201 and following relating to capital_gains_and_losses sec_834 of the internal_revenue_code allows a deduction for capital losses to the extent provided in subchapter_p sec_1201 and following plus losses from capital assets sold or exchanged in order to obtain funds to meet abnormal motto losses and to provide for the payment of dividends_and_similar_distributions to policyholders based on the changes in the limitations under internal_revenue_code irc sec_501 and the operation of org during 20xx 20xx it was determined from the chart above that org did not qualify for tax exempt status for the years beginning january 20xx org was able to meet the requirement of gross premiums to gross_receipts for 20xx 20xx however their gross_receipts exceeded the dollar_figure limitation for 20xx dollar_figure gross_receipts exceeded the dollar_figure limitation they automatically exceeded the dollar_figure limitation allowed for mutual motto companies 20xx dollar_figure since their section e of the pension funding act of p l provides the effective date of the new requirements for exemption under sec_501 it states effective date- form 886-a ev department of the treasury - internal_revenue_service page -5- form_886 a name of taxpayer org explanation of items department of the treasury - internal_revenue_service schedule no or exhibit year period ended 20xx 20xx in general- except as provided in paragraph the amendments made by this section shall apply to taxable years beginning after december 20xx transition rule for companies in receivership or liquidation- in the case of a company or association which-- a for the taxable_year which includes april 20xx meets the requirements of sec_501 of the internal_revenue_code_of_1986 as in effect for the last taxable_year beginning before january 20xx and b on april 20xx is in a receivership liquidation or similar proceeding under the supervision of a state court the amendments made by this section shall apply to taxable years beginning after the earlier of the date such proceeding ends or december 20xx org was not involved in a court ordered liquidation during 20xx or 20xx therefore section e does not apply to this organization therefore for the years beginning january 20xx org did not qualify for tax exempt status under sec_501 if org does not qualify for tax exempt status for years beginning january 20xx what are the tax consequences since org did not qualify for tax exempt status under sec_501 for the years beginning january 20xx org’s tax exempt status should be revoked for years beginning january 20xx org’s filings of the forms were incorrect org should have filed form 1120-pc for years beginning january 20xx sec_831 discusses tax on insurance_companies other than life_insurance_companies sec_831 states as a general_rule taxes computed as provided in sec_11 shall be imposed for each taxable_year on the taxable_income of every insurance_company other than a life_insurance_company sec_831 provides an alternative_tax for certain small companies it states in sec_831 that in general in lieu of the tax otherwise applicable under subsection a there is hereby imposed for each taxable_year on the income of every insurance_company to which this subsection applies a tax computed by multiplying the taxable_investment_income of such company for such taxable_year by the rates provided in sec_11 form 886-a crev department of the treasury - internal_revenue_service page -6- department of the treasury - internal_revenue_service form_886 a name of taxpayer org schedule no or exhibit year period ended 20xx 20xx explanation of items sec_831 discusses the companies to which this subsection applies a in general this subsection shall apply to every insurance_company other than life including interinsurers and reciprocal underwriters if- i ii the net written premiums or if greater direct written premiums for the taxable_year do not exceed dollar_figure and such company elects the application of this subsection for such taxable_year the election under clause ii shall apply to the taxable_year for which made and for all subsequent taxable years for which the requirements of clause are met such election once made may be revoked only with the consent of the secretary regulations regs a discusses the time for making elections under i described in paragraph a of this section must be made by the later of- it states in general that except as otherwise provided in this section the elections a the due_date taking into account any extensions of time to file obtained by the taxpayer of the tax_return for the first taxable_year for which the election is effective or b date in which case the election generally must be made by amended_return regs a mentioned above includes sec_831 regs a describes the manner of making elections it states except otherwise provided in this section the elections described in paragraph a of this section must be made by attaching a statement to the tax_return for the first taxable_year for which the election is to be effective based on the code and regulation sections above org is not entitled to the relief under b for years under examination and for any future year until they decide to file the election the election has never been filed either with the form_990 or separately the election was filed and all subsequent years the election can not be made retroactive any election filed now or in the future would only be effective for the year if the tax exempt status is revoked how will it affect future years the tax exempt status should be revoked for the years beginning january 20xx form 1120-pc is required for each year and all future years where org does not qualify for exemption if org meets the requirements under sec_501 in future years it may be allowed to file the form_990 for each year they qualify as a self- declared entity otherwise form 1120-pc would be required any year in the future form 886-a crev department of the treasury - internal_revenue_service page -7- department of the treasury - internal_revenue_service form_8 a explanation of items name of taxpayer org schedule no or exhibit year period ended 20xx 20xx that the form 1120-pc is required org is allowed to make an election under irc b once the election is made it is effective for the year the election was made and for all future years that the form 1120-pc is required the election can not be made retroactive taxpayer’s position unknown at the time of this writing summary it is the governments position based on the above facts law and analysis that the tax exemption status of org for the years beginning january 20xx should be revoked based on not meeting the qualifications for exemption under sec_501 form 1120-pc would be required to be filed for any year where org does not qualify for exemption under sec_501 form 886-a ceev department of the treasury - internal_revenue_service page -8-


internal_revenue_service number release date index number ------------------ ---------- --------------------------------------------- ---------------------------- --------------------------- legend legend department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc intl plr-166086-04 date date taxpayer ------------------------------------------------------------------------------------------------- ----------------------- ---------------------------------- --------------------------- ---------------------- --------------------- --------------------------- ------- cpa firm date a date b date c date d year x dear ----------------- this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to make the election provided by sec_953 in accordance with the procedural rules set forth in notice_89_79 1989_2_cb_392 and revproc_2003_47 2003_2_cb_55 to be treated as a domestic_corporation for u s tax purposes commencing on the first day of taxpayer’s year x taxable_year additional information was submitted on date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process taxpayer was incorporated on date a taxpayer received its license as an insurance_company and commenced business on date b date a and date b fell within the year plr-166086-04 x taxable_year date c was the statutory due_date for filing the tax_return for the year x taxable_year taxpayer engaged cpa firm to perform tax compliance services and to analyze the tax considerations of making the election provided by sec_953 after date c cpa firm confirmed that taxpayer desired to make the sec_953 election for the year x taxable_year and reviewed the provisions of notice_89_79 and revproc_2003_47 cpa firm concluded that the election could be filed prior to d the extended due_date for filing the tax_return for the year x taxable_year even though an application_for an extension of time to file the tax_return for the year x taxable_year had not been filed the sec_953 election was prepared and attached to the tax_return and filed a few days before date d subsequently taxpayer was informed by the irs that the sec_953 election for the year x taxable_year was not timely filed sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith within the meaning of sec_301_9100-3 subject_to the conditions set forth in sec_301_9100-3 and the grant of relief will not prejudice the interests of the government within the meaning of sec_301_9100-3 in the present situation notice_89_79 and revproc_2003_47 fix the time to make the sec_953 therefore the commissioner has discretionary authority under sec_301 c to grant taxpayer an extension of time provided that taxpayer satisfies the standards for relief as set forth in sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to make the election provided by sec_953 in accordance with the procedural rules set forth in notice_89_79 1989_2_cb_392 and revproc_2003_47 2003_2_cb_55 to be treated as a domestic plr-166086-04 corporation for u s tax purposes commencing on the first day of taxpayer’s year x taxable_year the granting of an extension of time is not a determination that taxpayer is otherwise eligible to make the sec_953 election sec_301_9100-1 a copy of this ruling letter should be associated with taxpayer’s sec_953 election this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representatives sincerely associate chief_counsel international by s valerie mark lippe valerie mark lippe senior technician reviewer enclosure copy for purposes


internal_revenue_service number release date index number ------------------------------- ------------------------------- --------------------------------- ty ------- ty ------- legend department of the treasury washington dc third party communication date of communication month dd yyyy person to contact --------------------------- id no --------------- ----------------- telephone number --------------------- refer reply to cc ita b05 plr-135328-09 date january ---------------------------------------------------- ------------------------------------------------------------------------------ taxpayer defendants --------------------------------------------------------------------------------------------------------------- legal aid organization ------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------ legal aid organization ----------------------------------------- law firm city year year year lawsuit ----------------------------------------------------- ------------------- ------- ------- ------- ------------------------------------------------------------------------------ ------------------------ ------------------------------------------------------------------------------ -------------------------------------------- ------------- --------------- ---------------- --- ------------------- order dollar_figurex dollar_figurey dollar_figurez act section x of act dear ------------------- this is in response to a request for a private_letter_ruling dated date submitted on your behalf by your authorized representatives you taxpayer have requested a ruling that an award of attorneys’ fees of dollar_figurey awarded directly to legal aid organization and law firm in the order is excludible from your gross_income under the circumstances set forth below plr-135328-09 facts in year taxpayer was one of several named plaintiffs who brought lawsuit against defendants alleging that defendants engaged in improper practices under the act lawsuit was not a class action taxpayer was represented on a pro bono basis by legal aid organization legal aid organization and law firm these organizations took the case to ensure that businesses like defendants’ comply with the act taxpayer entered into a retainer agreement with legal aid organization in the fees and costs section the retainer agreement states that legal aid organization will not charge taxpayer a fee for its services law firm joined legal aid organization as co-counsel and agreed to represent taxpayer and the other plaintiffs at no charge legal aid organization also represented the plaintiffs at no charge taxpayer did not enter into a retainer agreement or other contract for services with legal aid organization or law firm taxpayer has no obligation contractual or otherwise to pay any fees or other costs to legal aid organization legal aid organization or law firm taxpayer and the co-plaintiffs prevailed in lawsuit in year the court entered judgment and awarded taxpayer dollar_figurex the maximum recovery under the act under section x of act plaintiffs are entitled to recover the costs of the action together with reasonable attorneys’ fees and costs in year legal aid organization and law firm filed a motion for attorneys’ fees and costs in year the court issued order awarding dollar_figurez attorneys’ fees and other costs to co-counsel legal aid organization and law firm the portion of the dollar_figurez attorneys’ fees attributable to taxpayer’s claim was dollar_figurey law and analysis taxpayer concedes that the dollar_figurex award is taxable_income but contends that the award of dollar_figurey in attorneys’ fees is not includible in taxpayer’s gross_income under sec_61 of the internal_revenue_code code sec_61 of the code defines gross_income as all income from whatever source derived the definition extends broadly to all economic gains accessions to wealth not otherwise specifically exempted from taxation under the code 348_us_426 in the context of legal services contracts retainers plaintiff typically agrees to pay attorneys a fee for service the fee may be a flat fee or a contingency fee under either arrangement the plaintiff has a contractual obligation to pay the attorneys’ fees if a court awards attorneys’ fees to a successful plaintiff and the plaintiff uses the recovery to pay or offset payment of attorneys’ fees plaintiff must include the awarded attorneys’ fees in gross_income under sec_61 of the code see 114_tc_399 affd 259_f3d_881 7th cir o'brien v commissi38_tc_707 affd per curiam 319_f2d_532 3d cir the rationale is that the taxpayer receives the benefit of the payment ie an economic gain through debt satisfaction when a third party makes a payment to satisfy a taxpayer’s plaintiff’s obligation to a creditor retained attorney the taxpayer realizes an economic gain includable in gross_income even if the third party pays the creditor directly and the taxpayer never receives the payment 279_us_716 the principle of old colony trust co applies whether the attorneys' fees are paid on a contingency-fee basis or under a fee shifting statute 268_f3d_756 9th cir affg tcmemo_1998_364 vincent v commissioner tcmemo_2005_95 attorneys’ fees awarded pursuant to a fee shifting statute or regulation must be included in the gross_income of the plaintiff where the awards are in lieu of contingency-fee see also sanford v commissioner 95_tcm_1618 green v commissioner t c memo the supreme court has reached the same result in 543_us_426 the court held that the portion of plaintiff’s recovery from a money judgment or settlement paid to plaintiff’s attorney under a contingency-fee agreement is included in the plaintiff’s gross_income the supreme court viewed the contingency-fee agreement as an attempted anticipatory assignment of a portion of the client's income litigation recovery to the attorney in its discussion the court explained that a taxpayer cannot exclude an economic gain from gross_income by assigning the gain in advance to another party 281_us_111 333_us_591 311_us_112 attorneys’ fees awarded to a successful litigant are generally includible in the litigant’s gross_income under either the anticipatory_assignment_of_income doctrine_of banks and lucas v earl or under the payment of a liability doctrine enunciated in old colony trust under both analyses the litigant has an obligation by express or implied agreement to pay attorneys fees taxpayer’s case is distinguishable because taxpayer had no obligation to pay attorneys’ fees in fact taxpayer’s agreement retainer contract expressly provided that legal aid organization would not charge taxpayer any fee for legal services in addition taxpayer had no retainer contract with and did not otherwise agree to pay any fees to legal aid organization or law firm for their legal services rather legal aid organization and law firm requested attorneys’ fees directly under the provisions of section x of act they did not seek attorneys’ fees on behalf of taxpayer or in lieu of taxpayer’s contingency fee obligation we therefore conclude that the award of dollar_figurey in attorneys’ fees is not includible in taxpayer’s gross_income under sec_61 of the code plr-135328-09 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 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely william a jackson branch chief branch office_of_chief_counsel income_tax accounting


internal_revenue_service number release date index number ------------------------------------------------------------ --------- -------------------------------------------------------- --------------------------------------------- ----------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no ------------- telephone number --------------------- refer reply to cc fip b01 plr-149551-06 date march taxpayer ------------------------------------------------------------------------------------------------- ------------------------ ------------ --------------------------------------------------------- ------ ---------------------- -------------------------- state adviser a date date dear -------------- this is in reply to your letter requesting a ruling on behalf of taxpayer you have requested a ruling that any income received by taxpayer under an expense reimbursement agreement with its investment adviser will be qualifying_income for purposes of the gross_income tests under sec_856 and c of the internal_revenue_code facts taxpayer was organized as a state corporation and registered under the investment_company act of u s c 80a-1 et seq as amended as a closed- end non-diversified management investment_company taxpayer has elected to be taxed as a real_estate_investment_trust reit effective for its tax_year ended date taxpayer is a fund-of-funds which is designed to allow investors to participate in various real_estate private equity funds through a single investment vehicle the real_estate private equity funds are organized as partnerships that invest in commercial or residential properties that generate real_estate rents taxpayer represents that currently a of its assets qualify as real_estate_assets or government securities plr-149551-06 furthermore to the extent taxpayer raises more capital or liquidates mortgage assets the amounts will be invested in qualified real_estate_assets on date taxpayer entered into an investment advisory agreement the agreement with adviser under the agreement adviser will assist taxpayer in identifying evaluating structuring acquiring monitoring and disposing of taxpayer’s investment_assets the agreement provides that taxpayer will bear all expenses and taxpayer agreed to an expense reimbursement arrangement the reimbursement arrangement under the reimbursement arrangement adviser will reimburse taxpayer for a portion of taxpayer’s total ongoing expenses in any particular year of operation excluding adviser’s management fees law analysis and conclusion to provide taxpayer’s shareholders with a reasonable expense ratio adviser sec_856 provides that at least percent of a reit's gross_income excluding gross_income from prohibited_transactions must be derived from dividends interest rents_from_real_property gain from the sale_or_other_disposition of stock securities and real_property other than property in which the corporation is a dealer abatements and refunds of taxes on real_property income and gain derived from foreclosure_property commitment_fees and gain from certain_sales or other dispositions of real_estate_assets sec_856 provides that at least percent of a reit's gross_income the legislative_history underlying the tax treatment of reits indicates that the excluding gross_income from prohibited_transactions must be derived from rents_from_real_property interest on obligations secured_by real_property gain from the sale_or_other_disposition of real_property other than property in which the corporation is a dealer dividends from reit stock and gain from the sale of reit stock abatements and refunds of taxes on real_property income and gain derived from foreclosure_property commitment_fees gain from certain_sales or other dispositions of real_estate_assets and qualified_temporary_investment_income central concern behind the gross_income restrictions is that a reit’s gross_income should largely be composed of passive_income for example h_r rep no 86th cong 2d sess pincite 1960_2_cb_819 pincite states o ne of the principal purposes of your committee in imposing restrictions on types of income of a qualifying real_estate_investment_trust is to be sure the bulk of its income is from passive_income sources and not from the active_conduct_of_a_trade_or_business the legislative_history also indicates that congress intended to equate the tax treatment of reits with the treatment accorded regulated_investment_companies rics in the present case the amounts received under the reimbursement revrul_92_56 1992_2_cb_153 holds that if in the normal course of its plr-149551-06 business a ric receives a reimbursement from its investment_advisor and the reimbursement is included in the ric’s gross_income the reimbursement is qualifying_income under sec_851 because the reimbursement was made in the normal course of the ric’s business and not in an effort to artificially inflate the ric’s gross_income the reimbursement was derived with respect to the ric’s business of investing in stock securities or currencies sec_851 now provides that qualifying_income for a ric includes income derived with respect to its business of investing in stock securities or currencies the other income clause arrangement would likely be qualifying_income under the other income clause if taxpayer were a ric while there is no rule similar to the other income clause that is applicable to reits congress has indicated an intent to equate the tax treatment of rics and reits furthermore the legislative_history underlying the reit income tests under sec_856 indicates a concern only that a reit’s income be derived from passive sources and not from participation in an active trade_or_business there is no indication that congress intended to discourage or limit a reit from participating in an arrangement similar to the reimbursement arrangement the reimbursement arrangement is simply meant to provide a reasonable expense ratio for taxpayer’s shareholders it does not suggest participation in an active trade_or_business of investing conclude amounts received by taxpayer under the reimbursement arrangement which are attributable to expenses relating to the production of qualifying_income under sec_856 and sec_856 will be qualifying_income for purposes sec_856 and sec_856 other information accordingly based on the information submitted and representations made we except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of the transaction discussed in this letter for example no opinion is expressed concerning whether taxpayer qualifies as a reit under sec_856 or the tax status of any other entity described herein plr-149551-06 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 sincerely s ______________________________ elizabeth a handler chief branch office of associate chief_counsel financial institutions products


internal_revenue_service number release date index no cc psi plr-113965-00 date in re legend company dear this is in response to a letter_ruling request that you submitted on behalf of company concerning liability for the excise_tax imposed on the installation of trailer and truck accessories company’s business is limited to the manufacture sale and installation of accessories for trailers and trucks these accessories include fitted tarps for all types of trailers tarping systems for dump trucks and trailers side kits tarping systems for flat bed trailers and trucks cargo protection devices such as undermount storage boxes flatbed bulkheads and cab guards and refrigeration trailer air return bulkheads and air ducts company installs these accessories on trailers and trucks in the past company has characterized its installation of its accessories as taxable under sec_4051 of the internal_revenue_code consistent with this characterization company files quarterly excise_tax returns for the sec_4051 excise_tax that the company includes in its sale price of the accessories to its customers in this letter_ruling request company asks if it can discontinue paying this excise_tax and filing returns in connection with this tax sec_4051 imposes a percent excise_tax on the first_retail_sale of automobile truck chassis automobile truck bodies truck trailer and semitrailer chassis truck trailer and semitrailer bodies and tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer trucks with gross vehicle weight ratings of big_number pounds or less and trailers with gross vehicle weight ratings of big_number pounds or less are not subject_to this tax sec_4051 imposes a percent excise_tax on the price of the installation of a part or accessory installed or caused to be installed by the owner lessee or operator of any vehicle that contains an article described in sec_4051 this tax only applies to installations made not later than months after the date the vehicle was first placed_in_service sec_4051 and sec_145_4051-1 of the temporary excise_tax regulations under the highway revenue act of pub l provide that the excise_tax does not apply if the part or accessory installed is a replacement part or accessory or the aggregate price of the parts and accessories and their installation with respect to any vehicle does not exceed dollar_figure sec_4051 provides that the owners of the trade_or_business installing the parts or accessories shall be secondarily liable for this excise_tax the sec_4051 excise_tax on the installation of parts or accessories is imposed on the owner lessee or operator of the vehicle on which parts or accessories are installed company is not the owner lessee or operator of the vehicles on which company installs accessories therefore company is not required to pay this excise_tax on account of an installation however if the owner lessee or operator of the vehicle on which company installs an accessory does not file an excise_tax return and pay the excise_tax company is secondarily liable for this tax this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries by richard a kocak chief branch enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------ ------------------------------------ ---------------------------------------- --------------------------------- ------------------------------- in re ----------------------------------- 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 b05 plr-101619-17 date date legend taxpayer ------------------------------------------------------------------------------------------------- --------------------------------- ------------------------------------------------------------------------------------------------- tenant year x state property --------------------------------- ------------------------------------------------------ ------------- ----------------------------------------------------- dear ------------ this letter responds to a letter dated date and subsequent correspondence submitted on behalf of taxpayer requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations for taxpayer to make an election under sec_1_48-4 of the income_tax regulations for year x facts according to the information submitted and representations made taxpayer a limited_liability_company organized under the laws of state owns the property taxpayer rehabilitated the property in a manner that qualified for the rehabilitation_credit under sec_47 of the internal_revenue_code tenant a limited_liability_company organized under the laws of state leases the property from taxpayer taxpayer and tenant entered into an agreement to pass through taxpayer’s qualified_rehabilitation_expenditures qres relating to the property to tenant the agreement required taxpayer to file an election under sec_1_48-4 on or before the due plr-101619-17 date including extensions of tenant’s return for the year in which the qres are placed_in_service taxpayer placed_in_service a phase of the rehabilitated property in year x however taxpayer failed to timely make the election for year x due to inadvertence neither taxpayer nor tenant claimed the rehabilitation_credit based on the qres placed_in_service in year x further taxpayer has not made an election under sec_47 law and anaylysis sec_38 allows a credit for the taxable_year in an amount equal to the sum of the business_credit carryforwards carried to the taxable_year the amount of the current_year_business_credit plus the business_credit carrybacks carried to the taxable_year under sec_38 the amount of the current_year_business_credit includes the investment_credit under sec_46 under sec_46 the investment_credit includes the rehabilitation_credit under sec_47 sec_47 provides that the rehabilitation_credit for any taxable_year is the sum of percent of the qualified_rehabilitation_expenditures with respect to any qualified_rehabilitated_building other than a certified_historic_structure and percent of the qualified_rehabilitation_expenditures with respect to any certified_historic_structure under sec_47 qualified_rehabilitation_expenditures with respect to any qualified_rehabilitated_building shall be taken into account for the taxable_year in which the qualified_rehabilitated_building is placed_in_service sec_47 provides that a building shall be treated as having been substantially_rehabilitated only if the qualified_rehabilitation_expenditures during the 24-month measuring period selected by the taxpayer ending with or within the taxable_year exceed the greater of i the adjusted_basis of the building as of the beginning of the 24-month period or ii dollar_figure sec_47 provides that in the case of any rehabilitation that may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the physical work on the rehabilitation begins a month measuring period shall be substituted for a 24-month measuring period sec_1_48-12 provides in part that a rehabilitation may reasonably be expected to be completed in phases if it consists of two or more distinct stages of development the determination of whether a rehabilitation consists of distinct stages and therefore may reasonably be expected to be completed in phases shall be made on plr-101619-17 the basis of all the relevant facts and circumstances in existence before physical work on the rehabilitation begins section sec_50 makes applicable rules similar to the rules of former sec_48 relating to certain leased property under former sec_48 a person other than a person referred to in former sec_46 who is a lessor of property may at such time in such manner and subject_to such conditions as are provided by regulations prescribed by the secretary elect with respect to any new sec_38 property other than property described in former sec_48 to treat the lessee as having acquired the property sec_1_48-4 provides that a lessor of property may elect to treat the lessee of the property as having purchased the property for purposes of the credit allowed by sec_38 if the conditions specified in sec_1_48-4 through v are satisfied sec_1_48-4 requires a statement of election to treat the lessee as a purchaser to be filed in the manner and within the time provided in sec_1_48-4 or g sec_1_48-4 provides that the election of the lessor with respect to a particular property or properties must be made by filing a statement with the lessee signed by the lessor and including the written consent of the lessee containing the information specified in sec_1_48-4 through vii sec_1_48-4 provides that the sec_1_48-4 election statement must be filed with the lessee on or before the due_date including any extensions of time of the lessee’s return for the lessee’s taxable_year during which possession of the property is transferred to the lessee sec_1_48-4 provides that the lessor and the lessee must keep as a part of their records the election statement referred to in sec_1_48-4 and that the lessor must attach to its income_tax return a summary statement of all property leased during its taxable_year with respect to which an election is made the summary statement must contain the following information the name address and taxpayer account number of the lessor and in numerical account number order each lessee’s account number name and address the estimated_useful_life category of the property or if applicable the estimated_useful_life expressed in years and the basis or fair_market_value of the property whichever is applicable sec_301_9100-1 provides that this section and sec_301_9100-2 and sec_301_9100-3 establish the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election an extension of time is available for elections that a taxpayer is otherwise eligible to make however the granting of an extension of time is not a determination that the taxpayer is otherwise eligible to make the election plr-101619-17 sec_301_9100-1 provides that the term election includes an application_for relief in respect of tax and that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of taxpayer who is abroad under all subtitles of the code except subtitles e g h and i 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 sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including the affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly taxpayer is granted an extension of time of days from the date of this letter to make an election under sec_1_48-4 for year x for this purpose taxpayer must file a statement of election in accordance with sec_1_48-4 further taxpayer must file an amended_return for year x attaching the summary statement required by sec_1_48-4 and a copy of this letter a copy of this letter is enclosed for that purpose except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any provisions of the code in particular we express no opinion on whether all of the conditions specified in sec_1_48-4 are satisfied whether taxpayer’s rehabilitation_expenditures with respect to the property are qualified_rehabilitation_expenditures under sec_47 whether taxpayer’s rehabilitation meets the definition of a phased rehabilitation under sec_1_48-12 or whether taxpayer’s rehabilitation of the property otherwise meets the requirements under sec_47 further we express no opinion on whether any of the limited_liability companies involved are partnerships for federal tax purposes whether any of the members of the limited_liability companies are partners for federal tax purposes or whether the lease at issue is lease for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-101619-17 in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to each of your authorized representatives the ruling contained in this letter is based on the information submitted and representations made by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request_for_ruling it is subject_to verification on examination sincerely john p moriarty acting associate chief_counsel passthroughs and special industries by jian h grant senior technician reviewer branch office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes