department of the treasury internal_revenue_service washington d c mar qe tep ra th tax_exempt_and_government_entities_division uil no neaene’ employer a plan x plan y plan z state a date dear this is in response to your letter dated date submitted on your behalf by your authorized representative in which your request a ruling concerning the application of sec_402 and sec_401 of the internal_revenue_code the code’ under penalty of perjury the following facts and representations have been submitted in support of the ruling_request employer a is a tax exempt_corporation under sec_501 of the code employer a maintains plan x for employees of its participating employers plan x is a pension_plan within the meaning of sec_1_401-1 of the income_tax regulations the regulations on date the internal_revenue_service issued a favorable determination_letter on the qualified status of plan x under the terms of plan x participants are provided a choice of distribution options including a one-time election to receive an immediate single sum payment equal to the current value of the employee’s vested_accrued_benefit upon termination of employment employer a also maintains plan y a profit sharing plan within the meaning of sec_1_401-1 of the regulations that includes a cash_or_deferred_arrangement qualified under sec_401 of the code on date the service issued a favorable determination_letter on the qualified status of plan y plan y permits a plan participant or an employee who is expected to become a participant to establish a separate rollover_contribution account to which he or she may contribute an eligible_rollover_distribution as the term is defined in the plan document the plan definition is intended to conform to the requirements of sec_401 and sec_402 of the code plan y defines a participant as any employee who is not an excluded_employee who has satisfied all of the age and service requirements of the plan plan y defines a former participant as an individual who is no longer an employee due to having incurred a termination of employment but who retains and is entitled to receive an accrued_benefit under the plan finally employer a maintains plan z which allows employee deferrals and benefits under sec_403 of the code plan z provides for lump sum distributions to participants based on these facts and representations the following rulings are requested that a direct trustee-to-trustee transfer under sec_401 of the code of an eligible_rollover_distribution to plan y from either plan x or plan z by a former participant’ will not create a taxable_event for such former participant under sec_402 of the code that a rollover_contribution or direct trustee-to-trustee transfer under sec_401 of the code to plan y of an eligible_rollover_distribution from an ira or another qualified_plan or b plan held in the name of or for the benefit of a former participant that involves only proceeds received by the ira or other qualified_plan or b plan from plans x y or z and the earnings thereon will not create a taxable_event for such former participant under sec_402 of the code that acceptance of any transfer or rollover_contribution described above will not cause a loss of qualified status for plan y under sec_401 of the code with respect to ruling requests one and two sec_402 of the code provides that except as otherwise provided in this section any amount actually distributed to any distributee by any employees’ trust described in sec_401 which is exempt from tax under sec_501 shall be taxable to the distributee in the taxable_year of the distributee in which distributed under sec_72 relating to annuities sec_72 of the code provides for an additional tax on any amount received from a qualified_retirement_plan as defined in sec_4974 which includes plans described in sec_401 the additional tax for the taxable_year in which such amount is received is equal to percent of the portion of such amount which is includible in gross_income except where such income is distributed on or after an employee attains the age of or on account of one or more exceptions provided for under sec_72 of the code sec_401 of the code provides that a_trust created or organized in the united_states and forming part of a qualified_stock bonus pension or profit sharing plan of an employer constitutes a qualified_trust only if the various requirements set out in a are met revrul_67_213 1967_2_cb_149 involves the transfer of funds directly from the trust forming part of a qualified_pension plan to the trust forming part of a qualified_stock bonus plan the revenue_ruling provides in part that if a participant's interest in a qualified_plan is transferred from the trust forming part of that plan to the trust forming part of another qualified_plan without being made available to the participant no taxable_income will be recognized by reason of such transfer sec_401 of the code provides in general that a_trust shall not constitute a qualified_trust under sec_401 unless the plan of which such trust is a part provides that if the distributee of any eligible_rollover_distribution elects to have such distribution paid directly to an eligible_retirement_plan and specifies the eligible_retirement_plan to which such distribution is to be paid in such form and at such time as the plan_administrator may prescribe such distribution shall be made in the form of a direct trustee-to-trustee transfer to the eligible_retirement_plan so specified sec_401 of the code states that for purposes of this paragraph the term eligible_retirement_plan has the meaning given such term by sec_402 except that a qualified_trust shall be considered an eligible_retirement_plan only if it is a defined_contribution_plan the terms of which permit the acceptance of rollover distributions however sec_1_401_a_31_-1 q a-2 of the regulations states in pertinent part that a plan is permitted at a participant's election to make a direct_rollover to any type of retirement_plan as defined in sec_402 including a defined_benefit_plan sec_402 of the code states in pertinent part that the term eligible_retirement_plan means - i an individual_retirement_account described in sec_408 ii an individual_retirement_annuity described in sec_408 other than an endowment_contract iii a qualified_trust iv an annuity plan described in sec_403 v an eligible_deferred_compensation_plan described in sec_457 which is maintained by an eligible_employer described in sec_457 and vi an annuity_contract described in sec_403 sec_402 of the code provides that if a any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution b the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and c in the case of a distribution_of_property other than money the amount so transferred consists of the property transferred then such distribution to the extent so transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 of the code provides that for purposes of this subsection the term eligible_rollover_distribution means any distribution to an employee of all or any portion of the balance_to_the_credit of the employee in a qualified_trust with certain exceptions for substantially_equal_periodic_payments required minimum distributions and hardship distributions sec_402 of the code generally provides that the rollover described in sec_402 must occur no later than days after the day on which the distribute received the property distributed subject_to the hardship exception described in subparagraph b sec_402 of the code provides that a transfer to an ira resulting in any portion of a distribution being excluded from income under sec_402 shall be treated as a rollover_contribution described in code sec_408 sec_408 of the code defines a distribution from a conduit_ira eligible to be rolled over into a sec_401 qualified_plan as a distribution from an ira in which no amount in the account and no part of the value of the annuity is attributable to any source other than a rollover_contribution as defined in sec_402 from an employee's trust described in sec_401 which is exempt from tax under sec_501 or from an annuity plan described in sec_403 and any earnings on such contributions and the entire amount received including property and other money is paid for the benefit of such individual into another such trust or annuity plan not later than the day after the day on which the individual receives the payment or distribution with respect to ruling_request one plans x and z provides that participants can request a rollover in the form of a direct trustee-to-trustee transfer to an eligible_retirement_plan plan y is an eligible_retirement_plan within the meaning of sec_402 and it provides that it accepts eligible rollover distributions accordingly we conclude that a direct trustee-to-trustee transfer pursuant to sec_401 of the code of an eligible_rollover_distribution from plan x or plan z to plan y at the request of a former participant as defined in plan y will not create a taxable_event for such former participant under sec_402 of the code to the extent that it is otherwise an eligible_rollover_distribution and the requirements of sec_402 are met similarly with respect to ruling_request two because plan y provides for the establishment of rollover_contribution account amounts may be rolled over from another qualified_plan a b plan or a an ira including a conduit_ira to plan y by a participant or former participant as defined in plan y provided the amount rolled over is otherwise an eligible_rollover_distribution within the meaning of sec_402 and sec_408 of the code accordingly we conclude that a rollover_contribution or direct trustee-to- trustee transfer under sec_401 of the code to plan y of an eligible_rollover_distribution from an ira or another qualified_plan or b plan held in the name of or for the benefit of the former participant as defined in plan y that involves only proceeds received by the ira or other qualified_plan or b plan from plans x y or z and the earnings thereon will not create a taxable_event for such former participant under sec_402 of the code to the extent that it is otherwise an eligible_rollover_distribution and the requirements of sec_402 are met with respect to ruling_request three section dollar_figure of revproc_2009_4 2009_1_irb_121 provides that the employee_plans technical office ordinarily will not issue letter rulings on matters involving a plan's qualified status under sec_401 through of the code and sec_4975 of the code and that matters involving a plan's qualified status are generally handled by the employee_plans determination program as provided in revproc_2008_6 of 2008_1_irb_192 revproc_93_10 and revproc_93_12 no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this ruling is being sent to your authorized representative in accordance with a power_of_attorney on file with this office fc so if you wish to inquire about this ruling please contact d no at please address all correspondence to se t ep ra t4 sincerely yours d re ditth che donzell h littlejohn manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose ce


internal_revenue_service department of the treasury significant index no washington dc contact person telephone number in retérence two dateiep ra t a2 mar in re this letter constitutes notice that sec_412 of the internal_revenue_code code and sec_304 of the employee_retirement_income_security_act_of_1974 as amended erisa do not apply to the amendment described below with respect to the above-named defined benefit pension_plan this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent sec_412 of the code and sec_304 of erisa provide that if an extension of time under sec_412 of the code and sec_304 of erisa is in effect with respect to a plan that is amended to increase the liabilities of the plan by reason of any increase in benefits any change in the accrual_of_benefits or any change in the rate at which benefits become nonforfeitable such extension shall not apply to any plan_year ending on or after the date on which such amendment is adopted sec_412 of the code and sec_304 of erisa provide that sec_412 of the code and sec_304 of erisa shall not apply to any plan amendment which the secretary_of_the_treasury determines to be reasonable and which provides only de_minimis increases in the liabilities of the plan extensions of the amortization periods for amortizing the unfunded liabilities of the plan were granted by a letter_ruling dated date in accordance with sec_412 of the code and sec_304 of erisa effective for the plan_year beginning date a ruling letter dated date found that sec_412 of the code and sec_304 of erisa did not apply to a plan amendment adopted by the plan trustees that recognized a reciprocity agreement with another plan the plan is a defined_benefit_plan that is also a multiemployer pian as defined under sec_414 of the code effective date the merged into the pian the was covered ail participants represented by area collectively the employers that were required under various collective bargaining which are located in the g are referred to as the employers receive benefits based on agreements to contribute to the employers employees of the schedule b of the plan reproduced below all employees other than those working for employers receive benefits based on schedule a of the plan under the plan’s benefit formula a participant under schedule b eams approximately of the pension as a participant under schedule a all other participants benefit schedules a and b under the plan are described in the following table employers currently amount of hourly contribution rate schedule a unit benefit per year of benefit service schedule b unit benefit per year of benefit service below - - - - 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 -39 - - dollar_figure for each interval dollar_figure for each interval and above - - -54 dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure in an effort to create a sufficient benefit to maintain the participation of employers in the plan and to encourage participation of additional the plan trustees have proposed a plan amendment to be effective as of date or as soon thereafter as possible which would increase the future benefit service accruals of employers by prospectively eliminating benefit accruals under schedule b and by providing future benefit accruals under schedule a to all participants in the plan employers the plan trustees believe that the disparity in benefit accruals between schedule a and schedule b is a deterrent to both current and prospective participation by the employers benefits under schedule b are too low to be an incentive for employment under collective bargaining making it difficult to attract and retain employers moreover participants would like to receive similar benefit accruals as their counterparts in other parts of the country in order to sustain the participation and promote the growth of the plan a plan amendment that provides parity in benefit accruals for participants is reasonable amending the plan to provide for parity in benefit accruals is reasonable at this time because the financial strength of the plan has improved on the basis of better investment advice increased employer_contribution rates and close monitoring of the plan's financial position by the trustee’s funding review group specifically the credit balance in the funding_standard_account has increased from dollar_figure million in to dollar_figure million in the plan’s unfunded vested liabilities have decreased from dollar_figure million to dollar_figure million over this same period and the implementation of a pension benefit guaranty corporation-approved withdrawal_liability formula which reduces the potential liability of newer employers from pre-1995 unfunded liabilities has attracted new employers to maintain the plan calculations by the plan’s enrolled_actuary show that the amendment would only increase the entry age actuarial accrued liability by from dollar_figure million to dollar_figure million and would increase the present_value of accrued liabilities by only from dollar_figure million to dollar_figure million based on the information submitted the proposed amendment to the plan is reasonable and provides only a de_minimis increase in plan liabilities a copy of this letter is being sent to the a copy of this letter should also be furnished to the enrolled_actuary for the plan area office in if you have any questions concerning this ruling please contact the telephone number listed above at the sincerely yours in phuck ken yednock manager employee_plans technical tax exempt government entities division


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date aug t ep ra t3 uics legend company m division n local o union p fund v plan x act l date date date date state w date date page z0074e0 this is in response to the representative on your behalf as supplemented by several pieces of correspondence of in which you ask for letter rulings under sections which the latest is dated d of the internal_revenue_code code the following facts and representations support your ruling_request letter submitted by your authorized fund v is a jointly trusteed employee retirement_plan established under sec_302 of act l which your authorized representative asserts is intended to meet the qualification requirements of sec_401 a of the internal_revenue_code the administrative offices of fund v are located in state w fund v was established by a_trust agreement on or about date pursuant to a collective bargaining agreement between local o of union p and division n of company m said collective bargaining agreement requires that participating employers contribute to the fund on behalf of their employees your authorized representative has asserted on your behalf that numerous employers contribute to plan x on behalf of their employees see sec_1 of plan x below the trust agreement establishing the fund provides in relevant part that the specific benefits provided and the eligibility requirements for such benefits shall be set forth in plan x pursuant to provisions of plan x eligible participants receive benefits upon retirement death and disability relevant provisions further described below provide for severance benefits upon an affected plan x participant’s termination of employment a plan x participant is currently permitted to elect a severance benefit severance benefit upon termination of his employment and participation in plan x the severance benefit is a single sum cash payment equal to a percentage of employer contributions made to plan x on behalf of the participant starting with after five years of participation and increasing at a rate of for each additional year upon to a effective date plan x was maximum of after years of participation ' amended to eliminate the severance benefit for all benefits accrued after date said amendment provided that severance benefits shall be terminated for all benefits accrued after date ifa participant is eligible to repay a severance benefit ' notwithstanding the severance benefit calculations on date plan x was amended to provide that the single sum cash payment will not be less than the actuarial equivalent of the terminated participant’s accrued_benefit see section of plan x page subsequent to date pursuant to either federal_law or plan provisions he will still have a protected right to take a distribution of the repaid benefit in the form of a single sum severance benefit relevant provisions of plan x include sec_1 which defines accrued_benefit as the monthly benefit commencing at normal_retirement_age which has accrued to a participant pursuant to the benefit formula described in sec_4 of article iv sec_1 a which defines eligibility computation period as the twelve consecutive month period beginning with the day the employee first performs an hour_of_service the employment_commencement date and subsequently completes at least three hundred fifty hours_of_service for an employer sec_2_1 which provides in relevant part that each person who becomes an employee on or after date shall become a participant on the first date or date following his satisfaction of the requirements of the eligibility computation period sec_4 which provides that a participant’s monthly normal_retirement_benefit shall be equal to his accrued_benefit which shall be the sum of the amounts computed under paragraphs a through h found therein sec_4 further provides that for plan years beginning after date if a participant’s normal_retirement_benefit does not begin as of the normal_retirement_date because a timely application was not filed the normal_retirement_benefit shall be the greater of a the participant’s accrued_benefit on the date benefits begin or b the participant’s accrued_benefit at the normal_retirement_date adjusted to its actuarial equivalent as of the date benefits are to begin sec_5 c which in summary provides that any participant with at least years_of_service under the plan with at least one hour of covered employment after date shall receive of his accrued_benefit the 30-year early_retirement_benefit section which provides that a participant who has a termination of employment and meets the eligibility requirements for a severance or vested benefit as set forth in section dollar_figure of article i and this section ist anniversary of the date upon which a participant last had one hour_of_service prior to becoming eligible for normal early or disability retirement or prior to his death page shall become entitled to receive a severance benefit provided at the time he has such a termination of employment he had at least five years of participation section which provides that a terminated participant may elect to receive severance benefits even if he terminates employment after attaining age as a result of work cessation as long as he has at least five years of participation section further provides the severance benefit shall be a single sum cash payment equal to a percentage of employer contributions made to the fund on behalf of the terminated participant starting with after years of participation and increasing at the rate of for each additional year_of_participation up to a maximum of after such years provided however that such single sum cash payment shall not be less than the actuarial equivalent of the terminated participant’s accrued_benefit section also provides that severance benefits shall be terminated for all benefits accrued after date a proposed amendment to section of plan x which had not been adopted as of the date of this letter_ruling request but which will be adopted to effectuate this ruling letter provides payment of a single sum severance benefit to a terminated participant shall effect a full cancellation of the terminated participant’s years_of_service years of participation and years of past and future credit under the plan payment of a single sum severance benefit to a terminated participant shall not effect a cancellation of the terminated participant’s years_of_service for purposes of determining the participant’s vesting credit nor shall the terminated participant be required to complete the initial eligibility period upon reemployment with an employer if a participant elects a severance benefit for benefits accrued as of date the participant’s eligibility for same and the percentage of the employer contributions payable will be determined by the participant’s years_of_service earned as of the earlier of his date of termination or the effective date of this amendment in addition if a participant elects a severance benefit and still has an accrued_benefit for service rendered after date the years_of_service used to calculate the participant’s severance benefit will not be used for purposes of attaining eligibility for a disability retirement benefit however the pre-severance service shall be included for purposes of determining eligibility for a benefit under sec_5 c additionally the pre-severance service will be used when determining the participant’s accrued_benefit upon retirement including determining a participant’s accrued_benefit under sec_5 c the 30-year early page 2007460i4 retirement benefit however a participant’s accrued_benefit upon retirement including a participant’s accrued_benefit under sec_5 c the 30-year early_retirement_benefit will be offset by the amount of the accrued_benefit attributable to the severance benefit previously received by said participant it has been represented that notice intended to comply with the requirements of section h of title i of the employee_retirement_income_security_act_of_1974 as amended erisa will be provided plan x participants prior to the adoption of the proposed amendment to section of plan x sec_2 which defines a year_of_participation as ‘ the aggregate number of plan years since the inception of the original plan for which any contributions were made to the fund on his behalf’ once an employee becomes a participant meaning he completes hours within the first consecutive month period he will be credited with a year_of_participation for every year that at least hours of contributions have been paid on his behalf sec_12 which permitted a reinstated participant who previously received a severance benefit that was less than the actuarial equivalent of his accrued_benefit to repay his severance benefit plus interest in order to reinstate his previously forfeited service sec_12 further provided that effective date all participants who received a severance benefit equal to of the present_value of their accrued_benefit would not be permitted to repay this amount and in turn reinstate their years_of_service sec_1 which defines employer to include a b c d any member of an employee_association who is bound by the terms ofa collective bargaining agreement between the union and his association to make contributions to the trust fund any other employer engaged in work coming within the jurisdiction of the union who is obliged by a collective bargaining or other agreement to make contributions to the trust fund the union to the extent and solely to the extent that it employs business representative or other persons on whose behalf it makes contributions to the trust fund effective as of date any other employer established to administer fringe benefit apprenticeship educational or related funds or other programs established through collective bargaining with the union to the extent and solely to the extent such entity acts in the capacity of an employer of its employees on whose behalf contributions to the trust page fund are required in accordance with a collective bargaining or other agreement section dollar_figure which provides that the term termination of employment shall mean the cessation of work both within and outside the jurisdiction of the union for a complete plan_year prior to death or retirement of an employee for purposes of determining eligibility for a severance benefit as described in article lx sic termination of employment shall take place on the first anniversary of the date upon which a participant last had one hour_of_service the first amendment to the amendment restatement and continuation of plan x dated date provided in relevant part that effective date the following paragraph shall be added as the last paragraph in article vii sec_12 severance benefits shall be terminated for all benefits accrued after date ifa participant is eligible to repay a severance benefit subsequent to date pursuant to either federal_law or plan provisions he will still have a protected right to take a distribution of the repaid benefit in the form of a single sum severance distribution date occurred before date based on the above you through your authorized representative request the following letter rulings ifan affected plan x participant terminates his employment as that term is defined in section dollar_figure of plan x with all employers as defined in sec_1 of pian x that contribute to plan x subsequent to date and elects to receive a severance benefit based on his accrued_benefit as of date said election and receipt which do not effectuate a cancellation of all years_of_service used to compute his her severance benefit in accordance with relevant provisions of plan x noted above will not result in a violation of sec_41 d of the code and since pursuant to the terms of plan x as amended referenced herein an affected plan x participant who terminates his employment and receives a severance benefit need not re-establish eligibility and does not forfeit years for vesting with respect to benefits accrued after date the amendments to plan x referenced herein does not affect your response to our first ruling_request page with respect to your ruling requests code sec_411 provides that a plan shall be treated as not satisfying the requirements of this section if the accrued_benefit ofa participant is decreased by an amendment to the plan other than an amendment described in sec_412 or sec_4281 of the employee_retirement_income_security_act_of_1974 erisa code sec_411 provides in relevant part that for purposes of subparagraph a a plan amendment which has the effect of- i eliminating or reducing an early_retirement_benefit or a retirement-type subsidy as defined in regulations or eliminating an optional form of benefit with respect to benefits attributable to service before the amendment shall be treated as reducing accrued_benefits on date final income regulations were published regarding the anti- cutback rules of sec_411 of the internal_revenue_code and regarding the notice requirements of code sec_4980f sec_1_411_d_-3g of the final regulations provides that the regulations apply to amendments adopted on or after date sec_1_411_d_-4 of the final income_tax regulations question and answer-2 a provides in relevant part that a plan may not be amended to eliminate or reduce a sec_411 benefit that has already accrued except as provided in sec_412 sec_4281 of the employee_retirement_income_security_act_of_1974 as amended erisa and this section sec_1_411_d_-3 of the final income_tax regulations provides the general_rule that a plan is not a qualified_plan and a_trust forming part of such plan is not a qualified_trust if a plan amendment decreases the accrued_benefit of any plan participant except as provided in sec_412 sec_4281 of the employee_retirement_income_security_act_of_1974 as amended erisa or other applicable law sec_1_411_d_-3 of the final regulations provides that except as provided in this section a plan is treated as decreasing an accrued_benefit if it is amended to eliminate or reduce a sec_411 protected_benefit as defined in paragraph g of this section this paragraph b applies to participants who satisfy either before or after the plan amendment the preamendment conditions for a sec_411 protected_benefit sec_1_411_d_-3 of the final regulations provides that code sec_411 only protects benefits that accrue before the applicable amendment date thus a plan is permitted to be amended to eliminate or reduce an early_retirement_benefit a page retirement-type subsidy or an optional form of benefit with respect to benefits that accrue after the applicable amendment date without violating sec_41 d however code sec_4980f e and section h of erisa require notice of an amendment to a plan that either eliminates or significantly reduces an early retirement subsidy or retirement- type subsidy section dollar_figure d -3 g of the final regulations defines the term sec_411 protected_benefit as the portion of an early_retirement_benefit a retirement type subsidy or an optional form of benefit attributable to benefits accrued before the applicable amendment date sec_1_411_d_-3 of the final regulations defines retirement type subsidy as the excess if any of the actuarial present_value of a retirement-type benefit over the actuarial present_value of the accrued_benefit commencing at normal_retirement_age or at actual commencement_date if later with both actuarial present values determined as of the date the retirement-type benefit commences examples of retirement-type subsidies include a subsidized early_retirement_benefit and a subsidized qualified_joint_and_survivor_annuity as in effect on the date plan x was amended to limit the severance benefit to benefits accrued no later than date sec_1 d of the regulations q a-5 c example concludes that a plan amendment that does not change the annual_benefit commencing at normal_retirement_age does not reduce the rate of future benefit_accrual for purposes of section h code sec_401 provides that a plan qualified within the meaning of code sec_401 must satisfy the requirements of sec_410 relating to minimum_participation_standards code sec_410 provides the plan participation rules sec_410 b c and d provide the rules governing which years must be considered and which may be disregarded for plan participation purposes code sec_41 a provides the rules governing service to be included in determining the nonforfeitable percentage of a plan participant’s accrued_benefit the vesting rules section dollar_figure a -7 d ii of the regulations provides that for purposes of determining an employee’s accrued_benefit derived from employer contributions under a plan the plan may disregard service performed by the employee with respect to which a the employee receives a distribution of the present_value of his nonforfeitable benefit attributable to such service at the time of such distribution b the employee voluntarily elects to receive such distribution c the distribution is made on a termination of the page employee’s participation in the plan and d the plan has a repayment provision in effect at the time of the distribution which satisfies the requirements of subdivision iv of this subparagraph sec_1_411_a_-7 of the regulations provides in relevant part that with respect to an individual plan participant who receives a distribution of less than the present_value of his accrued_benefit under than plan years_of_service attributable to said distributed benefit may not be disregarded for purposes of determining his years_of_service under sec_410 and sec_41 a section dollar_figure a -7 d iv b of the regulations provides by way of example the situation in which an individual participates in a plan that provides both a subsidized joint_and_survivor_annuity and a subsidized early retirement annuity benefit said fully vested_participant receives a single sum distribution equal to the present_value of his single_life_annuity normal_retirement_benefit said participant is not required to be provided with the right of repayment upon subsequent reemployment even if the participant’s distribution did not reflect either the value of the subsidized joint and survivor benefit or the value of the early retirement annuity subsidy the participant has no right of repayment even if he had satisfied at the time of distribution all of the conditions necessary to receive the subsidies sec_1_411_a_-7 i other rules provides in relevant part similarly the fact that a plan cannot disregard an accrued_benefit attributable to service for which an employee has received a distribution because the plan does not satisfy the cash-out requirements of subparagraph of this paragraph does not mean that the employee’s accrued_benefit computed by taking into account such service cannot be offset by the accrued_benefit attributable to the distribution sec_1_411_d_-3 of the regulations provides in general that sec_411 does not provide protection for benefits that are ancillary_benefits other rights and features or any other_benefits not described in code sec_41 d section dollar_figure d -3 g ii of the regulations provides that the term ancillary benefit not protected by code sec_411 includes a benefit payable under a defined_benefit_plan in the event of disability to the extent that the benefit exceeds the benefit otherwise payable but only if the total benefit payable in the event of disability does not exceed the maximum qualified_disability_benefit as defined in sec_41 a sec_1_411_d_-4 of the regulations question and answer-2 a i provides that a plan may treat a participant as receiving his entire nonforfeitable accrued_benefit under the plan if the participant receives his benefit in an optional form of benefit in an amount page determined under the plan that is at least the actuarial equivalent of the employee’s nonforfeitable accrued_benefit payable at normal_retirement_age under the plan with respect to the requested ruling requests plan x either has or will be amended to eliminate the severance benefit for all benefits accrued on or after date the amendments provide in relevant part that an electing plan x participant’s severance benefit will be based upon all years_of_service up to his date of termination or date of amendment of section of plan x if earlier additionally section of plan x as amended does not affect an electing plan x participant’s vesting under plan x finally an electing plan x participant need not reestablish eligibility to receive additional benefits under plan x except as noted therein upon reemployment with a contributing employer thereto the amendments will not eliminate the eligibility to apply for said severance benefit with respect to benefits accrued prior to date thus based upon the above with respect to your ruling requests we conclude as follows ifan affected plan x participant terminates his employment as that term is defined in section dollar_figure of plan x with all employers as defined in sec_1 of plan x that contribute to plan x subsequent to date and elects to receive a severance benefit based on his accrued_benefit as of date said election and receipt which do not effectuate a cancellation of all years_of_service used to compute his her severance benefit in accordance with relevant provisions of plan x noted above will not result in a violation of sec_411 of the code and since pursuant to the terms of plan x as amended referenced herein an affected plan x participant who terminates his employment and receives a severance benefit need not re-establish eligibility and does not forfeit years for vesting with respect to benefits accrued after date the amendments to plan x referenced herein do not affect our response to your first ruling_request this ruling letter assumes that plan x will be qualified within the meaning of sec_401 at all times relevant thereto it also assumes that the amendment to plan x referenced herein will be adopted as proposed finally it assumes that notice complying with the requirements of section h of erisa will be provided as indicated above in accordance with a power_of_attorney provided the service a copy of this letter_ruling is being provided to your authorized representative page if you have any questions concerning this letter_ruling please contact not a toll-free esquire id - who may be reached at number or fax sincerely yours da neco v rances v sloan manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose


internal_revenue_service number release date index number ----------------------------------------- --------------------------------------------------- -------------------------------- ------------------------- in re request for rulings 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 b04 plr-110417-16 date date legend settlor a b c d bb bb dd dd dd trust subtrust 1-b subtrust 1-c subtrust 1-d trust subtrust 2-b subtrust 2-c subtrust 2-d trustee date date state a state b state a court ---------------------- ------------------ ------------------------------- ---------------------- ------------------------------- --------------- -------------------------- ------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------ ---------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------ ---------------------------------------------------------- ------------------------------------------------ ---------------------------------------------------------- --------------------------------------- -------------------------- --------------------- ------ -------- ------------------------------------------------------ plr-110417-16 ---------------------------------------- state b court state a statute --------------------------------------------- state a statute --------------------------------------------- state b statute -------------------------------------- state b statute -------------------------------------- state b statute -------------------------------------- x year year ------- ------ ------ dear -------------- this responds to your authorized representative’s letter of date requesting rulings on the federal income gift estate and generation-skipping_transfer gst tax consequences of the proposed division of trust and trust the facts submitted and representations made are as follows on date a date before date settlor created trust an irrevocable_trust for the benefit of the descendants of settlor's child a under article iii section dollar_figure of trust income is distributable to a's children and the descendants of any deceased child of a a has three adult children b c and d and five minor grandchild bb bb dd dd and dd under sec_3 the trustee may withhold distribution of income the withheld income may be accumulated and added to principal set_aside for future distribution or distributed to or for the benefit of the beneficiaries then entitled to the income under sec_3 the trustee in exercising the power to withhold or distribute income is to take into account the needs and other income and resources of the beneficiaries including those for health medical_care support and education under sec_3 if in the trustee's opinion the share of income to which a child of a is entitled is insufficient for the child's proper care education and support and in particular cases of severe or protracted illness the deficiency may be made up by payments of principal the trustee may require that the advances be restored from future income section dollar_figure provides that trust principal and accumulated income is to be distributed to a's children per stirpes one year after a's death under sec_3 if at final distribution of the trust a child of a has died without surviving descendants that child's share is to be reallocated to his or her siblings per stirpes section dollar_figure provides that if a beneficiary is under age at the time of distribution his or her share is to be held and the income is to be applied to his or her education support and maintenance the trustee may accumulate the income as deemed necessary the beneficiary's share is to be distributed outright on his or her reaching age plr-110417-16 sec_5 of exhibit a of trust provides that the trustee is expressly authorized to make any division distribution or partition of property in cash or otherwise and to allot any property including an undivided_interest therein to any trust or share section dollar_figure provides that where any portion of trust is designated as a separate trust for the benefit of a grandchild of settlor the share is to constitute a separate fund article iv section dollar_figure provides that the trust is to be interpreted under the laws of state a on date a date before date settlor created trust another irrevocable_trust for the benefit of a's descendants the provisions of trust are identical to those of trust except in the following respects trust does not provide for distributions to the descendants of any deceased child of a during the trust term and under article iii sec_3 of trust a's children have a non-cumulative right exercisable within days after receiving notice to withdraw a pro_rata portion of property transferred to trust during a calendar_year trustee proposes to divide trust into subtrust 1-b for b and b's descendants subtrust 1-c for c and c's descendants and subtrust 1-d for d and d's descendants each subtrust will be funded with a pro_rata share of each asset of trust the provisions of trust will govern subtrust 1-b subtrust 1-c and subtrust 1-d except that each respective subtrust will be held exclusively for the benefit of the child and the child's descendants for whom that subtrust was created income will be payable to the respective child or accumulated in the trustee's discretion if the child dies before termination of the subtrust with any descendant living income will be payable to the child's descendants or accumulated in the trustee's discretion prior to the termination of the subtrust principal may be distributed to the child in accordance with section dollar_figure of trust if a has or adopts another child after-born child prior to termination of a subtrust all of the subtrusts held for a’s children shall be reallocated to create a new subtrust for this after-born child such that the after-born child’s subtrust will receive a fraction of the aggregate value of the subtrusts then existing and held for a’s descendants the numerator of the fraction shall be one and the denominator of the fraction shall be one plus the number of subtrusts held for a’s children immediately before the birth or adoption of the after-born child each existing subtrust for a child of a shall contribute to the subtrust for the after-born child in the proportion that its value bears to the aggregate value of all such subtrusts for a’s children if a child of a and all descendants of that child die before the termination of that child’s subtrust the deceased child’s subtrust will be reallocated so as to be added to or used to fund the subtrusts held for that child’s siblings or their descendants or if there are no other descendants of a then living will remain in existence until the plr-110417-16 termination of the subtrusts created for children of a with income being payable to any after-born child of a or to the descendants of any deceased after-born child of a or accumulated if there is no after-born child of a or descendant of a deceased after-born child of a each subtrust then in existence will terminate one year after the death of a distribution or termination will be to the child of a if then living otherwise per stirpes to the deceased child of a’s then-living descendants or if none per stirpes to the then living descendants of a for whom the subtrust was created on termination if there is no living descendant of a the trust property will be distributed among the trusts established in year for the children of settlor other than a or to subtrusts which have been created for the children of settlor other than a or directly to the ultimate beneficiaries thereof if any trust established in year or subtrust has been terminated prior to termination of the subtrust then terminating likewise trustee proposes to divide trust into subtrust 2-b for b and b's descendants subtrust 2-c for c and c's descendants and subtrust 2-d for d and d's descendants each subtrust will be funded with a pro_rata share of each asset of trust the provisions of trust will govern subtrusts 2-b 2-c and 2d except that each respective subtrust will be held exclusively for the benefit of the child and the child's descendants for whom that subtrust was created income will be payable to the respective child or accumulated in the trustee's discretion if the child dies before termination of the subtrust with any descendant living income will be accumulated additions to the subtrust will be subject_to the child's withdrawal right under sec_3 of the trust agreement prior to termination of the subtrust principal may be distributed in accordance with section dollar_figure of trust but only to a child beneficiary if a has or adopts another child after-born child prior to termination all of the subtrusts held for a’s children shall be reallocated to create a new subtrust for this after-born child such that the after-born child’s subtrust will receive a fraction of the aggregate value of the subtrusts then existing and held for a’s descendants the numerator of the fraction shall be one and the denominator of the fraction shall be one plus the number of subtrusts held for a’s children immediately before the birth or adoption of the after-born child each existing subtrust for a child of a shall contribute to the subtrust for the after-born child in the proportion that its value bears to the aggregate value of all such subtrusts for a’s children if a child of a and all descendants of that child die before the termination of that child’s subtrust the deceased child’s subtrust will be reallocated so as to be added to or used to fund the subtrusts held for that child’s siblings or their descendants or if there are no other descendants of a then living will remain in existence until the plr-110417-16 termination of the subtrusts created for children of a with income being payable to any after-born child of a or accumulated if there is no after-born child of a each subtrust will terminate one year after a's death distribution on termination will be to the child if then living otherwise per stirpes to the deceased child's then-living descendants or if none per stirpes to the then living descendants of a who is the parent of the child for whom that subtrust is created on termination if there is no living descendant of a who is the parent of the child for whom a subtrust is created the trust property will be distributed among the year trusts for the children of settlor other than a or to subtrusts which have been created for the children of settlor other than a or directly to the ultimate beneficiaries thereof if any such year trust or subtrust has been terminated prior to the termination of the subtrust then terminating pursuant to an order of state a court the administration and situs of trust and trust were moved to state b trustee is now administering the trusts in state b therefore the division of trust and trust will be effected pursuant to a proceeding in and by order of state b court which will apply state a law to construe the trusts state a statute provides that an irrevocable_trust may be terminated or its dispositive provisions modified by the court with the consent of all of the beneficiaries if continuance of the trust on the same or different terms is not necessary to carry out a material purpose state a statute provides that without approval of a court a trustee may divide a_trust into two or more separate trusts with substantially_similar terms if the division will not defeat or substantially impair the accomplishment of the trust purposes or the rights of the beneficiaries unless the trust is a court reporting trust on petition by a trustee or beneficiary the court may divide a_trust into two or more separate trusts whether or not their terms are similar if the court determines that dividing the trust is in the best interest of the beneficiaries and will not defeat or substantially impair the accomplishment of the trust purposes or the rights of the beneficiaries to facilitate the division the trustee may divide the trust assets in_kind by pro_rata or non-pro rata division or by any combination of the methods by way of illustration and without limitation a_trust may be divided pursuant to this section to allow a_trust to qualify as a marital_deduction_trust for tax purposes as a qualified_subchapter_s_trust for federal_income_tax purposes as a separate trust for federal generation skipping tax purposes or for any other federal or state income estate excise or inheritance_tax benefit or to facilitate the administration of a_trust plr-110417-16 state b statute provides that to the extent there is no conflict of interest between the representative and the represented beneficiary with respect to the particular question or dispute a beneficiary who is a minor or a beneficiary with a disability or an unborn beneficiary or a beneficiary whose identity or location is unknown and not reasonably ascertainable hereinafter referred to as an unascertainable beneficiary may for all purposes be represented by and bound by another beneficiary having a substantially_similar interest with respect to the particular question or dispute provided however that the represented beneficiary is not otherwise represented by a guardian or agent in accordance with subdivision x or by a parent in accordance with state b statute state b statute provides that if all primary beneficiaries of a_trust either have legal capacity or have representatives in accordance with this subsection who have legal capacity the actions of such primary beneficiaries in each case either by the beneficiary or by the beneficiary's representative shall represent and bind all other beneficiaries who have a successor contingent future or other interest in the trust state b statute provides in part that if a_trust beneficiary is a minor or a person with a disability or an unborn person and is not represented by a guardian or agent in accordance with subdivision x then a parent of the beneficiary may represent and bind the beneficiary provided that there is no conflict of interest between the represented person and either of the person's parents with respect to the particular question or dispute it is represented that no additional contributions have been made to trust or trust after date you have requested the following rulings the division of trust and trust into subtrusts will not cause trust trust or a post-division subtrust to lose its grandfathered status for purposes of the gst tax or otherwise become subject_to the gst tax the subtrusts resulting from the division of trust and trust will be treated as separate trusts for federal_income_tax purposes the division of trust and trust into subtrusts will not cause trust trust a post-division subtrust or any beneficiary to recognize gain_or_loss from a sale_or_other_disposition of property under sec_61 sec_662 or sec_1001 the tax basis of the subtrust assets received from trust and trust will be the same as the tax basis in those assets of trust and trust and the subtrusts' holding periods in those assets will include the holding periods in those assets of trust and trust plr-110417-16 the division of trust and trust and the pro_rata allocation of trust and trust assets to the subtrusts will not cause those assets to be includible in a beneficiary's gross_estate the division of trust and trust and the pro_rata allocation of trust and trust assets to the subtrusts will not constitute a transfer subject_to federal gift_tax under sec_2501 ruling sec_2601 imposes a tax on every generation-skipping_transfer which is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip under of the tax_reform_act_of_1986 act gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the tax does not apply to a transfer under a_trust that was irrevocable on date except to the extent the transfer is made out of corpus added to the trust by an actual or constructive_addition after date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 will not cause the trust to lose its exempt status these rules are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust sec_26_2601-1 provides that for purposes of this section a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a plr-110417-16 modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust sec_26_2601-1 example considers a situation in which in grantor established an irrevocable_trust for the benefit of his two children a and b and their issue under the terms of the trust the trustee has the discretion to distribute income and principal to a b and their issue in such amounts as the trustee deems appropriate on the death of the last to die of a and b the trust principal is to be distributed to the living issue of a and b per stirpes in the appropriate local court approved the division of the trust into two equal trusts one for the benefit of a and a's issue and one for the benefit of b and b's issue the trust for a and a's issue provides that the trustee has the discretion to distribute trust income and principal to a and a's issue in such amounts as the trustee deems appropriate on a's death the trust principal is to be distributed equally to a's issue per stirpes if a dies with no living descendants the principal will be added to the trust for b and b's issue the trust for b and b's issue is identical except for the beneficiaries and terminates at b's death at which time the trust principal is to be distributed equally to b's issue per stirpes if b dies with no living descendants principal will be added to the trust for a and a's issue the division of the trust into two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the division in addition the division does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the two partitioned trusts resulting from the division will not be subject_to the provisions of chapter in the present case trust and trust were irrevocable on date it is represented that no trust additions have been made after date the proposed division of trust into subtrust 1-b subtrust 1-c and subtrust 1-d and trust into subtrust 2-b subtrust 2-c and subtrust 2-d are substantially_similar to the situation described in example of sec_26_2601-1 under the proposed division the trust subtrusts will except as described above be administered under the original terms of trust likewise the trust subtrusts will except as described above be administered under the original terms of trust plr-110417-16 based on the facts submitted and the representations made and provided the state a court order is effective under state a law and includes the division as described above we conclude that the proposed division of trust and trust will not shift a beneficial_interest in the respective trusts to any beneficiary who occupies a lower generation than the persons holding the beneficial interests prior to the division in addition the proposed division will not extend the time for vesting of any beneficial_interest in the subtrusts beyond the period provided in the original terms of trust and trust respectively accordingly the proposed division will not cause trust trust or the subtrusts to lose their exempt status and will not cause any distribution from or termination of any interests in trust trust or the subtrusts to be subject_to gst tax under sec_2601 ruling sec_643 provides that for purposes of subchapter_j of chapter of subtitle a under regulations prescribed by the secretary two or more trusts shall be treated as one trust if such trusts have substantially the same grantor or grantors and substantially the same primary beneficiary or beneficiaries and a principal purpose of such trusts is the avoidance of the tax_imposed_by_chapter_1 section b of the tax_reform_act_of_1986 provides that sec_643 shall apply to taxable years beginning after date except that in the case of a_trust that was irrevocable on date it shall apply only to that portion of the trust that is attributable to contributions of corpus after date it is represented that each subtrust will have different beneficiaries it is further represented that no portion of the principal of trust and trust was contributed after date based on the facts submitted and the representations made we conclude that as long as subtrusts are separately managed and administered they will be treated as separate trusts for federal_income_tax purposes ruling sec_61 provides that gross_income includes gain derived from dealings in property sec_661 provides that in any taxable_year a deduction is allowed in computing the taxable_income of a_trust other than a_trust to which subpart b applies for the sum of the amount of income for such taxable_year required to be distributed currently and any other_amounts_properly_paid_or_credited_or_required_to_be_distributed for such taxable_year however such deduction shall not exceed the distributable_net_income dni of the estate_or_trust plr-110417-16 sec_1_661_a_-2 of the income_tax regulations provides that gain_or_loss is realized by the trust or estate or the other beneficiaries by reason of a distribution_of_property in_kind if the distribution is in satisfaction of a right to receive a distribution of a specific dollar amount of specific property other than that distributed or of income as defined under sec_643 and the applicable regulations if income is required to be distributed currently sec_662 provides that there shall be included in the gross_income of a beneficiary to whom an amount specified in sec_661 is paid credited or required to be distributed by an estate_or_trust described in sec_661 the sum of the following amounts the amount of income_for_the_taxable_year_required_to_be_distributed_currently to such beneficiary whether distributed or not and all other_amounts properly paid credited or required to be distributed to such beneficiary for the taxable_year sec_1001 provides that the gain from the sale_or_other_disposition of property is the excess of the amount_realized over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss must be recognized except as otherwise provided sec_1_1001-1 provides that except as otherwise provided in subtitle a the gain_or_loss realized from the exchange of property for cash or for other_property differing materially either in_kind or in extent is treated as income or loss sustained revrul_56_437 1956_2_cb_507 holds that the conversion of a joint_tenancy in stock to a tenancy_in_common in order to eliminate the survivorship feature and the partition of a joint_tenancy in stock are not sales or exchanges similarly divisions of trusts are also not sales or exchanges of trust interests where each asset is divided pro_rata among the new trusts see revrul_69_486 1969_2_cb_159 pro_rata distribution of trust assets not a sale_or_exchange in the present case the assets of trust and trust will be distributed in_kind on a pro_rata basis among the subtrusts accordingly based on the facts submitted and the representations made we conclude that the proposed division of trust and trust will not result in the realization of gain_or_loss under sec_61 and sec_1001 and that the proposed division is not a distribution under sec_661 sec_662 or sec_1_661_a_-2 ruling sec_1015 provides that if property is acquired after date by a transfer in trust other than a transfer in trust by a gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer plr-110417-16 sec_1_1015-2 provides that in the case of property acquired after date by transfer in trust other than by transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer was made if the taxpayer acquired the property by transfer in trust this basis applies whether the property is in the hands of the trustee or the beneficiary and whether acquired prior to termination of the trust and distribution of the property or thereafter based on the facts submitted and representations made we conclude that because sec_1001 does not apply to the division of trust and trust under sec_1015 the basis of the assets received by the subtrusts from trust and trust will be the same after the division as the basis of those assets in the hands of trust and trust before the division likewise the holding_period of each asset in the hands of a new subtrust will be the same as the holding_period of that asset in the hands of trust or trust immediately before the distribution in further trust ruling sec_2035 provides that if the decedent made a transfer by trust or otherwise of an interest in any property or relinquished a power with respect to any property during the three-year period ending on the date of the decedent's death and the value of such property or an interest therein would have been included in the decedent's gross_estate under sec_2036 sec_2037 sec_2038 or sec_2042 if such transferred interest or relinquished power had been retained by the decedent on the date of the decedent's death the value of the gross_estate shall include the value of any property or interest therein that would have been so included sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2037 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time after date made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth by trust or otherwise if possession or enjoyment of the property can through ownership of such interest be plr-110417-16 obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property but in the case of a transfer made before date only if such reversionary_interest arose by the express terms of the instrument of transfer and the value of such reversionary_interest immediately before the death of the decedent exceeds five percent of the value of such property sec_2038 provides that the value of the decedent's gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the three-year period on the date of the decedent's death in the present case the distribution management and termination provisions of the subtrusts will be substantially_similar to the current_distribution management and distribution provisions of the respective trust accordingly based on the facts submitted and the representations made the division of trust and trust will not cause any property of trust trust or the subtrusts to be includible in the gross_estate of any beneficiary of any such trust under sec_2035 through ruling sec_2501 imposes a tax for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that subject_to certain limitations the gift_tax applies whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is real or personal tangible or intangible sec_2512 provides that if the gift is made in property the value thereof at the date of the gift is considered the amount_of_the_gift sec_2512 provides that where property is transferred for less than an adequate_and_full_consideration in money_or_money's_worth then the amount by which the value of the property exceeded the value of the consideration is deemed a gift that is included in computing the amount of gifts made during the calendar_year in this case the beneficiaries of the subtrusts will have substantially the same interests after the proposed division that they had as beneficiaries under trust and trust because the beneficial interests rights and expectancies of the beneficiaries plr-110417-16 are substantially the same both before and after the proposed division no transfer of property will be deemed to occur as a result of the division accordingly based on the facts submitted and the representations made we conclude that the division of trust and trust as described above will not result in a transfer by any beneficiary of trust trust or the subtrusts that will be subject_to federal gift_tax under sec_2501 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely leslie h finlow leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosure copy of this letter for sec_6110 purposes


internal_revenue_service number release date index number --------------------------------------- --------------- ---------------------------------- --------------------------------------- ------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-130794-09 date date legend x -------------------------------------------------- -------------------- y -------------------------------------------------- ---------------------------------- ---------------- --------------------- --------------------- --------------------------- d1 d2 d3 country dear ------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed on d1 under the laws of country on d2 y purchased percent of stock of x x intended to be treated as a disregarded_entity for federal tax purposes effective d3 however x inadvertently failed plr-130794-09 to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association 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 guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single member having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for 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 conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an plr-130794-09 extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective d3 x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely curt g wilson curt g wilson associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury mwasineron pc contact person identification_number telephone number - ed date nov no third party contact sin employer_identification_number legend t- xx y- dear sir or madam this is in reference to your ruling_request concerning a proposed restructuring and its effect on your tax exempt status under sec_501 of the internal_revenue_code and your unrelated_business_income_tax liability under sec_511 through as described below t is an organization described in sec_501 of the code and is not a private_foundation as described in sec_509 t currently provides services through two divisions the family social service counseling services division and the home health services division x is an organization described in sec_501 and is an organization described in sec_509 and sec_170 _ y is an organization described in sec_501 and is an organization described in sec_509 t created x and y pursuant to a plan_of_reorganization t plans on reorganizing its structure in order to separate the family social service counseling services and home health agency services ‘essen exposure of endowment funds pledge receivables and real_property to third party liability provide more efficient centralized planning and program devetopment administration and fund raising that are subject_to coordination through x as the patent entity and improve the quality of programming attract high quality personnel and increase the ability of the organizations to attract the attention of national funding sources that may have an interest in one or more of the family social service counseling services or home health agency services pursuant to the proposed plan of restructuring t will continue to operate the family social service counseling services division and will transfer and convey to y the assets related to the operation of the home health agency services subject_to existing mortgages liens and encumbrances provided that y has obtained all licenses and permits for the operation of the home health agency services y will assume the lease and continue to occupy space that is currently ieased by t from an unrelated third party t will transfer to x any outstanding contribution pledge receivables parcels of real_property and all assets and personnel related to the operation of administration program development and fund raising activities subject_to the existing mortgages liens and encumbrances x will be the sole member of y and t creating a parent-subsidiary relationship between the entities under the terms of the restructuring any existing and future endowment funds and contribution pledge receivables could be held be either x y or t although x will coordinate fundraising activities of all of the taxpayers y and t may also do separate fundraising x will provide services related to the development and enhancement of programs which will then be implemented by y and t x will occupy a portion of its existing_building and will lease a portion of its building to t after the restructuring in the future x may construct additional buildings and lease all or a portion of the buildings to y reimburse x for the cost of the building all leases will be at rental rates designed to all records files lists of contributors and other items related to fund raising of t x and y will be transferred from t to x it is expected that y and t will raise funds from contributions that each entity receives in some cases an organization may make distributions of funds and or assets or provide services to either x or t distribute portions of the contributions it receives to t and y based upon directions given by the donors or the needs of the particular entity as determined by x x may also provide assets and services to y and t including program enhancements fundraising coordination and assistance with staff recruiting in addition it is expected that x will also engage in fundraising and may you are requesting the following rulings the restructuring of t and transfer of some of its home health division assets liabilities and activities to y and the transfer of its endowment assets and administrative activities to x will not adversely affect the determination of tax-exempt status of x y or t nor will restructuring of y result in the classification of x y or tas a private_foundation under sec_509 of the code the restructuring and transter of assets pursuant thereto will not give rise to unrelated_business_taxable_income pursuant to sec_511 through of the code to x y or t t the sharing of assets and services and transfer of funds among x y and t after the reorganization will not give rise to unrelated_business_taxable_income under sec_511 through for either x y or t ko law sec_501 of the code provides in part for the exemption from federal_income_tax of organizations that are organized and operated exclusively for religious charitable scientific or educational_purposes provided no part of their net_earnings inures to the benefit of any private sharehoider or individual sec_1_501_c_3_-1 of the income_tax regulations provides that the term charitable is used in code sec_501 in its generally accepted tegal sense the promotion of health has long been recognized as a charitable purpose see restatement second of trusts sec_368 sec_372 iv scott on trusts sec_368 sec_372 3rd ed and revrul_69_545 1969_2_cb_117 sec_509 of the code provides that the term private_foundation means a domestic or foreign organization described in sec_501 other than an organization described in sec_170 other than in clauses vii and viii sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations exempt from federal_income_tax under sec_501 c sec_512 of the code defines the term unrelated_business_taxable_income as gross_income derived by an organization from any unrelated_trade_or_business regularly carried on by it less the deductions directly attributable to such business activity sec_513 of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of the organization for income or funds or the use it makes of the profits derived to the exercise or performance by an organization of the purpose or function constituting the basis for its exemption sec_1_513-1 of the regulations defines unrelated_business_taxable_income to mean gross_income from any unrelated_trade_or_business regularly carried on sec_1 b states that the phrase trade_or_business includes activities carried on for the production_of_income and which possess the characteristics of a trade_or_business within the meaning of sec_162 of the code finally sec_1_513-1 expiains that regularly carried on has reference to the frequency and continuity of the conduct of an activity and the manner in which the activity is pursued ‘ sec_1_513-1 of the regulations provides that a trade_or_business is related to exempt purposes only where the conduct of the business activity has a causal relationship to the achievement of any exempt_purpose and is substantially related for purposes of sec_513 only if the causal relationship is a substantial one thus for the conduct_of_a_trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes a sec_514 of the code provides for the taxation under sec_512 of the code of income from debt-financed_property sec_514 of the code however provides that the definition of debt-financed_property does not include any property substantially ail the use of which is substantially related to the exercise or performance by such organization of its charitable purposes constituting the basis for its exemption under sec_501 rev rui 1969_2_cb_117 sets forth standards under which a nonprofit_hospital may qualify for recognition of exemption under sec_501 of the code this revenue_ruling gave consideration to two separate hospitals only one of which was determined to qualify for exempt status under sec_501 c by weighing all the relevant facts and circumstances the revenue_ruling analyzed whether both the control and use of the hospitals were for the benefit of the public or for the benefit of private interests the hospital that qualified for exemption was found to be organized and operated to further the charitable purpose of promoting health by satisfying a community benefit standard that included among other factors a board_of directors that broadly represented the interests of the community the hospital that did not qualify for recognition of exemption was found to be operating for the private benefit of those who controlled it rather than for the benefit of the public revrul_72_209 1972_1_cb_148 provides that a nonprofit organization formed to provide low cost home health care for people of a community may qualify for exemption under sec_501 of the code as a charitable_organization the revenue_ruling concludes that by providing home nursing and therapeutic care in the manner described the organization serves many of the same health care needs of the community that hospitals traditionally serve and therefore is promoting health within the meaning of the general law of charity revrul_78_41 1978_1_cb_148 concludes that a_trust created by a hospital to accumulate and hold funds to pay malpractice claims against the hospital qualified for exemption under sec_501 of the code as an integral part of the hospital the hospital provided the funds for the trust and the banker-trustee was required to make payments to claimants at the direction of the hospital the organization conducted an activity that the hospital could perform itself since t will continue to operate the family social service counseling division its current tax-exempt status under sec_501 of the code and classification as not a private_foundation will not be affected by the reorganization the restructuring of t akd transfer of assets to x and y will not adversely affect their exempt status x and y will perférm the same functions that t formerly performed or could have performed consistent with its exempt purposes any transfer of assets and or funds will be one time transfers and therefore will not possess the characteristics of a trade_or_business regularly carried on following the proposed reorganization the sharing of services and facilities whether or not a fee is charged and transfers of cash and assets among the exempt_organizations will be substantially related to the exercise or performance of the exempt purposes of the involved corporations and will therefore not constitute unrelated_trade_or_business activities subject_to tax therefore each corporation will be merely supplying a related charitable_organization with a service or facility necessary for and in the furtherance of the performance of exempt functions under sec_501 based on all the facts and circumstances described above we rule as follows the restructuring of t and transfer of some its home health division assets liabilities and activities to y and the transfer of its endowment assets and administrative activities to x will not adversely affect the tax -exempt status of x y or t under sec_501 nor affect the status of x y or t as nota private_foundation under sec_509 the restructuring and transfer of assets pursuant thereto will not give rise to unrelated_business_taxable_income pursuant to sec_511 through of the code for either x y ort the sharing of assets and services and transfer of funds among x y and t after the restructuring will not give rise to unrelated_business_taxable_income under sec_511 through for either x y or t we have not been asked and we express no opinion on whether payments of rent by y and t to x which would otherwise be excluded from the computation of unrelated_business_taxable_income pursuant to sec_512 of the code would be subject_to tax by reason of sec_512 except as specifically ruled upon above no opinion is expressed concerning the federal_income_tax consequences of the transactions described above under any other provision of the code this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent 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 f a sincerely signed marvin friedlander marvin friedlander manager eo technical group sd2