t c memo united_states tax_court jay rosenthal petitioner v commissioner of internal revenue respondent docket no 28214-12l filed date steven ray mather for petitioner mindy s meigs for respondent memorandum findings_of_fact and opinion vasquez judge this case arises from a petition for judicial review filed in response to notices of determination concerning collection action s under sec_6320 and or with respect to petitioner’s federal_income_tax unless otherwise indicated all section references are to the internal continued liabilities for and the issue remaining for decision is whether respondent abused his discretion in sustaining the proposed levies for and and the notice_of_federal_tax_lien filing for and findings_of_fact i background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time petitioner filed his petition he was a resident of california on date petitioner filed hi sec_2001 federal_income_tax return and paid the tax_shown_on_the_return on date the internal_revenue_service irs assessed statutory interest and additions to tax for petitioner did not file a federal_income_tax return for or consequently the irs prepared substitutes for returns for both years pursuant to sec_6020 on date the irs mailed separate notices of deficiency continued revenue code code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure after trial petitioner’s tax_liability was paid in full through an offset of an overpayment from a subsequent year on date respondent filed a motion to dismiss as to the taxable_year on the ground of mootness we granted respondent’s motion on date for and to petitioner’s last_known_address petitioner did not file a petition with the court contesting the deficiency determinations and on date the irs assessed the tax and additions to tax for and ii petitioner’s collection_due_process cdp appeal a levy and lien notices petitioner had unpaid tax_liabilities for and on date the irs mailed petitioner a letter final notice_of_intent_to_levy and notice of your right to a hearing first levy notice with respect to his outstanding income_tax_liability for on date the irs mailed petitioner a letter second levy notice with respect to his outstanding income_tax liabilities for and on date the irs mailed petitioner a letter notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 nftl with respect to his outstanding income_tax liabilities for and on date petitioner’s representative james keating submitted a form request for a collection_due_process or equivalent_hearing in response to the first levy notice on date mr keating submitted a form mr keating held a power_of_attorney for petitioner and represented petitioner during the appeals process in response to the second levy notice on date mr keating submitted a form in response to the nftl on the various forms mr keating indicated that petitioner was interested in submitting a collection alternative mr keating also stated that petitioner suffered from physical and psychological ailments which prevented him from effectively interacting with his representatives b kentucky appeals_office on date settlement officer natalie krueger of the covington kentucky appeals_office mailed petitioner a letter stating that appeals had received his request for a cdp hearing and scheduling a telephone cdp hearing for date in the letter settlement officer krueger stated that she could consider collection alternatives such as an installment_agreement or an offer-in- compromise oic only if petitioner provided a completed form 433-a collection information statement for wage earners and self-employed individuals and a signed federal_income_tax return for which had not been filed settlement officer krueger instructed petitioner to submit the listed items by date petitioner did not submit the requested information the letter also stated that petitioner needed to file all unfiled tax returns even though only the tax_return was requested specifically instead on date the day before the scheduled cdp hearing mr keating telephoned settlement officer krueger and requested an extension of time to submit the requested information because petitioner suffered from various mental and physical conditions including diabetes severe anxiety and agoraphobia mr keating also requested that the case be transferred to the appeals_office in los angeles california for a face-to-face hearing settlement officer krueger rescheduled the telephone cdp hearing to date and extended the time to submit the requested information to date on date settlement officer krueger received a letter from mr keating enclosing a partially completed form 433-a a copy of petitioner’s wage and income transcript for and a cover memo again requesting that the case be transferred to the appeals_office in los angeles california for a face-to-face hearing according to the form 433-a petitioner owned a condominium an automobile two morgan stanley accounts two wells fargo accounts furniture and a piano the form 433-a showed that petitioner had assets in excess of his tax_liabilities petitioner did not submit a tax_return petitioner did not provide his income and expense information on the form 433-a c california appeals_office on date settlement officer krueger transferred the case to the appeals_office in los angeles california for a face-to-face hearing on date all three transferred cdp hearing requests were assigned to settlement officer nathan august on date settlement officer august mailed petitioner a letter scheduling a face-to-face hearing for date in the letter settlement officer august instructed petitioner to submit the following items by date signed tax returns for tax years and which had not been filed copies of bank statements for the prior six months a copy of petitioner’s latest morgan stanley account statement documentation concerning petitioner’s inheritance and a copy of the deed transferring title in the condominium to petitioner’s name petitioner did not submit the requested information on date a face-to-face cdp hearing was held between mr keating and settlement officer august petitioner did not attend the hearing at the hearing mr keating appeared without any of the requested financial after settlement officer august received petitioner’s case file he reviewed it and became aware of petitioner’s mental and physical health claims information except a copy of the rosenthal family_trust document mr keating also brought a letter to the hearing from petitioner’s psychologist dr bethany marshall stating that petitioner’s mental health problems had interfered significantly with his ability to file taxes to cooperate with his current tax preparer and to provide documents required to prepare tax returns because petitioner had assets in excess of his tax_liabilities but needed to retain sufficient funds to pay medical_expenses mr keating orally proposed an effective tax_administration oic settlement officer august rejected the oral proposal because petitioner was not in filing compliance mr keating informed settlement officer august that he continued to have difficulty communicating with petitioner and had been unsuccessful despite repeated attempts in getting petitioner to file his delinquent tax returns mr keating requested a one-month extension of time to file the delinquent tax returns after considering several factors including petitioner’s severe mental health problems and his failure to submit sufficient financial information or delinquent tax returns settlement officer august determined that any further extension of time would not be productive he therefore denied mr keating’s request for an extension on date mr keating telephoned carleen powers settlement officer august’s manager and again requested an extension ms powers agreed with settlement officer august’s decision and denied the request throughout the course of the cdp hearing petitioner did not submit a written proposal for a collection alternative on date the irs issued petitioner three notices of determination concerning collection action s under sec_6320 and or determination notices sustaining the lien and levy action at issue on date petitioner timely petitioned this court for review of the determination notices i statutory framework opinion sec_6321 imposes a lien in favor of the united_states on all property and rights to property of a taxpayer liable for tax when a demand for payment of the tax has been made and the taxpayer fails to pay the tax sec_6320 provides the determination notices state that appeals verified that the requirements of all applicable law and administrative procedure were met and determined that the nftl filing and proposed levy action appropriately balanced the need for efficient collection_of_taxes with petitioner’s concern that these collection actions be no more intrusive than necessary that the secretary shall furnish the taxpayer with an nftl within five business days after the notice of lien is filed sec_6331 authorizes the secretary to levy upon property and property rights of a taxpayer liable for tax if the taxpayer fails to pay the tax within days after notice_and_demand for payment is made sec_6330 provides that no levy may be made on any property or right to property of any person unless the secretary has notified such person in writing of the right to a hearing before the levy is made if a taxpayer requests a hearing in response to an nftl or a notice_of_levy pursuant to sec_6320 or sec_6330 a hearing shall be held before an impartial officer_or_employee of appeals sec_6320 b the hearing under sec_6320 generally shall be conducted in a manner consistent with the procedures set forth in sec_6330 d and e sec_6320 at the hearing the taxpayer may raise any relevant issue including appropriate spousal defenses challenges to the appropriateness of the collection action and collection alternatives sec_6330 in addition to considering issues raised by the taxpayer under sec_6330 the appeals officer must verify that the requirements of any applicable law or administrative procedure have been met sec_6330 a taxpayer is precluded from contesting the existence or amount of the underlying tax_liability unless the taxpayer did not receive a notice_of_deficiency for the liability in question or did not otherwise have an earlier opportunity to dispute the liability sec_6330 see also 114_tc_604 the phrase underlying tax_liability includes the tax_deficiency additions to tax and statutory interest 115_tc_329 following a hearing appeals must determine whether to sustain the filing of the lien and whether proceeding with the proposed levy is appropriate in making that determination appeals is required to take into consideration the verification required by sec_6330 relevant issues raised by the taxpayer and whether the proposed lien or levy action appropriately balances the need for efficient collection_of_taxes with the taxpayer’s concerns regarding the intrusiveness of the proposed collection action sec_6330 ii standard of review sec_6330 grants this court jurisdiction to review appeals’ determination in connection with a collection hearing petitioner argues that we should apply a de novo standard of review to all procedural matters including issues concerning the conduct of the cdp hearing respondent argues that we should apply an abuse_of_discretion standard of review although sec_6330 does not prescribe the standard of review that the court is to apply in reviewing the commissioner’s administrative determinations we have stated that where the validity of the underlying tax_liability is properly at issue the court will review the matter de novo sego v commissioner t c pincite 114_tc_176 where the validity of the underlying tax_liability is not properly at issue however the court will review the commissioner’s administrative determination for abuse_of_discretion sego v commissioner t c pincite goza v commissioner t c pincite petitioner does not dispute the existence or amounts of the underlying tax_liabilities accordingly we review respondent’s sustaining the proposed collection actions for abuse_of_discretion appeals abuses its discretion if it acts arbitrarily capriciously or without sound basis in fact or law 112_tc_19 see also tinnerman v commissioner tcmemo_2010_150 aff’d 448_fedappx_73 d c cir acting without a sound basis in fact or law means that an agency such as the irs makes an error of law or rests its determination on a clearly erroneous finding of fact or ‘applies the correct law to facts which are not clearly erroneous but rules in an irrational manner ’ 249_f3d_1121 9th cir citations omitted quoting 85_f3d_1400 9th cir see also 496_us_384 a taxpayer generally bears the burden of proving abuse_of_discretion rule a titsworth v commissioner tcmemo_2012_12 iii determination to proceed with collection petitioner asserts two theories to argue that respondent abused his discretion petitioner first attacks respondent’s decision to deny his date request for more time to submit the requested information petitioner argues that respondent in refusing to grant the extension request improperly and prematurely terminated the hearing petitioner next attacks respondent’s decision to reject collection alternatives petitioner argues that respondent was statutorily required under sec_6330 to consider collection alternatives we address each theory in turn a respondent’s decision to terminate petitioner’s hearing was not an abuse_of_discretion an appeals officer’s unreasonable denial of a request for more time to submit financial information or other evidence may be an abuse_of_discretion see shanley v commissioner tcmemo_2009_17 the reasonableness of a request for more time and the reasonableness of a denial of such a request will depend on the particular facts of the case dinino v commissioner tcmemo_2009_284 additionally the appeals officer’s denial of the request should be viewed in context morlino v commissioner tcmemo_2005_203 petitioner argues that respondent’s refusal to grant the request for more time to submit the information was unreasonable and arbitrary because respondent failed to take into account petitioner’s mental condition petitioner asserts that his mental condition precluded him from effectively assisting mr keating in the cdp hearing as a consequence petitioner argues that he should not be subject_to the same rigid deadlines as other taxpayers respondent argues that the denial of the request was reasonable in the light of among other things petitioner’s failure to meet deadlines his history of noncompliance and respondent’s previous deadline extensions and accommodations in other words respondent argues that under all of the facts and circumstances petitioner was given ample time to submit the requested information on the facts of this case we find that respondent’s decision was reasonable and that therefore there was no abuse_of_discretion in denying petitioner’s date request for more time to submit the requested information first at petitioner’s request respondent rescheduled the telephone cdp hearing from date to date and transferred the case to the appeals_office in los angeles california for a face-to-face hearing even though petitioner had not submitted the requested financial information or filed the requested delinquent tax returns second respondent’s approach was not inconsistent with irs guidelines there is no requirement that the commissioner wait a certain amount of time before making a determination as to a proposed levy gazi v commissioner tcmemo_2007_342 94_tcm_474 see also sec_301 e q a-e9 proced admin regs appeals will however attempt to conduct a cdp hearing and issue a notice_of_determination as expeditiously as possible under the circumstances sec_301_6330-1 q a-e9 proced admin regs third we disagree that respondent improperly and prematurely terminated petitioner’s hearing ignoring the fact that petitioner was suffering from mental health problems the record shows that respondent in making his determination took into account petitioner’s mental health problems in fact respondent contrary to petitioner’s argument on brief the date face-to- face hearing was not the first time that settlement officer august became aware of continued expended extra effort in an attempt to accommodate petitioner’s mental illness and to ensure he had adequate time to submit the requested information for example respondent transferred the case to the appeals_office in los angeles california for a face-to-face hearing when similarly situated taxpayers-- ie taxpayers who are not in filing compliance--generally would not have received such a hearing see sec_301_6330-1 q a-d8 proced admin regs respondent also gave petitioner multiple opportunities and extensions of time to submit the requested information before he closed the file furthermore by the time petitioner made the date final extension request more than five months had passed since respondent had sent petitioner the first letter dated date requesting supporting information no statutory or regulatory provision requires that taxpayers be afforded unlimited opportunities to supplement the administrative record roman v commissioner tcmemo_2004_20 the statute requires only that a taxpayer be given a reasonable chance to be heard before the issuance of a notice_of_determination id continued petitioner’s mental health problems as reflected in the case history entries by date settlement officer august was aware of them in addition settlement officer august credibly testified at trial that in making his determination he took them into account b respondent’s decision to reject collection alternatives was not an abuse_of_discretion petitioner also argues that even if respondent did not abuse his discretion by denying the request for more time respondent abused his discretion by failing to consider collection alternatives and that respondent was statutorily required under sec_6330 to consider collection alternatives respondent argues that petitioner was ineligible for a collection alternative because he failed to provide the required forms and information it is not an abuse_of_discretion for the appeals_office to reject collection alternatives and sustain a proposed collection action on the basis of the failure of a taxpayer to submit requested financial information or to achieve current compliance with filing obligations see eg 129_tc_107 taylor v commissioner tcmemo_2009_27 roman v commissioner tcmemo_2004_20 additionally it is not an abuse_of_discretion for the appeals_office to decline to consider a collection alternative where no written proposal is ever placed before the reviewing officer see 138_tc_228 124_tc_69 petitioner never made a concrete proposal in writing for a collection alternative never provided the requested financial information and never filed the requested delinquent tax returns for and any one of these failures justified respondent’s determination not to allow a collection alternative we are not unsympathetic to petitioner’s position we also realize that the statutory requirements may seem to work harsh results to taxpayers such as petitioner who suffer from mental illness however our role in this proceeding is limited by the express provisions of sec_6330 that govern a taxpayer’s challenges to collection action the record here does not show that respondent acted in a manner that was arbitrary capricious or without sound basis in fact or law the record in fact shows that respondent expended extra effort to accommodate petitioner’s mental illness accordingly we hold that respondent did not abuse his discretion by terminating petitioner’s cdp hearing and rejecting collection alternatives that were never submitted in writing respondent’s determination to proceed with collection is sustained in reaching our holding we have considered all arguments made and to the extent not mentioned we consider them irrelevant moot or without merit to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court christina m fitzpatrick petitioner v commissioner of internal revenue respondent docket no 9433-13l filed date keith howard johnson adam l heiden and michael p tyson for petitioner anne m craig lauren b epstein and peter t mccary for respondent memorandum opinion vasquez judge this case is before the court on petitioner’s motion for an award of administrative and litigation costs pursuant to sec_7430 and rule the parties agree that a hearing on the motion is not required accordingly we rule on petitioner’s motion on the basis of the parties’ submissions and the existing record see rule a the portions of our opinion on the merits in the instant case fitzpatrick v commissioner tcmemo_2016_199 that are relevant to our disposition of this motion are incorporated by this reference the issues we must decide are whether petitioner is entitled to recover administrative and litigation costs and if so whether the amount of costs claimed is reasonable background petitioner was the subject of a_trust fund recovery penalty tfrp investigation arising from unpaid employment_taxes petitioner was interviewed by a revenue_officer who subsequently issued a letter proposing assessment of the tfrps against her petitioner however never received the letter respondent subsequently assessed the liability and began collection actions petitioner requested a collection_due_process cdp hearing where she was allowed to challenge her underlying liability ie challenge whether she was liable unless otherwise indicated all section references are to the internal_revenue_code code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure for the tfrps because she had not had a prior opportunity to dispute the liability with the irs office of appeals appeals during the cdp hearing specifically on date petitioner submitted a sec_7430 qualified_offer the settlement officer neither accepted nor rejected the qualified_offer and he instead allowed it to lapse the settlement officer issued a notice_of_determination stating that petitioner was liable for the tfrps after petitioner filed a petition seeking review of the determination we reviewed the case de novo and held that petitioner was not liable for the tfrps petitioner subsequently moved for an award of administrative and litigation costs discussion i whether petitioner is entitled to an award of administrative and litigation costs sec_7430 permits the award of reasonable administrative and litigation costs to a taxpayer in an administrative or court_proceeding brought against the united_states in connection with the determination of any_tax interest or penalty under the code an award of reasonable administrative or litigation costs may be made where the taxpayer is the prevailing_party the taxpayer did not unreasonably protract the proceedings the amount of the costs requested is reasonable and the taxpayer exhausted the administrative remedies available to her sec_7430 and c respondent concedes that all requirements are met except for the prevailing_party requirement to qualify as a prevailing_party a taxpayer must establish that she substantially prevailed with respect to the amount in controversy or the most significant issue or set of issues presented and meets the applicable net_worth requirement sec_7430 however even if the taxpayer meets these requirements she will not be treated as a prevailing_party if the commissioner establishes that his position in the proceeding was substantially justified see sec_7430 even if the commissioner can establish that his position was substantially justified a taxpayer can still be considered a prevailing_party if she makes a qualified_offer and the liability of the taxpayer pursuant to the judgment in the proceeding is equal to or less than the liability of the taxpayer which would have been so determined if the united_states had accepted the qualified_offer sec_7430 this rule applies regardless of whether the commissioner’s position in the proceeding is substantially justified id 117_tc_48 aff’d 55_fedappx_476 9th cir costs recoverable under the qualified_offer_rule only include those costs incurred on or after the date of the last qualified_offer sec_301_7430-7 proced admin regs for all other claimed costs the commissioner may assert his substantial justification defense pursuant to the general prevailing_party rule_of sec_7430 respondent agrees that petitioner meets the net_worth requirements and substantially prevailed with respect to the amount in controversy and the most significant issue presented respondent also agrees that petitioner submitted a qualified_offer on date and that her liability pursuant to our opinion was less than the amount of the qualified_offer consequently respondent concedes that petitioner was a prevailing_party pursuant to sec_7430 for costs incurred on and after date the date that petitioner submitted her qualified_offer respondent maintains however that his position was substantially justified and that petitioner should therefore not recover administrative costs incurred before date in general the commissioner’s position is substantially justified if on the basis of all of the facts and circumstances and the legal precedents relating to the case the commissioner acted reasonably see 487_us_552 89_tc_79 aff’d 861_f2d_131 5th cir the commissioner’s position may be substantially justified even if incorrect if a reasonable person could think it correct 108_tc_430 quoting underwood u s pincite n the commissioner’s eventually conceding or losing a case does not establish that his position was not reasonable 92_tc_760 in evaluating the commissioner’s justification we must first identify when the commissioner took a position and then decide whether the position taken from that point was substantially justified the commissioner’s position in an administrative_proceeding is determined on the earlier of the date of receipt by the taxpayer of the decision of appeals or the date of the notice_of_deficiency see sec_7430 respondent’s position was therefore established when the settlement officer issued the notice_of_determination determining that petitioner was a responsible_person who willfully failed to pay over taxes respondent argues that the settlement officer’s determination was substantially justified because the administrative record shows that petitioner invested money in the business opened the business’ bank account as secretary for the corporation maintained signatory authority over the bank account signed checks for the corporation monitored the corporation’s bank account contracted with paychex to provide payroll services and directed and or authorized spending by the general manager we have reviewed the administrative record and agree with respondent that a reasonable person could conclude that many of the above items were true we also agree that under those circumstances a reasonable person could conclude that petitioner was liable for the tfrps accordingly we hold respondent’s position was substantially justified for the period up until the qualified_offer was made we note however that our ruling on substantial justification is based only on the information in the administrative record--ie the information available to the settlement officer when he made his determination the court by contrast had the benefit of a seven-day trial where numerous witnesses were under oath and subject_to cross-examination it was under these circumstances that we were able to determine that petitioner was not liable for the tfrps in order for a taxpayer to be held liable for tfrps she must be a responsible_person who willfully failed to pay over the trust_fund_taxes at issue sec_6672 indicia of responsibility include the holding of corporate office control_over financial affairs the authority to disburse corporate funds stock ownership and the ability to hire and fire employees 828_f2d_1499 11th cir in fitzpatrick v commissioner tcmemo_2016_199 we found that much of the information in the administrative record was either misleading or false the administrative record comprised the revenue officer’s investigatory continued ii whether petitioner’s claimed costs are reasonable in amount now that we have determined that petitioner is entitled to recover costs incurred from the date the qualified_offer was submitted we must next determine whether the claimed costs are reasonable in amount an award of attorney’s fees under sec_7430 is generally limited to a statutory rate4 unless the court determines that a special factor such as the limited availability of qualified attorneys for such proceeding the difficulty of the issues presented in the case or the local availability of tax expertise justifies a higher rate sec_7430 petitioner argues that she should be entitled to recover costs in excess of the statutory cap because of various special factors including mr johnson’s tax continued notes along with prior submissions from james stamps the president of the corporation and kris chislett the business’ general manager while petitioner submitted a narrative and affidavits to the settlement officer supporting her position the misinformation provided by mr chislett mr stamps and the revenue_officer was enough for a reasonable person to conclude that petitioner was liable for the tfrps an award for fees incurred in is limited to dollar_figure per hour revproc_2011_52 sec_3 2011_45_irb_701 an award for fees incurred in and is limited to dollar_figure per hour revproc_2012_41 sec_3 2012_45_irb_539 revproc_2013_35 sec_3 2013_47_irb_537 an award for fees incurred in and is limited to dollar_figure per hour revproc_2014_61 sec_3 2014_47_irb_860 revproc_2015_53 sec_3 2015_44_irb_615 revproc_2016_55 sec_3 2016_45_irb_707 controversy expertise the limited number of tax controversy attorneys in the jacksonville area the difficulty of the case and respondent’s unreasonable litigating position respondent counters that petitioner should be limited to the statutory cap because she has not established that a special factor exists to award an enhanced rate we will review each of the special factors petitioner claims for fee enhancement a limited availability of qualified attorneys petitioner first argues that there were a limited number of qualified attorneys available to represent her in order to recover under this special factor the taxpayer must show that the number of competent attorneys in the area was so limited that taxpayers with valid claims were otherwise unable to secure representation see 43_f3d_172 5th cir petitioner submitted an affidavit from another jacksonville tax controversy attorney david ferebee who avers that apart from petitioner’s attorneys there were around four other attorneys who could have represented petitioner we recognize that two of those attorneys represented mr chislett and mr stamps and would have therefore been ineligible to represent petitioner however the fact that two attorneys remained indicates that there were sufficient attorneys in the area who were available to represent petitioner furthermore notwithstanding mr ferebee’s assertions we take judicial_notice of the fact that numerous other attorneys were listed as counsel to various taxpayers at the same date trial session where this case was first tried this fact indicates that there are likely more tax controversy attorneys in the area than the several identified by mr ferebee consequently we find that this factor does not support a departure from the statutory rate b tax expertise petitioner next argues that mr johnson was exceptionally qualified to prosecute this case mr johnson is certainly a qualified attorney he is board certified in taxation and has practiced in the area of tax controversy for over years including years with the office_of_chief_counsel however courts generally do not recognize knowledge in tax as a factor leading to enhanced recovery see powers v commissioner f 3d pincite huffman v commissioner 978_f2d_1139 9th cir aff’g in part and rev’g in part tcmemo_1991_144 936_f2d_736 2d cir aff’g in part and rev’g in part 93_tc_256 images in motion of el paso inc v commissioner tcmemo_2006_19 slip op pincite rather a special factor in this context means a nonlegal or technical ability possessed by the attorney powers v commissioner f 3d pincite because petitioner failed to establish that mr johnson possesses nonlegal or technical abilities apart from his expertise in tax law this factor does not support a departure from the statutory rate c difficulty of the issues petitioner’s next argument in support of an enhanced recovery is that this was not a simple case to try we disagree the law in the tfrp area is well established consequently this factor does not support a departure from the statutory rate d undesirability of the case petitioner’s next argument for enhanced recovery is that she could not afford to litigate this case and that few law firms would have made similar arrangements to continue to absorb significant attorney’s fees and costs with only limited money coming in petitioner cites no authority that this is a factor courts have generally considered however the supreme court has held that the undesirability of the case is not a special factor warranting a departure from the statutory cap underwood u s pincite interpreting u s c sec d a ii because petitioner’s argument is clearly rooted in the the reasoning employed by the courts under the attorney’s fee provision of the equal_access_to_justice_act eaja applies equally to review under section continued undesirability of the case we reject petitioner’s assertion that it is a factor supporting enhanced recovery e unusually litigious position finally petitioner cites 863_f2d_759 11th cir and argues that she is entitled to an enhanced recovery because respondent took an unusually litigious position in prosecuting this case in jean the court_of_appeals for the eleventh circuit reviewed a district court’s decision which had enhanced an award of attorney’s fees according to numerous factors id the court_of_appeals rejected each of the special factors for being inconsistent with the eaja and the supreme court’s holding in underwood id the court_of_appeals remanded the case and advised the district_court that it should be free to approach this question of special factors enhancements anew and consider potential special factors that would be consistent with underwood and the court of appeals’ opinion including whether the government’s unusually litigious position in this case might constitute a special factor id pincite continued huffman v commissioner 978_f2d_1139 9th cir aff’g in part rev’g in part tcmemo_1991_144 since jean was decided several courts including this court have considered the court of appeals’ question whether a party’s taking an unusually litigious position is a factor supporting enhanced recovery most of the courts have concluded that an unusually litigious position cannot be considered a special factor because it would amount to an impermissible award of punitive_damages contrary to the statute and to principles of sovereign immunity 200_f3d_351 5th cir aff’g tcmemo_1998_176 see also 936_f2d_736 2d cir dixon v commissioner tcmemo_2006_97 slip op pincite we agree with the court_of_appeals for the fifth circuit which reviewed the legislative_history of sec_7430 and stated that congress intended the statutory rate to be sufficient to provide private parties with incentives to ‘defend against unreasonable government action ’ estate of cervin v commissioner f 3d pincite quoting h_r rept no 96th cong 2d sess an argument that the commissioner was unusually litigious does not explain why a departure from the statutory rate is appropriate it merely explains why there may those cases however generally rely on the fact that there was previously a threshold determination that the government’s position was not substantially justified the case before us is different because petitioner’s qualified_offer precludes us from determining at least during the litigation phase whether respondent’s position was substantially justified be an increase in the number of hours required to litigate the case id we agree with this reasoning and therefore reject petitioner’s assertion that an unusually litigious position is a special factor supporting enhanced recovery in sum we find that petitioner has not established any factor leading to an enhanced recovery therefore petitioner is limited to recovering her costs at the statutory rate iii mr johnson’s billing records petitioner submitted a spreadsheet itemizing costs incurred from date through date as stated supra section i petitioner is not entitled to recover costs incurred before the submission of the qualified_offer ie costs incurred from january through date of the remaining costs respondent takes issue with several line items respondent objects to costs incurred in researching libel and slander statutes filing a form_843 claim_for_refund and request for abatement filing a form 656-l offer_in_compromise doubt as to liability submitting a freedom_of_information_act foia request and representing petitioner’s husband first the line items that respondent identified related to the libel and slander research the form_843 and the form 656-l all relate to costs incurred before the filing of the qualified_offer and are therefore not recoverable for the reason stated supra section i second petitioner failed to address respondent’s objection to the foia- related costs therefore we find that she concedes that issue and that those items are not subject_to reimbursement finally respondent states without identifying any specific line items that many of the billing statements refer to actions taken on behalf of petitioner’s husband who was not a party to this case or the cdp hearing that preceded it we have reviewed the spreadsheet and as best we can determine respondent is referring to several entries for costs incurred for clients in the plural or client husband however the subject matter immediately adjacent to these entries clearly indicate that the costs were related to petitioner and not to petitioner’s husband this makes sense because mr johnson’s representation of petitioner’s husband was limited to the period during the revenue officer’s investigation the revenue_officer eventually determined that a tfrp assessment should not be proposed against petitioner’s husband therefore petitioner’s husband was no longer in need of mr johnson’s services by the time the costs at issue were incurred iv conclusion we award petitioner her claimed costs incurred from date through date limited to the statutory caps and subject_to removal of the foia costs given that respondent does not object to petitioner’s estimate of dollar_figure for additional costs incurred at the capped rate after the filing of her motion we also award that amount therefore we find that petitioner is entitled to a total award of dollar_figure in reaching our holding we have considered all arguments made and to the extent not mentioned we consider them irrelevant moot or without merit to reflect the foregoing an appropriate order will be issued we removed hours in fees incurred date and hours in fees incurred march we also removed dollar_figure in expense recovery for foia-related photocopies and postage


t c memo united_states tax_court stephen jones petitioner v commissioner of internal revenue respondent docket no filed date kenneth w mcwade for petitioner jonathan j ono for respondent memorandum opinion colvin judge respondent determined a dollar_figure deficiency in petitioner’s income_tax for the sole issue for decision is whether petitioner may exclude from gross_income under either sec_931 or sec_911 compensation he earned for personal services he performed in - - on johnston island a u s possession in the pacific ocean ’ we hold that he may not see farrell v united_states _ f 3d 9th cir date 117_tc_95 on appeal 10th cir date unless otherwise specified section references are to the internal_revenue_code as amended rule references are to the tax_court rules_of_practice and procedure background all of the facts have been stipulated and are so found the parties submitted the case fully stipulated under rule petitioner resided in melbourne florida when he filed the petition petitioner was employed by raytheon engineers constructors inc raytheon on johnston island throughout petitioner received wages of dollar_figure from raytheon in on his individual_income_tax_return as amended for petitioner excluded from his gross_income all of the wages that he received from raytheon in on the grounds that those wages were excludable under sec_931 or sec_911 johnston island is a u s possession act of aug ch 11_stat_119 u s c secs johnston island is not part of american samoa guam or the commonwealth of the n mariana islands 117_tc_95 discussion a whether petitioner may exclude from income under sec_931 compensation that he received for services he performed on johnston island petitioner contends that he may exclude from income under sec_931 compensation that he received for services he performed on johnston island in before sec_931 permitted citizens to exclude income derived from sources within various possessions of the united_states including johnston island if certain conditions were satisfied see farrell v united_states _ f 3d at _ specking v commissioner supra pincite sec_931 as amended by the tax_reform_act_of_1986 tra publaw_99_514 100_stat_2593 applies only to income derived from sources within guam american samoa and the northern mariana islands it does not apply to income derived from sources within johnston island sec_931 petitioner points out that sec_1_931-1 income_tax regs ’ continues to provide that sec_931 applies to johnston island and contends that as a result residents of johnston island may exclude income derived from sources within johnston island respondent recognizes that sec_1 931-l1 a income_tax regs is inconsistent with sec_931 and contends that sec_931 controls not sec_1_931-1 income_tax regs we agree with sec_1_931-1 income_tax regs was most recently amended in t d fed reg date q4e- respondent it is well settled that when a regulation conflicts with a subsequently enacted statute the statute controls 394_us_741 333_us_496 farrell v united_states _ f 3d at __ we decided this issue in specking v commissioner supra pincite one of the years at issue in that case was which is the year at issue here in specking we said for the years in issue sec_931 does not apply to the compensation petitioners received for services they performed on johnston island id the u s court_of_appeals for the ninth circuit to which this case is appealable reached the same conclusion in farrell petitioner also contends on the basis of a footnote in specking v commissioner supra pincite n that former sec_931 still applies to johnston island the footnote states thus had american samoa and the united_states not entered into an implementing agreement income from sources within that possession would qualify for the exclusion provided by old sec_931 id we disagree former sec_931 applied to johnston island however sec_931 as amended by tra sec_1272 does not note in specking does not provide otherwise tra sec_1277 and b 100_stat_2600 provides the following effective dates for the amendments to sec_931 a in general --except as otherwise provided in this section the amendments made by this subtitle shall apply to taxable years beginning after date b special rule for guam american samoa and the northern mariana islands ---the amendments made by this subtitle shall apply with respect to guam american samoa or the northern mariana islands and to residents thereof and corporations created or organized therein only if and so long as an implementing agreement under sec_1271 is in effect between the united_states and such possession thus the tra sec_1272 amendments that apply to johnston island are effective for taxable years beginning after date however under note in specking the amendments that apply with respect to american samoa apply only when and so long as an implementing agreement is in effect thus petitioner may not exclude income under the pre-1986 tra version of sec_931 see specking v commissioner supra pincite b whether petitioner may exclude from income under sec_911 dollar_figure that he received for services he performed on johnston island petitioner contends that dollar_figure of his income from employment on johnston island is exempt from tax under sec_911 petitioner relies on sec_1_931-1 income_tax regs which provides relationship of sec_931 and sec_911 a citizen_of_the_united_states who cannot meet the percent and the 50-percent requirements of sec_931 but who receives earned_income from sources within a possession_of_the_united_states is not deprived of the benefits of the provisions of sec_911 relating to the exemption of earned_income from sources outside the united_states provided he meets the requirements thereof in such a case none of the provisions of sec_931 is applicable in determining the citizen’s tax_liability -- - we disagree with petitioner a taxpayer who resides in johnston island does not qualify for the sec_911 exclusion because johnston island is a u s possession and not a foreign_country sec_1_931-1 income_tax regs does not provide otherwise thus income petitioner earned on johnston island is not foreign_earned_income excludable under sec_911 see farrell v united_states _ f 3d at _ specking v commissioner supra pincite we conclude that petitioner may not exclude from gross_income under either sec_931 or sec_911 compensation he earned for personal services he performed on johnston island in see farrell v united_states _ f 3d at __ specking v commissioner supra pincite to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c dec tax_exempt_and_government_entities_division uniform issue list tep alt legend taxpayer a ira b company c company d custodian e custodian f asset amount dear this is in response to your request for a private_letter_ruling dated date as supplemented by correspondence dated july and from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he received a distribution of asset from ira b taxpayer a asserts that his failure to accomplish a rollover within the page 60-day period prescribed by sec_408 was due to the unexpected and unauthorized distribution of asset by company d in taxpayer a rolled over ira b with company c which subsequently became company d in from to ira b was maintained by custodian e for company c ira b’s investments included asset a promissory note to an unrelated party and a cash account for amount asset required no monthly re-payments and had a lump-sum payment due in amount was a cash account used for set-up and annual administrative fees of ira b taxpayer a represents that he sent a change_of address notice to company d but received no communications from company d after his move annual administrative fees continued to be deducted from the cash account and by the close of only a small amount remained in this account in taxpayer moved from ‘to in company c changed its name to company d company d uses custodian e as the custodian of self-directed_ira custodial accounts that it sponsors including ira b the annual custodial fee assessed by company d reduced the balance in the cash account within ira b to zero unbeknown to taxpayer a on date company d deemed an in- kind distribution of asset custodial fee taxpayer a was unaware of the distribution until april when the internal_revenue_service sent form cp notifying taxpayer a that he failed to include an amount reported on form 1099-r on his tax_return taxpayer a represents that he never received asset and it is presumed lost taxpayer a also represents that a new ira custodian custodian f has agreed to accept a copy of asset in taxpayer a’s ira b for failure to pay the annual if a waiver is granted based on the facts and representations you request a ruling that the internal_revenue_service waive the day rollover requirement contained in sec_408 of the code with respect to the distribution of asset sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if page i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a are consistent with his assertion that his failure to accomplish a timely rollover of asset was due to its unexpected distribution from ira b by company d page therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of asset from ira b taxpayer a is granted a period of days from the issuance of this letter_ruling to complete an in-kind rollover of asset promissory note dated date into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such in-kind rollover the contribution will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter 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 letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please contact d if you wish to inquire about at or sincerely yours manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc


id office uilc cca_2008120208312957 ---------------- number release date from ------------------ sent tuesday december am to ------------ cc -------------------------------------------------------------------------- subject re follow-up questions hi -------- as to your first question you but not a taxpayer may submit a cca request see sec_6110 within months however as we discussed if the ruling requested is primarily factual we generally will not rule on the matter if a taxpayer requests a letter_ruling we generally respond as to your second question i believe that is the correct cite -----------------


internal_revenue_service number release date index numbers ---------------------------------- ------------------ ----------------------------------- ---------------------------------- -------------- -------------------------------- - 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-109232-06 date date ------------------ ---------------------- ----------------------- ------------------------ legend x d country dear --------------- this is in response to a letter dated date 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 d under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d however x inadvertently failed 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 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 a single owner can plr-109232-06 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 owner 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 section b 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 interest 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 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 d 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 plr-109232-06 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 your authorized representative sincerely heather c maloy associate chief_counsel passthroughs special industries copy of this letter copy for sec_6110 purposes enclosures cc


department of the treasury internal_revenue_service washington d c contact person contact number b t- eo tax_exempt_and_government_entities_division date nov -7 uniform issue list legend xx y ze dear sir or madam this is in reply to your rulings request of date concerning the proposed transfers by x and by y of all of their assets to z pursuant to sec_507 of the internal_revenue_code charitable_trust x and the nonprofit charitable corporations y and z are exempt from federal_income_tax under sec_501 of the code and are private_foundations under sec_509 of the code x y and z are controlled by the same individuals x will transfer all of its assets to z and will dissolve y will transfer all of its assets to z pursuant to a merger of y into z and will dissolve under state law under state law z will continue to operate as an exempt charitable private_foundation x and y will have no expenditure_responsibility grants outstanding under sec_4945 of the code at the time of their transfers of all of their assets to z subsequently x and y intend to notify the internal_revenue_service pursuant to sec_507 of the code of the termination of each's status as a private_foundation under sec_509 of the code the following rulings are requested x's transfer of all its assets to z will be a transfer pursuant to sec_507 of the code x's transfer of all of its assets to z will not be a termination of x's private_foundation_status and will not cause imposition of the termination_tax under sec_507 of the code if x terminates its private_foundation_status at least one day after the transfer of all of its assets and so notifies the secretary pursuant to sec_507 of the code x will be liable for the tax imposed by sec_507 of the code however because x will have no assets after such termination no tax will be due under sec_507 of the code x's transfer of all of its assets to z will be treated as a transfer of all of x's assets to a private foundation which is effectively controlled by the same persons which effectively control z thus pursuant to sec_1_507-3 of the regulations x's transfer will not subject x to the taxes imposed by sec_4941 through of the code because after x's transfer z will be treated as though z were x for purposes of chapter of the code as the transferee of the assets of x savings provisions applicable and enumerated in sec_1_507-3 and ii of the regulations z will receive the benefit of any transitional rules and the transfer will not give rise to net_investment_income for x or z therefore the transfer will not result in the imposition of additional tax on x or z under sec_4940 of the code the transfer of assets by x to z will not constitute an act of self-dealing under sec_4941 of the code to any of the interested parties or the foundation managers and no tax under sec_4941 of the code will be incurred as a result of the transfer z's distributable_amount under sec_4942 of the code for its tax_year in which the proposed transfer occurs will be increased by x's distributable_amount for its tax_year in which the proposed transfer occurs as if z had held the assets of x for z's entire tax_year all qualifying distributions made by z during the entire tax_year and all qualifying distributions made by x during its tax_year in which the proposed transfer occurs will be treated as if made by z thus x's distribution_requirements under sec_4942 of the code in the year of the proposed transfer may be fulfilled by z after the transfer x will not be required to comply with the recordkeeping requirements of section g b of the code because x will have no assets x's transfer will not constitute an investment and therefore x will not be subject_to the tax on jeopardy investments imposed by sec_4944 of the code the transfer by x of all of its assets to z will not be a taxable_expenditure under sec_4945 of the code and x will not be required to exercise expenditure_responsibility under sec_4945 of the code with respect to the transfer this ruling_request is not a notice of intent to terminate x's private_foundation_status the transfers described above will not affect the status of x or z under sec_501 or a of the code y's transfer of all of its assets to z pursuant to the merger will be a transfer pursuant to section b of the code y's transfer of all of its assets to z will not be a termination of y's private_foundation_status and will not cause imposition of the termination_tax under sec_507 of the code if terminates its private_foundation_status at least one day after the transfer of all of its assets and so notifies the secretary pursuant to sec_507 of the code y will be liable for the tax imposed by sec_507 of the code however because y will have no assets after such termination no tax will be due under sec_507 of the code y's transfer of all of its assets to z pursuant to the merger will be treated as a transfer of all of y's assets to a private_foundation which is effectively controlled by the same persons which effectively control y thus pursuant to sec_1_507-3 of the regulations the transfer will not subject y to the taxes imposed by sec_4941 through of the code because after the transfer z will be treated as though z were y for purposes of chapter of the code further z will succeed to the aggregate tax benefits of y including y's sec_4942 excess_distribution carryforwards z's distributable_amount under sec_4942 for its taxable_year in which the proposed transfer occurs will be increased by y's distributable_amount for its tax_year in which the proposed transfer occurs as if z had held the assets of y for z's entire tax_year all qualifying distributions made by z during the entire year and all qualifying distributions made by y during its tax_year in which the proposed transfer occurs will be treated as if made by z thus y's distribution_requirements under sec_4942 of the code in the tax_year of the proposed transfer may be fulfilled by z as the transferee of the assets of y z will receive the benefit of any transitional rules and savings provisions applicable and enumerated in sec_1_507-3 and ii of the regulations y's transfer will not give rise to net_investment_income for y or z therefore the transfers will not result in the imposition of additional tax on y or z under sec_4940 of the code y's merger with z will not be an act of self-dealing under sec_4941 of the code to any of the interested parties or the foundation managers and no tax under sec_4941 of the code will be incurred as a result of the transfer y's transfers will not constitute investments by y and therefore y will not be subject_to the tax on jeopardy investments imposed by sec_4944 of the code y's transfer of all of its assets to z will not be a taxable_expenditure under sec_4945 of the code and y will not be required to exercise expenditure_responsibility under sec_4945 with respect to the transfer the merger will not be treated as a sale_or_exchange of property subject_to tax this ruling_request is not a notice of intent to terminate y's private_foundation_status the merger described above will not affect the status of y or z under sec_501 or sec_509 of the code sec_501 of the code provides for the exemption from federal_income_tax of nonprofit_organizations organized and operated exclusively for charitable and or other exempt purposes stated in that section sec_509 of the code describes organizations exempt from federal_income_tax under sec_501 of the code that are private_foundations subject_to the private_foundation provisions of chapter of the code sec_507 of the code concerns the transfer of assets by one private_foundation to one or more other private_foundations and provides that each transferee private_foundation shall not be treated as a newly created organization sec_1_507-3 of the income_tax regulations indicates that a transfer under sec_507 of the code includes a transfer of assets from one private_foundation to another private_foundation pursuant to any reorganization including a significant disposition of or more of the transferor foundation's assets sec_1_507-3 of the regulations indicates that a transfer of assets from one private_foundation to another private_foundation pursuant to a reorganization the transferee foundation shall not be treated as a newly created organization but shall succeed to the transferor's aggregate tax benefits under sec_507 of the code in sec_507 of the code indicates in general that the aggregate tax benefits of an exempt_private_foundation refer to the value of its exemption from federal_income_tax and the deductions taken by its donors during its existence sec_1_507-1 of the regulations provides that a private_foundation which has transferred all of its net assets is not required to file annual information returns under sec_6033 of the code for tax years after the tax_year of such transfer when the transferor has no assets or activities sec_1_507-3 of the regulations indicates that a transferor private_foundation is required to meet its own charitable distribution_requirements under sec_4942 of the code even for its tax_year in which it makes a transfer of its assets to another private_foundation pursuant to sec_507 of the code sec_1_507-3 of the regulations provides that a private_foundation that has transferred all of its assets to another private_foundation in a transfer pursuant to sec_507 of the code is not subject_to the expenditure_responsibility requirement of sec_4945 of the code sec_1_507-3 of the regulations provides that certain tax provisions will carry over to a transferee private_foundation that is given a transfer of assets from a transferor private_foundation pursuant to sec_507 of the code sec_1_507-3 i of the regulations indicates that if a transferor private_foundation transfers assets to one or more private_foundations which are effectively controlled directly or indirectly by the same person or persons who effectively control the transferor foundation then each transferee foundation will be treated as if it were the transferor foundation for purposes of sec_4940 through and also sec_507 through each transferee is treated as the transferor in the proportion which the fair_market_value of the transferor's assets that were transferred bears to the fair_market_value of all of the assets of the transferor immediately before the transfer sec_1_507-3 of the regulations indicates that a transfer of assets under sec_507 of the code does not relieve the transferor private_foundation from filing its own final returns sec_1_507-1 and sec_1_507-3 of the regulations provide that a transferor foundation's transfer of assets under sec_507 of the code will not constitute any termination of the transferor foundation's status as a private_foundation sec_1_507-4 of the regulations provides that the tax under sec_507 of the code on a transfer of assets pursuant to section termination of private_foundation_status does not apply to b of the code sec_4941 of the code imposes excise_tax on any act of self-dealing between a private_foundation and any of its disqualified persons under sec_4946 of the code sec_53_4946-1 of the foundation and similar excise_taxes regulations provides that for purposes of self-dealing under sec_4941 of the code an exempt_organization under sec_501 of the code is not a disqualified_person sec_4942 of the code requires that a private_foundation must expend qualifying distributions under sec_4942 for the conduct of exempt purposes revrul_78_387 1978_2_cb_270 describes the carryover of a transferor foundation's excess qualifying distributions under sec_4942 of the code to a transferee foundation that is effectively controlled by the same persons under sec_1_507-3 of the regulations under the regulation the transferee is treated as the transferor and thus the transferee can reduce its own distributable_amount under sec_4942 of the code by the amount if any of its transferor's excess qualifying distributions under sec_4942 of the code sec_4945 of the code imposes excise_tax on a private foundation's making of any taxable_expenditure under sec_4945 of the code sec_4945 of the code requires that in order to avoid making a taxable_expenditure a transferor private_foundation must exercise expenditure_responsibility under sec_4945 of the code on its grants to another private_foundation sec_4945 of the code defines expenditure_responsibility in terms of a grantor private_foundation requiring proper pre-grant inquiry and post-grant reports from a grantee private_foundation on the grantee's uses of the grant sec_4945 of the code provides that a taxable_expenditure also includes any amount expended by a private_foundation for purposes other than purposes under sec_170 of the code sec_53_4945-6 allows a private_foundation to make transfers of its assets pursuant to sec_507 of the code to organizations exempt under sec_501 of the code without the transfers being taxable_expenditures under sec_4945 analysi sec_1 under sec_1_507-3 of the regulations a transfer under sec_507 of the code includes a transfer of assets from one private_foundation to another private_foundation pursuant to any reorganization or merger including a significant disposition of or more of the transferor foundation's assets x's transfer will be a significant disposition of its assets under sec_1_507-3 of the regulations and thus will be a transfer under sec_507 of the code because x will transfer all of its assets to z under sec_1_507-3 of the regulations x's transfer of all of its assets to z pursuant to sec_507 of the code will not be a termination of x's private_foundation_status under sec_509 of the code and thus will not result in termination_tax under sec_507 of the code under sec_507 of the code when x notifies the internal_revenue_service at least one day after its transfer all of its net assets to z of its intent to voluntarily terminate its private_foundation_status pursuant to sec_507 of the code x will then terminate its private_foundation_status pursuant to that sec_507 of the code under sec_507 of the code the value of x's assets after x has transferred all of its assets to z thus x's voluntary notices of termination of private_foundation_status pursuant to section will be zero a of the code will not result in termination_tax under sec_507 of the code under sec_1_507-3 of the regulations transferee z will be treated as its transferor x for purposes of chapter of the code under sec_1_507-3 of the regulations and as in revrul_78_387 described above z will succeed to any excess qualifying distributions carryovers under sec_4942 of the code of x and y under sec_1_507-3 of the regulations transferee z will receive the carryover of any savings provisions applicable to x that are carried over to z under sec_1_507-3 through of the regulations under sec_4940 of the code x's transfer of its assets to z will not subject x or z to tax under that section under sec_4941 of the code x's transfer of assets to z will not be act of self-dealing because it will be for exempt purposes to organization z which is exempt from federal_income_tax under sec_501 of the code and which is thus not a disqualified_person for purposes of sec_4941 of the code pursuant to sec_53_4946-1 of the regulations under sec_1_507-3 of the regulations x's transfer to z will result in z being treated as x for purposes of sec_4942 of the code thus x's distribution_requirements under sec_4942 of the code for its tax_year of its transfer of assets may be satisfied by z and x's qualifying distributions during its tax_year of its transfer may be treated as made by z under sec_1_507-3 of the regulations x will not be required to comply with any record- keeping requirements under sec_4942 of the code after x transfers all of its assets to z under sec_4944 of the code x's transfer of assets and y's merger of assets into z for exempt purposes under sec_501 of the code will not be a jeopardizing investment or result in tax under that section under sec_4945 of the code sec_53_4945-6 of the regulations indicates that a private_foundation can transfer its assets pursuant to sec_507 of the code to an organization exempt under sec_501 of the code without the transfer being a taxable_expenditure under sec_4945 thus x's transfer to z pursuant to sec_507 of the code will not be a taxable_expenditure under sec_4945 of the code under sec_1_507-3 of the regulations x will not be required to exercise any expenditure_responsibility under sec_4945 of the code because x will transfer all of its assets to z a we note as a fact that this rulings request is not a notice of intent under sec_507 of the code by x to voluntarily terminate x's status as a private_foundation under sec_509 of the code because x's transfer of its assets to z will be for exempt purposes to an organization exempt from federal_income_tax under sec_501 of the code x's transfer will not adversely affect the exemptions under sec_501 of x or y under sec_1_507-3 of the regulations x's and y's transfers of all of their assets to z pursuant to sec_507 of the code will not be a termination of x's or y's private_foundation_status under sec_509 of the code under sec_1_507-3 of the regulations a transfer under sec_507 of the code includes a transfer of assets from one private_foundation to another private_foundation pursuant to any reorganization or merger including a significant disposition of or more of the transferor foundation's assets because y's merger into z will transfer all of its assets into z y's merger will be a significant disposition of its assets under sec_1_507-3 of the regulations and thus will be a transfer under sec_507 of the code under sec_1_507-3 of the regulations y's transfer of all of its assets to z by merger into z pursuant to sec_507 of the code will not be a termination of y's private_foundation_status under sec_509 of the code and thus wil not result in termination_tax under sec_507 of the code under sec_507 of the code when y notifies the internal_revenue_service at least one day after its transfer by merger of all of its net assets into z of y's intent to voluntarily terminate its private_foundation_status pursuant to sec_507 of the code y will then terminate its private_foundation_status pursuant to that sec_507 of the code under sec_507 of the code the value of y's assets after it has transferred all of its assets to z thus y's voluntary notice of termination of private_foundation_status pursuant to section will be zero a of the code will not result in termination_tax under sec_507 of the code under sec_1_507-3 of the regulations transferee z will be treated as its transferor y for purposes of chapter of the code a under sec_1_507-3 of the regulations y's merger into z will result in z being treated as y for purposes of sec_4942 of the code thus y's distribution_requirements under sec_4942 of the code for the tax_year of its merger of its assets into z may be satisfied by z and y's qualifying distributions during that tax_year of its transfer of assets by merger may be treated as made by z under sec_1_507-3 of the regulations transferee z will receive the carryover of any savings provisions applicable to y that are carried over to z under sec_1_507-3 through of the regulations under sec_4940 of the code y's transfer of its assets to z by merger into z will not subject y or z to tax under that section under sec_4941 of the code x's transfer of assets to z and y's merger of its assets into z will not be act of self-dealing because they will be for exempt purposes to organization z which is exempt from federal_income_tax under sec_501 of the code and which is thus not a disqualified_person for purposes of sec_4941 of the code pursuant to sec_53_4946-1 of the regulations under sec_4944 of the code y's merger of assets into z for exempt purposes under sec_501 of the code will not be a jeopardizing investment or result in tax under that section under sec_4945 of the code sec_53_4945-6 of the regulations indicates that a private_foundation can transfer its assets pursuant to sec_507 of the code to an organization exempt under sec_501 of the code without the transfer being a taxable_expenditure under sec_4945 thus y's transfer of assets by merger into z pursuant to sec_507 of the code will not be a taxable_expenditure under sec_4945 of the code under sec_1_507-3 of the regulations y will not be required to exercise any expenditure_responsibility under sec_4945 of the code because y will transfer alt of its assets to z under sec_4940 of the code x's and y's transfers of their assets to z will not subject x y or z to tax under that section -10- we note as a fact that this rulings request is not a notice of intent under sec_507 of the code by y to voluntarily terminate y's status as a private_foundation under sec_509 of the code because y's transfer of its assets by merger into z will be for exempt purposes to an organization exempt from federal_income_tax under sec_501 of the code y's transfer will not adversely affect the exemptions under sec_501 of y or z under sec_1_507-3 of the regulations y's transfer of all of its assets by merger into z pursuant private_foundation_status under to sec_507 of the code will not be a termination of y's or z's sec_509 of the code accordingly we rule x's transfer of all its assets to z will be a transfer pursuant to sec_507 of the code x's transfer of all of its assets to z will not be a termination of x's private_foundation_status and will not cause imposition of the termination_tax under sec_507 of the code ‘if x terminates its private_foundation_status at least one day after the transfer of all of its assets to z and so notifies the internal_revenue_service pursuant to sec_507 of the code x will be liable for the tax imposed by sec_507 of the code but because x will have no assets upon such termination no termination_tax will be due under sec_507 of the code x's transfer of all of its assets to z will be treated as a transfer of all of x's assets to a private_foundation which is controlled by the same persons who control z pursuant to sec_1_507-3 of the regulations x's transfer will not subject x to the taxes imposed by sec_4941 through after x's transfer z will be treated as though z were x for purposes of chapter of of the code the code as the transferee of x's assets z will receive the benefit of any transitional rules and saving sec_5 provisions applicable to x under sec_1_507-3 of the regulations x's transfer will not be net_investment_income for x or z and will not result in tax on x or z under sec_4940 of the code x's transfer of assets to z will not constitute an act of self-dealing under sec_4941 of the code to any of the interested parties or the foundation managers and no tax under sec_4941 of the code will be incurred as a result of the transfer an z's distributable_amount under sec_4942 of the code for its tax_year in which x's transfer occurs will be increased by x's distributable_amount for its tax_year in which x's transfer occurs as if z had held the assets of x for z's entire tax_year all qualifying distributions made by z during the entire tax_year and all qualifying distributions made by x during its tax_year in which x's transfer occurs will be treated as if made by z thus x's distribution_requirements under sec_4942 of the code in the tax_year of x's transfer may be fulfilled by z after the transfer by x x will not be required to comply with the recordkeeping requirements of sec_4942 of the code because x will have no assets x's transfer will not constitute an investment and therefore x will not be subject_to the tax on jeopardy investments imposed by sec_4944 of the code the transfer by x of all of its assets to z will not be a taxable_expenditure under sec_4945 of the code and x will not be required to exercise expenditure_responsibility under sec_4945 of the code with respect to the transfer we note as a fact that this ruling_request is not x's notice of intent under sec_507 of the code to voluntarily terminate x's private_foundation_status the transfers by x and y will not affect the status of x or z under sec_501 and sec_509 of the code y's transfer of all of its assets to z pursuant to the merger will be a transfer pursuant to section b of the code y's transfer of all of its assets to z will not be a termination of y's private_foundation_status and will not cause imposition of the termination_tax under sec_507 of the code if terminates its private_foundation_status at least one day after the transfer of all of its assets and so notifies the internal_revenue_service pursuant to sec_507 of the code y will be liable for the tax imposed by sec_507 of the code but because y will have no assets after such termination no termination_tax will be due under sec_507 of the code y's transfer of all of its assets to z pursuant to its merger into z will be treated as a transfer of a private_foundation which is controlled by the same persons who control y the transfer will not subject y to the taxes after the transfer z will be treated as though z further z will succeed to the aggregate tax benefits all of y's assets to pursuant to sec_1_507-3 of the regulations imposed by sec_4941 through of the code were y for purposes of chapter of the code of y including y's excess_distribution carryover if any under sec_4942 of the code z's distributable_amount under sec_4942 of the code for its tax_year in which the y's transfer occurs will be increased by y's distributable_amount for its tax_year in which y's transfer occurs as if all qualifying distributions made by z during its entire tax_year and all qualifying distributions made by y during its tax_year in which y's transfer occurs will be treated as if made by z thus y’s distribution_requirements under sec_4942 of the code in the tax_year of y's transfer may be satisfied by z z had held the assets of y for z's entire tax_year as transferee of y's assets by merger z will receive the benefit of any transitional rules and savings provisions applicable to y under sec_1_507-3 of the regulations ‘y's transfer of assets by merger into z will not be net_investment_income for y or z and the transfers will not result in tax on y or z under sec_4940 of the code y's merger into z will not be an act of self-dealing under sec_4941 of the code to any of the interested parties or private_foundation managers and no tax under sec_4941 of the code will be incurred as a result of the transfer y's transfer by merger of its assets into z will not be investments by y and y will not be subject to the tax on jeopardy investments under sec_4944 of the code ‘y's transfer by merger of all of its assets into z will not be a taxable_expenditure under sec_4945 of the code and y will not be required to exercise expenditure_responsibility under sec_4945 with respect to the transfer of all its assets to z by merger the merger of y into z will not be treated as a sale_or_exchange of property subject_to tax under sec_4940 of the code we note as a fact that this ruling_request is not y's notice of intent under sec_507 of the code to voluntarily terminate y's private_foundation_status the merger of y into z will not affect the status of y or z under sec_501 and sec_509 of the code because this ruling letter could help to resolve any questions please keep it in your permanent records this ruling letter 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 sincerely signed terrell m berkovsky terrell m berkovsky manager exempt_organizations technical group


dnybu sec_887 os internal_revenue_service department of the treasury washington dc 19go8 ty contact person telephone number in reference to date jan dear sir or madam this is in reference to your letter of date requesting advance approval of revisions made to the guidelines and procedures of b we originally approved your grant procedures in a ruling letter dated date your proposed changes to b’s guidelines and procedures are when fully c guidelines each year thereafter up to ten scholarships for post high c’s guidelines encompass two changes a commencing with the fall semester of the year c’s guidelines have been incorporated as part f of b’s as follows you intend to grant up school study pursuant to to an additional ten scholarships may be awarded implemented there may be up to forty scholarships being funded annually guidelines and procedures from the general scholarship fund guidelines i applicants must have attended d for three years academically ranked in the top of his her eighth grade class selection is based solely on academic standing without regard to financial need the members of your board_of trustees nor any of your staff have any family members who attend d directly to the student rather than to the school that the student attends sent directly to the student upon receipt from the student of the student’s fee bill required in the instruction letter to the student experienced a great deal of difficulty in attempting to pay schools directly and your board believes this change is necessary a check in the amount of the grant will be class schedule transcripts and other items is one of the middle schools in ii applicants must have been you intend to grant awards you have none of b e d nc pov at us to facilitate the awards being funded on a timely basis maximum award has been increased from dollar_figure per academic semester to dollar_figure per academic semester which represents an increase from dollar_figure over a four year period to dollar_figure over a you have d ropped the special scholarship four year period program for emt paramedic students d c the you will receive periodic reports concerning the progress of you will investigate any possible misuse scholarship recipients of funds and seek recovery_of any misused funds sec_4945 of the code provides for the imposition of taxes on each taxable_expenditure of a private_foundation sec_4945 of the code provides that the term taxable_expenditure private_foundation as or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 means any amount_paid or incurred by a a grant to an individual for travel study sec_4945 of the code provides that section shall not apply to an individual grant awarded on an d objective and nondiscriminatory basis pursuant to approved in advance by the secretary if is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 a educational_institution described in sec_170 the code to be used for study at a procedure and is a ii of an it the information provided indicates that your revised scholarship program and the procedures under which it conducted will not differ materially from your original program approved in the letter dated date is therefore based upon the information submitted and assuming your revised program will be conducted as proposed with a view to providing objectivity and nondiscrimination in the awarding of scholarship grants we rule that your procedures for the awarding of scholarship grants comply with the requirements of sec_4945 accordance with these procedures will not constitute taxable_expenditures within the meaning of sec_4945 of the code provided for in sec_117 such grants are actually used for qualified_tuition_and_related_expenses within the meaning of sec_117 and as such are eligible for the exclusion from income the code to the extent that thus expenditures made in of the code of the code of no material changes in the facts upon which it this ruling is conditioned on the understanding that there is based is further conditioned on the premise that no grants will be will be it awarded to creators officers directors trustees or members of the selection committee or for a purpose inconsistent with the purposes described in sec_170 b of the code please note that this ruling is only applicable to grants awarded under your program as outlined above before you enter into any other scholarship programs you should submit a request for advance approval of that program we are informing your key district_director of this action please keep a copy of this ruling with your organization’s permanent records this ruling is directed only to the organization that requested it may not be used or cited as precedent sec_6110 of the code provides that it sincerely yours bevortot v beck gerald v chief exempt_organizations sack technical branch


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 intl b06 plr-104406-15 date date legend taxpayer accounting firm law firm corporation shareholder a shareholder b shareholder c shareholder d shareholder e shareholder f husband wife individual year date date date ----------------------- ------------------------- ------------------------------------------------- ------------------------------------------- ---------------------- ---------------------------------- --------------------------------- ----------------------------------- ------------------------- ------------------------ --------------------------- ----------------------------- ------------------------ ------- --------------------------- ---------------------- ---------------------- dear ----- --------------- this responds to a letter dated date supplemented by a letter dated date submitted by accounting firm requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc for taxpayer’s first taxable_year the rulings contained in this letter are based upon information and representations submitted by taxpayer and accounting firm and accompanied by affidavits and penalty of perjury statements executed by appropriate parties this office has not verified any plr-104406-15 of the materials submitted in support of the request for rulings it is subject_to verification on examination facts taxpayer is a domestic_corporation and was formed on date for the sole purpose of qualifying and operating as an interest charge domestic_international_sales_corporation ic-disc taxpayer operates under a commission arrangement with corporation taxpayer is owned by shareholders a and b shareholder a is a limited_liability_company and is owned by shareholders c d e and f shareholder c is a_trust for the benefit of husband and shareholder d is a_trust for the benefit of wife shareholders e and f are the children of husband and wife corporation is owned by shareholders b c and d in year law firm and accounting firm advised shareholders b c and d of the benefits associated with operating an ic-disc after deciding to form taxpayer as an ic-disc corporation retained law firm to organize taxpayer as an ic-disc and prepare the required incorporation documents individual was corporation’s cfo and was responsible for filing returns on behalf of taxpayer taxpayer relied on accounting firm law firm and individual to organize and to prepare all documents and filings needed to establish taxpayer as an ic-disc due to a miscommunication individual believed that law firm or accounting firm would file form 4876-a on taxpayer’s behalf however law firm and accounting firm believed that individual filed form 4876-a on behalf of taxpayer as a result a form 4876-a for taxpayer was not filed believing all the requirements to conduct business and be treated as an ic-disc for its first taxable_year were satisfied taxpayer began operating as an ic-disc on date on date which was before taxpayer’s tax_return for its first taxable_year was due accounting firm discovered that a form 4876-a for taxpayer had not been filed upon discovery of this error and in order to operate as an ic-disc beginning on date taxpayer requested a ruling granting an extension of time to file form 4876-a for its first taxable_year law and analysis sec_992 of the internal_revenue_code the code provides that an election by a corporation to be treated as a disc1 shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the as used in this letter the terms ic-disc and disc have the same meaning plr-104406-15 beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate sec_992 of the code provides that such election shall be made in such manner as the secretary shall prescribe and shall be valid only if all persons who are shareholders in such corporation on such first day of the first taxable_year for which such election is effective consent to such election temp sec_1_921-1t provides in part that a corporation electing ic- disc status must file form 4876-a and that a corporation electing to be treated as an ic-disc for its first taxable_year shall make its election within days after the beginning of that year sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion 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 under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that a regulatory election is an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin for this purpose an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government based on the facts and representations submitted with taxpayer’s ruling_request 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 file form 4876-a such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year the granting of an extension in this ruling letter is not a determination that taxpayer is otherwise eligible to make the election or to claim ic-disc status or benefits see sec_301_9100-1 in addition we express no opinion as to whether the commissions or portions thereof paid to taxpayer by corporation may constitute taxable_gifts see eg revrul_81_54 1981_1_cb_476 taxpayer should attach a copy of this ruling letter to its federal_income_tax return for the taxable years to which this letter applies plr-104406-15 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 pursuant to a power_of_attorney on file in this office copies of this ruling letter are being furnished to your authorized representatives sincerely _____________________________________ christopher j bello chief branch office of associate chief_counsel international enclosures copy of this letter copy for sec_6110 purposes cc