department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number se t eo ra t tax_exempt_and_government_entities_division release number release date yate date jil code legend transferor foundation recipient foundation recipient foundation ii recipient foundation iii recipient foundation iv l o w_i o d m i m i o i x i dear sir or madam we have considered your ruling_request dated date concerning the federal income and excise_tax consequences under sec_507 sec_4941 sec_4942 sec_4944 and sec_4945 of the internal_revenue_code_of_1986 as amended hereafter code related to a proposed transfer of assets in the manner and for the purposes described below facts transferor foundation is a tax-exempt_organization recognized as a private_foundation under sec_501 and sec_509 of the code transferor foundation is managed by eight individuals a b c d e f g and h individuals b c d and e are all children of a since its inception transferor foundation’s mission has been to improve the city within which it is located and the quality of life of its citizens because of a’s advanced age a anticipates that her children if they succeed to the management of transferor foundation would have diverse charitable interests and objectives because of the differences in their geographic residences and backgrounds as such a’s children have formed recipient foundation recipient foundation ii recipient foundation iil and recipient foundation iv hereafter referred to as recipient foundations to further their separate charitable interests and goals recipient foundations il ill and iv are all tax-exempt organizations recognized as private_foundations under sec_501 and sec_509 of the code recipient foundation is managed by b is managed by c and two other directors who are not members of a’s family recipient foundation ii is managed by b and two other directors who are not members of a's family recipient foundation iii d and e who are all members of a's family recipient foundation iv is managed by e and d who are members of a's family and a third director f who is not a member of a’s family - - representations have been made that transferor foundation has approved a plan with recipient foundations whereby the assets of transferor foundation will be distributed percent to each of the recipient foundations to enable the children of a who manage the recipient foundations to pursue their own separate charitable goals through the charities they respectively manage representations have been further made that subsequent to the transfer transferor foundation and the recipient foundations will continue to operate and maintain their tax-exempt status as private_foundations under sec_501 and sec_509 of the code furthermore transferor foundation represents that it will ensure expenditure_responsibility you have requested the following rulings the distribution by transferor foundation of approximately percent of its assets to each of the recipient foundations will be a sufficient disposition of assets to one or more private_foundations as described in sec_1_507-3 of the regulations made pursuant to an adjustment or reorganization and will be a transfer of assets by a private_foundation to other private_foundations described in sec_507 of the code the distribution by transferor foundation of approximately percent of its assets to each of the recipient foundations will not result in the termination of transferor foundation’s private_foundation_status and will not result in transferor foundation being subject_to the tax imposed by sec_507 of the code in the year of the distributions pursuant to sec_1_507-3 of the regulations each recipient foundation will not be treated as a newly created organization pursuant to sec_1_507-3 of the regulations each of the recipient foundations will succeed to the aggregate tax benefits of transferor foundation in proportion to the net fair_market_value of the assets distributed to them pursuant to sec_1_507-3 of the regulations each of the recipient foundations will be treated as having received the distributed assets subject_to the proportionate amount of any liability transferor foundation may have incurred under chapter of the code to the extent not satisfied by transferor foundation the provisions of sec_1_507-3 through g of the regulations will apply to each of the recipient foundations with respect to the assets distributed to them from transferor foundation assuming each of the recipient foundations and transferor foundation are effectively controlled within the meaning of sec_1_482-1 of the regulations directly or indirectly by the same persons and because transferor foundation will have transferred approximately percent of its assets to each of the recipient foundations each recipient foundation will be treated under sec_1_507-3 of the regulations as if they were transferor foundation for purposes of chapter of the code and sec_507 through of the code each recipient foundation will be treated as if they were transferor foundation in the proportion which the fair_market_value of the assets less encumbrances transferred to the respective recipient foundation bears to the fair_market_value of the assets less encumbrances of transferor foundation immediately before the transfer following the distributions transferor foundation will be liable for the tax imposed by sec_4940 of the code on assets held until the date of the distributions after the distributions have occurred each of the recipient foundations and transferor foundation will be liable for the tax imposed under sec_4940 with respect to their respective shares of assets as of the date of the distributions the distribution of a portion of the assets of transferor foundation to a recipient foundation will not constitute an act of self-dealing under sec_4941 of the code pursuant to sec_1_507-3 of the regulations and revrul_78_387 each recipient foundation may reduce the amount of the recipient foundation's required_distribution under sec_4942 of the code by the amount of transferor foundation’s excess qualifying_distribution carryover for prior years in proportion to the net fair_market_value of the assets distributed to it the distribution of a portion of the assets of transferor foundation to a recipient foundation will not constitute a jeopardizing investment within the meaning of sec_4944 of the code the distribution of a portion of the assets of transferor foundation to a recipient foundation will constitute a grant as described in sec_4945 of the code and thus will not constitute a taxable_expenditure within the meaning of sec_4945 provided that transferor foundation exercises expenditures responsibility over the distributed assets as set forth in sec_53_4945-5 of the regulations for the year in which the proposed distribution of assets takes place and for the two it is reasonably apparent to the transferor foundation that before succeeding taxable years only if the end of such second succeeding taxable_year neither the principal the income from the grant funds nor any equipment purchased with the grant funds has been used for any purpose which would result in liability for tax under sec_4945 the transferor foundation may then allow such reports to be discontinued after the second succeeding taxable_year otherwise the transferor foundation must continue to exercise expenditure_responsibility until the grant funds are fully expended or the grant is terminated the distribution by transferor foundation of approximately percent of its assets to each of the recipient foundations will neither affect the status of transferor foundation as an organization described in sec_501 of the code nor will it affect the status of any of the recipient foundations as organizations described in sec_501 or as private_foundations described in sec_509 law sec_507 of the code states that except as provided in sec_507 an exempt it commits acts or failures to act giving rise to tax under organization which is a private_foundation can terminate its private_foundation_status only if the service of its intent to terminate or if chapter and if it pays the termination_tax imposed by sec_507 or has the tax abated it notifies sec_507 of the code provides that in the case of a transfer of assets of any private_foundation to another private_foundation pursuant to any liquidation merger redemption recapitalization or the adjustment organization or reorganization the transferee foundation shall not be treated as a newly created organization sec_507 of the code imposes an excise_tax on each terminating private_foundation equal to the lower_of the aggregate tax_benefit resulting from such termination or the value of its net assets chapter of the code imposes excise_taxes on private_foundations for net_investment_income under sec_4940 acts of self-dealing under sec_4941 undistributed_income under sec_4942 excess_business_holdings under sec_4943 jeopardy investments under sec_4944 and taxable_expenditures under sec_4945 a sec_4940 of the code provides for the imposition of a tax on the net_investment_income of private_foundations sec_4941 of the code provides for the imposition of tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 of the code states that the term self dealing means any direct or indirect transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation sec_4944 of the code imposes a tax on a private_foundation if manner as to jeopardize the carrying out of any of its exempt purposes it invests any amount in a sec_4945 of the code imposes a tax on the taxable_expenditures of a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an organization unless such organization is described in paragraph or of sec_509 or is an exempt_operating_foundation or the private_foundation exercises expenditure_responsibility with respect to such grant sec_4945 of the code provides that the term taxable_expenditure does not include amounts paid_or_incurred by a private_foundation as a grant to another organization for purposes specified in sec_170 sec_4945 of the code provides that the expenditure_responsibility referred to in subsection d means that the private_foundation is responsible to exert all reasonable efforts and to establish adequate procedures to see that the grant is spent solely for the purpose for which made to obtain full and complete reports from the grantee on how the funds are spent and to make full and detailed reports with respect to such expenditures to the secretary sec_4946 of the code provides in part that the term disqualified_person shall not include any organization which is described in sec_501 other than an organization described in sec_509 sec_1_482-1a of the federal_income_tax regulations hereafter regulations’ defines control for purposes of sec_482 of the code as any kind of control direct or indirect whether legally enforceable or not and however exercisable or exercised sec_1_507-1 of the regulations provides that a transfer of all or part of a private foundation's assets to one or more private_foundations pursuant to a transfer described in sec_507 of the code and sec_1_507-3 such transferor foundation will not be deemed to have terminated its private_foundation_status under sec_507 sec_1_507-1 of the regulations provides that neither a transfer of all the assets ofa private_foundation nor a significant disposition of assets by a private_foundation shall be deemed to result in a termination of the transferor private_foundation under sec_507 of the code unless the transferor private_foundation elects to terminate pursuant to sec_507 or sec_507 sec_1_507-3 of the regulations provides that for purposes of sec_507 of the code the terms other adjustment organization or reorganization shall include any partial_liquidation or any other significant disposition of assets to one or more private_foundations other than transfers for full and adequate_consideration or distributions out of current income sec_1_507-3 of the regulations provides that the term significant disposition of assets to one or more private_foundations shall include any disposition for a taxable_year where the aggregate of the dispositions to one or more private_foundations for the taxable_year is twenty-five percent or more of the fair_market_value of the net assets of the foundation at the beginning of the taxable_year sec_1_507-3 of the regulations provides that in the case of a significant disposition of assets to one or more private_foundations within the meaning of paragraph c of this section the transferee organization shall not be treated as a newly created organization a transferee organization to which this paragraph applies shall be treated as possessing those attributes and characteristics of the transferor organization sec_1_507-3 of the regulations provides that a transferee organization to which sec_507 of the code applies shall succeed to the aggregate tax_benefit of the transferor organization in an amount equal to the amount of the aggregate tax_benefit multiplied by a fraction of the numerator of which is the fair_market_value of the assets less encumbrances transferred to such transferee and the denominator of which is the fair market of the assets of the transferor less encumbrances immediately before the transfer fair_market_value shall be determined as of the time of the transfer sec_1_507-3 of the regulations provides that except as provided in subparagraph of sec_1_507-3 a private_foundation is required to meet the distribution_requirements of sec_4942 of the code for any taxable_year in which it makes a sec_507 transfer of all or part of its net assets to another private_foundation sec_1_507-3 of the regulations provides that the provisions enumerated in subparagraphs a through g of this subdivision shall apply to the transferee private_foundation with respect to the assets transferred to the same extent and in the same manner that they would have applied to the transferor private_foundation had the transfer described in sec_507 not been effected sec_1_507-3 of the regulations provides that if a private_foundation transfers all or part of its net assets to one or more private_foundations that are effectively controlled within the meaning of sec_1_482-1 directly or indirectly by the same persons who effectively control the transferor private_foundation for purposes of chapter and sections of the code such a it were the transferor in the proportion which the fair transferee private_foundation shall be treated as if market_value of the assets less encumbrances transferred to the transferee foundation bears to the fair_market_value of the assets less encumbrances of the transferor foundation immediately before the transfer sec_1_507-3 of the regulations provides that unless a private_foundation gives notice pursuant to sec_507 of the code a transfer of assets described in sec_507 will not constitute a termination of the transferor's private_foundation_status under sec_507 sec_1_507-4 of the regulations provides that private_foundations that make transfers described in sec_507 or of the code are not subject_to the termination_tax imposed under sec_507 with respect to such transfers sec_53_4945-5 of the foundation and similar excise_tax regulations hereafter foundation regulations’ provides that if a private_foundation makes a grant described in sec_4945 of the code to a private_foundation which is exempt from taxation under sec_501 for endowment for the purchase of capital equipment or for other capital purposes the grantor foundation shall require reports from the grantee on the use of the principal and the income if any from the grant funds the grantee shall make such reports annually for its taxable_year in which the grant was made it is reasonably apparent to the grantor that and the immediately succeeding taxable years only if before the end of such second succeeding taxable_year neither the principal the income from the grant funds nor the equipment purchased with the grant funds has been used for any purpose which would result in liability for tax under sec_4945 the grantor may then allow such reports to be discontinued sec_53_4946-1 of the foundation regulations provides that for purposes of sec_4941 of the code the term disqualified_person does not include any organization described in sec_501 other than an organization described in sec_509 revrul_78_387 1978_2_cb_270 holds that when a transferee foundation is treated as the transferor under sec_1_507-3 of the regulations the transferee is entitled to reduce its distributable_amount under sec_4942 of the code by the amount of the transferor's excess qualifying_distribution carryover analysis ruling the issue of whether transferor foundation’s disposition to recipient foundations is a significant disposition of assets and thus not subject_to the termination_tax under sec_507 of the code is governed by sec_507 a sec_507 transfer includes a transfer by a private_foundation of all or part of its assets to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization see sec_507 for purposes of sec_507 the terms other adjustment organization or reorganization shall include any partial_liquidation or any other significant dispositions see sec_4 c of the regulations the term ‘significant dispositions means a distribution where the aggregate value transferred is percent or more of the fair_market_value of the net assets of the foundation see sec_1_507-3 here the recipient foundations and transferor foundation are all private_foundations through the proposed transaction transferor foundation intends to transfer to each of the four recipient foundations approximately percent of the fair_market_value of its net assets as the aggregate amount expected to be transferred exceeds twenty-five percent the distribution by transferor foundation qualifies as a transfer under sec_507 ruling regarding the termination of transferor foundation's private_foundation_status sec_507 of the code provides that an exempt_organization which is a private_foundation can terminate its private it commits acts or failures to foundation status only if it notifies the service of its intent to terminate or if it pays the termination_tax imposed by sec_507 or act giving rise to tax under chapter and if has the tax abated as transferor foundation has represented that it has neither notified the service of any intent to terminate its private_foundation_status nor has it committed acts or failures to act giving rise to a tax under chapter its disposition of assets under sec_507 does not terminate its private_foundation_status and does not result in a termination_tax imposed by sec_507 ruling under sec_507 of the code and sec_1_507-3 of the regulations a transfer of assets by any private_foundation to another private_foundation pursuant to a sec_507 disposition will not result in the transferee foundation being treated as a newly created organization because the transferor foundation and recipient foundations are all private_foundations and the transfer qualifies under sec_507 recipient foundations will not be treated as newly created organizations ruling for recipient foundations to succeed to the aggregate tax benefits of transferor foundation in the property transferred sec_1_507-3 of the regulations require that the transferees are all effectively controlled within the meaning of sec_1_482-1 of the regulations now effectively retitled sec_1_482-1a directly or indirectly by the same person or persons who effectively control the transferor organization it is assumed for purposes of this ruling that recipient foundations are all effectively controlled under sec_1_482-1a by the same persons who effectively control transferor foundation therefore after the transfer of assets by transferor foundation to the recipient foundations the recipient foundations will succeed to the aggregate tax benefits of transferor foundation in proportion to the net fair_market_value of the assets distributed under sec_1_507-3 ruling under sec_1_507-3 of the regulations the recipient of a transfer under sec_507 of the code will be treated as receiving the transferred assets subject_to any outstanding tax_liability incurred by the transferor under chapter in proportion to the assets received and to the extent the liability had not been previously satisfied here recipient foundations are the recipients of a transfer under sec_507 therefore recipient foundations shall be treated as receiving the assets of transferor foundation subject_to any outstanding liability not previously satisfied by transferor foundation in proportion to the assets received ruling pursuant to sec_1_507-3 through g of the regulations each transferee of a sec_507 of the code transfer will succeed to the property attributes enumerated under subsections a through g therein with respect to the assets transferred and to the same extent and in the same manner that would have applied to the transferor had the transfer not occurred as enumerated under sec_1 a ii a of the regulations and as referenced to sec_4940 of the code transferees will succeed to the basis of the property transferred by transferor to the same extent and in the same manner that would have applied to the transferor had the transfer not occurred as the transfer of assets from transferor foundation to recipient foundations qualifies under sec_507 recipient foundations succeed to the basis under sec_4940 of the property transferred to the same extend as if the property was still held by transferor foundation under sec_1 a ii b of the regulations and as referenced to sec_4942 of the code transferees will succeed to the attributes related to the transferred property with respect to distributions of income to the same extent and in the same manner that would have applied to the transferor had the transfer not occurred as the transfer of assets from transferor foundation to recipient foundations qualifies as a sec_507 transfer recipient foundations succeed to the attributes related to the transferred property with respect to distributions of income as if the property was still held by transferor foundation under sec_1 a ii c of the regulations and as referenced to sec_101 of the tax reform act of as amended by sec_1301 and of the tax reform act of with respect to the provisions of sec_4941 of the code a qualifying transfer under sec_507 does not constitute a self-dealing transaction subject_to tax under sec_4941 because the transfer is not between disqualified persons under sec_53 a of the foundation regulations only for purposes of sec_4941 the term disqualified persons shall not include any organization described in sec_501 other than an organization described in sec_509 private_foundations are described under sec_501 and are therefore not disqualified persons for sec_4941 purpose therefore because transferor foundation and recipient foundations are private_foundations ina qualifying b transfer the transfer does not constitute a self-dealing transaction subject_to tax under sec_4941 under sec_1 a ii d of the regulations and as referenced to sec_101 of the tax reform act of with respect to the provisions of sec_4942 of the code transferees will succeed to the attributes related to the transferred property under sec_4942 to the same extent and in the same manner that would have applied to the transferor had the transfer not occurred provided that the transferor qualified for the application of this section immediately before the transfer and at least eight-five percent of the fair_market_value of the net assets of the transferee immediately_after_the_transfer were received pursuant to the transfer representations have been made by transferor foundation to the affect of its qualification for the application of this section and representations have been made by recipient foundations that at least eight-five percent of their net assets were received via the transfer therefore recipient foundations will succeed to the attributes related to the transferred property under sec_4942 to the same extent and in the same manner that would have applied to transferor foundation had the transfer not occurred under sec_1 a ii e of the regulations and as referenced to sec_101 through e of the tax reform act of with respect to the provisions of sec_4942 of the code the distribution from one private_foundation to another under a sec_507 transaction will be deemed a qualifying_distribution pursuant to sec_4942 as the transference of assets between transferor foundation and recipient foundations qualifies as a sec_507 transaction the transaction is a deemed qualifying_distribution under sec_4942 under sec_1 a ii f of the regulations and as referenced to sec_101 of the tax reform act of with respect to the provisions of sec_4945 of the code the distribution from one private_foundation to another under a sec_507 transaction will not be deemed a taxable_expenditure pursuant to sec_4945 as the transference of assets between transferor foundation and recipient foundations qualifies as a sec_507 transaction the transaction is not a taxable_expenditure under sec_4945 with sec_4945 applying to the recipient foundations with respect to the assets transferred to the same extent and in the same manner as applied to the transferor foundation under sec_1 a ii g of the regulations and as referenced to sec_101 of the tax reform act of with respect to the provisions of sec_508 of the code the distribution from one private_foundation to another under a sec_507 transference will subject the transferee to the same requirements of sec_508 therefore recipient foundations are subject_to the same requirements of sec_508 as it would apply to transferor foundation as if the transfer had not occurred ruling the issue of whether recipient foundations will also be treated as if they were transferor foundation with respect to chapter and sec_507 through of the code in proportion to the assets each foundation receives is governed by sec_1_507-3 of the regulations under sec_1_507-3 if a private_foundation transfers all or part of its net assets to one or more private_foundations that are effectively controlled within the meaning of sec_1_482-1 now effectively retitled sec_1_482-1a directly or indirectly by the same persons who effectively control the transferor private_foundation for purposes of chapter and sections sucha transferee private_foundation shall be treated as if market_value of the assets less encumbrances transferred bears to the fair_market_value of the assets less encumbrances of the transferor immediately before the transfer assuming each recipient foundation is effectively controlled by transferor foundation because transferor foundation made a sec_507 transfer of percent of its net assets to each recipient foundation each recipient foundation will be treated as if they were transferor foundation for purposes of chapter and sec_507 through in proportion to the assets transferred it were the transferor in proportion to which the fair ruling the degree of tax_liability imposed upon recipient foundations and transferor foundation in relation to the transferred assets held by each after the transference is governed under sec_1 a of the regulations and sec_4940 of the code because the recipient foundations will be treated as if they were transferor foundation in respect to chapter and under sec_1 a i described above the recipient foundations will be liable for the tax imposed under sec_4940 in proportion to their share of assets received as of the date of the sec_507 transfer ruling whether the distribution of a portion of the assets of transferor foundation to recipient foundations in a sec_507 of the code transaction will constitute an act of self-dealing is governed under sec_1_507-3 of the regulations and sec_4941 the excise_tax on self-dealing is imposed where a private_foundation and a disqualified_person engage in prohibited_transactions such as the sale_or_exchange of property under sec_4946 and sec_53_4946-1 of the foundation regulations a disqualified_person does not include an organization under sec_501 therefore the transfer of assets by transferor foundation to the recipient foundations is not an act of self-dealing because each foundation has received a determination_letter stating that it is a tax-exempt_organization under sec_501 ruling under sec_1_507-3 of the regulations and revrul_78_387 1978_2_cb_270 a transferee in a sec_507 of the code transaction may reduce their minimum distribution_requirements under sec_4942 by any carryover of excess qualifying distributions of the transferor to the extent that the transferee is treated as transferor under sec_1_507-3 because the transfer of assets herein from transferor foundation to recipient foundations qualifies as a sec_507 transaction and recipient foundations are treated as transferor foundation under sec_1 a in proportion to the assets transferred each recipient foundation may reduce their minimum distribution_requirements under sec_4942 by any carryover of excess qualifying distributions of the transferor to the extent of the assets received ruling sec_4944 of the code imposes a tax on investments by private_foundations which jeopardize their charitable purposes under sec_4944 a transfer pursuant to sec_507 is not considered an investment for purposes of sec_4944 if the transfer of assets was made for the purpose of accomplishing charitable purpose because transferor foundation will distribute approximately percent of its assets to each of the four recipient foundations with the goal of enabling each recipient foundation to pursue separate charitable goals the transfer will not result in the imposition of tax for a jeopardy investment under sec_4944 ruling the transfer of assets by transferor foundation to the recipient foundations does not result in the imposition of tax for a taxable_expenditure under sec_4945 of the code because transferor foundation will exercise its capital endowment grant expenditure_responsibility required by sec_4945 and sec_53_4945-5 of the foundation regulations ruling the distribution by transferor foundation of approximately percent of its assets to each of the recipient foundations will not affect the status of transferor foundation and the recipient foundations as tax-exempt organizations described in sec_501 of the code and as private_foundations described in sec_509 the tax-exempt status of these foundations is not adversely affected because the transfer qualifies under sec_507 and is made to a sec_501 organization accordingly based on the information submitted in your ruling_request we rule as follows the distribution by transferor foundation of approximately percent of its assets to each of the recipient foundations will be a sufficient disposition of assets to one or more private_foundations as described in sec_1_507-3 of the regulations made pursuant to an adjustment or reorganization and will be a transfer of assets by a private_foundation to other private_foundations described in sec_507 of the code the distribution by transferor foundation of approximately percent of its assets to each of the recipient foundations will not result in the termination of transferor foundation’s private_foundation_status and will not result in transferor foundation being subject_to the tax imposed by sec_507 of the code in the year of the distributions pursuant to sec_1_507-3 of the regulations each recipient foundation will not be treated as a newly created organization pursuant to sec_1_507-3 of the regulations each of the recipient foundations will succeed to the aggregate tax benefits of transferor foundation in proportion to the net fair_market_value of the assets distributed to them pursuant to sec_1_507-3 of the regulations each of the recipient foundations will be treated as having received the distributed assets subject_to the proportionate amount of any liability transferor foundation may have incurred under chapter of the code to the extent not satisfied by transferor foundation the provisions of sec_1_507-3 through g of the regulations will apply to each of the recipient foundations with respect to the assets distributed to them from transferor foundation assuming each of the recipient foundations and transferor foundation are effectively controlled within the meaning of sec_1_482-1 of the regulations directly or indirectly by the same persons and because transferor foundation will have transferred approximately percent of its assets to each of the recipient foundations each recipient foundation will be treated under sec_1_507-3 of the regulations as if they were transferor foundation for purposes of chapter of the code and sec_507 through of the code each recipient foundation will be treated as if they were transferor foundation in the proportion which the fair_market_value of the assets less encumbrances transferred to the respective recipient foundation bears to the fair_market_value of the assets less encumbrances of transferor foundation immediately before the transfer following the distributions transferor foundation will be liable for the tax imposed by sec_4940 of the code on assets held until the date of the distributions after the distributions have occurred each of the recipient foundations and transferor foundation will be liable for the tax imposed under sec_4940 with respect to their respective shares of assets as of the date of the distributions the distribution of a portion of the assets of transferor foundation to a recipient foundation will not constitute an act of self-dealing under sec_4941 of the code pursuant to sec_1_507-3 of the regulations and revrul_78_387 each recipient foundation may reduce the amount of the recipient foundation’s required_distribution under sec_4942 of the code by the amount of transferor foundation’s excess qualifying_distribution carryover for prior years in proportion to the net fair_market_value of the assets distributed to it the distribution of a portion of the assets of transferor foundation to a recipient foundation will not constitute a jeopardizing investment within the meaning of sec_4944 of the code the distribution of a portion of the assets of transferor foundation to a recipient foundation will constitute a grant as described in sec_4945 of the code and thus will not constitute a taxable_expenditure within the meaning of sec_4945 provided that transferor foundation exercises expenditures responsibility over the distributed assets as set forth in sec_53_4945-5 of the regulations for the year in which the proposed distribution of assets takes place and for the two it is reasonably apparent to the transferor foundation that before succeeding taxable years only if the end of such second succeeding taxable_year neither the principal the income from the grant funds nor any equipment purchased with the grant funds has been used for any purpose which would result in liability for tax under sec_4945 the transferor foundation may then allow such reports to be discontinued after the second succeeding taxable_year otherwise the transferor foundation must continue to exercise expenditure_responsibility until the grant funds are fully expended or the grant is terminated the distribution by transferor foundation of approximately percent of its assets to each of the recipient foundations will neither affect the status of transferor foundation as an organization described in sec_501 of the code nor will it affect the status of any of the recipient foundations as organizations described in sec_501 or as private_foundations described in sec_509 for purposes of this ruling we are presuming that recipient foundations are effectively controlled under sec_482 of the code all parts of this ruling that rely upon recipient foundations being effectively controlled will no longer apply should it be determined that recipient foundations are not all effectively controlled under sec_1_482-1a of the regulations by the same persons that effectively control’ transferor foundation this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for if you disagree with our proposed deletions you should public inspection is attached to notice follow the instructions in notice blank foundation this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolved questions concerning your federal_income_tax status this ruling should be kept in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely robert c harper jr manager exempt_organizations technical group enclosure notice


internal_revenue_service number release date index number ------------------------------------------ ------------------------------- ----------------------- ------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-155090-06 date february x a ---------------------- ---------------------- ------------------------------------------------------------------------------------------------------ ------------------------ ------------------------------------------------------------------------------------------------------ -------------------------- ------------------------------------------------- ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------ --------------------------------- trust state court this responds to a letter dated date and subsequent ------------------------------------------------------------------------------------------------------ -------------------------- d1 d2 d3 d4 dear --------------------- correspondence submitted on behalf of x by its authorized representative requesting a ruling as to whether x’s subchapter_s_election was terminated on d3 made an election to be treated as an s_corporation effective d2 x’s articles of incorporation provide that any shareholder wishing to sell or transfer their shares must first give notice to the corporation and provide the other shareholders the opportunity to purchase the shares before they are sold or transferred x’s articles of incorporation further provides that any sale or transfer of shares in violation of these requirements is null and void the information submitted states that x was incorporated in state on d1 x on d3 a attempted to transfer all of his shares in x to trust on d4 in plr-155090-06 connection with a pending civil suit for dissolution of x court entered an order holding that the attempted transfer of a’s shares in x to trust was null and void and that a remained the record and legal owner of all of the shares he attempted to transfer to trust sec_1362 of the internal_revenue_code provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1362 provides that an s election terminates whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation based solely on the facts and representations submitted because a's transfer of x shares to trust was void ab initio under state law as determined by court we conclude that x's s_corporation_election did not terminate on d3 accordingly as trust was never a shareholder of x x will be treated as continuing to be an s_corporation from d3 and thereafter provided x's s_corporation_election was valid and has not otherwise terminated under the provisions of sec_1362 x and all its current and prior shareholders must treat x as having been an s_corporation for the period from d3 to the present in addition x and its shareholders must treat a as having been the shareholder of the x shares which a attempted to transfer to trust and amend any prior tax returns that are inconsistent with this treatment except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s plr-155090-06 authorized representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------- ------------------------------ --------------------- -------------------------------------- ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number --------------------- refer reply to cc corp b05 plr-126403-11 date date ty ------- ty ------- legend distributing --------------------- ------------------------ ------------------------------- controlled sub1 sub2 sub3 sub4 sub5 ------------------------- ------------------------ ------------------------------- ------------------------ ----------------------- -------------------------------- ---------------------------------------------------- ----------------------- -------------------------------- ---------------------------- -------------------------------- ---------------------- ---------------------- -------------------------------- ------------------------------------------ -------------------------------- sub6 ----------------------------- plr-126403-11 -------------------------------- sub7 sub8 fsub1 fsub2 fsub3 ----------------------------- ---------------------------------------------------------------------------------------------- --------------------------------------- ------------------------------------------------------------- ------------------------------- ------------------------------------ ---------------------------------------------------------------------------------------------- ---------------------------- -------------------------- ---------------------------------------------------------------------------------------------- ---------------------------- -------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------- partnership --------------------------------- ---------------------------------------------------------------------------------------------- --------------------------------------- a b c d e f g h i j ------ ---- ---- -- ---- -- ---- ----------------- --------------- ------ plr-126403-11 k l m n o p q ----------------- --------------- -------------- --------------- ---- ------ -------------------- business a ---------------------------------------- business b ------------------------------- business c ---------------------------------------------------------------- dear --------------- this letter is in response to your date request for rulings as to the us federal_income_tax consequences of certain steps of a proposed series of transactions the information submitted in that request and in subsequent correspondence is summarized below the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover no information provided by the taxpayer has been reviewed and no determination has been made regarding whether the distribution described below i satisfies the business_purpose requirement of sec_1_355-2 ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 and iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing plr-126403-11 corporation or the controlled_corporation see sec_355 and sec_1_355-7 facts the following describes the facts immediately before the proposed transaction defined below distributing is the common parent of an affiliated_group_of_corporations that file a u s consolidated federal_income_tax return distributing owns of controlled and sub1 and prior to the proposed transaction will own a of sub2 and b of sub3 sub2 owns of sub4 sub3 owns of sub5 and fsub1 sub5 owns of sub6 and c of sub7 sub6 owns the remaining d of sub7 sub7 and sub5 own e and f of partnership respectively fsub1 owns of fsub2 fsub2 owns g of fsub3 distributing has authorized capital of h shares consisting of i i shares of class a common_stock par_value dollar_figurej per share the distributing class a stock ii k shares of class b common_stock par_value dollar_figurej per share the distributing class b stock and iii l shares of preferred_stock par_value dollar_figurej per share distributing preferred_stock at the time of the distribution defined below it is anticipated that distributing will have issued and outstanding i m shares of distributing class a stock ii n shares of distributing class b stock and iii shares or distributing preferred_stock controlled was formed in anticipation of the proposed transaction immediately prior to the contribution defined below controlled held only nominal assets prior to the date of the request_for_ruling distributing contributed its interest in sub2 to controlled in exchange for all of the stock of controlled prior to the distribution controlled will have authorized capital of h shares consisting of i i shares of class a common_stock par_value dollar_figurej per share the controlled class a stock ii k shares of class b common_stock par_value dollar_figurej per share the controlled class b stock and iii l shares of preferred_stock par_value dollar_figurej per share controlled preferred_stock at the time of the distribution it is anticipated that controlled will have issued and outstanding i m shares of controlled class a stock ii n shares of controlled class b stock and iii shares or controlled preferred_stock in addition to the share structure described above it is anticipated that controlled will implement an equity incentive plan prior to the proposed transaction with shares of controlled class b stock representing approximately o of controlled’s total equity being allocated to the plan some portion of those shares will be granted in the form of options and restricted_stock prior or concurrent with consummation of the proposed transaction plr-126403-11 distributing is a holding_company that engages through its direct and indirect subsidiaries in business a business b and business c operations sub1 engages in all of distributing’s business a and business c operations sub4 a member of controlled’s separate_affiliated_group as defined in sec_355 the controlled sag engages in business b distributing will rely on business a and controlled will rely on business b as their respective active trades_or_businesses upon the distribution prior to the date of the distribution distributing intends to contribute all of its business c assets and additional cash to newly formed sub8 of which it will own p and distribute shares of sub8 to distributing’s shareholders in a transaction intended to qualify as a non-taxable reorganization under sec_368 and sec_355 the business c distribution distributing does not intend to request rulings on the business c distribution the purposes of separating business a and business b in the proposed transaction are to i enhance the ability of the businesses to raise capital by focusing on their respective industry and growth potential ii allow management of each business to design and implement corporate strategies and policies based on the business characteristics and industry of each business iii focus on core business and growth opportunities for the respective businesses iv concentrate each business’s financial resources on its own operations and reduce internal competition for capital v allow business b to use its common_stock to effect future strategic transactions vi allow business b to develop performance based equity incentive programs to attract and retain key employees directly linked to business b and vii allow each business to recruit and retain employees pursuant to compensation policies appropriate to the respective business proposed transaction distributing intends to separate business b from business a distributing proposes to undertake pursuant to one overall plan the following steps some of which have already been completed the proposed transaction i ii iii prior to the date of the ruling_request distributing contributed its interest in sub2 to controlled in exchange for controlled stock distributing will contribute approximately dollar_figureq of cash to controlled together with step i the contribution distributing will distribute pro_rata percent of the issued and outstanding shares of controlled to its shareholders the shareholders the distribution in the distribution each shareholder will receive one share of controlled class a stock for every share of distributing class a stock and plr-126403-11 one share of controlled class b stock for every share of distributing class b stock representations the following representations have been made in connection with the proposed transaction a b c d e f g h i j the indebtedness if any owed by controlled to distributing after the distribution will not constitute stock_or_securities no part of the consideration to be distributed by distributing in the distribution will be received by the shareholders as creditors employees or in any capacity other than that of shareholders of distributing the five years of financial information submitted for business a is representative of the present operations and there have been no substantial operational changes since the date of the last financial statements submitted the five years of financial information submitted for business b is representative of the present operations and there have been no substantial operational changes since the date of the last financial statements submitted following the distribution no person will hold a greater than percent interest in either distributing or controlled within the meaning of sec_355 who did not hold such an interest immediately before the distribution following the distribution distributing through its separate_affiliated_group will continue the active_conduct of business a independently and with its separate employees following the distribution controlled through its separate_affiliated_group will continue the active_conduct of business b independently and with its separate employees the proposed transaction will be carried out for valid business purposes the distribution of stock or stock and securities of the controlled_corporation is motivated in whole or substantial part by one or more of those purposes the distribution will not be used principally as a device for the distribution of earnings or profits of distributing or controlled or both for purposes of sec_355 immediately after the distribution no person determined after applying the aggregation rules of sec_355 will hold plr-126403-11 stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the distribution date for purposes of sec_355 immediately after the distribution no person determined after applying the aggregation rules of sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the distribution date no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length neither distributing nor controlled is an investment_company as defined in sec_368 and iv distributing and controlled each will pay its or their own expenses if any incurred in connection with the distribution the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons other than persons described in sec_355 will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation neither business a nor business b nor control of any entity conducting these businesses was acquired during the five-year period ending on the distribution date in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_32_irb_6 and as currently in effect sec_1_1502-13 as published by t d k l m n o p q r plr-126403-11 further distributing’s excess_loss_account if any with respect to controlled will be included in income immediately before the distribution see sec_1_1502-19 the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing will equal or exceed the sum of the liabilities assumed as determined under sec_357 by controlled plus any liabilities to which the transferred assets are subject the liabilities assumed if any as determined under sec_357 by controlled were incurred in the ordinary course of business and were associated with the assets transferred distributing was not and will not be a united_states_real_property_holding_corporation as defined in sec_897 either i at any time during the five-year period ending on the distribution date or ii immediately following the distribution controlled will not be a united_states_real_property_holding_corporation as defined in sec_897 either i at any time during the five-year period ending on the distribution date or ii immediately following the distribution rulings the contribution together with the distribution will qualify as a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing did not recognize any gain_or_loss upon the transfer of sub2 and will not recognize any gain_or_loss upon the transfer of cash to controlled pursuant to the contribution sec_361 controlled will not recognize any gain_or_loss upon the receipt of sub2 shares and cash from distributing pursuant to the contribution sec_1032 controlled’s basis in the shares of sub2 received from distributing pursuant to the contribution will be the same as the basis of those shares in the hands of distributing immediately before their transfer sec_362 controlled’s holding_period in the shares of sub2 received from distributing pursuant to the contribution will include the period during which distributing held such shares sec_1223 s t u plr-126403-11 distributing will not recognize any gain_or_loss upon the distribution of controlled stock in the distribution sec_355 and sec_361 the shareholders will not recognize any gain_or_loss and will not otherwise include any amount in income on the receipt of shares of controlled stock in the distribution sec_355 each shareholder’s basis in a share of distributing stock as adjusted under sec_1_358-1 will be allocated between the share of distributing stock with respect to which the distribution is made and the share of controlled stock received with respect to that share in proportion to their fair market values sec_358 sec_358 and sec_358 c sec_1 a the holding_period of the controlled stock received by the shareholders in the distribution will include the holding_period of the distributing stock with respect to which the distribution was made provided that the distributing stock is held as a capital_asset in the hands of the shareholder on the date of the distribution sec_1223 earnings_and_profits of distributing if any will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 caveats except as expressly provided herein no opinion is expressed about the tax treatment of the proposed transaction or any other transaction or item mentioned in this letter under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the foregoing that are not specifically covered by the above rulings in particular no opinion is expressed regarding i whether the distribution satisfies the business_purpose requirement of sec_1_355-2 ii whether the distribution is used principally as a device for the distribution of the earnings_and_profits of distributing controlled or both or iii whether the distribution is part of a plan or a series of related transactions under sec_355 further because no ruling was requested no opinion is expressed regarding the tax treatment of the business c distribution procedural statements 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 plr-126403-11 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling 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 _isaac w zimbalist_________ isaac w zimbalist senior technical reviewer branch office of associate chief_counsel corporate


t c memo united_states tax_court william b and diane s meyer petitioners v commissioner of internal revenue respondent docket no 13514-03l filed date william b and diane s meyer pro sese nancy c carver and warren p simonsen for respondent memorandum opinion wells judge this matter is before the court on respondent’s motion for summary_judgment filed pursuant to rule all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure background petitioners are husband and wife at the time of the filing of the petition petitioners resided in las vegas nevada on date petitioners filed a form_1040 u s individual_income_tax_return tax_return reporting zero gross_income for the tax_year with the tax_return petitioners submitted a document making the following assertions the internal_revenue_code does not establish an income_tax_liability the tax_return is not being filed voluntarily but out of fear of illegal governmental prosecution the privacy_act notice contained in the form_1040 booklet informed petitioners that they are not required to file a return regulations requiring the filing of a tax_return apply only to foreign_earned_income laws requiring taxpayers to provide information to the federal government violate taxpayers’ fifth_amendment rights courts have held that a form_1040 with zeros inserted in the spaces provided qualifies as a tax_return petitioners had zero income according to the supreme court’s definition of income petitioners’ tax_return does not constitute a frivolous_return for purposes of sec_6702 and no statute allows the irs to change petitioners’ tax_return on date respondent mailed a statutory_notice_of_deficiency to petitioners in the notice respondent determined a corrected taxable_income of dollar_figure a deficiency of dollar_figure and a sec_6662 accuracy-related_penalty of dollar_figure petitioners received the notice but did not file a petition with this court for a redetermination of the deficiency pursuant to sec_6213 consequently respondent issued a final notice-- notice_of_intent_to_levy and notice of your right to a hearing informing petitioners of respondent’s intent to levy and of petitioners’ right to a hearing before respondent’s appeals_office pursuant to sec_6330 in response petitioners timely filed a form request for a collection_due_process_hearing in a letter dated date appeals officer jerry l johnson notified petitioners that the sec_6330 hearing had been scheduled for date petitioners would not be permitted to record the hearing and petitioners could choose a hearing by correspondence in lieu of a personal appearance before appeals officer johnson in response petitioners requested a hearing by correspondence and submitted a joint affidavit containing a record of petitioners’ contacts with respondent and making various contentions 1the foregoing contentions include the following to the best of my knowledge i am not nor have i ever been statutorily liable or made liable for any_tax pursuant to usc in a letter dated date petitioners described the contentions contained in their affidavit as follows you will find no frivolous arguments in the packet we sent you some of the issues we raised are as follows continued before date appeals officer johnson provided petitioners with a form_4340 certificate of assessments payments and other specified matters the form_4340 certified a deficiency of dollar_figure and a sec_6662 accuracy-related_penalty of dollar_figure the form_4340 certified that respondent assessed the foregoing amounts and issued a statutory notice of balance due on date the form_4340 further certified that respondent subsequently issued a notice of balance due and a statutory notice_of_intent_to_levy respondent’s supervisory investigative analyst lee hansen signed the form_4340 on date appeals officer johnson issued a letter dated date as part of petitioners’ sec_6330 hearing by correspondence the letter stated that the underlying tax_liability could not be challenged because petitioners had received a statutory_notice_of_deficiency and had had an opportunity to dispute the underlying tax_liability issues included the appropriateness of collection actions offers of collection alternatives and continued we have received no assessment certificate to date which includes our individual assessment we have received no notice_and_demand irs computer records show some other party is using our social_security_number so that none of the entries on our records can be relied upon as correct there are numerous errors in our individual_master_file appropriate spousal defenses appeals officer johnson had determined that the requirements of applicable law and administrative procedure had been met this court has held that many arguments raised by petitioners are tax protestor arguments that need not be considered by appeals officers in sec_6330 hearings and that may result in sanctions pursuant to sec_6673 and petitioners would be allowed days to raise any procedural issues with appeals officer johnson on date respondent issued a notice_of_determination concerning collection action s under sec_6320 and or determining that the proposed levy action was appropriate petitioners timely filed a petition for lien or levy action contending inter alia that the appeals_office did not consider petitioners’ allegations of irregularities in the assessment procedure the form_4340 relied upon by the appeals_office is contradicted by respondent’s records and was improperly certified and respondent did not issue a notice_and_demand in compliance with sec_6303 respondent filed a motion for summary_judgment on date discussion the purpose of summary_judgment is to expedite litigation and avoid the expense of unnecessary trials fla peach corp v commissioner 90_tc_678 a motion for summary_judgment may be granted where there is no dispute as to a material fact and a decision may be rendered as a matter of law see rule a and b the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences are viewed in a light most favorable to the nonmoving party 119_tc_252 85_tc_812 79_tc_340 the party opposing summary_judgment must set forth specific facts which show that a question of genuine material fact exists and may not rely merely on allegations or denials in the pleadings see 91_tc_322 87_tc_214 sec_6330 provides that no levy may be made on any property or right to property of a person unless the secretary first notifies the person in writing of the right to a hearing before the appeals_office sec_6330 provides that the 2rule b provides a decision shall thereafter be rendered if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law sec_6330 notice and opportunity for hearing before levy a requirement of notice before levy -- in general --no levy may be made on any continued appeals officer must verify at the hearing that applicable laws and administrative procedures have been followed the appeals officer may rely on a form_4340 for purposes of complying with sec_6330 118_tc_162 at the hearing the person may raise any relevant issue relating to the unpaid tax or the proposed levy including appropriate spousal defenses challenges to the appropriateness of collection actions and collection alternatives sec_6330 however the person may challenge the existence or amount of the underlying tax_liability only if the person did not receive any statutory_notice_of_deficiency for the tax_liability or did not otherwise have an opportunity to dispute the continued property or right to property of any person unless the secretary has notified such person in writing of their right to a hearing under this section before such levy is made b right to fair hearing -- in general --if the person requests a hearing such hearing shall be held by the internal_revenue_service office of appeals sec_6330 provides requirement of investigation --the appeals officer shall at the hearing obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met tax_liability sec_6330 114_tc_604 in the instant case petitioners received a statutory_notice_of_deficiency consequently sec_6330 precluded petitioners from challenging the underlying tax_liability at the sec_6330 hearing accordingly we review the administrative determination for abuse_of_discretion see 114_tc_176 sego v commissioner supra pincite the record establishes that the appeals_office properly verified that all applicable laws and administrative procedures were followed appeals officer johnson had no prior involvement with respect to the unpaid tax_liabilities before the sec_6330 hearing the form_4340 shows that proper assessments were made and that requisite notices had been sent to petitioners petitioners raised no viable claims of procedural irregularities and respondent properly relied on the form_4340 during the administrative process see nestor v commissioner supra petitioners did not discuss collection alternatives sec_6330 provides b underlying liability --the person may also raise at the hearing challenges to the existence or amount of the underlying tax_liability for any_tax period if the person did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability 6we address respondent’s refusal to allow the recording of sec_6330 hearings below petitioners’ contentions are frivolous and groundless and will not be refuted with copious citation and extended discussion see 114_tc_136 citing 737_f2d_1417 5th cir consequently although respondent improperly refused to allow any recording of the sec_6330 hearing see sec_7521 we conclude that it is unnecessary and would not be productive to remand the instant case to the appeals_office for another sec_6330 hearing in order to allow petitioners to make an audio recording and it is unnecessary and inappropriate to reject respondent’s determination see 117_tc_183 kemper v commissioner tcmemo_2003_195 sec_6673 authorizes this court to require a taxpayer to pay a penalty not in excess of dollar_figure whenever the 7petitioners’ contentions are substantially_similar to contentions raised by the taxpayer in hiland v commissioner tcmemo_2004_225 taxpayer’s complaints with respect to the administrative proceedings included the following no legitimate hearing under sec_6330 ever took place taxpayer was denied the opportunity to raise issues he deemed relevant eg the existence of the underlying tax_liability and cited documentation had not been produced and or addressed eg record of the assessments statutory notice_and_demand for payment any valid notice_of_deficiency and verification from the secretary that all applicable_requirements were met in that case we held that the contentions raised by the taxpayer were frivolous and or groundless and we imposed a penalty pursuant to sec_6673 taxpayer’s position is frivolous or groundless or the taxpayer has instituted or pursued the proceeding primarily for delay sec_6673 sanctions and costs awarded by courts a tax_court proceedings -- procedures instituted primarily for delay etc --whenever it appears to the tax_court that-- a proceedings before it have been instituted or maintained by the taxpayer primarily for delay b the taxpayer’s position in such proceeding is frivolous or groundless or c the taxpayer unreasonably failed to pursue available administrative remedies the tax_court in its decision may require the taxpayer to pay to the united_states a penalty not in excess of dollar_figure the record demonstrates that petitioners’ contentions are frivolous and groundless and we are convinced that petitioners instituted and maintained the instant proceeding primarily if not exclusively for purposes of delay as noted above respondent’s letter dated date informed petitioners that they risked a monetary penalty by making such arguments but they continued to waste the limited resources of the federal tax system consequently pursuant to sec_6673 we shall 8petitioners have made the same frivolous and groundless contentions in a separate proceeding before this court docket no 6901-03l with respect to their tax_year require petitioners to pay to the united_states a penalty of dollar_figure to reflect the foregoing an appropriate order and decision for respondent will be entered