department of the treasury internal_revenue_service washington d c nov government entities division se t er raty uil no 408a xxxxkxkxxxkkxkxkkakk xxxxxkkxxkkxxxkxkxk xxxkxkxkxkxkxkkxkxkkaxk legend taxpayer a xxxxxxxx taxpayer b xxxxxxxx custodian m xxxxxxxx amount a xxxxxxxx ira x ira y xxxxxxkxkx xxxkxkxxkxkx xxxxxxxkx xxxkxxxkxx year xxxxxxxkx date xxxxxxxkx dear xxxxxxxx this is in response to your letter dated date in which your authorized representative on your behalf request relief under sec_301_9100-3 of the procedure and administrative regulations the p a regulations following conversion of your traditional individual_retirement_account ira to your roth_ira you request a ruling to allow the recharacterization of your roth_ira as a traditional_ira after the expiration of the election_period under sec_408a of the internal_revenue_code the code and sec_1_408a-5 of the federal_income_tax regulations the it regulations’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested xxxxxxxxk page of the taxpayers file form_1040 u s individual taxpayer a and taxpayer b income_tax retum jointly as a married couple taxpayer a owns ira x an individual_retirement_account described in sec_408 of the code and maintained by custodian m in december year custodian m at taxpayer a's request transferred amount a from ira x to ira y a roth_ira described in sec_408a of the code as a roth_ira_conversion taxpayer a represents that at the time of the conversion the taxpayers were unaware that their modified_adjusted_gross_income for the year taxable_year exceeded dollar_figure thus making them ineligible to convert the traditional_ira to a roth_ira the taxpayers federal_income_tax return for year was prepared by a tax professional who had prepared the taxpayers joint_return for several years prior to and including year although the taxpayers provided the tax professional with a form 1099-r he did not inform them that they were ineligible for a roth_ira_conversion for the taxable_year in addition the tax professional did not inform the taxpayers of the need to recharacterize the roth_ira y conversion prior to the deadline for doing so form 1099-r issued for year reported amount a as an ira distribution the taxpayers year income_tax return was timely filed on or about date by electronic_filing the taxpayer's request for relief under sec_301 of the p a regulations was filed after discovering that they had missed the deadline to recharacterize roth_ira y back to ira x and prior to the internal_revenue_service the service discovering that taxpayer a had not timely elected to recharacterize roth_ira y to a traditional_ira the statute_of_limitations on taxpayer a's federal_income_tax return for year was open when this ruling_request was submitted ' based on your submission and the foregoing facts and representations you request a ruling that pursuant to sec_301_9100-3 of the p a regulations taxpayer a be granted a period of time not to exceed days from the date of this letter_ruling to recharacterize roth_ira y as a traditional_ira with respect to your ruling_request sec_408a of the code and sec_1_408a-5 of the it regulations provide that except as otherwise provided by the secretary a taxpayer may elect to recharacterize an ira contribution made to one type of ira as having been made to another type of ira by making a trustee-to-trustee transfer of the ira contribution plus earnings to the other type of ira in a recharacterization the ira contribution is treated as having been made to the transferee ira and not the transferor ira under sec_408a of the code and sec_1_408a-5 of the it regulations this recharacterization election generally must occur on or before the date prescribed by law including extensions for filing the taxpayer's federal_income_tax return for the year of contribution page of sec_1_408a-5 question answer q a -6 of the it regulations describes how a taxpayer makes the election to recharacterize the ira contribution to recharacterize an amount that has been converted from a traditional_ira to a roth_ira the taxpayer must notify the roth_ira trustee of the taxpayer's intent to recharacterize the amount the taxpayer must provide the trustee and the transferee trustee if different from the transferor trustee with specified information that is sufficient to effect the recharacterization and the trustee must make the transfer sec_408a of the code provides in relevant part that an individual with an adjusted_gross_income as modified within the meaning of subparagraph c c in excess of dollar_figure for a taxable_year is not permitted to make a qualified_rollover_contribution to a roth_ira from an individual_retirement_plan other than a roth_ira during that taxable_year sec_1_408a-4 q a-2 of the it regulations provides that an individual with modified_adjusted_gross_income in excess of dollar_figure for a taxable_year is not permitted to convert an amount to a roth_ira during a taxable_year sec_1_408a-4 q a-2 further provides that an individual and his spouse must file a joint federal tax_return to convert a traditional_ira to a roth_ira and that the modified_adjusted_gross_income agi subject_to the dollar_figure limit for a taxable_year is the modified_adjusted_gross_income derived from the joint_return using the couple's combined income sec_301_9100-1 sec_301_9100-2 and sec_301_9100-3 of the p a regulations provide guidance concerning requests for relief submitted to the service on or after date sec_301_9100-1 provides that the commissioner of interna revenue in his discretion may grant a reasonable extension of the time fixed by a regulation a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin for the making of an election or application_for relief in respect of tax under among others subtitle a of the code sec_301_9100-2 of the p a regulations lists certain elections for which automatic extensions of time to file are granted sec_301_9100-3 generally provides guidance with respect to the granting of relief with respect to those elections not referenced in sec_301_9100-2 the relief requested in this case is not referenced in sec_301_9100-2 sec_301_9100-3 of the p a regulations provides that applications for relief that fall within sec_301_9100-3 will be granted when the taxpayer provides sufficient evidence including affidavits described in sec_301_9100-3 to establish that the taxpayer acted reasonably and in good_faith and granting relief would not prejudice the interests of the government xxxxxkxkxxk page of sec_301_9100-3 of the p a regulations provides that a taxpayer will be deemed to have acted reasonably and in good_faith i if its request for sec_301_9100-1 relief is filed before the failure to make a timely election is discovered by the service ii if the taxpayer inadvertently failed to make the election because of intervening events beyond the taxpayer's control iii if the taxpayer failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv the taxpayer reasonably relied upon the written advice of the service or v the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 of the p a regulations provides that ordinarily the interests of the government will be treated as prejudiced and that ordinarily the service will not grant relief when tax years that would have been affected by the election had it been timely made are closed by the statute_of_limitations before the taxpayer's receipt of a ruling granting relief under this section the taxpayers’ ruling_request requires the internal_revenue_service to determine whether they are eligible for relief under the provisions of sec_301_9100-3 of the p a regulations in this case the taxpayers provided the tax_return_preparer information which showed taxpayer a had converted amount a from ira x to roth_ira y during year thus while the taxpayers were ineligible to convert ira x to roth_ira y because their adjusted_gross_income exceeded the dollar_figure limit under sec_408a of the code the taxpayers relied on their professional tax advisor to advise them of the ability to recharacterize a failed roth_ira_conversion the professional tax advisor failed to advise them of the need to make the election within the time permitted by law with respect to taxpayers’ request for relief based on the information submitted and the representations made the requirements of sec_301_9100-1 and sec_301_9100-3 of the p a regulations have been met and that the taxpayers acted reasonably and in good_faith with respect to making the election to recharacterize the failed roth_ira_conversion as a traditional_ira the taxpayers were unaware that they were ineligible to establish roth_ira y until the due_date for recharacterizing had passed further this ruling was requested prior to the service discovering the taxpayers failure to make a timely election to recharacterize in addition the taxpayers relied on tax professionals to prepare their year income_tax returns who did not inform them that they were ineligible to do a roth conversion or of the need for a recharacterization election thus the taxpayers satisfy clauses i and v of sec_301_9100-3 of the p a regulations in addition the statute_of_limitations on the taxpayers federal_income_tax return for year was open at the time this request was submitted and the interests of the government would not be prejudiced by providing relief xxxxxkxkxkxk page of accordingly we rule that pursuant to sec_301_9100-3 of the p a regulations the taxpayers are granted a period not to exceed days from the date of this letter to recharacterize roth_ira y back to a traditional_ira this letter assumes that ira x and ira y otherwise qualify under code sec_408 and sec_408a respectively at all relevant times 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 ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office if you wish to inquire about this ruling please contact xxxxxxkxx d no xxxxxxx at xxx xxxxxxxx please address all correspondence to se t ep ra t3 sincerely yours ob lating laura b warshawsky manager employee_plans technical group enclosures deleted copy of this letter notice


internal_revenue_service number release date index number ----------------------- ------------------------ ------------------------------------------- -------------------------------- in re --------------------------------- - - legend department of the treasury washington dc person to contact ----------------------- id no --------------- telephone number --------------------- refer reply to cc intl - plr-137477-03 date date -------------------- ----------------------- ------------------------ -------------------------- --------------------------------- taxpayer -------------------------------------------------------------------- date one individual a individual b cpa firm dear ---------------- this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file agreements under sec_1_1503-2 as required under sec_1_1503-2 for the tax_year ended on date one in accordance with schedule a which is attached and made a part of this ruling letter the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling including the information submitted on schedule a verification of the factual information representations and other data may be required as a part of the audit process in re plr-137477-03 individual a and individual b are tax professionals with cpa firm individuals a and b assisted taxpayer on various tax matters in connection with its request to obtain a closing_agreement under sec_1_1503-2 including relief under sec_301 to file late agreements under sec_1_1503-2 the affidavits of individuals a and b and the facts submitted recount the discussion held with respect to the interpretation of a provision in sec_1_1503-2 this provision requires an agreement described in sec_1_1503-2 to be filed for the taxable_year in which the event described in sec_1_1503-2 occurs the provision was interpretated to mean that taxpayer was not required to file agreements under sec_1_1503-2 with respect to the dual consolidated losses indicated on schedule a taxpayer subsequently learned that this interpretation was not correct and that agreements should have been filed with respect to those losses sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides 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 the grant of relief will not prejudice the interests of the government in the present situation the agreement is a regulatory election within the meaning of sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards set forth in sec_301_9100-3 based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to file agreements under sec_1_1503-2 as required under sec_1_1503-2 for the tax_year ended on date one in accordance with schedule a in re plr-137477-03 as provided in a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the agreements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter should be associated with the agreements no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented furthermore no opinion is expressed as the accuracy of the dual consolidated losses reported on schedule a pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to taxpayer and the other authorized representative sincerely associate chief_counsel international by s allen goldstein allen goldstein reviewer attachments schedule a copy for purposes in re plr-137477-03 schedule a taxpayer requests an extension of time under sec_301 -3 to file agreements under sec_1_1503-2 as required under sec_1_1503-2 for the entities listed below for the tax_year ended on ---------------- ------------- entity ------------------------------------------- ------------------------------------------- ------------------------------------------- --------- - - - - - - - ------------------------------------------- ------------------------------------------- ------------------------------------------- ------------- - - - - - - - ------------------------------------------- ------------------------------------------- ---- - - - tax_year --------- amount of loss ------------ --------- --------- --------- --------- --------- --------- - --------- --------- --------- --------- --------- --------- --------- - --------- --------- --------- - -------------- -------------- ------------ -------------- -------------- ------------ - ------------ ------------ ------------ ---------- ------------ -------------- ------------ - -------------- -------------- ------------ - in re plr-137477-03 ------------------------------------------- ----------------------------- - - ------------------------------------------- --------------------- --------- ------------ --------- --------- --------- -------------- ---------- -


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-151843-06 date date legend x ----------------------------------------------- -------- ------------------ country d1 dear ----------------- this is in response to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a partnership for federal tax purposes facts the information submitted states that x was formed in country on d1 as an entity eligible to make a classification election x’s default status was as an association_taxable_as_a_corporation for federal tax purposes x intended to be classified as a partnership for federal tax purposes effective d1 however a form_8832 entity plr-151843-06 classification election for x to elect to be treated as a partnership effective d1 was not timely filed law and analysis sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides that an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301 b or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or - an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is an association if all members have limited_liability except as provided in sec_301_7701-3 sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing a form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-151843-06 sec_301_9100-3 provides that request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of sixty days from the date of this letter to elect to be classified as a partnership for federal tax purposes effective d1 the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representatives sincerely william p o’shea associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------- ------------------------------- ------------------------------------ ----------------------------------- -------------------------- ---------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-124200-09 date november ------- ---------------------- --------------------- ----------------------- ------------------------------------------------------ ----------------------------------------------------- -------------------------------------------------------- ---------------------- ----------------------------- ------------------------ --------------------------- ---------------------------------------- year a b c trust a_trust b_trust c child child child individual trust d trust e ----------------------------------------------- trust f trust g --------------------------------------------------------------------------------------------------------- trust h --------------------------------------------------------------------------------------------------------- trust i ---------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- dear -------------- this responds to your date letter and other correspondence requesting rulings under sec_1001 sec_2501 and sec_2601 of the internal_revenue_code concerning the income gift and generation-skipping_transfer gst tax consequences of a proposed division and subsequent merger of certain trusts plr-124200-09 you have requested the following rulings the proposed transaction will not constitute a sale or other taxable division of assets under sec_1001 the proposed transaction will not result in a transfer that is subject_to gift_tax under sec_2501 the proposed transaction will not affect the status of the trusts as exempt from the gst tax under sec_2601 the facts submitted are as follows in year prior to date a created trust a b created trust b and c created trust c collectively the trusts a and b were husband and wife and had three children child child and child collectively the children thetrusts were created for the benefit of the children of a and b and their respective families under the provisions of paragraph of trusts a and b as long as any of the children are living the trustee is directed to divide all of the income of each trust into equal parts one part for each living child and one part for each deceased child survived by issue with respect to a living child the trustee has the discretion to pay to that child his her share of the income or to accumulate it in whole or in part with respect to a deceased child the trustee is directed to pay to the living issue of such child per stirpes the accumulated income of such deceased child’s share the income on the accumulated income and the current undistributed_income of the deceased child’s share under the provisions of paragraph of trust c as long as any of the children are living the trustee is directed to divide the trust’s income into equal parts one part for each living child and one part for each deceased child survived by issue the trustee is directed to apply each living child’s share of the income to the education maintenance and support of that child or in the trustee’s discretion accumulate such income in whole or in part upon the death of a child the trustee is directed to pay to the living issue of such child per stirpes the accumulated income of such deceased child’s share the income on the accumulated income and the current undistributed_income of the deceased child’s share under the provisions of paragraph of trusts a b and c upon the death of the last survivor of child child and child the trustee is directed to pay over the principal of the trusts to the then living issue per stirpes of child child and child plr-124200-09 each trust is currently being administered as a single fund with two parts one part consists of the primary trust assets and the other part contains the accumulated income no distributions have ever been made from either part child child and child are still living child child and individual are serving as the trustees of the trusts trustees propose to divide each trust into three separate trusts one for the benefit of child and his issue one for the benefit of child and her issue and one for the benefit of child and his issue following the division the trust for the benefit of child and his issue under trust a and the trust for the benefit of child and his issue under trust b will be merged into trust d the trust for the benefit of child and her issue under trust a and the trust for the benefit of child and her issue under trust b will be merged into trust e the trust for the benefit of child and his issue under trust a and the trust for the benefit of child and his issue under trust b will be merged into trust f the trusts created from the division of trust c will each continue to be held as separate trusts one for the benefit of child and his issue trust g one for the benefit of child and her issue trust h and one for the benefit of child and his issue trust i the trustees have petitioned the local court for an order approving the division and merger of the trusts subject_to favorable rulings by the service it is represented that under the proposed restructuring of the trusts the assets of trust a_trust b and trust c will be divided equally on a pro_rata basis each asset of each trust will be divided into three parts one part for each new trust if an asset cannot be divided it will be sold and the proceeds will be divided among the new trusts each of the new trusts trust d trust e trust f trust g trust h and trust i will be governed by the same provisions as the original trusts trust a_trust b and trust c except for the provisions of paragraph in each original trust as noted above paragraph of the original trusts provides that the principal of each trust is to be distributed per stirpes to the then living issue of child child and child after the death of the survivor of child child and child under the new trusts distributions of principal are to be made per stirpes to the issue of a deceased child upon that child’s death rather than at the death of the survivor of child child and child law and analysis ruling sec_61 provides that gross_income includes gains derived from dealings in property sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis plr-124200-09 provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized sec_1001 provides that except as otherwise provided in subtitle a of the code the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property must be recognized sec_1_1001-1 of the income_tax regulations provides that except as otherwise provided in subtitle a of the code the gain_or_loss realized from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or as loss sustained an exchange of property results in the realization of gain_or_loss under sec_1001 if the properties exchanged are materially different 499_us_554 properties exchanged are materially different if the properties embody legal entitlements different in_kind or extent or if the properties confer different rights and powers id pincite in cottage savings the supreme court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans id pincite in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent id pincite a pro_rata partition of jointly owned property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result thereof see revrul_56_437 1956_2_cb_507 in this case the trusts will be partitioned and merged into six trusts the distribution of assets from the trusts into the new trusts will be pro_rata as to value and as to each of the assets the payments and legal entitlements of the beneficiaries will not be changed the modification of the terms and conditions of the new trusts to provide for the early termination of the trusts and the early distribution of assets to the remaindermen is a change from the terms and conditions of the trusts however this change modifies only the timing of the receipt of trust assets by the remaindermen except for this change all other provisions of the trusts will remain unchanged we thus conclude that the division of each of trust a_trust b and trust c into three separate trusts one for the benefit of each child and his her family the merger of the two trusts created for the benefit of each child and his her family under trusts a and b into trust d trust e and trust f and the creation of trusts g h and i under trust c with the approval of the state court on a pro_rata basis will not cause the legal plr-124200-09 entitlements and interests of the beneficiaries of these separate trusts to differ materially from their legal entitlements and interests under the trusts the beneficiaries will hold essentially the same interests before and after the pro_rata division therefore this transaction will not result in the realization of any gain_or_loss from a sale_or_other_disposition of assets of any of the trusts under sec_1001 ruling sec_2501 imposes a tax on the transfer of property by gift by any individual sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible in this case the beneficial interests in the original trusts trust a_trust b and trust c will be identical to the beneficial interests in the new trusts trusts d e f g h and i therefore no interests in the original trusts will be passed gratuitously to the new trusts accordingly based upon the facts submitted and representations made we conclude that the transaction will not be subject_to gift_tax under sec_2501 ruling sec_2601 imposes a tax on every generation-skipping_transfer the term generation-skipping_transfer is defined in sec_2611 as a taxable_distribution a taxable_termination or a direct_skip under a of the tax_reform_act_of_1986 act and sec_26_2601-1 of the generation-skipping_transfer gst tax regulations the gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 the gst tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the plr-124200-09 modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a generation-skipping_transfer or the creation of a new generation-skipping_transfer a modification that is administrative in nature that only indirectly increases the amount transferred will not be considered to shift a beneficial_interest in the trust sec_26_2601-1 example illustrates a situation where a_trust that is otherwise exempt from the gst tax is divided into two trusts under the facts presented the division of a_trust into two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the division and the division does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust accordingly the two partitioned trusts will not be subject_to the gst tax in this case the original trusts will be partitioned and merged into six trusts the transaction will not result in a shift of any beneficial_interest in the trusts to any beneficiary who occupies a generation lower than the persons holding the beneficial interests further the proposed division will not extend the time for vesting of any beneficial_interest in the new trusts beyond the period provided for in the trusts accordingly based on the facts submitted and the representations made we conclude that the proposed transaction will not adversely affect the trusts’ status as exempt from the gst tax and that the new trusts will remain exempt from the gst tax in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representative 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-124200-09 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely katherine a mellody senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter


internal_revenue_service significant index no department of the treasury washington dc person to contact telephone number reter reply to tsep ra t a2 date in re jul a0 request_for_ruling on behalf of this letter is in response to your request dated date in which you asked for a ruling as to whether certain proposed distributions from three individual_retirement_accounts iras owned by you are part of a series of substantially_equal_periodic_payments and are therefore not subject_to the percent additional tax imposed under sec_72 of the internal_revenue_code code authorized representative pursuant to form call with ms trichilo of our office on date to provide that the methodology calculates an annual payment for a calendar_year using an interest rate assumption of percent and to clarify the ruling requested the ruling_request was amended by the taxpayer's in a telephone according to the facts as stated you are the owner of three traditional iras of birth is december ira sec_1 and and a roth_ira your date and you will attain age in you want to start taking distributions from ira sec_1 and in on early distributions by using the and want to avoid the additional percent tax imposed under sec_72 exception provided in sec_72 a iv substantially_equal_periodic_payments calculate an annual distribution amount for by amortizing the aggregated account balances of ira sec_1 over a number of years equal to your life expectancy derived from table v of regulation sec_1_72-9 using your age attained in using an interest rate assumption of percent distributed for subsequent years the same amount will be and as of january you have proposed to of the code for b buling requested based on these facts you have requested the following ruling the proposed method of determining periodic_payments satisfies one of the methods described in notice_89_25 and results in substantially_equal_periodic_payments within the meaning of sec_72 subject_to the additional tax of sec_72 unless the requirements of sec_72 are not met a iv of the code and such payments will not be applicable law sec_408 of the internal_revenue_code provides that amounts paid or distributed out of an individual_retirement_plan must be included in gross_income by the payee or distributee in the manner provided under sec_72 of the code sec_72 of the internal_revenue_code provides rules for determining how amounts received as annuities endowments or life_insurance contracts and distributions from qualified_plans are to be taxed sec_72 of the internal_revenue_code was added to the code by the tax_reform_act_of_1986 for taxable years beginning after date t provides for the imposition of an additional percent tax on early distributions from qualified_plans including iras the additional tax is imposed on that portion of the distribution which is includible in gross_income tra_'86 effective generally section sec_72 a iv of the code provides that sec_72 shall not apply to distributions which are part of a series of substantially_equal_periodic_payments not less frequently than annually made for the life or life expectancy of the employee or the joint lives or joint life expectancies of such employee and his beneficiary sec_72 of the code imposes the additional a iv that if the series of payments is limitation on distributions excepted from the percent tax by sec_72 subsequently modified other than by reason of death or disability before the later of beginning with the date of the first payment and the employee's attainment of age then the taxpayer's tax for the first taxable_year in which such modification occurs shall be the close of the 5-year period increased by an amount determined under regulations equal to the tax which would have been imposed except for the sec_72 a iv exception plus interest for the deferral_period sec_1_72-9 of the income_tax regulations regulations provides tables that are to be used in connection with computations under sec_72 and the regulations thereunder included in this section are tables giving life expectancies for one life table v and joint life and last survivor expectancies for two lives table vi notice_89_25 1989_1_cb_662 provides guidance in the form of questions and answers on certain provisions of the tax_reform_act_of_1986 tra_'86 in the absence of regulations on sec_72 of the code this notice provides guidance with respect to the exception to the tax on premature distributions provided under sec_72 a iv methods for determining substantially_equal_periodic_payments for purposes of sec_72 of the code methods involve the use of an interest rate assumption which must be an interest rate that does not exceed a reasonable interest rate on the date payments commence q a-12 of notice_89_25 provides three two of these proposed methodology the proposed method for determining annual periodic_payments described in the ruling_request as modified is to calculate an end of year annual payment for the year by amortizing the aggregated account balances of ira sec_1 over a number of years equal to your life expectancy derived from table v of sec_1_72-9 of the regulations using your age attained in using an effective annual interest rate assumption of percent for subsequent years the same annual distribution amount will be distributed for example the annual distribution amount for will be the same as the annual distribution amount for the annual distribution amount will be taken out of one or more of the three iras ira ira or ira and only from these iras and as of january conclusion the life expectancy and the interest rate used are such that they do not result in the circumvention of the requirements of sec_72 of an unreasonably high interest rate or an unreasonable life expectancy a iv and t of the code through the use -4- accordingly we conclude that the proposed method as modified of determining periodic_payments satisfies one of the methods described in notice_89_25 and results in substantially_equal_periodic_payments within the meaning of sec_72 a iv of the code and such payments will not be subject_to the additional tax of sec_72 unless the requirements of sec_72 are not met sincerely yours martin l pippins manager employee_plans actuarial group tax_exempt_and_government_entities_division


t c memo united_states tax_court geoffrey s dickes petitioner v commissioner of internal revenue respondent docket no 15107-12l filed date geoffrey s dickes pro_se anne m craig for respondent memorandum findings_of_fact and opinion marvel judge pursuant to sec_6320 and sec_6330 petitioner seeks review of respondent’s determination to proceed with the collection by lien or levy of petitioner’s tax_liabilities unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure the issues for decision are whether petitioner is liable for the following additions to tax additions to tax sec sec_6651 a dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure sec_6654 -0- dollar_figure -0- year and whether the appeals_office abused its discretion in determining to proceed with the collection by lien or levy of petitioner’s tax_liabilities findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and facts drawn from stipulated exhibits are incorporated herein by this reference petitioner resided in florida when he petitioned this court i background petitioner earned a bachelor of science degree from the college of engineering and mathematical sciences at the university of vermont in after he earned his degree petitioner built furniture and then worked for a home builder after investing in a real_estate venture that went bad petitioner apprenticed with a boat builder for three years and then worked in the naval architecture industry designing powerboats since then he has maintained a sole_proprietorship working as a powerboat designer petitioner generally did not file estimated_tax returns or make quarterly estimated_tax payments he always requested an extension of time to file his annual federal_income_tax return because spring was a busy season for his business although his earnings from his naval architecture business were sufficient for him to live on he did not earn a lot and typically paid what he estimated he owed for a given taxable_year when he filed his extension request ii petitioner’s divorce in approximately petitioner filed for divorce in massachusetts where he and his then wife resided when he filed for divorce petitioner had a net_worth of approximately dollar_figure million of that amount approximately dollar_figure was attributable to an inheritance the massachusetts court with jurisdiction over his divorce case eventually awarded petitioner’s wife most of his net_worth additionally the court awarded alimony of dollar_figure per week to the wife petitioner’s alimony obligation was ultimately reduced to dollar_figure per week as of the time of trial he was in arrears in date at about the time that he was beginning to prepare his form_1040 u s individual_income_tax_return which was then on extension petitioner traveled to massachusetts to deal with a contempt complaint because he was in arrears on his alimony payments the court ordered him jailed for days shortly after petitioner was incarcerated his attorney retrieved petitioner’s computer and business records from petitioner’s hotel room the attorney left the computer and business records in her car over the weekend and they were stolen the stolen records included petitioner’s books_and_records for his naval architecture business from date to approximately date petitioner filed a police report regarding the theft petitioner was released from jail in date because of his imprisonment petitioner lost all of his business his clients went elsewhere he used his savings to pay bills and he had no financial resources left he began replenishing his design jobs and continued working as best he could petitioner is a beneficiary of a family_trust the family_trust holds shares in two family corporations--a construction company and a real_estate_holding_company the family_trust sometimes but not always makes an annual distribution petitioner has no control_over the family_trust and cannot compel those in control of the family_trust to distribute any money to him petitioner used his trust distributions in to restore his personal effects for example he purchased a tv a ford expedition and a boat petitioner also used what limited funds he had to support himself his girlfriend her grown children who could not find jobs and had no other place to live and two of his girlfriend’s grandchildren iii petitioner’s returns during his incarceration petitioner forgot about filing his return which he had neither completed nor filed before the theft of his records he first recalled that he had not filed the return when he began preparing his return in the late summer or fall of petitioner prepared his own returns using turbotax when he tried to import information from his return onto his return he could not do so he called turbotax to ask whether he could file his return without first preparing his return a turbotax representative advised him that he would first have to complete the return because his return would have various carryover items from his return petitioner’s returns reported dividends received from the family_trust of dollar_figure dollar_figure and dollar_figure respectively petitioner credibly testified that he bought the boat with the intention of repairing it and selling it for a profit on a date that is not in the record petitioner called the internal_revenue_service irs about the problems he faced in filing his and returns he spoke with an irs employee who advised him to pay whatever he thought he owed and to reconstruct his missing information so that he could prepare and file the and returns petitioner attempted to do this spending approximately to hours on the reconstruction effort between the fall of and the spring of in date the irs sent a letter to petitioner regarding his delinquent and returns in the letter the irs asserted that he owed a significant amount of federal_income_tax for those years from date through date petitioner spent approximately hours finishing the reconstruction effort meeting with the irs representative fending off levies and preparing his and returns on date petitioner filed his return on date he filed his and returns he later filed an amended return to correct a mistake on his original return on date petitioner filed his return on his returns petitioner reported the following adjusted_gross_income total_tax withholding refundable credits amounts paid with requests for extensions to file and amounts owed adjusted_gross_income total_tax withholding refundable credits amount_paid with extension amount owed dollar_figure big_number big_number dollar_figure big_number big_number dollar_figure -0- dollar_figure dollar_figure -0- -0- dollar_figure big_number big_number year petitioner’s return shows an estimated_tax penalty of dollar_figure which he included in his amount owed for on attached schedules c profit or loss from business petitioner reported the following gross_receipts and net profits from his naval architecture business year gross_receipts net profit dollar_figure big_number big_number dollar_figure big_number big_number iv petitioner’s sec_6320 hearing on date respondent mailed to petitioner a letter final notice_of_intent_to_levy and notice of your right to a hearing with respect to petitioner’s tax_liabilities for and petitioner timely requested a sec_6330 hearing on date respondent mailed to petitioner a letter notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 advising petitioner that a notice_of_federal_tax_lien nftl had been filed with respect to his tax_liability for petitioner timely requested a sec_6320 hearing on date settlement officer joe breazeale settlement officer breazeale sent a letter to petitioner in the letter settlement officer breazeale asked petitioner to submit a form 433-a collection information statement for wage earners and self-employed individuals together with supporting documentation petitioner requested a face-to-face hearing on date petitioner faxed to settlement officer breazeale a copy of his form 433-a however petitioner did not provide any of the supporting financial documents that settlement officer breazeale had requested settlement officer breazeale conducted a face-to-face hearing with petitioner on date petitioner stated that he thought the irs should abate both interest and penalties settlement officer breazeale informed petitioner that unless the irs had made a mistake or caused a lengthy delay the irs could not abate interest he asked petitioner to submit a written penalty abatement request by date addressing each year separately and stating what circumstances prevented him from filing and paying on time settlement officer breazeale also asked petitioner to submit an offer-in-compromise oic by date settlement officer breazeale informed petitioner that he would have to file hi sec_2010 return with the oic and that he would have to provide various financial documents along with the oic on date petitioner sent by fax to settlement officer breazeale a letter requesting an extension until date to submit his request for penalty abatement letter on date petitioner sent to settlement officer breazeale by fax a cover letter and his written penalty abatement request in the cover letter petitioner mentioned problems he had encountered in filing hi sec_2010 return as well as some concerns that he had with respect to requesting an oic he also stated as follows along those lines i know our agreement was that i would have the oic related materials gathered for you by around the end of the month i wonder though if we might amend that a bit to allow you to process the abatement request first before i start assembling the oic materials putting everything together should take no more than two weeks and not having a lot of it to spare these days i would prefer not to waste the time on it if it turns out the abatement is satisfactory if this is okay i guess you don’t really need to do anything i’ll just wait to hear about the abatement if not let me know so i can pick up with assembling the oic materials settlement officer breazeale noted petitioner’s request in the case activity record on date the appeals_office issued to petitioner a notice_of_determination sustaining the proposed lien and levy in the notice_of_determination the appeals_office determined that petitioner was not eligible for penalty abatement because he did not meet the reasonable_cause requirements and petitioner was not eligible for an oic because he had failed to properly request an oic and had not yet filed hi sec_2010 and sec_2011 returns the appeals_office did not address petitioner’s interest abatement request in the notice_of_determination i sec_6320 hearing opinion sec_6321 imposes a lien on all property and property rights of a taxpayer liable for taxes where a demand for the payment of the taxes has been made and the taxpayer fails to pay the irs is authorized to file an nftl with respect to taxpayers who have outstanding tax_liabilities and fail to pay after notice_and_demand sec_6323 sec_6320 requires the secretary to send written notice to the taxpayer of the filing of an nftl and of the taxpayer’s right to an administrative hearing on the matter the conduct and scope of sec_6320 the term secretary means the secretary_of_the_treasury or_his_delegate sec_7701 hearings are governed by sec_6330 d other than paragraph b e and g sec_6320 the secretary is authorized to collect tax by levy upon the taxpayer’s property if any taxpayer liable to pay any_tax neglects or refuses to pay such tax within days after notice_and_demand for payment sec_6331 sec_6330 requires the secretary to send written notice to the taxpayer of the taxpayer’s right to request a sec_6330 hearing before a levy is made if the taxpayer makes a timely request for a hearing a hearing is held by the irs office of appeals sec_6330 at a sec_6320 or sec_6330 hearing a taxpayer may raise any relevant issue including appropriate spousal defenses challenges to the appropriateness of the collection action and collection alternatives such as an oic or an installment_agreement sec_6330 additionally the taxpayer may contest the validity of the underlying tax_liability but only if the taxpayer did not otherwise have an opportunity to dispute the tax_liability sec_6330 114_tc_604 following a hearing the appeals_office must issue a notice_of_determination regarding the appropriateness of the proposed collection action the appeals_office is required to take into consideration verification presented by the secretary that the requirements of applicable law and administrative procedure have been met relevant issues raised by the taxpayer and whether the proposed collection 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 134_tc_280 pursuant to sec_6320 and sec_6330 we have jurisdiction to review the appeals office’s determination see 125_tc_301 aff’d 469_f3d_27 1st cir where the validity of the underlying tax_liability is properly at issue we review the determination regarding the underlying tax_liability de novo sego v commissioner t c pincite 114_tc_176 where the validity of the underlying tax_liability is not properly at issue we review the appeals office’s determination for abuse_of_discretion sego v commissioner t c pincite goza v commissioner t c pincite in reviewing for abuse_of_discretion we must uphold the appeals office’s determination unless it is arbitrary capricious or without sound basis in fact or law see eg murphy v commissioner t c pincite taylor v commissioner tcmemo_2009_27 97_tcm_1109 however we can uphold the appeals office’s determination only on grounds actually relied upon by the appeals officer in the notice_of_determination see 318_us_80 antioco v commissioner tcmemo_2013_35 at jones v commissioner tcmemo_2012_274 at respondent concedes that petitioner was entitled to contest the validity of the underlying liability for the additions to tax because he had not received a notice_of_deficiency accordingly we have jurisdiction to review the appeals office’s determination with respect to the underlying liability for the additions to tax and we review that determination de novo we also review for abuse_of_discretion respondent’s determination to proceed with the collection by lien or levy of petitioner’s tax_liabilities ii underlying liability for the additions to tax the commissioner bears the burden of production with respect to the taxpayer’s liability for additions to tax and must produce sufficient evidence indicating that it is appropriate to impose the additions to tax see sec_7491 116_tc_438 once the commissioner meets his burden of production the taxpayer must come forward with persuasive evidence that the commissioner’s determination is incorrect or that the taxpayer had reasonable_cause or substantial_authority for the position see higbee v commissioner t c pincite a addition_to_tax under sec_6651 sec_6651 authorizes the imposition of an addition_to_tax for failure to timely file a return unless it is shown that such failure is due to reasonable_cause and not due to willful neglect see 469_us_241 38_f3d_440 9th cir a failure to timely file a federal_income_tax return is due to reasonable_cause if the taxpayer exercised ordinary business care and prudence but nevertheless was unable to file the return within the prescribed time see sec_301_6651-1 proced admin regs circumstances that are considered to constitute reasonable_cause for failure to timely file a return are typically those outside of the taxpayer’s control including for example unavoidable postal delays the timely filing of a return with the wrong office the death or serious illness of the taxpayer or a member of the taxpayer’s immediate_family a taxpayer’s unavoidable absence from the united_states destruction by casualty of a taxpayer’s records or place of business and reliance on the erroneous advice of an irs officer_or_employee 114_f3d_366 2d cir aff’g tcmemo_1995_547 however the unavailability of information or records does not necessarily establish reasonable_cause see 79_tc_298 56_tc_1324 aff’d without published opinion 496_f2d_876 5th cir cayabyab v commissioner tcmemo_2012_89 103_tcm_1479 and mere forgetfulness does not constitute reasonable_cause see 27_tc_840 the parties agree that petitioner failed to timely file his federal_income_tax returns for accordingly respondent has met his burden of producing evidence showing that the additions to tax under sec_6651 for are appropriate petitioner contends that he exercised ordinary business care and prudence but was unable to timely file his returns because of the problems he faced in filing his and returns petitioner was incarcerated during the time that he would have otherwise filed his return and he forgot about filing the return until he began preparing his return because his business and tax records for and part of were stolen from his attorney’s car and his tax software did not allow him to properly complete his return until he completed his return petitioner contends he was unable to timely file his and returns petitioner asked an irs employee for guidance with respect to the filing of his and returns but he did not document the advice that the irs employee provided the issue of whether the facts recited above establish reasonable_cause for purposes of the sec_6651 additions to tax for and is not before us the only additions to tax that are at issue are those for petitioner has not proven that he made a diligent and reasonable effort to timely file his returns petitioner’s records were not stolen and were presumably available to him he could have used those records to prepare and timely file his returns even if the information available to petitioner was not complete he should have timely filed the returns and later filed amended returns to correct any mistakes caused by any missing information see estate of vriniotis v commissioner t c pincite elec neon inc v commissioner t c pincite3 cayabyab v commissioner t c m cch pincite we therefore conclude that petitioner has not shown that he exercised ordinary business care and prudence with respect to his failure to timely file his returns accordingly petitioner is liable for the additions to tax under sec_6651 for b addition_to_tax under sec_6651 sec_6651 imposes an addition_to_tax for failure to pay the amount of tax shown on a taxpayer’s federal_income_tax return on or before the payment due_date unless such failure is due to reasonable_cause and not due to willful neglect the sec_6651 addition_to_tax applies only when an amount of tax is shown on a return filed by the taxpayer or prepared by the secretary sec_6651 g 120_tc_163 a failure to timely pay the amount shown on a federal_income_tax return is due to reasonable_cause if the taxpayer exercised ordinary business care and prudence in providing for the timely payment of his tax_liability but nevertheless was either unable to pay the tax or would suffer an undue_hardship if he paid on the due_date see sec_301_6651-1 proced admin regs the parties agree that petitioner failed to pay the amounts of tax shown on his returns on or before the payment due_date accordingly respondent has met his burden of producing evidence showing that the additions to tax under sec_6651 for are appropriate the amount of the addition_to_tax under sec_6651 reduces the amount of the addition_to_tax under sec_6651 for any month for which an addition_to_tax applies under both paragraphs sec_6651 petitioner contends that he exercised ordinary business care and prudence but was unable to timely pay the tax shown on his returns because he was unable to timely file those returns however as we explained above see supra pp petitioner has failed to prove that he had reasonable_cause for failing to timely file his returns moreover petitioner’s purported inability to timely file his returns should not have prevented him from reasonably estimating the amount of tax that he would owe on those returns we therefore conclude that petitioner has not shown that he exercised ordinary business care and prudence with respect to his failure to pay the amounts of tax shown on his returns on or before the payment due dates c addition_to_tax under sec_6654 sec_6654 imposes an addition_to_tax on an individual who underpays his estimated_tax the addition_to_tax is calculated with reference to four required_installment payments of the taxpayer’s estimated_tax liability sec_6654 each required_installment of estimated_tax is equal to of the required annual petitioner does not contend that his failure to timely pay the tax shown on his returns was due to his financial circumstances on the payment due dates his contention is that his failure to timely pay the tax shown on his returns was due to his lack of knowledge of the amounts of tax due accordingly we do not consider whether petitioner has established that his financial circumstances on the relevant due dates were such that he could not pay the tax shown on his returns even if he had known the amounts due payment sec_6654 the required_annual_payment is equal to the lesser_of of the tax shown on the individual’s return for that year or if no return is filed of his tax for such year or if the individual filed a return for the immediately preceding_taxable_year of the tax shown on that return sec_6654 and c a taxpayer has an obligation to pay estimated_tax only if he has a required_annual_payment 127_tc_200 aff’d 521_f3d_1289 10th cir see also 121_tc_308 the parties agree that petitioner was required and failed to make estimated_tax payments for accordingly respondent has met his burden of producing evidence showing that the addition_to_tax under sec_6654 is appropriate because there is no reasonable_cause exception to the sec_6654 addition_to_tax petitioner is liable for the addition_to_tax under sec_6654 for iii whether the appeals_office abused its discretion petitioner contends that the appeals_office abused its discretion in sustaining the proposed collection actions because settlement officer breazeale did not allow him to submit an oic during the sec_6320 hearing and failed to address his interest abatement request in the notice_of_determination the administrative record shows that on date petitioner asked settlement officer breazeale to first process his penalty abatement request before he submitted his oic petitioner further asked settlement officer breazeale to let him know whether this was unacceptable settlement officer breazeale noted this request in the case activity record the administrative record however does not show that settlement officer breazeale ever responded to petitioner’s request by failing to respond to petitioner’s request settlement officer breazeale effectively caused petitioner to be under the mistaken impression that he would have an opportunity to submit his oic--and to become current on his tax reporting obligations--if his penalty abatement request was denied we conclude that settlement officer breazeale erred in failing to respond to petitioner’s request and that therefore settlement officer breazeale effectively denied petitioner an opportunity to submit an oic during the sec_6320 hearing under these circumstances remand is appropriate see sec_6330 117_tc_183 churchill v commissioner tcmemo_2011_182 102_tcm_116 there is no indication that petitioner’s request was submitted for an improper purpose the administrative record further shows that petitioner requested interest abatement pursuant to sec_6404 during the sec_6320 hearing the appeals_office failed to address this issue in the notice_of_determination upon remand the appeals_office shall address this issue in a supplemental notice_of_determination see chenery u s pincite antioco v commissioner at jones v commissioner at we have considered the parties’ remaining arguments and to the extent not discussed above conclude those arguments are irrelevant moot or without merit to reflect the foregoing an appropriate order will be issued


department of the treasury internal_revenue_service washington d c date cc intl br wta-n-105867-99 number release date uilc internal_revenue_service national_office technical assistance memorandum for james e wallace irs taxpayer service specialist from m grace fleeman assistant to the branch chief cc intl br subject resident_alien v nonresident_alien status this technical assistance responds to your memorandum dated date technical assistance is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent issue whether portuguese citizens and residents who were at one time admitted to the united_states as lawful permanent residents may elect to be treated as resident aliens for u s tax purposes so that the u s social_security_benefits they are receiving will be taxed under sec_86 instead of sec_871 all references to section are to sections of the internal_revenue_code_of_1986 code as amended wta-n-105867-99 conclusion provided the taxpayers’ status as lawful permanent residents has not been revoked or abandoned they may be treated as resident aliens for purposes of sec_86 if i they refrain from claiming any benefits under the u s -portugal income_tax treaty and ii they file u s tax returns as resident aliens and pay u s income_tax on a net_basis on their worldwide income the determination of whether the taxpayers’ status as lawful permanent residents has been revoked or abandoned must be made under the immigration laws of the united_states which are administered by the immigration and naturalization service ins facts the taxpayers are portuguese citizens and residents who were at one time admitted to the united_states as lawful permanent residents green card holders when they left the united_states they did not relinquish their green cards the taxpayers are receiving u s social_security_benefits they claim they should be treated as resident aliens for purposes of determining how their benefits are taxed by the united_states if the taxpayers are treated as resident aliens sec_86 will apply and a portion of their benefits or percent depending on their income level will be taxed at graduated rates on a net_basis if on the other hand the taxpayers are treated as nonresident_aliens sec_871 will apply and percent of the gross amount of their benefits will be subject_to a percent withholding_tax the taxpayers rely on the last two sentences of the following paragraph in publication u s tax guide for aliens green_card_test you are a resident for tax purposes if you are a lawful permanent resident_of_the_united_states at any time during the calendar_year however see dual status aliens later this is known as the green_card_test you are a lawful permanent resident_of_the_united_states at any time if you have been given the privilege according to the immigration laws of residing permanently in the united_states as an immigrant you generally have this status if the immigration and naturalization service ins has issued you an alien registration card also known as a green card you continue to have resident status under this test unless it is taken away from you or is administratively or judicially determined to have been abandoned law and analysis wta-n-105867-99 sec_7701 provides in relevant part that an alien individual who is lawfully admitted for permanent residence at any time during a calendar_year shall be treated as a resident_of_the_united_states with respect to that calendar_year code sec_7701 for purposes of sec_7701 an individual is a lawful permanent resident_of_the_united_states at any time if-- a such individual has the status of having been lawfully accorded the privilege of residing permanently in the united_states as an immigrant in accordance with the immigration laws and b such status has not been revoked and has not been administratively or judicially determined to have been abandoned code sec_7701 an individual is a nonresident_alien if such individual is neither a citizen_of_the_united_states nor a resident_of_the_united_states within the meaning of sec_7701 code sec_7701 the determination of whether the status of the taxpayers in this case as lawful permanent residents has been revoked or abandoned must be made under the immigration laws of the united_states which are administered by the ins for purposes of the remainder of this memorandum we assume the ins will continue to treat the taxpayers as lawful permanent residents and that the taxpayers therefore will be resident aliens under the rules of sec_7701 however sec_7701 must be applied to the taxpayers with due regard to any treaty obligation of the united_states that applies to the taxpayers code sec_894 when congress enacted sec_7701 it recognized that an individual who would be treated as a resident_alien under sec_7701 might be treated as a nonresident_alien under the so-called tie-breaker rules of the income_tax treaties to which the united_states is a party the legislative_history makes it clear that congress did not intend for sec_7701 to override any treaty obligations of the united_states if the taxpayers’ status as lawful permanent residents has been revoked or if there is an administrative or judicial determination that such status had been abandoned the taxpayers will be nonresident_aliens under sec_7701 and their social_security_benefits must be taxed under sec_871 wta-n-105867-99 the conferees do not intend that the conference agreement override treaty obligations of the united_states for example an alien who is a resident_of_the_united_states under the new statutory definition but who is a resident of a treaty partner of the united_states and not a resident_of_the_united_states under a united_states income_tax treaty will be eligible for the benefits that the treaty extends to residents of the treaty partner h_r rep no 98th cong 2d sess consistent with the legislative intent the regulations issued under sec_7701 allow individuals who would be resident aliens under sec_7701 but nonresident_aliens under an income_tax treaty to claim benefits under the treaty as nonresident_aliens however if such individuals elect to claim treaty benefits they will be treated as nonresident_aliens for purposes of computing their u s tax_liability sec_301_7701_b_-7 coordination with income_tax treaties - a consistency requirement- application the application of this section shall be limited to an alien individual who is a dual_resident_taxpayer pursuant to a provision of a treaty that provides for resolution of conflicting claims of residence by the united_states and its treaty partner a dual_resident_taxpayer is an individual who is considered a resident_of_the_united_states pursuant to the internal laws of the united_states and also a resident of a treaty country pursuant to the treaty partner’s internal laws if the alien individual determines that he or she is a resident of the foreign_country for treaty purposes and the alien individual claims a treaty benefit as a nonresident of the united_states so as to reduce the individual’s united_states income_tax_liability with respect to any item_of_income covered by an applicable tax_convention during a taxable_year in which the individual was considered a dual_resident_taxpayer then that individual shall be treated as a nonresident_alien of the united_states for purposes of computing that individual’s income_tax_liability under the provisions of the internal_revenue_code and the regulations thereunder including the withholding provisions of sec_1441 and the regulations under that section in cases in which the dual_resident_taxpayer is the recipient of income subject_to_withholding with respect to that portion of the taxable_year the individual was considered a dual_resident_taxpayer a dual_resident_taxpayer may elect not to claim treaty benefits and to file returns as a resident_alien see sec_301_7701_b_-7 example wta-n-105867-99 we assume the taxpayers in this case would be treated as residents of portugal under paragraph of article residence of the u s -portugal income_tax treaty treaty which provides the following tie-breaker rule where by reason of the provisions of paragraph an individual is a resident of both contracting states then his status shall be determined as follows a he shall be deemed to be a resident of the state in which he has a permanent home available to him if he has a permanent home available to him in both states he shall be deemed to be a resident of the state with which his personal and economic relations are closer center of vital interests b if the state in which he has his center of vital interests cannot be determined or if he does not have a permanent home available to him in either state he shall be deemed to be a resident of the state in which he has an habitual abode c if he has an habitual abode in both states or in neither of them he shall be deemed to be a resident of the state of which he is a national d if he is a national of both states or of neither of them the competent_authorities of the contracting states shall settle the question by mutual agreement assuming the taxpayers are both lawful permanent residents who would be treated as resident aliens under sec_7701 and residents of portugal who would be treated as nonresident_aliens under article of the treaty it is necessary to determine with respect to each particular taxpayer whether he or she has claimed any benefits under the treaty if a particular taxpayer has claimed benefits under the treaty as a nonresident_alien he or she cannot elect to be treated as a resident_alien for purposes of determining his or her tax_liability under the code article b of the treaty allows the united_states to apply its domestic law to tax social_security_benefits paid to a resident of portugal under the code the taxpayer’s social_security_benefits will be subject_to percent withholding on percent of the gross amount of the benefits under sec_871 wta-n-105867-99 if on the other hand a particular taxpayer has not claimed benefits under the treaty as a nonresident_alien such taxpayer will be treated as a resident_alien if he or she files a u s tax_return as a resident_alien and pays u s tax on his or her worldwide income in this case the taxpayer’s social_security_benefits will be taxable at graduated rates on a net_basis under sec_86 depending on the total amount of the taxpayer’s worldwide income and allowable deductions there may be little or no u s tax actually due on the social_security_benefits if taxpayers who elect to be treated as resident aliens have not been filing u s tax returns as resident aliens they may be liable for unpaid u s taxes on their worldwide income and may be subject_to penalties for failure_to_file as well as penalties and interest on their unpaid taxes if you have any further questions please call m grace fleeman assistant to the branch chief branch office of the associate chief_counsel international


t c memo united_states tax_court christopher e huminski petitioner v commissioner of internal revenue respondent docket no filed date alexander c socia for petitioner michael j gabor for respondent memorandum findings_of_fact and opinion morrison judge the respondent irs determined deficiencies in the petitioner’s and federal_income_tax in the respective amounts of dollar_figure dollar_figure dollar_figure and dollar_figure plus additions to tax under sec_6651 sec_6651 and sec_6654 unless otherwise indicated all section references are to the internal_revenue_code before trial the court issued a partial summary_judgment order stating that huminski earned unreported income during the years at issue in the same amounts as those underlying the deficiencies determined in the notice_of_deficiency although huminski had previously opposed this judgment he does not in his posttrial brief make any further challenges to the deficiency determinations therefore we sustain the deficiency determinations similarly he does not in his posttrial brief contest the irs’s determinations that he is liable for the additions to tax under sec_6651 or the additions to tax under sec_6654 therefore we sustain these determinations as well the only issues remaining for decision are whether huminski is liable for fraudulent-failure-to-file additions to tax under sec_6651 for the years at issue and whether the court should impose a penalty on huminski under sec_6673 at trial the irs made an oral motion to impose this penalty we hold that huminski is liable for the additions to tax under sec_6651 although we decline to impose a penalty under sec_6673 1we need not address the irs’s alternative contentions which were asserted continued findings_of_fact some facts have been deemed stipulated under tax_court rule_of practice procedure f and are so found huminski resided in florida at the time the petition was filed huminski earned a bachelor of science degree and a two-year degree in mechanical design he took an additional year of education courses to be a certified secondary-education teacher but he was never certified from to huminski received compensation from various companies for making technical drawings of machinery during these years he filed federal income-tax returns in which he reported the compensation he received for his services he paid the tax he reported from until huminski testified he was unemployed continued in its amended answer that if the additions to tax under sec_6651 do not apply because the court determines that huminski filed valid returns then huminski should be held liable for additions to tax under sec_6663 and that if the court determines that the additions to tax under sec_6651 do not apply because the court determines that huminski filed valid returns and that additions to tax under sec_6663 do not apply because fraud is not present then huminski should be held liable for accuracy-related_penalties under sec_6662 2we do not find as a matter of fact whether this testimony was truthful as it does not affect our conclusions beginning in huminski began making technical drawings for mid-state machine fabricating corp this company will be referred to as mid-state machine for tax years and huminski filed form sec_1040 u s individual_income_tax_return these purported returns were zero returns in that on each return he listed zero as the amount of his wages total income adjusted_gross_income taxable_income and total_tax to each of his purported returns he attached a self-created form labeled corrected form 1099-misc on which he claimed that he received no income from mid-state machine however during and huminski received dollar_figure dollar_figure dollar_figure and dollar_figure respectively for services performed for mid-state machine for each year mid-state machine issued a form 1099-misc miscellaneous income to huminski reflecting the correct amount it paid him for each year huminski received the correct form 1099-misc from mid- state machine before he submitted to the irs the form he labeled corrected form 1099-misc 3the one exception is that on his purported return for huminski wrote the words not applicable in the line for wages the irs did not treat huminski’s purported returns as valid returns rather pursuant to sec_6020 the irs prepared substitutes for returns for and on date the irs mailed a notice_of_deficiency to huminski regarding his and tax years huminski filed a timely petition with the court additions to tax under sec_6651 opinion the irs determined that huminski is liable for additions to tax under sec_6651 for fraudulently failing to file his and tax returns although huminski mailed the irs what purported to be tax returns he filled in zeros for all lines where he should have reported income and the irs treated the form sec_1040 as invalid returns the majority of courts of appeals as well as this court have held that generally a return that contains only zeros is not a valid_return see 738_f2d_157 6th cir 727_f2d_681 8th cir 638_f2d_182 10th cir 627_f2d_830 7th cir 618_f2d_280 5th cir 604_f2d_232 3d cir 120_tc_163 for example in moore f 2d pincite the court_of_appeals for the seventh circuit noted that a tax might conceivably be calculated on the basis of the zero entries however it is not enough for a form to contain some income information there must also be an honest and reasonable intent to supply the information required by the tax code see also mosel f 2d pincite accordingly we conclude that the returns huminski filed were invalid and tantamount to failing to file returns we must therefore consider whether huminski’s failure_to_file returns was fraudulent in deciding whether a failure_to_file is fraudulent under sec_6651 we consider the same elements that are considered in imposing the addition_to_tax for fraud under former sec_6653 and present sec_6663 102_tc_632 the irs must establish by clear_and_convincing evidence that huminki’s failure_to_file was fraudulent see sec_7454 clayton v commissioner t c pincite the instant case involves many indicators of fraud for example huminski failed to file valid returns for the years at issue huminski failed to make any payments for those years as he was an independent_contractor huminski was supposed to prepay his tax in quarterly installments on brief huminski argues that his conduct was not fraudulent because he genuinely believed that if someone files an income-tax return that is based on personal knowledge then the correctness of the return cannot be questioned by the irs or the courts although he testified that this was his belief we find his testimony incredible huminski did not have a good-faith misunderstanding of the law huminski knew of his legal duty to file tax returns and pay tax and sought to avoid it huminski has no defense to the fraudulent-failure-to-file additions to tax see 99_tc_202 we find that the irs has established fraud by clear_and_convincing evidence thus huminski is liable for the additions to tax under sec_6651 for and section-6673 penalty the irs moved that the court impose a penalty against huminski pursuant to sec_6673 sec_6673 authorizes the court to require a taxpayer to pay a penalty to the united_states in an amount not to exceed dollar_figure whenever it appears to the court that the taxpayer instituted or maintained the proceeding primarily for delay or that the taxpayer’s position in the proceeding is frivolous or groundless huminski’s posttrial brief signed by a lawyer that he had retained after trial is free of frivolous arguments we decline to impose the penalty against huminski although we warn him that making such arguments before this court in the future will likely result in the imposition of the penalty against him conclusion huminski is liable for the deficiencies the additions to tax under sec_6651 the additions to tax under under sec_6651 and the additions to tax under sec_6654 that the irs determined to reflect the foregoing an appropriate order and decision will be entered


department of the treasury intern al revenue service washi ng ton d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n date number release date uil the honorable robert b aderholt u s house of representatives washington dc dear mr aderholt i am responding to your inquiry dated date on behalf of your constituent ---------------------- --------------- asked about the ability of public_charities to engage in lobbying_activities as you requested i responded directly to --------------- i am enclosing a copy of my response i hope this information is helpful if you have any questions please contact me at ----- -------------- or ------------------------ identification_number ------------- at ----- -------------- sincerely dave fish for lois g lerner director exempt_organizations enclosure department of the treasury intern al revenue service washi ng ton d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n uil date date person to contact and id number contact telephone number dear this letter responds to your email dated date to representative robert aderholt you asked about the extent to which a public charity described in sec_501 of the internal_revenue_code may engage in lobbying_activities you also asked under what circumstances an individual is considered as acting on behalf of the charity with regard to lobbying rather than in some other capacity representative aderholt has asked us to respond to you directly in general a public charity will not qualify for tax-exempt status if a substantial part of its activities is attempting to influence legislation we find that a public charity is attempting to influence legislation if it contacts or urges the public to contact members or employees of a legislative body for the purpose of proposing supporting or opposing legislation or if the charity advocates the adoption or rejection of legislation a public charity may engage in some lobbying but if it engages in too much lobbying it risks the imposition of excise_taxes or loss of its tax-exempt status a charity may however become involved in issues of public policy without the activity being considered lobbying for example a public charity may conduct educational meetings prepare and distribute educational materials or otherwise consider public policy issues in an educational manner without jeopardizing its tax-exempt status lobbying activity may be measured under either the substantial part test or the expenditure test whether lobbying constitutes a substantial part of a charity’s overall activities is based on all the pertinent facts and circumstances in each case we consider a variety of factors including the expenditures and the time the organization devotes by both compensated and volunteer workers to the activity when we determine whether the lobbying activity is substantial certain organizations may elect the expenditure test under sec_501 as an alternative method for measuring lobbying activity under the expenditure test the extent of an organization’s lobbying activity will not jeopardize its tax-exempt status provided its expenditures related to such activity do not normally exceed a specified limit this limit is generally based upon the size of the organization and may not exceed dollar_figure we determine whether an individual engaged in lobbying on behalf of a charity or in some other capacity on a case-by-case basis in light of all relevant facts and circumstances for more information regarding a charity’s ability to engage in lobbying_activities please see publication tax-exempt status for your organization which you can find at http www irs gov pub irs-pdf p557 pdf you stated that you believe several public_charities are engaged in too much lobbying although you do not name any particular charities we maintain an ongoing examination program to ensure exempt_organizations continue to meet the requirements for tax- exempt status when we receive information about an organization that raises questions about its continued exempt status or compliance with the tax laws we forward the information to our dallas office to determine if it warrants an examination or other action if you have information about an exempt_organization you want to submit for our consideration please send it to irs - eo classification commerce street mc dal dallas tx the internal_revenue_code includes taxpayer privacy provisions the congress enacted to protect the privacy of tax returns and tax_return information of all taxpayers therefore i cannot comment on what action if any we take on the information provided this letter is for informational purposes only and is intended to provide general statements of well-defined law it is not a ruling and may not be relied on as such see revproc_2013_4 internal_revenue_bulletin we will make this letter available for public inspection we will delete any name address and other identifying information as appropriate under the freedom_of_information_act see announcement 2000_2_irb_295 if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely david l fish manager exempt_organizations guidance cc the honorable robert b aderholt


t c memo united_states tax_court charles e shepherd petitioner v commissioner of internal revenue respondent docket no filed date charles e shepherd pro_se david choi for respondent memorandum opinion foley judge respondent determined a dollar_figure deficiency and a dollar_figure accuracy-related_penalty for all section references are to the internal_revenue_code in effect for and all rule references are to the tax_court rules_of_practice and procedure the issues for decision are whether petitioner is entitled to deductions for business_expenses we hold that he is to the extent provided below whether petitioner is entitled to certain itemized_deductions we hold that he is to the extent provided below whether petitioner is entitled to a credit for federal tax paid on fuel we hold that he is not whether petitioner is liable for an accuracy-related_penalty we hold that he is petitioner resided in evanston illinois at the time he filed his petition during petitioner worked as a traveling salesperson driving to various sites and selling peanuts candy soda pastries and other snacks out of his automobiles he also sold bibles and secondhand clothing petitioner filed in a timely manner his federal_income_tax return on schedule c of the return he reported dollar_figure of gross_receipts dollar_figure of other income ie relating to fuel credits and dollar_figure of expenses on schedule a he claimed dollar_figure of deductions in the notice_of_deficiency respondent disallowed all of petitioner's schedule c expenses and the following schedule a deductions dollar_figure of taxes dollar_figure of charitable_contributions dollar_figure of casualty losses and dollar_figure of miscellaneous deductions in addition respondent disallowed an dollar_figure credit and the dollar_figure of other income on schedule c that petitioner claimed for federal tax paid on fuel petitioner who has the burden_of_proof 290_us_111 contends that respondent erred in disallowing the expenses and deductions claimed on his return in an attempt to substantiate his expenses and deductions petitioner submitted a disorganized assortment of receipts the vast majority of these receipts relate either to personal expenses or to cost_of_goods_sold which respondent allowed in full petitioner did however substantiate dollar_figure of charitable_contributions and dollar_figure of expenses relating to the business use of his automobiles petitioner is not entitled to the other expenses and deductions that he claimed petitioner contends that he is entitled to a credit for fuel excise_taxes that he allegedly paid sec_34 allows a credit for excise_tax paid with respect to gasoline used for certain qualifying purposes such as farming off-highway use and public transportation on form_4136 petitioner claimed a fuel tax_credit relating to big_number gallons of gasoline that he allegedly purchased petitioner failed however to establish a qualifying purpose accordingly petitioner is not entitled to the sec_34 credit petitioner contends that respondent should not have imposed an accuracy-related_penalty sec_6662 imposes an accuracy- related penalty in an amount equal to percent of the portion of the underpayment_of_tax attributable to negligence or disregard of rules or regulations sec_6662 and b sec_1_6001-1 income_tax regs requires taxpayers to keep adequate_records of their deductions and expenses petitioner disregarded this regulation in addition petitioner failed to exercise due care in claiming a tax_credit for the alleged purchase of big_number gallons of gasoline accordingly petitioner is liable for the accuracy-related_penalty all other contentions raised by the parties are either moot or without merit to reflect the foregoing decision will be entered pursuant to rule