internal_revenue_service number release date index number -------------------------- ---------------------- --------------------------------------------------- -------------------------- in re ------------------ department of the treasury washington dc person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc intl-plr-164304-02 date may taxpayer legend --------------------------------------------------------------------------------------------- ----------------------- -------------------- election_year individual a --------------------- dear --------------- this replies to your letter dated date submitted on behalf of taxpayer in which taxpayer requests an extension of time under sec_301_9100-3 to elect the provisions of revproc_89_45 1989_2_cb_596 for the election_year additional information was submitted in a letter dated date in which taxpayer elected to apply the provisions of revproc_2002_23 2002_1_cb_744 rather than revproc_89_45 as originally requested in the ruling_request the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process plr-164304-02 taxpayer is a united_states citizen and a canadian citizen and canadian resident taxpayer established and contributed to a canadian registered retirement savings_plan rrsp taxpayer timely filed her u s income_tax return for the election_year but she failed to make the election under revproc_89_45 to defer u s income_tax on the current earnings_of the rrsp taxpayer has never taken a distribution from her rrsp individual a is a licensed chartered accountant in canada and has prepared the canadian and u s income_tax returns of taxpayer for over ten years neither the taxpayer nor individual a was aware of the election provided by revproc_89_45 until individual a read about the election in a professional accounting journal and notified taxpayer about the election this information prompted taxpayer to request relief to file the missed election 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 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 election provided in revproc_2002_23 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 plr-164304-02 based on the facts and circumstances of this case we conclude that taxpayer satisfies the standards of sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to elect the provisions of rev_proc for the election_year pursuant to section dollar_figure of revproc_2002_23 the election once made cannot be revoked except with the consent of the commissioner pursuant to section dollar_figure of revproc_2002_23 taxpayer must attach a copy of the election statement to her timely filed including extensions u s federal_income_tax return for each year subsequent to the election_year until the tax_year in which a final distribution is made from the rrsp as provided in sec_301_9100-1 the granting of an extension of time is not a determination that taxpayer is otherwise eligible to make the election for the election_year 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 a copy of this ruling letter should be associated with the tax_return for the election_year this ruling is directed only to taxpayer who has requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to taxpayer sincerely associate chief_counsel international by s allen goldstein allen goldstein reviewer enclosure copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division uniform issue list aug set ep lat legend taxpayer a ira b financial_institution c financial_institution d account e amount dear this letter is in response to a request for a letter_ruling dated date as modified and supplemented by additional correspondence dated date from your authorized representative in which you have applied for a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to an error committed by financial_institution d taxpayer a further represents that amount has not been used for any purpose taxpayer a maintained ira b an individual_retirement_account under sec_408 of the code with financial_institution c on date taxpayer a closed her ira with financial_institution c with the intention to complete a direct_rollover to an ira with financial_institution d taxpayer a received a check made payable to financial_institution d fbo taxpayer a ira taxpayer a immediately went to financial_institution d and presented them with the direct_rollover check amount was mistakenly put into a non-ira cd instead of an ira cd an employee of financial_institution d signed an affidavit acknowledging it was their error that caused amount to be deposited in a non-ira account zuu54606 hp based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 of the code any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code sec_408 of the code provides that sec_408 of the code does not apply to any amount described in sec_408 of the code received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 i of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred 2zuu940u6g the information presented and the documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover of amount was due to an error committed by financial_institution d therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute amount into a rollover ira provided all other requirements of sec_408 of the code except the day requirement are met with respect to such contribution amount will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office if you wish to inquire about this ruling please contact at sincerely yours carblore- willen carlton a watkins manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice cc


t c summary opinion united_states tax_court rodrigo kho and loreta kho petitioners v commissioner of internal revenue respondent docket no 10398-16s filed date rodrigo kho and loreta kho pro sese jason t scott for respondent summary opinion carluzzo chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not 1unless otherwise indicated section references are to the internal revenue continued reviewable by any other court and this opinion shall not be treated as precedent for any other case in a notice_of_deficiency dated date notice respondent determined deficiencies in petitioners’ federal_income_tax and accuracy-related_penalties as follows penalty year deficiency sec_6662 dollar_figure dollar_figure big_number big_number the issues for decision are whether petitioners are entitled to charitable_contribution deductions claimed on schedules a itemized_deductions for donations made in cash and or property during the years in issue entitled to various deductions claimed on schedules c profit or loss from business for certain expenses related to a foster care business in excess of amounts allowed by respondent entitled to certain dependency_exemption deductions claimed on their return entitled to education credits under sec_25a for and liable for a sec_6662 accuracy-related_penalty for either year in issue continued code code as amended and in effect for the years in issue and rule references are to the tax_court rules_of_practice and procedure dollar amounts have been rounded to the nearest dollar background some of the facts have been stipulated and are so found at the time the petition was filed petitioners resided in california petitioners have two children a son and a daughter during and petitioners and their son resided in a big_number square-foot single-family house along with two adult individuals with developmental disabilities who were placed with petitioners under a state-sponsored foster care program foster care clients petitioners purchased the house in for dollar_figure in petitioners added three additional bedrooms and an additional bathroom square feet to what had been a two bedroom big_number square-foot house two of the additional bedrooms and the additional bathroom were used exclusively by the foster care clients the third additional bedroom was used primarily but not exclusively by the foster care clients one of the foster care clients moved into petitioners’ house in date and the other moved into the house in date during the years in issue one of the foster care clients routinely spent weekends at his parents’ home with the exception of certain holidays the other foster care client lived with petitioners year round and accompanied them on family vacations and recreational outings one of the foster care clients had special dietary requirements and restrictions a state_agency paid petitioners dollar_figure in and dollar_figure in for providing foster care services to the foster care clients the services petitioners provided to these individuals included purchasing their food preparing their meals and transporting them to their numerous doctors’ appointments and other activities away from the house at all times relevant petitioners owned a bmw and a lexus petitioners did not maintain contemporaneous mileage logs for either vehicle however they did keep receipts for automobile repairs and gas they also maintained receipts and or records for expenses_incurred for groceries travel meals and entertainment repairs and certain noncash charitable_contributions mrs kho was not employed during either year in issue mr kho was employed by various healthcare providers during both years petitioners’ timely filed joint and federal_income_tax returns were prepared by a paid income_tax_return_preparer the and returns reported wages of dollar_figure and dollar_figure respectively from mr kho’s employment petitioners claimed dependency_exemption deductions for both of the foster care clients on their return but not on their return each return includes a schedule c and a schedule a the income and deductions attributable to the foster care services they provided for the foster care clients are shown on the schedules c as follows income gross_receipts or sales gross_income expenses car and truck1 contract labor depreciation and sec_179 expense2 legal and professional office rent or lease of vehicles machinery and equipment supplies taxes and licenses travel meals and entertainment utilities other3 business use of home total dollar_figure big_number dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number -0- big_number big_number -0- big_number big_number big_number net profit loss big_number big_number 1mrs kho testified that the car and truck expense for each year was computed on the basis of actual expenses however a review of the returns shows that the expenses were actually computed using the standard mileage rate the commissioner generally updates the optional standard mileage rate annually see sec_1_274-5 income_tax regs revproc_2010_51 2010_51_irb_883 for the rate wa sec_55 cents per mile see notice_2012_1 sec_2 2012_2_irb_260 for the rate wa sec_56 cents per mile see notice_2012_72 sec_2 2012_50_irb_673 2petitioners attached form_4562 depreciation and amortization to their return which shows how the dollar_figure depreciation deduction was calculated 3the deduction for other expenses for each year includes parking fees education postage and groceries for the deduction for other expenses also includes salon for clients as relevant here the schedules a show charitable_contribution deductions as follows year cash noncash dollar_figure dollar_figure big_number according to petitioners they regularly donated money and property to a church and some non-profit organization petitioners attached form_8283 noncash charitable_contributions to their return generally describing the noncash contributions as bags of clothing household_items toys the fair_market_value of the donated property is reported as dollar_figure they did not attach form_8283 to their return in support of their claim to the cash contributions petitioners submitted bank records supporting a dollar_figure deduction for cash contributions to a church petitioners’ return also includes form_8863 education credits on that form petitioners claimed an american_opportunity_tax_credit aotc of dollar_figure of which they treated dollar_figure as refundable and dollar_figure as nonrefundable according to the form the credit is attributable to petitioners’ daughter’s education expenses at the university of portland a form 1098-t tuition statement issued to petitioner’s daughter by the university suggests that none of the qualifying tuition billed for was paid in the notice respondent disallowed all the deductions for schedule a noncash charitable_contributions for and disallowed all but dollar_figure of the deductions claimed on the and schedules a for cash charitable_contributions disallowed the dependency_exemption deductions for the foster care clients for disallowed in full or in part schedule c deductions for car and truck expenses depreciation travel meals and entertainment utilities and groceries disallowed dollar_figure of the dollar_figure deduction for expenses attributable to the business use of petitioners’ home for disallowed dollar_figure of the dollar_figure deduction for expenses attributable to the business use of petitioners’ home for disallowed the aotc for and imposed a sec_6662 accuracy-related_penalty on various grounds for each year some of the adjustments made in the notice are computational and will not be discussed discussion as a general_rule the commissioner’s determination of a taxpayer’s liability in a notice_of_deficiency is presumed correct and the taxpayer bears the burden of proving that the determination is incorrect rule a 290_us_111 deductions and credits are a matter of legislative grace and the taxpayer generally bears the burden of proving entitlement to any deduction or credit claimed rule a 503_us_79 292_us_435 i charitable_contribution deductions petitioners claimed a dollar_figure charitable_contribution_deduction on their return consisting of dollar_figure in cash contributions and dollar_figure in noncash contributions petitioners claimed a dollar_figure charitable_contribution_deduction on their return consisting of dollar_figure in cash contributions and dollar_figure in noncash contributions according to respondent petitioners are not entitled to any deduction greater than the amounts already allowed because they failed to substantiate the claimed deductions 2petitioners do not claim and the record does not otherwise demonstrate that the provisions of sec_7491 are applicable here and we proceed as though they are not sec_170 allows deductions for contributions made during a taxable_year to qualifying organizations cash contributions must be substantiated by canceled checks or receipts from the donee showing the donee’s name and the date and amount of the donation sec_170 in general a gift of property must be substantiated by a receipt from the donee showing the donee’s name the date and location of the contribution and a description of the property contributed sec_1_170a-13 income_tax regs any contribution of dollar_figure or more must also satisfy the requirement of sec_1_170a-13 income_tax regs which provides that to claim a charitable_contribution_deduction of dollar_figure or more the taxpayer must substantiate the contribution with a contemporaneous written acknowledgment from the donee organization sec_170 the contemporaneous written acknowledgment must contain a statement of the amount of cash or a description of any property other than cash contributed a statement as to whether the donee organization provided any goods or services in consideration for any property contributed and a description and good-faith estimate of the value of any provided goods or services or if such goods or services consist of intangible religious benefits a statement to that effect see sec_170 sec_1_170a-13 income_tax regs a written acknowledgment is contemporaneous if it is obtained by the taxpayer on or before the earlier of the date the taxpayer files the original return for the taxable_year of the contribution or the due_date including extensions for filing the original return for the year sec_170 sec_1_170a-13 income_tax regs if a taxpayer makes a charitable_contribution of property other than money and claims a deduction in excess of dollar_figure with respect to the contribution of that item then the taxpayer must maintain written records showing the manner of acquisition of the item and the approximate date of the acquisition see sec_1_170a-13 income_tax regs a cash charitable_contributions with respect to the cash charitable_contributions petitioners provided a bank statement purporting to substantiate some of the cash contributions they claim to have made in the bank statement shows a number of checks in the amount of dollar_figure that total dollar_figure during although the bank statement does not identify the payee we find that the bank statement along with petitioners’ 3separate contributions of less than dollar_figure are not subject_to the requirements of sec_170 regardless of whether the sum of the contributions made by a taxpayer to a donee organization during a taxable_year equals dollar_figure or more see sec_1_170a-13 income_tax regs testimonies on the point is sufficient to allow a dollar_figure cash charitable_contribution_deduction for petitioners did not otherwise provide any documentation to substantiate cash donations made in or accordingly petitioners are not entitled to a deduction for cash charitable_contributions greater than dollar_figure for and the amount respondent has already allowed for b noncash charitable_contributions with respect to the noncash charitable_contributions petitioners attached form_8283 to their return showing a contribution of property valued at dollar_figure to the cancer control society according to form_8283 petitioners purchased the donated property in date petitioners provided a donation receipt from the cancer control society describing the donated property as clothes household_items toys the donation receipt establishes nothing more than the fact that certain items generally and vaguely described were donated to the organization that issued the receipt we are satisfied that a donation was made but nothing in the record supports the value that petitioners attributed to the donation instead the record would allow for a noncash charitable_contribution_deduction of dollar_figure for and we so find petitioners did not provide any substantiating documents for the noncash charitable_contribution_deduction for accordingly petitioners are not entitled to a noncash charitable_contribution_deduction for ii schedule c deductions taxpayers may deduct ordinary and necessary expenses paid in connection with operating a trade_or_business sec_162 122_tc_305 to be ordinary the expense must be of a common or frequent occurrence in the type of business involved 308_us_488 to be necessary an expense must be appropriate and helpful to the taxpayer’s business welch v helvering u s pincite a deduction normally is not allowed however for personal living or family_expenses sec_262 whether an expenditure satisfies the requirements for deductibility under sec_162 is a question of fact see 320_us_467 as a general_rule if a taxpayer provides sufficient evidence that the taxpayer has paid_or_incurred a trade_or_business expense contemplated by sec_162 but is unable to adequately substantiate the amount the court may estimate the amount and allow a deduction to that extent 39_f2d_540 2d cir however in order for the court to estimate the amount of an expense there must be some basis upon which an estimate may be made 85_tc_731 otherwise any allowance would amount to unguided largesse 245_f2d_559 5th cir respondent agrees that petitioners were engaged in a foster care trade_or_business during each year in issue but according to respondent petitioners failed to substantiate the amounts claimed for the disallowed schedule c expenses or establish that they were ordinary and necessary trade_or_business_expenses of that business a car and truck travel meals and entertainment utilities and groceries petitioners acknowledge that the deductions claimed on the schedule c for each year in issue include both personal and business_expenses a taxpayer seeking a business_expense deduction for what would ordinarily be considered personal living_expenses such as vehicle expenses and meals and entertainment_expenses for oneself and one’s dependents must demonstrate that the expenditures were different from or in excess of that which would have been made for the taxpayer’s personal purposes 77_tc_911 quoting 21_tc_170 petitioners failed to show that their car and truck travel meals and entertainment utilities and groceries expenses in excess of the amounts allowed by respondent were different from or exceeded those they would have spent for personal purposes accordingly we find that the expenses in dispute were primarily for petitioners’ and their son’s personal benefit and any business_purpose was distinctly secondary and incidental see eg 55_tc_94 consequently we conclude that the disputed amounts constitute nondeductible personal living or family_expenses under sec_262 b depreciation and business use of home a taxpayer generally is not entitled to deduct any expenses related to a dwelling_unit used as a residence during the taxable_year sec_280a sec_280a provides an exception for certain business uses of a dwelling_unit provided the dwelling_unit has a portion which is exclusively used on a regular basis a as the principal_place_of_business for any trade_or_business of the taxpayer b as a place of business which is used by patients clients or customers in meeting or dealing with the taxpayer in the normal course of his trade_or_business or c in the case of a separate structure which is not attached to the dwelling_unit in connection with the taxpayer’s trade_or_business depreciation petitioners claimed deductions of dollar_figure and dollar_figure for depreciation on schedules c for and respectively according to petitioners the deductions for depreciation are attributable entirely to their use of their personal_residence there is allowed as a depreciation deduction a reasonable allowance for the exhaustion and wear_and_tear including obsolescence of property used in a trade_or_business sec_167 as relevant here the basis for depreciation is the cost of the property sec_167 sec_1011 respondent agrees that petitioners satisfy at least one of the exceptions set forth in sec_280a furthermore petitioners have shown that two of the additional bedrooms and the additional bathroom were used exclusively and on a regular basis for their foster care business as best we can tell from what has been submitted we calculate that the additional bedrooms and the additional bathroom represent or square feet of the total square footage added during the renovation to claim the deductions for depreciation petitioners must establish the depreciable basis in the renovation on the basis of the record and specifically petitioners’ testimony we find that petitioners’ cost of the renovation in was dollar_figure see cohan v commissioner f 2d pincite accordingly petitioners are entitled to deductions for depreciation for each year in issue in accordance with our findings above the appropriate depreciation calculation should be reflected in the parties’ rule_155_computations business use of home petitioners claimed deductions of dollar_figure and dollar_figure for the business use of their home on schedules c for and respectively petitioners reported that and of their home was used exclusively for business during and respectively as we determined above petitioners used square feet out of the home’s total area of big_number square feet exclusively for business thus of their home was used exclusively for business accordingly petitioners are entitled to deductions for the business use of their home for each year in issue in accordance with our findings above the appropriate deductions should be reflected in the parties’ rule_155_computations iii dependency_exemption deduction petitioners claimed a dependency_exemption deduction for each foster care client for respondent contends that petitioners have not proved that their foster care clients resided with them for more than one-half of and that they provided more than one-half of their foster care clients’ support in computing taxable_income sec_151 allows as a deduction an exemption for each dependent of a taxpayer sec_152 defines the term dependent to mean either a qualifying_child see sec_152 c or a qualifying_relative see sec_152 d of the taxpayer a qualifying_child in order to be a taxpayer’s qualifying_child an individual must a bear a specified relationship to the taxpayer b have the same principal_place_of_abode as the taxpayer for more than one-half of the taxable_year c meet certain age requirements d have not provided more than one-half of his or her own support for the year and if married e have not filed a joint_return other than only for a claim of refund with his or her spouse sec_152 the term child includes an individual who is an eligible_foster_child of the taxpayer sec_152 the term eligible_foster_child for the purposes of subparagraph a ii means an individual who is placed with the taxpayer by an authorized_placement_agency or by judgment decree or other order of any court of competent jurisdiction sec_152 petitioners acknowledged that their foster care clients did not have the same principal_place_of_abode as petitioners for more than one-half of it follows that their foster care clients were not petitioners’ qualifying children within the meaning of sec_152 b qualifying_relative the term qualifying_relative means an individual a who bears a specified relationship to the taxpayer b whose gross_income is less than the exemption_amount c with respect to whom the taxpayer provides over one-half of the individual’s support and d who is not a qualifying_child of the taxpayer or of any other taxpayer sec_152 in applying the support_test we evaluate the amount of support furnished by the taxpayer as compared to the total amount of support received by the claimed dependent from all sources 554_f2d_564 2d cir aff’g 64_tc_720 sec_1_152-1 income_tax regs the taxpayer must initially demonstrate by competent evidence the total amount of support furnished by all sources for the taxable_year in issue 56_tc_512 otherwise the taxpayer cannot be said to have established that he provided more than one-half of the support for the claimed dependent id pincite support provided by a third party such as a federal or state_agency is not considered support furnished by the taxpayer see eg 644_f2d_2 5th cir aff’g tcmemo_1980_111 61_tc_685 aff’d 514_f2d_1095 7th cir williams v commissioner tcmemo_1996_126 aff’d without published opinion 119_f3d_10 11th cir petitioners paid various expenses on behalf of their foster care clients during however they introduced no evidence of the total support furnished for each moreover a state_agency paid petitioners dollar_figure in for providing foster care services to their foster care clients as noted above the state_agency payments do not constitute support by petitioners see 61_tc_685 consequently petitioners have not established that they provided over one half of their foster care clients’ support during it follows that petitioners’ foster care clients were not their qualifying relatives within the meaning of sec_152 accordingly petitioners are not entitled to the dependency_exemption deductions here in dispute and respondent’s disallowances of those deductions are sustained iv aotc on form_8863 attached to their return petitioners claimed an aotc of dollar_figure of which they treated dollar_figure as refundable and dollar_figure as nonrefundable according to that form the credit is attributable to petitioners’ daughter’s education expenses at the university of portland the aotc is a modified version of the hope scholarship credit see sec_25a it provides for a credit for qualified_tuition_and_related_expenses paid_by a taxpayer for education furnished to an eligible_student the credit is equal to a percent of so much of the qualified_tuition_and_related_expenses paid_by the taxpayer during the taxable_year as does not exceed dollar_figure plus b percent of such expenses so paid as exceeds dollar_figure but does not exceed dollar_figure sec_25a the statute defines qualified_tuition_and_related_expenses to include tuition and fees at an eligible_educational_institution that the taxpayer the taxpayer’s spouse or the taxpayer’s dependent attends as well as course materials sec_25a i petitioners did not provide any canceled checks credit card statements bank account statements account statements from the university of portland or any other document that shows that they paid any of the qualified_tuition_and_related_expenses shown on the form_8863 the form 1098-t suggests that nothing was paid that being so petitioners are not entitled to the aotc here in dispute and respondent’s disallowance of the credit is sustained v sec_6662 accuracy-related_penalties lastly we consider whether petitioners are liable for a sec_6662 accuracy-related_penalty for either year in issue as relevant here sec_6662 imposes a penalty of of the portion of an underpayment_of_tax attributable to the taxpayer’s negligence or disregard of rules or regulations or substantial_understatement_of_income_tax sec_6662 and b and negligence includes any failure to make a reasonable attempt to comply with the provisions of the code including any failure to keep adequate books_and_records or to substantiate items properly sec_6662 sec_1_6662-3 income_tax regs a substantial_understatement_of_income_tax includes an understatement of income_tax that exceeds the greater of of the tax required to be shown on the return or dollar_figure sec_6662 sec_1_6662-4 income_tax regs respondent bears the burden of production with respect to the imposition of the sec_6662 accuracy-related_penalties see sec_7491 116_tc_438 sec_6751 provides that subject_to certain exceptions in sec_6751 no penalty shall be assessed unless the initial determination of the assessment is personally approved in writing by the immediate supervisor of the individual making the determination or such higher level official as the secretary may designate written approval of the initial penalty determination under sec_6751 must be obtained no later than the date the notice_of_deficiency is issued or the date the commissioner files an answer or amended answer asserting the penalty 851_f3d_190 2d cir aff’g in part rev’g in part tcmemo_2015_42 see also graev v commissioner 149_tc_485 supplementing and overruling in part 147_tc_460 the sec_6662 accuracy-related_penalties determined in the notice were properly approved as required by sec_6751 the record includes a civil penalty approval form approving imposition of accuracy-related_penalties against petitioners for and and executed by the internal_revenue_service tax examiner’s immediate supervisor before the date the notice was issued respondent has proven sufficient facts to satisfy the burden of production as to that requirement petitioners did not present adequate documents substantiating their claimed charitable_contributions for and or their payment of qualified_tuition_and_related_expenses shown on the form_8863 they also claimed significant personal expenses as schedule c expenses for the years in issue therefore respondent has met his burden of production with respect to the imposition of sec_6662 accuracy-related_penalties the accuracy-related_penalty does not apply to any part of an underpayment_of_tax if it is shown that the taxpayer acted with reasonable_cause and in good_faith with respect to that portion sec_6664 the determination of whether a taxpayer acted in good_faith is made on a case-by-case basis taking into account all the pertinent facts and circumstances sec_1_6664-4 income_tax regs circumstances that may indicate reasonable_cause and good_faith include an honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances including the experience knowledge and education of the taxpayer id petitioners bear the burden of proving that they had reasonable_cause and acted in good_faith with respect to the underpayments see higbee v commissioner t c pincite considering all the facts and circumstances including petitioners’ good- faith reliance on the assistance of an accountant in preparing their tax returns for the years in issue we conclude that petitioners have shown reasonable_cause and that they acted in good_faith in respect of the portions of the underpayments that are attributable to the disallowance of deductions for depreciation and business use of home expenses claimed on their schedules c for and and the dependency_exemption deductions claimed for therefore we hold that petitioners are not liable for sec_6662 accuracy-related_penalties in respect of those portions of the underpayments in contrast petitioners’ explanations for claiming personal expenses as business_expenses on their schedules c and their failure to substantiate payments of the qualified_tuition_and_related_expenses shown on the form_8863 and charitable_contributions for and do not demonstrate that they acted with reasonable_cause and in good_faith with respect to the portions of the underpayments attributable to those adjustments and we therefore conclude that petitioners are liable for the penalties in respect of those portions of the underpayments to reflect the foregoing decision will be entered under rule


number release date id office uilc cca-921123-09 ----------------------------- from --------------- sent friday date am to ---------------------- cc ---------------------------- subject re school_bus drivers school districts if they reported on particularly as nonee comp driver should have reported income offset by deductions on for both income seca purposes of course maybe the deductions wipe out the income which gives them a benefit beyond what they would get as ees -------------------------------------------- ------------------------------------------------------it sounds like they would have some facts for the separate lease agreement and some facts against it b c they were not as consistent as they should have been we put out a rr a few years ago saying ee can't lease to er but leaves open by silence the possibility of dual relationship ie that there is a separate lessee-lessor relationship ---------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------


internal_revenue_service number release date index number ----------------------------------------------- ----------------------------------------- ------------------------- in re ----------------------- ----------------------------- ------------------------- department of the treasury washington dc person to contact ---------------------------- id no -------------- ---------------------------------------------------- telephone number --------------------- refer reply to cc corp b06 - plr-145200-03 date date distributing controlled ------------------------------------------------------------ ------------------------------------------------------------ -------------------------------- ------------------------------------------------------------ ------------------------------------------------------------ --------------------------------------- --------------------------------- ------------- ---------------------- -------------------------------------------- ------------------------------------------------- ----------------------- --------------------- ------------------------ -------- ----- ----- --------- --------- date a state b busine sec_1 busine sec_2 busine sec_3 asset xyz shareholder aa shareholder bb x y z p q dear ------------------------------ this letter responds to your letter dated date in which rulings were requested as to the federal_income_tax consequences of a proposed transaction additional information was submitted in a letter dated date the information submitted for consideration is summarized below distributing was incorporated as a subchapter_c_corporation in state b on date a distributing is on the cash_basis of accounting and directly conducts busine sec_1 busine sec_2 and busine sec_3 distributing currently has x shares of common_stock outstanding y shares or p of such common_stock is owned by shareholder aa and trusts established for the benefit of the shareholder aa family hereinafter referred to as the shareholder aa family trusts z shares or q of such common_stock is owned by shareholder bb and trusts established for the benefit of the shareholder bb family hereinafter referred to as the shareholder bb family trusts there are no security holders of distributing shareholder aa serves as the president of distributing and shareholder bb is the vice president financial information has been received indicating that distributing's busine sec_1 busine sec_2 and busine sec_3 has had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years information has been submitted indicating that certain disagreements have arisen regarding the operations of distributing between the families of shareholder aa and shareholder bb such disagreements have primarily involved disputes concerning the risks associated with the continued expansion of distributing’s holdings of asset xyz through leveraged financing as well as operation and control of asset xyz shareholder aa and shareholder bb along with their respective families have very distinct and different views for the future of distributing and each desires to pursue different visions of the company differing views of how to run the businesses raise disagreements between the shareholders regarding the investments and risks associated with such actions these disagreements adversely affect the normal operations of distributing’s businesses to resolve these management and systemic problems the shareholders have decided to engage in a split-off so that the shareholders may each go their separate way distributing proposes the following series of transactions distributing will transfer certain assets subject_to certain liabilities of busine sec_1 busine sec_2 and busine sec_3 to controlled a newly formed state b wholly owned subchapter_c_corporation controlled will be on the cash_basis of accounting it is anticipated that the assets transferred to controlled will represent q of the fair_market_value of all the assets net of liabilities which it owns and manages in exchange for such capitalization distributing will receive all of the z outstanding shares of controlled stock distributing will distribute the controlled stock to shareholder bb and the shareholder bb family trusts in exchange for all of shareholder bb’s and the shareholder bb family trusts distributing stock no shareholders of distributing will transfer or surrender any property in the transaction other than stock in distributing after controlled receives busine sec_1 busine sec_2 and busine sec_3 from distributing both distributing and controlled will thereafter each separately and directly engage in busine sec_1 busine sec_2 and busine sec_3 the following representations have been made with respect to the proposed transaction a controlled will not be indebted to distributing after the distribution of controlled stock b the fair_market_value of the controlled stock to be received by each shareholder of distributing will be approximately equal to the fair_market_value of the distributing stock surrendered by the shareholder in the exchange c no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing d the years of financial information submitted on behalf of distributing is representative of the corporation’s present operation and with regard to distributing there have been no substantial operational changes since the date of the last financial statements submitted e distributing and controlled are and will be directly engaged in the active businesses mentioned above and neither will be engaged indirectly through ownership of stock and securities in corporations controlled by it f following the transaction distributing and controlled will each continue independently and with its separate employees the active_conduct of its share of all the integrated activities of the business conducted by distributing prior to consummation of the transaction neither distributing nor controlled plan or intend any substantial reduction in business activity for any of the business it will conduct g the distribution of the controlled stock to shareholder bb and shareholder bb’s family in exchange for all of their stock is carried out for the following corporate business_purpose to separate the active business of distributing into two portions one to be owned and controlled by each of shareholder bb and shareholder bb’s family and shareholder aa and shareholder aa’s family in order to avoid continual and ongoing disagreements concerning the operation of distributing among its shareholders which threatens its operations and continued existence the distribution of the controlled stock is motivated in whole or in substantial part by this corporate business_purpose h there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in either distributing or controlled after the transaction i there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the distribution other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 j there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business k the income_tax_liability for the taxable_year in which investment_credit_property including any building to which sec_47 applies is transferred will be adjusted pursuant to sec_50 or a or sec_47 as in effect before amendment by public law title 104_stat_1388 if applicable to reflect an early disposition of the property l distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction m no intercorporate debt will exist between the distributing and controlled_corporation at the time of or subsequent to the distribution of the controlled stock n payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length o no two parties to the transaction are investment companies as defined in sec_368 and iv p the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing each equals or exceeds the sum of the liabilities assumed as determined under sec_357 by controlled plus the fair_market_value of any other_property and the amount of any money transferred by controlled to distributing that is distributed to the shareholders of distributing or transferred to the creditors of distributing pursuant to the plan_of_reorganization the sum of the liabilities assumed as determined under sec_357 were incurred in the ordinary course of business and are associated with the assets being transferred q the gross assets of the trades_or_businesses relied on to satisfy the active business requirement of sec_355 for both distributing and controlled will have a fair_market_value that i sec_5 percent or more of the total fair_market_value of the gross assets of the corporation directly conducting the trades_or_businesses r for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five year period determined after applying sec_355 ending on the date of the distribution for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five year period determined after applying sec_355 ending on the date of the distribution s the distribution of controlled is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled t distributing is not an s_corporation within the meaning of sec_1361 and there is no plan or intention by distributing or controlled to make an s_corporation_election pursuant to sec_1362 u the expenses_incurred in connection with the proposed corporate_division will be paid_by distributing prior to a division of the assets and after the division p of the remaining assets will be retained by distributing and q of the remaining assets will be transferred to controlled therefore the expenses of the proposed transaction will be shared by the parties to the transaction in accordance with their respective interests the expenses will be borne p by distributing and q by controlled based solely upon the information submitted and the representations made we rule as follows the transfer by distributing to controlled of the assets described above in exchange for all of the stock of controlled and the assumption by controlled of certain liabilities of distributing followed by the distribution of the controlled stock to distributing's shareholders will constitute a reorganization within the meaning of sec_368 distributing will recognize no gain_or_loss upon the transfer of the assets subject_to liabilities to controlled in exchange for controlled stock sec_357 and sec_361 no gain_or_loss shall be recognized by controlled on its receipt of the assets solely in exchange for all of the stock of controlled sec_1032 the basis of the assets received by controlled shall be the same as the basis of the assets in the hands of distributing immediately prior to the transaction sec_362 the holding_period of the distributing assets received by controlled shall include the period during which such assets were held by distributing sec_1223 no gain_or_loss shall be recognized by and no amount shall be included in the income of shareholder bb and the shareholder bb family upon receipt of the controlled stock in exchange for all of their distributing stock as described above sec_355 no gain_or_loss shall be recognized by distributing upon the distribution of all of its controlled stock sec_311 the basis of the controlled stock in the hands of shareholder bb and the shareholder bb family after the exchange shall in each instance be the same as the basis of the distributing stock exchanged therefore sec_358 the holding_period for the controlled stock received by shareholder bb and shareholder bb’s family shall include the holding_period of the distributing stock surrendered in the exchange therefore provided that such stock is held as a capital_asset on the date of the exchange sec_1223 the proper allocation of earnings_and_profits between distributing and controlled shall be made under sec_1_312-10 sec_312 caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your taxpayer the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely steven j hankin senior technician reviewer office of associate chief_counsel corporate


internal_revenue_service p o box cincinnati oh number release date date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil w social media website x scholarship name y scholarship name z disease name b quantity c dollars amount d dollars amount e number f number dear you asked for advance approval of your scholarship grant procedures under sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 description of your request your letter indicates you will operate a scholarship program your purpose is to find therapies for z a debilitating disease that causes progressive muscle weakness and takes years to diagnose because even some physicians are unaware of its existence the purpose of your program is to support students in post-secondary education who teach their peers about z in hopes of spreading awareness because the first symptoms letter catalog number 58263t often appear in high school and college age individuals your scholarships are intended to further your purpose to identify individuals who are afflicted with the disease by rewarding students in this age group who spread awareness and teach others about z the scholarship is for tuition books and equipment required for education courses there are two categories of scholarships which are x and y that will be publicized through press releases popular scholarship databases conferences and handbooks from association of college counselors in independent schools accis and national association for college admission counseling nacac and informational packets sent to high school college counselors applications for both scholarships as well as information on eligibility deadlines and official rules are found on your web site to be eligible for a scholarship applicants must meet the following criteria a be within the age range of e b be enrolled as a candidate_for_a_degree at an educational_organization described in sec_170 a ii of the internal_revenue_code c initially united_states citizenship will also be a criterion however this criterion may be eliminated in the future current or former employees of yours or your directors as well as immediate_family members spouses parents siblings and children of a current or former employee or director are not eligible applicants must complete a detailed application form provide school transcripts and describe all extracurricular activities including their role any leadership positions and significant accomplishments the dates of their involvement information on how they spread awareness about z and the names and signatures of those who were surveyed about z applicants must also submit an essay on how awareness of the disease can be improved and what they personally learned about z from surveying people the selection committee will be composed of members of your entire staff any of your future hires may also be added to the committee members of the selection committee will not be in a position to directly or indirectly receive private benefit the selection committee will use a rubrics you developed to determine the winner of each category recipients of the x scholarship will be selected based on the following criteria a academic achievement gpa b participation in extracurricular activities c demonstrated leadership and d answers to a short survey about their experiences teaching at least f people about z recipients of the y scholarship will be selected based on the following criteria letter catalog number 58263t a entrants must have a minimum grade point average gpa b entrants must post a message on w to teach about z and those who are able to reach the most people with their post will be awarded the scholarship in your first year you will award b scholarships for c dollars for each category the amount shall be payable over two years you will pay d dollars in the first year to be eligible for the remainder for the second year the recipient must meet the following criteria a each recipient must be in good-standing at the educational_institution you will ascertain this information by way of each recipient granting you direct access to his or her college transcript or you will obtain a letter from the educational_institution stating that the student is enrolled and in good-standing b each recipient must continue to spread awareness of z you will ascertain this information by obtaining a report demonstrating that the recipient has continued to spread awareness of z during the first year c recipients must maintain a minimum gpa scholarships will be paid directly to the educational_institution who will apply the grant funds only for enrolled students who are in good-standing scholarship recipients must send you proof of age and contact information for the educational institution's administrative office if a recipient is found to be ineligible for the scholarship because criteria are not met funds will not be sent to the educational_institution depending on the success of your program you may increase or decrease the number of new scholarships awarded the next year as well as the dollar amount you will retain all records submitted by the recipients and the educational institutions supervision of scholarship and fellowship grants and investigation of jeopardized grants is determined to be satisfied per sec_53_4945-4 of the treasury regulations basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 a ii letter catalog number 58263t other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely director exempt_organizations letter catalog number 58263t


id office uilc cca-481252-11 ------------------ number release date from ---------------------- sent friday april pm to ------------------ cc ----------------------- subject re levy on domestic branch of financial_institution to reach funds held in an offshore_account --------- ------------------- ---------------------sees no reason why a levy cannot be issued in the u s for an account that the taxpayer has overseas it appears based on the facts presented the taxpayer does indeed have an overseas account with an office branch of a bank engaged in banking business in the united_states sec_301_6332-1 please follow the procedures laid out in sec_301_6332-1 when issuing and serving the levy on the bank in addition please feel free to recoordinate this matter with -------and --------------in the event that the issuance of the levy is challenged thanks ---------- ---------------------