department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division uniform issue list mar legend taxpayer a taxpayer b bank c bank d amount e ira x dear rrrekekkekerekrererkeere this is in response to a ruling_request submitted by you on in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the following facts and representations have been submitted in support of your request taxpayer a maintained an individual_retirement_account ira x with bank c taxpayer a is married to taxpayer b taxpayer a who had handled the family finances for many years has been suffering from the increasing effects of first diagnosed in at age taxpayer b age is being treated for of her children through compounded by and has suffered the tragic loss of in the spring of taxpayer a while on a trip across the country was hospitalized and unable to and make the return trip home alone at that time taxpayer a had already experienced some confusion in personal and family matters and he further suffered a degree of sameness e taxpayer a closed out ira x at bank c by taking a full distribution of amount e less than two weeks later on taxpayer a opened up an non-ira account at bank d by depositing amount e and other funds but taxpayer a neglected to inform bank d that the main source of this deposit were his ira funds the error by taxpayer a in completing his ira rollover was not discovered until he began tax preparation in the spring of and found that a form 1099-r had been issued to him regarding the distribution of amount e taxpayer a had no memory of moving his ira funds and he did not recall where he moved amount e no further transactions have taken place with regard to amount e and these funds have remained in place based on the above facts and representations you request that the service waive the 60-day rollover requirement with respect to the distribution of amount e from ira x because the failure to waive such requirement would be against equity or good conscience this would allow you to return amount e to one or more iras restoring the tax deferred status of amount e while not incurring the tax_liability on the unplanned distribution at this time sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money or 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 or any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary_of_the_treasury may waive the 60-day requirement under sec_408 and d of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented by the taxpayers demonstrates that after the deposit of ira funds to a non-ira account at bank d no further transactions were made with respect to amount e which has remained in place further the facts submitted also demonstrate the serious medical conditions faced by taxpayers a and b taxpayer a age who handled all of the family finances has suffered for some time these conditions led to confusion regarding personal family and business matters and resulted in an ira transaction that taxpayer a was unable to complete therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount e taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount e in cash into one or more iras provided ail other requirements of sec_408 of the code except the 60-day rollover requirement are met with respect to such contribution this amount will be considered a rollover_contribution within the meaning of sec_408 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 that may be applicable hereto this ruling is directed solely to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions regarding this ruling you may contact id at sincerely yours nan chk fitthy bbw ny - an donzell littlejohn manager employee_plans technical group enclosures notice of intention to disclose deleted copy of letter


internal_revenue_service p o box cincinnati oh release number release date date date uil code department of the treasury employer_identification_number contact person - id number contact telephone number legend w company x scholarship y school z city state b c dollar amount dollar amount dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code 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 code sec_117 description of your request your letter indicates you will operate a scholarship program called x the purpose of x is to award scholarship each year to graduating seniors at y in z scholarship funds are to be used for college tuition and other required fees books supplies and equipment at an accredited college or university offering a four year degree program all graduating seniors at y who will attend an accredited college or university offering a four-year degree program will be eligible to apply for x each scholarship will initially be letter catalog number 58263t awarded on single year basis but will be renewable for a total of four years provided the recipient remains in good academic standing there is no requirement or restriction on the course of study required for the original awarding of a scholarship or the renewal of a scholarship the criteria used for selection of the scholarship grant recipients will be academic performance demonstrated leadership skills and financial need you will require each recipient to annually provide a statement of the use scholarship funds also to be considered for renewal of the scholarship the recipient must provide evidence of continued enrollment in an accredited college or university and evidence of good academic standing should a recipient fail to provide the annual_statement of use of the scholarship funds and good academic standing the recipient will be ineligible for renewal additionally if inappropriate use of funds is evidenced any further funds will be withheld and you will take all reasonable and appropriate steps to recover any diverted funds and devote those funds to intended and appropriate purposes your trustees will determine the specific number of scholarships that will be made annually based upon the amount of funding available for x up to five scholarships will be awarded to graduating seniors each year each scholarship will be in an amount between b dollars and c dollars per year for each student your trustees will determine the specific amount of the annual grants based upon the amount of available funding the selection of scholarship recipients will be made by your scholarship committee comprised of certain trustees of yours and two employees of w no members of your committee may have children from which recipients will be selected application_for publicity and announcement of x will be made through the guidance counselor's office at y 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 fuxindation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant e e e the grant is a scholarship or fellowship subject_to the provisions of code section e a the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination_letter catalog number 58263t e e e e e e 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 office of exempt_organizations at internal_revenue_service exempt_organizations determinations 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 kenneth corbin acting director exempt_organizations letter catalog number 58263t


t c memo united_states tax_court bob j and ernestene sams et al ’ petitioners v commissioner of internal revenue respondent docket nos filed date frederick w southern jr specially recognized for petitioners ernestene sams carter bonding co and sherri lynn sullivan bruce k meneely for respondent ‘cases of the following petitioners are consolidated herewith carter bonding company inc docket no and sherri lynn sullivan f k a sherri lynn reavis f k a sherri lynn faulkenberry docket no - - memorandum findings_of_fact and opinion cohen judge respondent determined deficiencies in and additions to tax and penalties with respect to petitioners’ federal income taxes as follows bob j ernestene sams docket no year deficiency sec_6651 a sec_6662 dollar_figure dollar_figure dollar_figure big_number - dollar_figure carter bonding company inc docket no year deficiency sec_6651 a sec_6655 sec_6662 a dollar_figure dollar_figure - dollar_figure big_number big_number dollar_figure - sherri lynn sullivan docket no year deficiency sec_6651 a sec_6654 dollar_figure dollar_figure s517 big_number big_number big_number big_number big_number big_number big_number big_number for reasons discussed below the only issue remaining in these cases is whether the gross_income of petitioner carter bonding company inc carter bonding should be determined by reference to the fees charged for bail bonds written during the years in issue as reported to the oklahoma insurance commission or whether carter bonding’s gross_income was a lesser amount as claimed by petitioners unless otherwise indicated all section - - references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact at the time that the petitions were filed bob j and ernestene sams the samses resided in tulsa oklahoma carter bonding had its principal_place_of_business in tulsa oklahoma sherri lynn sullivan sullivan resided in broken arrow oklahoma carter bonding was in the bail bond business during and the stock of carter bonding was owned by ernestene sams sams who was the president of carter bonding and by sullivan who was the vice president of carter bonding sullivan is the daughter of the samses sams and sullivan wrote bonds in and for carter bonding however most of the bonds written during those years were written by sullivan because sams was sick sams conducted business for carter bonding primarily over the telephone and did not go into the office much during those years carter bonding charged a fee or bond_premium in an amount that was up to percent of the face_amount of the bail bond for the service of writing the bail bond depending on the circumstances of the particular client carter bonding received full partial or no payment of the bond_premium at the time the q4e- bond was written premiums were paid_by cash by check in person or by mail each premium payment received was recorded in an accounts_receivable ledger that was maintained by client name and included the date and amount of the payment and the client’s account balance a receipt was issued to each client who made a bond_premium payment to assure payment carter bonding sought cosigners for the bonds and pursued litigation to recover the unpaid fees sams terminated sullivan’s employment with carter bonding in on date sams sent a letter to sullivan demanding the return of carter bonding’s books_and_records sullivan’s employment with carter bonding resumed in the middle of carter bonding filed monthly professional bondsman reports with the oklahoma insurance department in and reflecting the total amount of the bond premiums that carter bonding charged to its clients during each monthly reporting_period on the reports filed with the oklahoma insurance department carter bonding reported total premiums of dollar_figure in and dollar_figure in carter bonding employed an accountant to prepare its federal_income_tax returns the accountant reported gross_receipts based on the bank_deposits of carter bonding carter bonding reported gross_receipts of dollar_figure on its federal_income_tax return - - a federal tax_return prepared for for carter bonding reflected gross_receipts of dollar_figure that return however was not filed by carter bonding respondent determined that carter bonding received and failed to report income in the amounts of dollar_figure in and dollar_figure in the amount for represents the difference between the total premiums reported to the oklahoma insurance department and the bank_deposits used in preparing carter bonding’s federal_income_tax return for the amount for represents the total premiums reported to the oklahoma insurance department because carter bonding did not file an income_tax return for respondent determined that the unreported income constituted constructive dividends to the samses and to sullivan respondent also determined that the samses and sullivan had unreported income equal to deposits in their personal bank accounts respondent has now conceded that the amounts of constructive dividends to the samses and to sullivan should be only the amounts deposited in their personal bank accounts and should not include the unreported income to carter bonding the samses and sullivan have not disputed that the unexplained deposits in their personal bank accounts were constructive dividends from carter bonding other adjustments in the statutory notices such as unreported rental income of sullivan - - have either been expressly conceded by either respondent or petitioners or abandoned by petitioners opinion petitioners contend that respondent improperly used the premium amounts reported to the oklahoma insurance department rather than using the bank_deposits to determine carter bonding’s gross_receipts for and petitioners argue that they collected only approximately percent of the bond premiums charged which were the amounts reflected on the face of the bonds written and the amounts reported to the state authority they failed to produce the accounts_receivable records that allegedly supported these contentions blaming at various times sullivan and another employee of carter bonding at trial sullivan belatedly produced a handwritten journal of doubtful authenticity based on our observation of the witnesses and review of the entire record we cannot accept petitioners’ claim that the uncollected premiums during the years in issue approximated dollar_figure in and dollar_figure in respondent was entitled to use the reports filed with the oklahoma insurance department to reconstruct carter bonding’s income in the absence of adequate books_and_records see 961_f2d_1518 10th cir 394_f2d_366 5th cir affg tcmemo_1966_81 43_tc_824 - j- the reconstruction need only be reasonable in light of all facts and circumstances 54_tc_1530 petitioners have not persuaded us that the gross_receipts so determined should be reduced we do not believe petitioners’ unsupported claim that only percent of the fees charged were received we have no reliable basis for any estimate of the amounts not paid to reflect concessions by respondent decisions will be entered under rule


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date vil contact person identification_number contact number employer_identification_number form required to be filed tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you agree with our deletions you do not need to take any further action if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your or the irs customer service number for businesses the irs customer service number for people with hearing impairments is sincerely tamera ripperda director exempt_organizations rulings and agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date uil contact person identification_number contact number fax number employer_identification_number dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below facts you are incorporated under your state’s utilities code law as a telephone cooperative your state utilities code provides that telephone cooperatives operate a nonprofit basis for the mutual benefit of its members and patrons you filed form_1024 application_for recognition of exemption under sec_501 seeking recognition as an organization like a mutual or cooperative telephone company under sec_501 your articles of incorporation provide that you formed for the purpose of furnishing communication services and any and all other purposes for which a telephone cooperative corporation may be formed specifically you facilitate communication services by providing gateway and policy control services to your members which are companies that provide telecommunication services such as cellular and internet services to the public your gateway service provides your members with affordable access to the worldwide 4g broadband network you state that without the gateway your members would be unable to provide access to the 4g broadband network and therefore would be unable to provide broadband ie internet to their customers your policy control service manages the traffic through your gateway so that your members’ customers receive optimal usage of the network in other words your policy control service ensures that your members’ customers receive the fastest connect times at the best quality possible with current technology membership you state that your members must provide telephone or communications_services or be a wholly owned subsidiary or controlled affiliate of an entity providing telephone or communications_services your members must pay a one-time membership fee agree to comply with and be bound by your articles and bylaws and be accepted for membership by your board_of directors you have four membership classes e e e e founding members are those members that created you and invested the initial capital and infrastructure necessary to carry out your services charter members are those members that committed to becoming full members prior to a certain date full members are those members who have paid a membership fee dues and pro_rata costs necessary to entitle them to participate in your services and associate members are members that participate only in select services you state that in the future you may create additional membership classes currently you have a total of four full members three of these members are also your founding and charter members you have no associate members at this time termination of membership may be voluntary or involuntary your bylaws provide that termination of any kind releases the member of all right title and interest in your property and assets operation at cost each full member must pay a one-time membership fee of dollar_figurex additionally each month every member pays a fixed fee of dollar_figure 5x and a variable usage fee for provision of gateway and policy services you state that you will adjust the variable usage fee quarterly to ensure that you have sufficient cash to cover your expenses you provide capital credits to your members for amounts received in excess of operating costs and expenses you allocate these credits on a pro_rata basis in proportion to the member's business with you patronage basis at the board_of director’s discretion you may allocate non-operating and nonmember income in excess of costs and expenses to your members’ capital accounts on a patronage basis any distribution from the members’ capital accounts is at the board_of director's discretion you intend to keep appropriate books_and_records and will report to each member the amount of capital credited to its account each fiscal_year distributions from your members’ capital accounts are at the board_of director's discretion governance you conduct annual membership meetings at least one-half of the total members must be present at the annual meeting to constitute a quorum you do not permit your members to vote by proxy each full member is entitled to one vote upon each matter submitted to a vote ata meeting of the members founding charter and associate members are not entitled to vote each of founding members elects two of your six directors your board_of directors in turn elects its officers by and from the board_of directors full charter and associate members are not entitled to elect or appoint directors or officers nonetheless full members may remove a director with a petition signed by the majority of all the full members income you state that currently member income is your sole source_of_income in the future you anticipate some interest_income additionally you state that you will account for any income received from associate members as nonmember income however you do not anticipate either income source to exceed percent of your total income law sec_501 provides for the exemption of benevolent life_insurance_companies of a purely local character mutual_ditch_or_irrigation_companies mutual_or_cooperative_telephone_companies or like organizations but only if percent or more of the income consists of amounts collected from members for the sole purpose of meeting losses_and_expenses it requires advance deposits to cover the cost of the insurance and maintains sec_1_501_c_12_-1 states that an organization described in sec_501 must receive at least percent of its income from amounts collected from members for the sole purposes of meeting losses_and_expenses if an organization issues policies for stipulated cash premiums or if investments from which more than percent of its income is derived it is not entitled to exemption on the other hand an organization may be entitled to exemption although it makes advance assessments for the sole purpose of meeting future losses_and_expenses provided that the balance of such assessments remaining on hand at the end of the year is retained to meet losses_and_expenses or is returned to members revrul_57_420 1957_2_cb_308 determined that an organization that provided and maintained a two-way radio system for its members on a mutual or cooperative basis qualified for recognition under sec_501 the two-way radio association was similar to a mutual or cooperative telephone company in that a two-way radio communication system on a mutual basis is an organization whose purpose is similar in nature to a mutual telephone company accordingly the organization qualified for recognition under sec_501 as a like organization the service has determined that end user internet service providers end user isps provide a service similar to the two-way radio system held to be exempt in revrul_57_420 and therefore qualify for exemption under sec_501 subject_to certain conditions set forth in revenue_ruling below revrul_72_36 1972_1_cb_151 sets forth certain requirements cooperative companies must meet for exemption under sec_501 the rights and interests of the members in the savings of an organization should be determined in proportion to their business with the organization the interests of members in the savings of the organization may be determined in proportion to either the value or the quantity of the services purchased from the organization provided such basis is realistic in terms of actual cost of the services to the organization funds retained in excess of those currently needed for such purposes as retiring indebtedness incurred in acquiring assets expanding the services of the organization or ‘maintaining reserves for necessary purposes must be reasonable in light of the organization’s business needs whether there is an improper accumulation of funds depends upon the particular circumstances of each case the organization’s records must show each member’s rights and interests in the funds it retains amember’s rights and interest cannot be forfeited upon dissolution or termination upon dissolution gains from the sale of an appreciated asset should be distributed to all persons who were members during the period which the asset was owned by the organization in proportion to the amount of business done by such members during that period insofar as is practicable revrul_2002_55 2002_2_cb_529 determined that a telephone cooperative that received percent of its income from its members for telephone services satisfied the percent member income test the percent member income test requires a cooperative exempt under sec_501 for any taxable_year to combine all sources of income not otherwise excludable under sec_501 or c and calculate whether more than percent of that income is derived from nonmembers in the year in question the organization received dollar_figurex from its members for telephone services dollar_figurex as a dividend from a wholly owned taxable subsidiary and dollar_figurex interest_income accordingly the organization met the percent member income test for the year in question in 44_tc_305 acq 1966_1_cb_3 the tax_court stated that an organization must meet certain common_law requirements in order to be a cooperative which include democratic control of the organization by members operation at cost for the benefit of the members and the subordination of capital rationale an organization seeking exemption under sec_501 must satisfy three requirements first it must be organized and operated as a cooperative the organizational and operational tests’ second it must conduct activities described in sec_501 the activities test derive at least percent of its income from members solely for the sole purpose of meeting expenses and losses the income source test you request recognition under sec_501 as an organization like a mutual or cooperative telephone company however the materials submitted indicate that you do not qualify for recognition under sec_501 finally it must organization and operational_test although you are organized as a cooperative telephone company under your state law you are not operated as such an organization meets the requirements of the organizational and it is organized and operated under both the common_law definition and the operational tests if requirements of revrul_72_36 under the common_law a cooperative organization exhibits three characteristics democratic control by the members operation at cost and subordination of capital 44_tc_305 acq 1966_1_cb_3 additionally a cooperative organization must meet the five requirements of revrul_72_36 in puget sound plywood the tax_court stated that you are not a cooperative within the common_law definition because your operations do not illustrate subordination of capital implementation of the subordination of capital as regards control_over the management and direction of the cooperative is achieved through bylaw provisions which vest in the members themselves the right and power to elect the trustees and the officers of the cooperative your bylaws vest the right and power to elect your directors solely in your founding members charter full and associate members retain no right or power to elect directors furthermore the power to elect officers is vested solely in the founding-member-elected board_of directors no membership class retains the right to elect officers accordingly control_over your management and direction is vested in only part of your membership additionally you fail to meet the requirements of revrul_72_36 because your members forfeit their rights and interests upon termination of membership therefore you are not a cooperative organization within the meaning of sec_501 activities test you do not perform activities like a mutual or cooperative telephone company under sec_501 the term like is limited by the type of organizations specified in sec_501 organizations that are like mutual_or_cooperative_telephone_companies facilitate communication between members and others revrul_57_420 two-way radio service accordingly organizations end user isps that provide internet or broadband services on a mutual or cooperative basis usually qualify for recognition under sec_501 however you do not provide internet or broadband to your members rather you provide a gateway through which your members-other telecommunications companies-access the worldwide 4g broadband network this access allows your members to provide broadband services to their customers nothing in your materials indicates that your operations facilitate communication between your members and others rather your operations facilitate communication between your members’ customers ie nonmembers and others therefore you are not a like organization within the meaning of sec_501 income source test you failed to establish that you receive at least percent of your income from your members for the sole purpose of meeting income and expenses the percent member income test requires an organization exempt under sec_501 for any taxable_year to combine all sources of income not otherwise excludable under sec_501 or c and calculate whether more than percent of that income is derived from nonmembers revrul_2002_55 a member’ is an individual who has the right to elect the governing board_of the cooperative and be involved in the operations of the organization 44_tc_305 in this case your full charter and associate members are not ‘members’ within the meaning of sec_501 because these membership classes are not entitled to elect or appoint officers or directors additionally founding charter and associate members are not entitled to vote at membership meetings nonetheless your founding members may vote at membership meetings because your founding members are also full and charter members currently you have one full member that is not also a founding or charter member and no associate members you do not state how much income you receive from this member accordingly you may receive nonmember income in excess of percent conclusion you do not qualify for recognition as a mutual or cooperative telephone company or like organization under sec_501 you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this letter if you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely michael seto manager eo technical


department of the treasury internal_revenue_service te_ge eo examinations tax_exempt_and_government_entities_division number release date uil commerce street mc dal dallas tx date february taxpayer’s ld number person to contact identification_number telephone number in reply refer to last date for filing a petition with the tax_court certified mail - return receipt requested dear a final adverse determination regarding your exempt status under sec_501 of this is the internal_revenue_code irc our favorable determination_letter to you dated december as an 20xx is hereby revoked and you are no longer exempt under sec_501 organization described in sec_501 c of the irc effective january 20xx a our adverse determination was made for the following reasons you have not established that you are operated exclusively for an exempt_purpose or that you have been engaged primarily in activities that accomplish one or more exempt purposes within the meaning of sec_501 contributions to your organization are no longer deductible under sec_170 of the code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all years thereafter processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits following addresses for declaratory_judgment you may write to the courts at the united_states tax_court second street nw washington dc us court of federal claims madison place nw washington dc u s district_court for the district of columbia constitution ave n w washington dc the taxpayer_advocate_service ias is an independent organization within the irs that can help protect your taxpayer tights we can offer you help if your tax problem is causing a if you hardship or you’ve tried but haven’t been able to resolve your problem with the irs qualify for our assistance which is always free we will do everything possible to help you if you prefer you may contact your visit taxpayeradvocate irs gov or call local taxpayer_advocate at taxpayer_advocate_service we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours ut lr aria hooke director exempt_organizations examinations enclosures publication department of the treasury internal_revenue_service tax exempt and government entities exempt_organizations examinations pa wember taxpayer identification seation number number form tax_year s ended person to contact 1d number contact numbers telephone fax number manager’s name id number manager’s contact number response due_date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren't an organization described in sec_501 after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code if we don't hear from you if you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years letter rev catalog number 34809f what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn’t a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service -fax for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely wane boete director eo examinations letter rev catalog number 34809f enclosures report of examination 886-a form_6018 form 4621-a copy of form 1023ez streamline application_for tax-exempt status copy of determination_letter dated date publication publication letter rev catalog number 34809f form 886a name of taxpayer explanation of items department of the ‘treasury - internal_revenue_service schedule no or exhibit year period ended december 20xx date of final report may 20xx governments rebuttal issues whether from federal_income_tax under sec_501 of the internal_revenue_code continues to qualify for exemption facts applied for tax-exempt status by filing form 1023-ez streamlined application_for recognition of exemption under sec_501 of the internal_revenue_code on october 20xx and was granted tax-exempt status as a c on december 20xx with an effective date of october 20xx was incorporated on june 20xx in the state of was selected for audit to ensure that the activities and operations align with their approved exempt status was sent letter with information_document_request idr attachments on september 20xx one of the idrs’s requested the organization to provide a complete copy of their original organizing document and any amendments response was received from were included in the response the organizing documents were dated may 20xx by the state of the purpose of said organization is to establish a on october 20xx the organizing documents in county organization does not have the required dissolution clause required by all c organizations dissolution clause upon the dissolution of the organization assets shall be distributed for one or more exempt purposes within the meaning of sec_501 of the internal_revenue_code or corresponding section of any future federal tax code or shall be distributed to the federal government or to a state_or_local_government for a public purpose any such assets not disposed of shall be disposed of by a court of competent jurisdiction in the county in which the principal office of the organization is then located exclusively for such purposes or to such organization or organizations as said court shall determine which are organized and operated exclusively for such purposes currently does not meet the organizational_test of a 501_c_3_organization form 886-a crev department of the treasury - internal_revenue_service page -1- form 886a department of the ‘treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended december 20xx on october 20xx states they are a producer only and surrounding areas response received from market with the mission of providing consumers in with locally-grown foods and farm products the markets goal is to provide a venue for the social educational and economic strength that stems from our region’s agricultural heritage the market and its vendors strive to educate the population and visitors within a 0-mile radius of prepared food and value-added products county on the benefits of using fresh locally grown and or are uniquely and directly educational because they bring together farmers and eaters they give an opportunity for consumers and the general_public to learn how to identify compare and properly handle and prepare local food choices the consumer also may learn how a product is grown or raised and its dietary information the market's vendors give samples providing an opportunity to try out new products which generates interest in locally grown foods and their producers the market also features a display and information table run by the master gardeners twice a month during the growing season to educate the consumer about their own gardens and gardening issues such as tomato blight soil testing questions composting insects and so much more master preservers also attend the market at least once during the height of the growing season they are available for the consumers to get information on the many ways they can preserve the produce they purchase or grow in their own gardens since beginning they have engaged in a market where farmers and other vendors sell their products to the community at large vendors are allowed to sell vegetables herbs and herb products fruits baked goods cut flowers meat eggs and dairy products live plants and other items which include jams and jellies soaps honey syrup and other handmade crafts from farm sources on the condition they are selling one of the above other items the vendor membership fees per season are dollar_figure with a dollar_figure stall fee the market can hold up to vendors this revenue helps to pay for the market management rental fees and insurance for the location and product insurance that covers all produce and products that are sold at our location for the tax_year 20xx the 20xx ran from may 20xx to november market is on saturdays from a m to p m is managed through their board members the board spends of their time creating and managing the cooperation no one on the board receives any monetary form 886-a rev department of the treasury - internal_revenue_service page -2- poem 886a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit year period ended december 20xx compensation or reduction of market fees board members are elected by the vendors for a 0-year term market coordinator promotes the market produce and products on facebook and adds educational material about agriculture and agricultural products that would interest and educate the consumer market coordinator is an independent_contractor and works an estimated hours estimating time for meetings market open hours organize and manage advertising community outreach answering emails phone calls grant writing managing vendors and customers website and social media management vendors are selected by the board_of directors after submitting a pre-application form and the board decides whether to accept an application based on the product s the person is looking to sell membership requirements and vacancies has promoted the market through the dissemination of newspaper ads in several papers banners flyers facebook building and hosting a website and building a presence in the local farmers market community the website includes basic information regarding the location and hours that the markets operate the budget indicates that the gross_receipts consist of a grant for dollar_figure membership dues of dollar_figure stall fees dollar_figure and sponsor income of dollar_figure expenses include advertising awards contract services facilities and equipment maintenance and insurance total expenses were identified as dollar_figure law internal_revenue_code irc sec_501 of the code exempts from federal_income_tax corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition or for the prevention of cruelty to children or animals no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_511 of the internal_revenue_code imposes a tax at corporate rates under sec_11 on the unrelated_business_taxable_income of certain tax-exempt organizations treasury regulations regulation sec_1_501_c_3_-1 of the regulations provides that to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in such section organizational_test or the operational_test it is not exempt if an organization fails to meet either the form 886-a rev department of the treasury - internal_revenue_service page -3- form 886a name of taxpayer explanation of items department of the ‘treasury - internal_revenue_service schedule no or exhibit year period ended december 20xx regulation sec_1_501_c_3_-1 of the regulations provides that an organization will be it engages regarded as operated exclusively for one or more exempt purposes only if primarily in activities that accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose regulation sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest to meet this requirement it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests regulations sec_1_501_c_3_-1 of the regulations provides that the term charitable is used in sec_501 in its generally accepted legal sense and includes relief of the poor and distressed or of the underprivileged advancement of religion advancement of education or science erection or maintenance of public buildings monuments or works lessening of the burdens of government and promotion of social welfare by organizations designed to accomplish any of the above purposes or i to lessen neighborhood tensions ii to eliminate prejudice and discrimination iii to defend human and civil rights secured_by law or iv to combat community deterioration and juvenile delinquency regulations sec_1_501_c_3_-1 of the regulations provides that the term educational as used in sec_501 of the code relates to a the instruction or training of the individual for the purposes of improving or developing his capabilities or b the instruction of the public on subjects useful to the individual and beneficial to the community revrul_61_170 1961_2_cb_112 held that an association composed of professional private duty nurses and practical nurses which supported and operated a nurses’ registry primarily to afford greater employment opportunities for its members was not entitled to exemption under sec_501 of the code although the public received some benefit from the organization’s activities the primary benefit of these activities was to organization’s members revrul_67_216 1967_2_cb_180 established that a nonprofit organization formed and operated exclusively to instruct the public on agricultural matters by conducting annual public fairs and exhibitions of livestock poultry and farm products may qualify for exemption from federal_income_tax under sec_501 of the internal_revenue_code of the principal activities and exhibits of the fair are educational they are planned and managed by persons whose business it is to inform the public in general and farmers form 886-a rev department of the treasury - internal_revenue_service page -4- foun 886a department of the treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended december 20xx in particular about the resources of the region and the methods by which they may be conserved utilized and improved in addition the overall activities of the fair are conducted in such a fashion and on such subjects as will enlighten the viewers and participants on the newest and best techniques of farming and on other matters useful and beneficial to them and to the community revrul_68_167 1968_1_cb_255 held that a nonprofit organization created to market the cooking and needlework of needy women may be exempt from tax under sec_501 of the code the organization operated a market where it sold the cooking and needlework of these women who were not otherwise able to support themselves and their families the organization provided a necessary service for needy women by giving them a market for their products and sources of income revrul_71_395 1971_2_cb_228 a cooperative art gallery was formed and operated by a group of artists for the purpose of exhibiting and selling their works and did not qualify for exemption under sec_501 of the code it served the private purposes of its members even though the exhibition and sale of paintings may be an educational activity in other respects revrul_73_127 1973_1_cb_221 the service held that an organization that operated a cut-price retail grocery outlet and allocated a small portion of its earnings to provide on- the-job training to the hard-core unemployed did not qualify for exemption the organization’s purpose of providing training for the hardcore unemployed was charitable and educational within the meaning of the common_law concept of charity however the organization’s purpose of operating a retail grocery store was not the ruling concluded that the operation of the store and the operation of the training program were to distinct purposes since the former purpose was not recognized charitable purpose the organization was not organized and operated exclusively for charitable purposes revrul_78_86 held denial of an organization formed by various merchants to provide customer parking a parking arrangement whereby merchants join together to provide parking for their customers at a reduced_rate serves the merchants’ private interests by encouraging the public to patronize their stores thus it cannot be said to be operated exclusively for charitable purposes under sec_501 of the code revrul_80_287 1980_2_cb_185 involved a nonprofit lawyer referral service that arranged at the request of any member of the public an initial half-hour appointment for a nominal charge with a lawyer whose name was on an approved list maintained by the organization as a rule providing services of an ordinary commercial nature in a community even though the undertaking is conducted on a nonprofit basis is not regarded as conferring a charitable benefit on the community unless the service directly accomplishes one of the established categories of charitable purposes the organization’s activities were directed toward assisting individuals in obtaining preventive form 886-arrev department of the treasury - internal_revenue_service page -5- forni 886a department of the ‘i'reasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended december 20xx or remedial legal services and as such were not specifically designed to confer a charitable benefit on the community although the lawyer referral service provided some public benefit a substantial purpose of the program was promotion of the legal profession in 326_us_279 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will preclude exemption under sec_501 of the code regardless of the number or importance of truly exempt purposes thus the operational_test standard prohibiting a substantial non-exempt purpose is broad enough to include inurement private benefit and operations that further nonprofit goals outside the scope of sec_501 its in 70_tc_352 the court found that a corporation formed to provide consulting services did not satisfy the operational_test under sec_501 of the code because its activities constituted the conduct_of_a_trade_or_business that is ordinarily carried on by commercial ventures organized for profit primary purpose was not charitable educational or scientific but rather commercial in addition the court found that the organization's financing did not resemble that of the typical sec_501 organizations it had not solicited nor had it received voluntary contributions from the public its only source_of_income was from fees from services and those fees were set high enough to recoup all projected costs and to produce a profit moreover it did not appear that the corporation ever planned to charge a fee less than cost and finally the corporation did not limit its clientele to organizations that were sec_501 exempt_organizations in easter house v u s cl_ct aff'd 846_f2d_78 fed cir cert_denied 488_us_907 109_sct_257 102_led_246 the court found an organization that operated an adoption agency was not exempt under sec_501 of the code because a substantial purpose of the agency was a nonexempt commercial purpose the court concluded that the organization did not qualify for exemption under sec_501 because its primary activity was placing children for adoption in a manner indistinguishable from that of a commercial adoption agency the court rejected the organization's argument that the adoption services merely complemented the health- related_services to unwed mothers and their children rather the court found that the health-related services were merely incident to the organization's operation of an adoption service which in and of itself did not serve an exempt_purpose the organization's sole source of support was the fees it charged adoptive parents rather than contributions from the public the court also found that the organization competed with for-profit adoption agencies engaged in substantial advertising and accumulated substantial profits accordingly the court found that the business_purpose and not the advancement of educational and charitable activities purpose of plaintiff's adoption service is its primary goal and held that the organization was not operated exclusively for purposes described in sec_501 easter house cl_ct pincite department of the treasury - internal_revenue_service form 886-a rev page -6- foun 886a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit year period ended december 20xx in american institute for economic research v united_states f 2d9 ct_cl the court considered the status of an organization that provided analysis of securities and industries and of the economic climate in general it sold subscriptions to various periodicals and services providing advice for purchases of individual securities the court noted that education is a broad concept and assumed that the organization had an educational purpose the court concluded however that the totality of the organization’s activities which included the sale of many publications as well as the sale of advice for a fee to individuals was more indicative of a business than that of an educational_organization the court held that the organization had a significant non- exempt commercial purpose that was not incidental to the educational purpose and that the organization was not entitled to be regarded as exempt cir the court_of_appeals in 950_f2d_365 upheld a tax_court decision tcmemo_1990_484 that an organization operating restaurants and health food stores in a manner consistent with the doctrines of the seventh day adventist church did not qualify under sec_501 of the code the court found substantial evidence to support a conclusion that the organization’s activities furthered a substantial nonexempt purpose including that the operations were presumptively commercial the organization competed with restaurants and food stores used profit-making pricing formulas consistent with the food industry and incurred significant advertising costs application of law is not organized and operated exclusively for charitable educational or religious purposes consistent with sec_501 of the code nor sec_1_501_c_3_-1 of the income_tax regulations and therefore fail to meet the operational_test the organization helps to facilitate the sale of produce baked goods and other items for the benefit of the seller organization advertises promote and inform potential buyers about the market and your primary activities revolve around setting up the vendor spaces as a catalyst for facilitating the sale_of_goods for local farmers and other organizational members alike organization pays insurance for the location of the farmers market and for the produce and products sold at the farmers market sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish one or more of such exempt purposes specified in sec_501 of the code you engaged in substantial non-exempt activity similar to commercial enterprise by operating a market selling various goods to the public vendors participating in your market pay a fee to rent their space and then are free to set sale form 886-a rev department of the treasury - internal_revenue_service page -7- form 886a department of the ‘treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended december 20xx prices to maximize sales and profits for their own benefit you therefore do not operate exclusively for exempt purposes contrary to sec_1_501_c_3_-1 of the regulations you are operated for the substantial purpose of providing private benefit to vendors of the products at your market although the market includes educational events more than an insubstantial part of your activities are in furtherance of the non-exempt purpose of being a profitable outlet for your vendors you not only provided the outlet for them to sell their products you provided marketing and cover overhead expenses that the vendors would otherwise have to expend because your governing body members are also vendors this private benefit constitutes inurement sec_1_501_c_3_-1 of the regulations provides in part that the term ‘educational’ as used in sec_501 of the code relates to the instruction of the public on subjects useful to the individual and beneficial to the community as described above your facilitation of produce sales is not educational nor is advertising your farmer's market within your organization only a limited amount of time and resources are devoted to educational and charitable activities and purposes with the meaning of sec_501 of the code any consumer education you provide is incidental to the sale of the vendors’ products you are similar to the organization described in revrul_61_170 in your case your primary purpose is to provide a commercial market for vendors while the public may benefit from an increase in market selection and the educational programs that you provide the overall purpose of your organization is to serve and benefit the vendors selling at the market and not the general_public you are unlike the organization in revrul_67_216 because your principle purpose is to facilitate vendor sales and connect buyers with sellers you devote a majority of your time and resources to this purpose you utilize resources to assist local and regional farmers as well as other producers to gain visibility to potential buyers through the vehicle of your farmer’s market your website includes a vendor list that includes his or her products sold at the market you encourage the public to support the vendors at your market each vendor would otherwise be responsible for the expense of providing the same services on an individual basis therefore you do not qualify for exemption unlike the organization described in revrul_68_167 you do not serve needy individuals who are not otherwise able to support themselves and their families your activities are in effect identical to those of the cooperative art gallery described in revrul_71_395 you operate for the purpose of providing space to local farmers and vendors to exhibit and sell their products exhibiting and promoting the sales of products for the benefit of private individuals does not qualify for exemption under sec_501 of the code form 886-a rev department of the treasury - internal_revenue_service page -8- foan 886a name of taxpayer explanation of items department of the ‘treasury - internal_revenue_service schedule no or exhibit year period ended december 20xx you are similar to the organization described in revrul_73_127 because the operation of the farmers’ market and your provision for educational programs are two distinct purposes because the operation of a market is not recognized as a charitable or educational purpose you are not operated exclusively c purposes you are like the organization in revrul_80_287 which provided that where regular commercial services even if offered on a non-profit basis did not directly accomplish one of the established types of charitable purposes an organization and does not qualify for exemption because your activities are directed at promoting and facilitating the sale of products selected by vendors for increasing sales and you were formed to provide an improved market for products and expand sales opportunities you were not formed to further exclusive sec_501 purposes while consumers at the market may receive information about products this is not serving an exclusive educational purpose also since vendor set their own prices sales of products confer no charitable benefit to the community therefore you are not substantially serving established sec_501 purposes and do not qualify for exemption an organization is not operated exclusively for charitable purposes and thus will not qualify for exemption under sec_501 if is substantial in nature better business bureau of washington d c v united_states you devote a substantial amount of your time resources and activities to creating an event for vendor sales your expenses are directed towards attracting potential buyers and facilitating produce sales you maintain a vendor list and are actively involved in the sales process as these are not serving exclusively c purposes and are not insubstantial in nature you are like the organization in the above ruling it has a single non-charitable purpose that a substantial part of your activities consists of providing a marketplace for private individuals to sell their produce and other goods to members of the public at prices established by the vendor vendors are selected based upon consumer demand for their products and not for any charitable or educational_purposes vendors select and set product prices for sale to maximize profits and sales as seen in b s w group and_easter house a lack of public support is further evidence that an organization is operating for commercial purposes and not for charitable purposes essentially most of your income is derived from vendor fees and dues because you conduct activities similar to a commercial business you do not meet the requirements for exemption under sec_501 of the code you are like the organizations described in the american institute for economic research v united_states and living faith inc v commissioner you are operating a market in competition with other commercial markets your sale of products such as fruits vegetables cookies wines breads and coffee is indicative of a business your sources of revenues are mainly from vendor dues and vendor fees and your expenses are mainly for marketing supplies insurance and professional fees your market is a significant form 886-a rev department of the treasury - internal_revenue_service page -9- boar 886a department of the treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended december 20xx non-exempt commercial activity that is not incidental to the achievement of other educational_purposes organizations rebuttal to proposed revocation organization replied march 20xx with a rebuttal to proposed revocation letter and 886-a dated december 20xx the organization believes that the requirements of the regulations issued pursuant to said statutory section namely sec_1_501_c_3_-1 because the serves the purposes of the advancement of education the lessening of the burdens of government the promotion of social welfare by an organization designed to accomplish the above purposes and to combat community deterioration in this case does meet the our community which suffers from the horrible effects of obesity diabetes and other obesity related illnesses and the scourge of opioids and other drugs needs our the is the source of encouragement of healthy lifestyles through healthy eating and gardening for both good nutrition and exercise the educates children and adults on how affordable fresh vegetables and fruits are contrary to popular belief teaches vegetable preparation and educates people on the variety of fresh locally grown vegetables and fruits not sharing in the sales at all is not about profits with the market the market further is the means of not only encouraging but also making it possible for the farm community in our area to raise healthy often organic vegetables and fruits and at this place where the farmers and general community come together there is an atmosphere created and promoted which improves the social welfare of our community and combats the community deterioration that we are fighting so hard here in county first concerning the ways in which the lessens the burden of the government direct your attention to the enclosure entitled diabetes prevention managing risk factors provided by our local hospital which points to the out-of-control diabetes problem due to childhood obesity and adult obesity the adult obesity rate in county for 20xx was see attachment enclosed herein which is traced back in great part to a poor diet as it shows we live in an area of the united_states where between and of the population suffers from diabetes form 886-arev department of the treasury - internal_revenue_service page -10- porn 886a department of the treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended december 20xx the the consumption of vegetables and fruits a key factor in successfully managing diabetes as indicated in the enclosed document from educates the community on good healthy eating habits which include hospital enclosed are examples of some of the many programs run by through the county over the recent years far beyond these educational programs the market provides an attractive enjoyable place to come to learn how to cook the vegetables where there is always a lively discussion of different recipes and where people come to buy one item but end up leaving with many more healthy eating choices further promotes the social welfare of this community which thereby the combats community deterioration by providing a place where each saturday the community gathers and visits in a healthy environment and everyone comes away having learned something and having gained something from the experience that cannot be overlooked relative to lessening the by providing the education and means by which the public can learn the to cook and consume healthy vegetables and fruits serves to reduce not only diabetes but also other obesity and poor diet related illnesses suffered in our community which thereby lessens the burden of government there is no doubt that prevention or control of one case of diabetes in a child or adult saves tens of thousands if not hundreds of thousands of dollars most often which comes from the government that is necessary for hospitalization amputation of limbs and other treatment needed as diabetes progresses one aspect of the burden of government promoting social welfare and combating community deterioration is the role the plays in encouraging local farmers and making it possible for local farmers to raise vegetables and fruits to supplement their meager livelihoods and making it thereby possible for them to remain in the profession of farming our community every year loses many farmers because it is so difficult in our area for farmers to make financial ends meet as alongtime -_leader and attorney in this area have seen the number of farming families dwindle all too much because despite the long hours and hard work it is too difficult to make ends meet the ability to supplement the farmer’s income with vegetables and fruits raised in the farmer’s garden provides an important supplement to their income and allows them to remain on the family farm as a result the burden on government of unemployed families and the deterioration of the community when there is a loss of farm families is combatted by providing a location time and place where the community can gather with the local farmers and purchase the fresh vegetables and fruits which it would be difficult and usually impossible for the farmers to otherwise market department of the treasury - internal_revenue_service form 886-arev page -11- 886a ror name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit year period ended december 20xx allows local farmers to diversify their crops which combats moreover the community deterioration by preserving the environment specifically by allowing farmers to diversify their crops this protects the environment by improving soil quality preventing soil erosion which protects the farm_land and local water sources allowing crop rotation allowing contour planting which promotes soil conservation and all of this promotes ecological balance thereby preventing environmental deterioration eg no need to use pesticides if crops are diversified which thereby promotes natural predation finally the organizational requirement that was identified in your letter concerning dissolution of the organization has now been met with the required paragraph having been added to the organization’s by-laws by amendment please see the enclosed unanimous consent of the board_of directors of county please understand that the our community that certainly meets both the letter and spirit of the c designation serves many important purposes to on april 20xx he stated the during phone call with power_of_attorney amendment to the by-laws were not added to the articles of incorporation and were not sent to the state of but he was willing to do so government’s position by providing a profitable outlet for local farmers and vendors you are primarily serving the private interests of the businesses and individuals who come to your market to sell their products the facts show the gathering of residents for educational_purposes is secondary to the commercial activities that occur at your market governments position to rebuttal organizations rebuttal identified organization does not meet the organizational_test as they did not send amended by-laws with the dissolution clause to the state for approval corporations must include the amendment of dissolution as part of their articles of incorporation and it must be approved through the state of you are not described under sec_501 of the code or sec_1_501_c_3_-1 because you do not meet the organizational or operational tests if an organization fails either the organizational or operational_test it cannot qualify as an exempt_organization under sec_501 of the code form 886-a rev department of the treasury - internal_revenue_service page -12- form 886a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit year period ended december 20xx second you do not meet the operational_test under sec_1 c - d ii because you are operating for the private interests of your members the facts show that activity similar to a commercial enterprise by operating an open market for farmers and other vendors engaged in substantial nonexempt while the public may have benefitted from an increase in market selection and the educational programs that the organization provided the overall purpose of the organization was to serve and benefit the vendors selling at the market and not the general_public the provision of a marketplace for the sale_of_goods is not an educational activity nor is it charitable because it is not limited to a charitable_class as in revrul_68_167 1968_1_cb_255 revrul_85_1 holds that lessening the burdens of government occurs only if the governmental_unit formally recognizes the activities of the organization to be its burden this objective manifestation may be evident in the interrelationship between the organization and the governmental_unit the organization’s activities are an integral part of a larger governmental program and the organizations funded governmental expenses the fact that a governmental_unit expresses approval of an organization’s activities doesn’t establish that the organization is lessening the burdens of government revrul_85_2 sets forth two requirements for an organization to qualify for exemption under sec_501 by lessening the burdens of government these requirements are an organization’s activities must be activities that a governmental_unit considers to be its burdens and the activities of the organization must actually lessen such governmental burdens an organization which claims to lessen the burdens of government must demonstrate that any private benefit received by individuals or businesses is both qualitatively and quantitatively incidental to its exempt purposes to be qualitatively incidental the private benefit must be a necessary concomitant of activities which benefits the public at large form 886-a crev department of the treasury - internal_revenue_service page -13- form 886a department of the ‘t'reasury - internal_revenue_service explanation of items schedule no or exhibit year period ended december 20xx name of taxpayer to be quantitatively incidental the private benefit must be insubstantial in the context of the overall public conclusion the organization does not qualify for recognition of exemption from federal_income_tax as an organization described in sec_501 of the code because you do not meet the organizational or operational_test therefore you are not described in sec_501 based on the foregoing reasons the organization does not qualify for exemption under sec_501 and its tax-exempt status should be revoked form_1120 return should be filed for tax periods after january 20xx form 886-a rev department of the treasury - internal_revenue_service page -14-


internal_revenue_service number release date index number ----------------------------------------- --------------------------------------- ----------------------------- --------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-147101-05 date date --------------------------------------- legend x ------------------------------------ state ------ d1 -------------------------- d2 -------------------------- year1 ------- year2 ------- dear ------------------- this responds to the letter dated date submitted on behalf of x requesting a ruling on the proper treatment of an involuntary termination of x facts subchapter_s_corporation effective d2 in year2 x discovered that it had been administratively dissolved by state in year1 upon learning the dissolution x immediately took an action to reincorporate in state law and analysis which an election under sec_1362 is in effect business corporation means a domestic_corporation which is not an ineligible_corporation and which does not -- a have more than shareholders b have as a sec_1361 provides that for purposes of subchapter_s the term small x was incorporated in state on d1 x made an election to be treated as a sec_1361 defines an s_corporation as a small_business_corporation for the core test of corporate existence for purposes of federal income_taxation is plr-147101-05 shareholder a person other than an estate a_trust described in subsection c or an organization described in subsection c who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock always a matter of federal_law whether an organization is to be taxed as a corporation under the code is determined by federal_law not state law if the conduct of the affairs of a corporation continues after the expiration of its charter or the termination of its existence it becomes an association see 305_f2d_844 ct_cl cert_denied 373_us_923 a corporation is subject_to federal corporate_income_tax liability as long as it continues to do business in a corporate manner despite the fact that its recognized legal status under state law is terminated see 438_f2d_774 3rd cir1971 conclusion as follows provided that x qualifies as a small_business_corporation under sec_1361 prior to the administrative dissolution under the laws of state x’s status as a small_business_corporation is not terminated by reason of the administrative dissolution and subsequent reincorporation and x will not be required to make a new election under sec_1362 concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed concerning whether the original election made by x to be treated as an s_corporation was a valid election under sec_1362 provides that it may not be used or cited as precedent based solely on the facts submitted and the representations made we conclude this ruling is directed only to the taxpayer requesting it sec_6110 except as expressly provided herein no opinion is expressed or implied sincerely dianna k miosi dianna k miosi chief branch office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes