tcmemo_2011_126 united_states tax_court sharon denise collier petitioner v commissioner of internal revenue respondent docket nos filed date sharon denise collier pro_se tammra s mitchell for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined deficiencies of dollar_figure and dollar_figure in petitioner’s federal_income_tax tax for her taxable years and respectively the issues for decision are is petitioner entitled to dependency_exemption deduc- tions under sec_151 a for cl for her taxable_year and for jia and sjh for her taxable_year we hold that she is not is petitioner entitled to the child_tax_credit under sec_24 with respect to cl for her taxable_year and with respect to jia and sjh for her taxable_year we hold that she is not is petitioner entitled to the additional_child_tax_credit under sec_24 with respect to cl for her taxable_year and with respect to jia and sjh for her taxable_year we hold that she is not is petitioner entitled to the earned_income_tax_credit under sec_32 with respect to cl for her taxable_year and with respect to jia and sjh for her taxable_year we hold that she is not is petitioner entitled to head_of_household filing_status under sec_2 for her taxable_year we hold that she is not 1all section references are to the internal_revenue_code code in effect for each of the years at issue all rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and are so found at the time petitioner filed the petitions in these cases she resided in georgia in date petitioner married charlie frank collier sr mr collier senior and they were still married as of the time of the trial in these cases petitioner and mr collier senior have one child together charlie frank collier jr mr collier junior at the end of mr collier junior who was born in wa sec_21 years old mr collier junior has two children both of whom were born after cl who was born in and wa sec_11 years old at the end of is the son of sherry stevens ms stevens petitioner does not know who cl’s father is neither cl nor ms stevens is biologically related to petitioner or to petitioner’s husband mr collier senior jia was born in and wa sec_12 years old at the end of sjh was born in and was years old at the end of 2although petitioner and mr collier senior have been mar- ried since date they did not live together during at least a substantial portion of and the years at issue at least during petitioner received food stamps in a dollar amount that is not established by the record petitioner filed form 1040a u s individual_income_tax_return for her taxable_year return in that re- turn petitioner reported total income of dollar_figure and claimed dependency_exemption deductions for mr collier junior and cl head_of_household filing_status the child_tax_credit with respect to cl the additional_child_tax_credit with respect to cl and the earned_income_tax_credit with respect to mr collier junior and cl respondent issued to petitioner a notice_of_deficiency for her taxable_year notice in that notice respondent disallowed petitioner’s claimed dependency_exemption deduc- tion for cl child_tax_credit with respect to cl addi- tional child_tax_credit with respect to cl and earned_income_tax_credit with respect to cl 3mr collier senior did not file a tax_return for his tax- able year or 4in her return petitioner claimed that cl’s relation- ship to her was grandchild 5respondent acknowledged in the notice that mr collier junior is petitioner’s biological child and therefore her quali- fying child as defined in sec_152 respondent did not disallow in that notice the dependency_exemption deduction and the earned_income_tax_credit that petitioner claimed in her return with respect to him petitioner filed electronically form_1040 u s individual_income_tax_return for her taxable_year return in that return petitioner reported total income and adjusted_gross_income of dollar_figure and claimed dependency_exemption deductions for jia and sjh head_of_household filing_status the child_tax_credit with respect to jia and sjh the additional_child_tax_credit with respect to jia and sjh and the earned_income_tax_credit with respect to jia and sjh respondent issued to petitioner a notice_of_deficiency for her taxable_year notice in that notice respondent disallowed petitioner’s claimed dependency_exemption deduc- tions for jia and sjh head_of_household filing_status child_tax_credit with respect to jia and sjh additional_child_tax_credit with respect to jia and sjh and earned_income_tax_credit with respect to jia and sjh opinion petitioner has the burden of establishing that the respec- tive determinations in the notice and the notice are wrong see rule a 290_us_111 6in her return petitioner claimed that jia’s relation- ship to her was nephew and that sjh’s relationship to her was niece in support of her position with respect to each of the issues presented petitioner relies almost exclusively on her own testimony and to a lesser extent on the testimony of her husband mr collier senior we found petitioner’s testimony to be in certain material respects internally inconsistent inconsistent with certain other evidence in the record questionable conclu- sory vague puzzling uncorroborated and self-serving we are not required to and we shall not rely on the testimony of petitioner in order to establish her position with respect to each of the issues presented see eg 87_tc_74 we found the testimony of mr collier senior to be generally credible8 but not helpful to petitioner’s position with respect to each of those issues dependency_exemption deductions sec_151 provides that the exemptions provided by this section shall be allowed as deductions to a taxpayer 7in support of her testimony that jia is her nephew peti- tioner relies on a letter allegedly written by her sister both a redacted copy of that letter and an unredacted copy of that letter are part of the record in these cases the court admitted that unredacted copy into the record under seal assuming arguendo that the unredacted copy of the letter were written by petitioner’s sister we do not find that that letter supports petitioner’s contention that jia is her nephew the letter allegedly written by petitioner’s sister on which petitioner relies does not even appear to refer to jia whom petitioner claimed as her nephew and dependent in her return 8we found mr collier senior’s memory to be faulty at times sec_151 provides an exemption for each dependent of the taxpayer as defined in sec_152 sec_152 defines the term dependent to mean either a qualifying_child see sec_152 or a qualifying_relative see sec_152 we turn first to whether cl is her qualifying_child for petitioner’s taxable_year and each of jia and sjh is her qualifying_child for her taxable_year sec_152 defines the term qualifying_child as follows sec_152 dependent defined c qualifying_child --for purposes of this section-- in general --the term qualifying_child means with respect to any taxpayer for any taxable_year an individual-- a who bears a relationship to the taxpayer described in paragraph b who has the same principal_place_of_abode as the taxpayer for more than one-half of such taxable_year c who meets the age requirements of paragraph and d who has not provided over one-half of such individual’s own support for the calendar_year in which the taxable_year of the taxpayer begins as pertinent here for purposes of sec_152 an individual meets the age requirements if that individual is under age see sec_152 as pertinent here sec_152 provides that a person bears a relationship to the taxpayer for purposes of sec_152 if such individual is-- a a child of the taxpayer or a descendant of such a child or b a brother sister step- brother or stepsister of the taxpayer or a descendant of any such relative as pertinent here sec_152 defines the term child for purposes of sec_152 to mean either a son daughter stepson or stepdaughter of the taxpayer sec_152 the term stepdaughter in sec_152 is not defined in the code where as is the case here the statute does not define the word we generally interpret it by using its ordinary and common meaning 116_tc_87 fn ref omitted merriam-webster’s collegiate dictionary 11th ed defines the word stepdaughter to mean a daughter of one’s wife or husband by a former part- ner we address initially whether the relationship requirement in sec_152 is satisfied with respect to cl for peti- tioner’s taxable_year and with respect to each of jia and sjh for her taxable_year in her return petitioner claimed that cl is her grandchild in her return peti- tioner claimed that jia is her nephew and that sjh is her niece we have found that cl is the son of ms stevens that petitioner does not know who cl’s father is and that neither cl nor ms stevens is biologically related to petitioner or to mr collier senior petitioner’s husband we find no reliable evidence in the record that jia is petitioner’s nephew9 and that sjh is petitioner’s niece on the record before us we find that petitioner has failed to carry her burden of establish- ing that the relationship requirement in sec_152 is satisfied with respect to cl for her taxable_year and with respect to each of jia and sjh for her taxable_year we address next whether the principal-place-of-abode re- quirement in sec_152 is satisfied with respect to cl for petitioner’s taxable_year and with respect to each of jia and sjh for her taxable_year we find no reliable evidence in the record that cl resided with petitioner during any portion of and that each of jia and sjh resided with her during any portion of on the record before us we find that petitioner has failed to carry her burden of establishing that she and cl had the same principal_place_of_abode at any time during let alone for more than one-half of that year see sec_152 and that she and jia and she and sjh had the same principal_place_of_abode at any time during 9see supra note let alone for more than one-half of that year see id on the record before us we find that petitioner has failed to carry her burden of establishing that the principal-place-of-abode require- ment in sec_152 is satisfied with respect to cl for her taxable_year and with respect to each of jia and sjh for her taxable_year on the record before us we find that petitioner has failed to carry her burden of establishing that for her taxable_year a cl is her qualifying_child as defined in sec_152 and b that therefore he is her dependent as defined in sec_152 and that for her taxable_year a each of jia and sjh is her qualifying_child as defined in sec_152 and b that therefore each of them is her dependent as defined in sec_152 we turn now to whether cl is petitioner’s qualifying_relative for her taxable_year and each of jia and sjh is her qualifying_relative for her taxable_year sec_152 defines the term qualifying_relative as follows sec_152 dependent defined d qualifying_relative --for purposes of this section-- in general --the term qualifying rela- tive means with respect to any taxpayer for any taxable_year an individual-- a who bears a relationship to the taxpayer described in paragraph b whose gross_income for the calen- dar year in which such taxable_year be- gins is less than the exemption_amount as defined in sec_151 c with respect to whom the taxpayer provides over one-half of the individ- ual’s support for the calendar_year in which such taxable_year begins and d who is not a qualifying_child of such taxpayer or of any other taxpayer for any taxable_year beginning in the calendar_year in which such taxable_year begins as pertinent here sec_152 provides that for purposes of sec_152 an individual bears a relation- ship to the taxpayer if that individual is a a child or descendant of a child e a son or daughter of a brother or sister of the taxpayer or h an individual other than an individual who at any time during the taxable_year was the spouse determined without regard to sec_7703 of the tax- payer who for the taxable_year of the taxpayer has the same principal_place_of_abode as the taxpayer and is a member of the taxpayer’s household we address initially whether the relationship requirement in sec_152 is satisfied with respect to cl for peti- tioner’s taxable_year and with respect to each of jia and sjh for her taxable_year we have found that cl is the son of ms stevens that petitioner does not know who cl’s father is and that neither cl nor ms stevens is biologically related to petitioner or to mr collier senior petitioner’s husband see sec_152 we have further found that there is no reliable evidence in the record establishing that jia is peti- tioner’s nephew and that sjh is petitioner’s niece see sec_152 we have also found that petitioner has failed to carry her burden of establishing that she and cl had the same principal_place_of_abode at any time during and that she and jia and she and sjh had the same principal_place_of_abode at any time during see sec_152 on the record before us we find that petitioner has failed to carry her burden of establishing that the relationship requirement in sec_152 is satisfied with respect to cl for her taxable_year and with respect to each of jia and sjh for her taxable_year we address next whether the support requirement in sec_152 is satisfied with respect to cl for petitioner’s taxable_year and with respect to each of jia and sjh for her taxable_year in order to prove that that requirement is satisfied petitioner must establish the total amount of support from all sources provided a during to cl and b during to each of jia and sjh and that petitioner provided a during over one-half of that total amount for cl and b during over one-half of that total amount for each of jia and sjh see 73_tc_963 56_tc_512 sec_1_152-1 income_tax regs the term support includes food shelter clothing medical and dental care education and the like sec_1_152-1 income_tax regs the total amount of support for each claimed dependent provided by all sources during the year in question must be shown by competent evidence blanco v commissioner supra pincite where the total amount of support provided to a child during the year in question is not shown and may not reasonably be inferred from competent evidence it is not possi- ble to find that the taxpayer contributed more than one-half of that child’s total support id pincite 31_tc_1252 we find no reliable evidence in the record establishing the total amount of any support that petitioner provided a during to cl and b during to each of jia and sjh and the total amount of support from all sources provided a during to cl and b during to each of jia and sjh nor did petitioner proffer any evidence from which we might infer the total amount of support from all sources provided during to cl and during to each of jia and sjh on the record before us we find that petitioner has failed to carry her burden of establishing that the support requirement in sec_152 is satisfied with respect to cl for her taxable_year and with respect to each of jia and sjh for her taxable_year on the record before us we find that petitioner has failed to carry her burden of establishing a that cl is her quali- fying relative as defined in sec_152 for her taxable_year and b that therefore he is her dependent as defined in sec_152 and a that each of jia and sjh is her qualifying_relative as defined in sec_152 for her tax- able year and b that therefore each of them is her depend- ent as defined in sec_152 based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- lishing that she is entitled under sec_151 to dependency_exemption deductions for cl for her taxable_year and jia and sjh for her taxable_year child_tax_credit sec_24 provides a credit with respect to each quali- fying child of the taxpayer as pertinent here sec_24 defines the term qualifying_child as a qualifying_child of the taxpayer as defined in sec_152 who has not attained age 10the parties agree that at all relevant times each of cl continued we have found that petitioner has failed to carry her burden of establishing that cl is her qualifying_child as defined in sec_152 for her taxable_year and that each of jia and sjh is her qualifying_child as defined in that section for her taxable_year on the record before us we find that petitioner has failed to carry her burden of establishing that cl is her qualifying_child as defined in sec_24 for her taxable_year and that each of jia and sjh is her qualifying_child as defined in that section for her taxable_year based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- lishing that she is entitled to the child care tax_credit under sec_24 with respect to cl for her taxable_year and with respect to each of jia and sjh for her taxable_year additional_child_tax_credit the child_tax_credit provided by sec_24 may not exceed the taxpayer’s regular_tax_liability sec_24 where a taxpayer is eligible for the child_tax_credit but the taxpayer’s regular_tax_liability is less than the amount of the child_tax_credit potentially available under sec_24 continued jia and sjh was under years old sec_24 makes a portion of the credit known as the addi- tional child_tax_credit refundable we have found that petitioner has failed to carry her burden of establishing that she is entitled to the child_tax_credit under sec_24 with respect to cl for her taxable_year and with respect to each of jia and sjh for her taxable_year based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- lishing that she is entitled to the additional_child_tax_credit under sec_24 with respect to cl for her taxable_year and with respect to each of jia and sjh for her taxable_year earned_income_tax_credit sec_32 permits an eligible_individual an earned_income_credit against that individual’s tax liabilitydollar_figure as pertinent here the term eligible_individual is defined to mean any individual who has a qualifying_child for the taxable_year sec_32 as pertinent here sec_32 11the amount of the credit is determined on the basis of percentages that vary depending on whether the taxpayer has one qualifying_child two or more qualifying children or no qualify- ing children see sec_32 the credit is also subject_to a limitation based on adjusted_gross_income see sec_32 see also infra note defines the term qualifying_child to mean a qualifying_child of the taxpayer as defined in sec_152 we have found petitioner has failed to carry her burden of establishing that cl is her qualifying_child as defined in sec_152 for her taxable_year and that each of jia and sjh is her qualifying_child as defined in that section for her taxable_year on the record before us we find that petitioner has failed to carry her burden of establishing that cl is her qualifying_child as defined in sec_32 for her taxable_year and that each of jia and sjh is her qualifying_child as defined in that section for her taxable_year based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- lishing that she is entitled to the earned_income_tax_credit under sec_32 with respect to cl for her taxable_year on that record we find that petitioner has failed to carry her burden of establishing that she is an eligible_individual as defined in sec_32 for her taxable_year dollar_figure 12see supra note 13petitioner does not claim that she is an eligible individ- ual as defined in sec_32 for her taxable_year even if she had made that claim the record is devoid of evidence establishing petitioner’s age before the end of as a result petitioner has failed to carry her burden of estab- lishing that she satisfies the age requirements of sec continued on the record before us we find that petitioner has failed to carry her burden of establishing that she is entitled to the earned_income_tax_credit under sec_32 with respect to each of jia and sjh for her taxable_year head_of_household filing_status sec_1 provides a special tax_rate for an individual who qualifies as a head_of_household as pertinent here sec_2 provides that an unmarried individual shall be consid- ered a head of a household if that individual maintains as his home a household which constitutes for more than one-half of such taxable_year the principal_place_of_abode of a qualifying_child of the individual as defined in sec_152 sec_2 or any other person who is a dependent of the taxpayer if the taxpayer is entitled to a deduction for the taxable_year for such person under sec_151 sec_2 continued c a ii ii which she must satisfy among other require- ments in order to qualify as an eligible_individual as defined in sec_32 assuming arguendo that petitioner were an eligible_individual as defined in sec_32 for her taxable_year she nonetheless would not be entitled to the earned_income_tax_credit for that year that is because petitioner reported in her return adjusted_gross_income of dollar_figure sec_32 completely phases out the earned_income_tax_credit for the taxable_year for an eligible_individual who has no qualifying children does not file a tax_return using married_filing_jointly filing_status and has adjusted_gross_income of dollar_figure or more see revproc_2007_66 sec_3 2007_2_cb_970 we have found that petitioner has failed to carry her burden of establishing that each of jia and sjh is her qualifying_child as defined in sec_152 for her taxable_year we have also found that petitioner has failed to carry her burden of establishing that she is entitled under sec_151 to a dependency_exemption deduction for each of jia and sjh for her taxable_year based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- lishing that she is entitled to head_of_household filing_status under sec_2 for her taxable_year we have considered all of the parties’ contentions and arguments that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing decisions will be entered for respondent


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number release date cc dom fs proc tln-6057-99 uilc internal_revenue_service national_office field_service_advice memorandum for district_counsel new england district boston cc ner ned bos from deborah a butler assistant chief_counsel field service cc dom fs - subject claim for additional interest this field_service_advice responds to your memorandum received date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend taxpayer year year year year year dollar_figurea dollar_figure dollar_figureb dollar_figure dollar_figurec dollar_figure dollar_figured dollar_figure dollar_figuree dollar_figure dollar_figuref dollar_figure dollar_figureg dollar_figure dollar_figureh dollar_figure issues date i date date date date date date date date date date whether under the described circumstances the taxpayer is entitled to a refund of additional overpayment interest whether under the described circumstances there is an administrative means by which the taxpayer may seek a refund of additional overpayment interest conclusion sec_1 under the circumstances no additional overpayment interest may be allowed to the taxpayer in light of the application of sec_6611 no facts an examination of the taxpayer resulted in a finding that there was a deficiency in tax due for year overpayments were due to the taxpayer for year year and year based on the agreed deficiency determination for year the service transferred overpayment credits of tax to the year account a transcript of the taxpayers’ account reflects the following transactions on date dollar_figurea was transferred to the year account from the year account on date dollar_figureb was transferred to the year account from the year account on date dollar_figurec was transferred to the year account from the year account on date dollar_figured was transferred to the year account from the year account on date dollar_figuree was transferred to the year account from the year account on date dollar_figuref was transferred to the year account from the year account on date dollar_figureg was transferred to the year account from the year account no overpayment interest was credited to the year account before the overpayment credits were transferred to the year account within the year account however the taxpayer claims that deficiency_interest was calculated without taking into account the dates on which the transferred credits became available the taxpayer now alleges that this was an error and that the result of this error was an assessment of excessive deficiency_interest the taxpayer concedes that the period of limitations for claiming a refund of the excessive deficiency_interest for year has now expired instead casting its claim as a claim based on an account_stated theory the taxpayer argues that the service had the use of its money for the period during which overpayment interest was owed to it but was not paid or credited to its account for year specifically the taxpayer claims it should be allowed overpayment interest on the amount of dollar_figurea from the date the overpayment became available on date to date the date the taxpayer alleges the credit was actually applied to the year account in addition the taxpayer seeks to recover accrued interest on that amount from date until the alleged overpayment is paid it calculated this amount as of date to be dollar_figureh taxpayer made an informal claim administratively to the service in a letter dated date the service responded by letter dated date in that letter the service stated that a claim for additional interest on an overpayment is not subject_to an administrative claim_for_refund and that there is no administrative remedy for the taxpayer’s complaint the letter advised the taxpayer that it could file suit within the six year statute of u s c section a and that the six year period was not extended by the service’s administrative consideration of the case the taxpayer sought confirmation of this position from its examining agents who in turn sought confirmation from your office law and analysi sec_1 whether the taxpayer has a claim for additional overpayment interest the-service is authorized to refund overpayments of tax to taxpayers under sec_6402 an overpayment_of_tax is the amount by which the tax_payments made by a taxpayer exceed the taxpayer’s liability for taxes interest and penalties for a given type of tax and tax period there is no overpayment until the entire amount of tax is satisfied see sec_301_6401-1 an overpayment can result from the overpayment of estimated_taxes carrybacks of net operating losses or other adjustments made on an amended_return adjustments made as the result of an audit or by the payment of tax that is assessed or collected after the relevant limitations_period has expired see interest handbook irm sec_121 overpayments of tax can be refunded to a taxpayer at the request of the taxpayer in a formal or informal claim_for_refund or upon the service's initiative sec_301_6402-2 in lieu of actually refunding such overpayments to a taxpayer sec_6402 also allows the service to credit an overpayment against existing liabilities when it provides in the case of any overpayment the secretary within the applicable_period of limitations may credit the amount of such overpayment including any interest thereon against any liability in respect of an internal revenue tax on the part of the person who rnade the the transcript reflects that the credit transfers detailed above were actually processed during the third week of we assume for purposes of this discussion that the taxpayer has chosen date based on the date it agreed to the assessment of the agreed deficiency since the date is not material to the result reached here we have not ascertained the source of date overpayment and shall subject_to subsections c or d refund any balance to such person no credit or refund of an overpayment can be made however after the expiration of the statute_of_limitations on refunds unless before the expiration of the statutory period the taxpayer files a timely claim_for_refund with the service sec_6511 sec_301_6611-1 defines due_date in a number of situations for purposes of computing interest in general the term due_date means the last day fixed by law or regulations for the payment of the tax determined without regard to any extension of time and not the date of a notice_and_demand for payment issued by the service sec_301_6611-1 in the case of a credit against interest that accrues for any period beginning on or after date such interest is due as it economically accrues on a daily basis rather than when it is assessed sec_301_6611-1 in the case of a credit against an additional_amount addition to the tax or assessable penalty the due_date is the earlier of the date of assessment or the date from which such amount would bear interest if not satisfied by payment or credit sec_301_6611-1 when as in this case an overpayment is credited against another tax_liability sec_6611 provides that interest is to be allowed and paid on the overpayment from the date of the overpayment to the due_date of the amount against which the credit is taken in this case the taxpayer's year tax_liability is the amount against which the credit is taken sec_6611 payment of the year tax_liability was due march year sec_301_6611-1 because the due_date for payment of the year tax_liability march year preceded the date date on which the overpayment for year arose there was no period on which overpayment interest was allowable sec_6611 in contrast sec_6611 allows interest on overpayments from the date the overpayment arises until a date preceding the date of a refund check by no more than days the taxpayer would have been entitled to overpayment interest if its year overpayment had been refunded to it rather than credited against the agreed deficiency for year see revproc_84_58 1984_2_cb_401 we find further support for this conclusion by considering the interdependence between sec_6601 and sec_6611 sec_6601 provides that interest on an underpayment_of_tax that is not paid on or before the last date prescribed for payment accrues from the prescribed payment_date until the date on which the tax is paid sec_6601 e provides that the interest on any tax- shall be assessed collected and paid in the same manner as taxes any reference in this title to any_tax imposed by this title shall be deemed to refer to interest imposed by this section on such tax underpayment interest on a tax may be assessed and collected at any time during the period within which the tax to which such interest relates may be collected see sec_6601 under this provision the agreed deficiency would accrue interest from the due_date of the return for which it was due until it was paid to parallel sec_6611 sec_6601 provides that ilf any portion of a tax is satisfied by credit of an overpayment then no interest shall be imposed under this section on the portion of the tax so satisfied for any period during which if the credit had not been made interest would have been allowable with respect to such overpayment interest on the agreed deficiency for year began to run on the due_date of the year tax payment march year and continued to accrue until the liability was paid in full on date the date on which the year overpayment became available to be applied to the year agreed deficiency_interest stopped accruing on the portion of the agreed deficiency that was paid_by the credit transfer interest on the agreed deficiency for year continued to accrue from date until the agreed deficiency was paid in full taxpayer claims that date is date under sec_6601 since overpayment interest was not allowed after date on the year overpayments accrual of underpayment interest on the year agreed deficiency that was paid with the year overpayment should likewise have stopped to the extent the liability was paid as of date although we have not reviewed the interest computations we were advised for purposes of providing this advice that the service assessed and collected underpayment interest on the year agreed deficiency for the period after date we do not know the date on which the service stopped accruing interest on the year agreed deficiency it has been long established that the crediting of an overpayment_of_tax from one year against an underpayment of another tax_liability constitutes a payment of tax as effectively as a payment of the underpaid tax in cash 302_us_56 282_us_468 98_f2d_880 3d cir inasmuch as the amount of the credit is transferred from the overpaid account as a full or partial payment to the underpaid account the credited amount ceases to be a payment in the overpayment account in this case the tax_liability for year was no longer overpaid once the service credited the overpayment amount in that account to the agreed deficiency account for year once an overpayment has been credited in payment of another tax_liability the proper remedy for contesting the validity and legality of the tax against which the overpayment has been credited lies in a timely claim_for_refund of the tax paid_by means of the credit sec_301_6402-2 see 33_fedclaims_600 a claim must be filed within two years from the date on which the tax was paid sec_6511 for purposes of claiming a refund the payment of a tax_deficiency for one year is made when the overpayment from another tax_year is actually credited to the deficiency year see 613_f2d_518 ndollar_figure 5th cir 33_fedclaims_600 bazargani v united_states u s t c big_number e d pa revrul_56_506 1956_2_cb_959 it is undisputed that the period of limitations on the making of a refund claim for year has expired relying upon the sec_6601 prescription that references to tax also refer to underpayment interest on such tax the united_states court of federal claims has held that a taxpayer is required to follow the refund procedures for taxes with respect to claims for refund of underpayment interest before any suit can be filed to recover underpayment interest deficiency_interest has been so closely braided to principal that it has been deemed an integral part of the tax 454_f2d_1379 ct_cl in that case the court expressly rejected the taxpayer's argument that the refund procedures of the code do not apply to underpayment interest instead the court held that the general provisions governing suits against the government including the 6-year statute_of_limitations provided in u s c sec_2501 apply citing the acknowledged purposes of the refund claim requirement and the shorter limitations_period for tax_refund suits -- to prevent surprise to give adequate notice to the service of the nature of the claim and to allow the service to address the claim administratively prior to litigation -- the court observed all of these goals are advanced by adhering to the claim requirement as well as truncated limitations even where deficiency_interest alone is at stake alexander pincite emphasis added taxpayer has styled its claim as a claim based on an account_stated theory for the recovery_of additional overpayment interest on the overpayment for year this argument disregards the fact that the overpayment was properly credited to the agreed deficiency for year once the overpayment was applied to that agreed deficiency there was no longer any overpayment in the account for year that was subject_to refund or to the accrual of interest the only overpayment interest provided under sec_6611 is that allowable under sec_6611 or sec_6611 sec_6611 provides for the payment of interest on an overpayment only when the overpayment is credited to a tax_liability for a year subsequent to the year the overpayment arises sec_6611 provides for the payment of interest from the date of an overpayment to the date thirty days before a refund check is issued to the taxpayer however in this example sec_6611 does not provide for the payment of interest on the overpayment since the internal_revenue_code does not provide for interest to be paid on an overpayment where the overpayment is credited to a prior year’s liability no interest may be paid to the taxpayer sec_6611 this result is the same whether the taxpayer describes its complaint as a claim based on an account_stated theory or a claim_for_refund whether under the described circumstances there is an administrative means by which the taxpayer may seek a refund of additional overpayment interest a suit for the recovery_of an account_stated brought under u s c is based on the common_law concept that an implied contract arises when the service as debtor submits to the taxpayer as creditor a statement of the final balance due on an account and the creditor agrees to accept the proposed balance to close the account west publishing co v united_states ct_cl to constitute an account_stated the service must have agreed with the taxpayer that he has overpaid his taxes in a definite amount and must have communicated to him its intention to repay id a suit on an account_stated theory must be brought within six years from the date the right of action first accrues u s c a cause of action for overpayment interest first accrues on the date the related credit is allowed and this is the date the irs authorizes the scheduling of an overassessment see sec_6407 see also 289_us_367 the proper method for a taxpayer to request additional overpayment interest is to file form_843 claim_for_refund however a request filed by a taxpayer on form_843 does not toll the six year statute_of_limitations see revrul_55_477 1955_2_cb_498 superseded by revrul_76_74 1976_1_cb_388 revrul_57_242 1957_1_cb_452 since the suit on an account_stated is not a refund_suit there is no requirement imposed by the internal_revenue_code that an administrative claim be filed see u s c 283_us_258 we agree with your conclusion that such a claim should be considered as if it were a refund claim it correctly communicated however the service's position that such a claim for additional overpayment interest does not extend the six year period for filing suit see revrul_57_242 to the extent that the examination personnel handling this case may believe that the service will not administratively consider a claim for additional interest or is prohibited from considering such a claim administratively that belief is not correct the service will consider an administrative claim for additional interest and could pay such additional interest were it determined to be due to the taxpayer as noted above however this taxpayer is not entitled to a payment of additional interest case development hazards and other considerations please call if you have any further questions


t c memo united_states tax_court gregg h risner petitioner v commissioner of internal revenue respondent docket no filed date gregg s risner pro_se blaise g dusenberry and james e archie for respondent memorandum opinion panuthos chief special_trial_judge this matter is before the court on petitioner's motion to shift burden_of_proof to respondent as explained in greater detail below we shall deny petitioner's motion all section references are to the internal_revenue_code in effect for the tax years at issue all rule references are to the tax_court rules_of_practice and procedure background gregg h risner petitioner operates a chiropractic business near dallas texas petitioner filed a federal_income_tax return for the taxable_year in which he reported net profit on schedule c in the amount of dollar_figure capital_gains in the amount of dollar_figure and taxable_income in the amount of dollar_figure although petitioner filed a tax_return for he reported no taxable_income and instead claimed a refund of dollar_figure petitioner did not file tax returns for or by letter dated date revenue_agent robert d southern notified petitioner that he was being audited by the internal_revenue_service irs for the taxable years and revenue_agent southern requested that petitioner bring his books_and_records to an appointment scheduled for date petitioner responded to the above-described letter by sending revenue_agent southern a document entitled affidavit and constructive notice that states in pertinent part petitioner returned his assigned social_security_number to its proper owner petitioner as a belligerent claimant was claiming immunity and would refuse to produce his books_and_records and revenue_agent southern should provide petitioner with the code sections and implementing regulations demonstrating his authority to audit petitioner's records on date petitioner was served with an irs summons form directing him to appear before revenue_agent southern with his financial records as well as those of the risner chiropractic clinic and the risner family_trust although petitioner appeared before revenue_agent southern at the date and time specified in the summons he refused to produce his books_and_records on the grounds that to do so would violate his rights under the fourth and fifth amendments to the u s constitution by notice_of_deficiency dated date respondent determined deficiencies additions to tax and a penalty with respect to petitioner's federal income taxes for the years and in the amounts as follows additions to tax penalty year deficiency sec_6651 sec_6654 sec_6662 dollar_figure dollar_figure --- dollar_figure big_number big_number --- --- big_number big_number dollar_figure --- the explanation of adjustments portion of the notice_of_deficiency states that respondent arrived at petitioner's taxable_income by increasing petitioner's interest and dividend income to account for third-party information reported to respondent on forms 1099-int and 1099-div and computing petitioner's net_income from his chiropractic business using petitioner's prior earnings experience in conjunction with the applicable consumer_price_index factors for the years and using dollar_figure the net profit figure reported by petitioner on the schedule c attached to his tax_return a sec_2 respondent received third-party information including forms 1099-int and 1099-div indicating that petitioner invested substantial amounts in several different stock and bond mutual_fund accounts during and base_year income respondent determined that petitioner earned net profits of dollar_figure dollar_figure and dollar_figure from his chiropractic business during the taxable years and respectively petitioner invoked this court's jurisdiction by filing a timely petition for redetermination on date the petition states in pertinent part petitioner specifically denies the receipt of the taxable_income shown in the notice_of_deficiency on which the amount of the alleged deficiency was figured and therefore denies the deficiency and the penalties because of the inaccuracies in that taxable_income and petitioner pleads that there is are no implementing regulations of the code_of_federal_regulations which give any authority to the internal_revenue_service or any of its officers or employees to proceed in the manner in which it has proceeded in the instant matter and therefore the actions taken by the internal_revenue_service in this matter falls outside of its scope of authority granted to it by the code and petitioner pleads that based upon title_26 usc the internal_revenue_code and its implementing regulations petitioner is engaged in no taxable activities and is therefore outside the jurisdiction of the internal_revenue_service and petitioner pleads that the burden of proving the non-receipt of income is beyond the reasonable burden which the court should place on an individual and petitioner pleads that the entire case by the government is based upon a naked assertion ie one person's word against another's and therefore is insufficient to sustain a decision in the government's favor at the time he filed his petition petitioner was residing in longview texas on date petitioner filed a motion to shift burden_of_proof to respondent relying on 988_f2d_27 5th cir revg and remanding tcmemo_1992_99 and 932_f2d_1128 5th cir affg in part and revg in part tcmemo_1990_68 petitioner contends that respondent failed to provide a factual foundation for her determination and therefore the notice_of_deficiency constitutes a naked assertion based on these arguments petitioner concludes that the normal presumption of correctness should not apply to respondent's deficiency determination and that the burden_of_proof should shift to respondent on date respondent filed an answer to the petition generally denying the allegations contained therein on the same date respondent filed an objection to petitioner's motion to shift the burden_of_proof respondent argues that petitioner's motion should be denied on the ground that the petition filed herein fails to state a justiciable claim for relief and is based on nothing more than time-worn tax_protester arguments in this regard respondent maintains that although the petition includes an allegation that respondent erred in her determinations petitioner failed to allege any specific facts regarding the correct amount of his tax_liability in the alternative respondent contends that petitioner's motion is premature and that the question of the placement of the burden_of_proof is a matter best resolved at trial this matter was called for hearing in washington d c counsel for respondent appeared at the hearing and presented argument in opposition to the pending motion although petitioner did not appear at the hearing he did file a written_statement with the court pursuant to rule c in response to respondent's objection to his motion in that statement petitioner asserts that the compensation that he receives in exchange for his labor is not income as defined in the internal_revenue_code petitioner also contends that he is not subject_to the federal_income_tax because he is a self-governing free born sovereign citizen significantly petitioner admits that he receives compensation from the operation of a chiropractic business he asserts that any gains earned on his investments do not constitute taxable_income discussion we begin with the well-settled rule that determinations made by the commissioner in a notice_of_deficiency normally are presumed to be correct and the taxpayer bears the burden of proving that those determinations are erroneous rule a 290_us_111 in addition this court ordinarily will not look behind a statutory_notice_of_deficiency to examine the evidence used or the propriety of respondent's motives or conduct in determining the deficiency 79_tc_185 62_tc_324 there are exceptions to the general_rule that the commissioner's determination is presumed to be correct one such exception arises in cases involving unreported income where the taxpayer challenges the notice_of_deficiency on the ground that it is arbitrary and the commissioner fails to substantiate her determination with predicate evidence 46_f3d_382 5th cir affg in part revg in part and remanding in part tcmemo_1992_168 portillo v commissioner f 2d pincite as indicated petitioner moves to shift the burden_of_proof in the instant case based on his assertion that the notice_of_deficiency is arbitrary respondent counters that petitioner's motion should be denied and his petition fails to state a justiciable claim for relief we agree rule b requires that a petition filed in this court contain clear and concise assignments of each and every error which the taxpayer alleges to have been committed by the commissioner in the determination of the deficiency and the additions to tax in dispute rule b further requires that the petition contain clear and concise lettered statements of the facts on which the taxpayer bases the assignments of error see 78_tc_646 any issue not raised in the pleadings is deemed to be conceded rule b jarvis v commissioner supra pincite n gordon v an appeal in the instant case would lie in the court_of_appeals for the fifth circuit commissioner 73_tc_736 further the failure of a party to plead or otherwise proceed as provided in the court's rules may be grounds for the court to hold such party in default either on the motion of another party or on the initiative of the court rule a based upon our review of the petition petitioner's motion and rule c statement we conclude that petitioner has failed to satisfy the requirements of rule b viewing the petition in isolation the best that can be said is that petitioner has assigned error in respect of respondent's determinations however the petition lacks any statement of the facts on which petitioner bases the assignments of error petitioner's motion to shift the burden_of_proof to respondent adds nothing in this regard petitioner's rule c statement contains significant admissions rather than denying that he was engaged in an income-producing activity during the years in issue petitioner admits that he received compensation from operating a chiropractic business petitioner also concedes that he maintained income-producing investments during the period in question in conjunction with these statements petitioner asserts that respondent erred in determining deficiencies in this case on the theories that compensation received in exchange for labor is not taxable_income and as a sovereign citizen he is not subject_to the federal_income_tax petitioner's arguments are nothing more than time-worn tax_protester arguments that have been long rejected by this and other federal courts e g 793_f2d_139 6th cir affg per curiam 82_tc_766 791_f2d_68 7th cir 784_f2d_1006 9th cir 760_f2d_1003 9th cir 737_f2d_439 5th cir 733_f2d_709 9th cir 687_f2d_264 8th cir affg tcmemo_1981_506 661_f2d_71 5th cir affg tcmemo_1981_122 640_f2d_1014 9th cir compensation_for labor or services paid in the form of wages or salary has been universally held by the courts of this republic to be income subject_to the income_tax laws currently applicable 633_f2d_1356 9th cir 82_tc_403 80_tc_1111 77_tc_1169 70_tc_730 affd 614_f2d_159 8th cir mcneel v commissioner tcmemo_1995_211 affd ___ f 3d ___ 9th cir date fischer v commissioner tcmemo_1994_586 zyglis v commissioner tcmemo_1993_341 affd without published opinion 29_f3d_620 2d cir fox v commissioner tcmemo_1993_277 affd without published opinion 69_f3d_543 9th cir williams v commissioner tcmemo_1988_368 allen v commissioner tcmemo_1987_242 hebrank v commissioner tcmemo_1982_496 see sec_61 an allegation in an unreported income case that respondent's determination is arbitrary might under some circumstances be viewed as a valid assignment of error however it is evident as discussed above that the petition in the instant case amounts to nothing more than a frivolous protest of this country's tax laws as we see it petitioner's motion to shift the burden_of_proof to respondent is simply a transparent attempt at furthering that protest consequently petitioner's motion will be denied as previously indicated where a party fails to plead or otherwise proceed as provided in the court's rules the court may hold such party in default and enter a decision against the party on its own initiative rule a although the petition clearly fails to conform with rule b petitioner will be given another opportunity to correct the defects in his petition accordingly we shall issue an order allowing petitioner a reasonable amount of time to file a proper amended petition to reflect the foregoing an appropriate order will be issued in an effort to encourage petitioner to file a proper amended petition we will take this opportunity to remind petitioner that sec_6673 authorizes the tax_court to require a taxpayer to pay to the united_states a penalty not in excess of dollar_figure whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in such proceeding is frivolous or groundless


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc corp - plr-110775-00 date date distributing controlled sub sub sub sub sub sub 5a sub 5b sub sub sub sub sub partnership n corp sub n-1 sub n-2 sub n-3 sub n-4 sub n-5 sub n-6 sub n-7 distributing llc business m ‘ business n aa corp bb corp bb cc notes dd corp date ee date kk date ll ff gg hh jj mm nn oo 5-percent shareholders we respond to your request dated date for rulings as to certain federal_income_tax consequences of a series of proposed transactions this letter summarizes information in that letter and subsequent correspondence the rulings contained in this letter are based upon the 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 this material may be required as part of the audit process distributing is the common parent of a consolidated_group that directly and indirectly owns corporations that are engaged in businesses m and n business m is conducted through certain members of distributing’s consolidated_group including sub sub sub and sub each of which are wholly owned by distributing business n is conducted by subsidiaries of n corp which is indirectly owned by distributing as follows distributing owns the stock of sub and sub sub owns the stock of sub 5a prior to date kk sub 5a and sub together owned all the partnership interests in partnership prior to date ll partnership owned all the stock of n corp sub 5a and sub have held their interests in partnership for more than five years sub also owns all the stock of sub 5b distributing also owns all the stock of three inactive subsidiaries sub sub and sub as well as the stock of sub aa corp and bb corp n corp is a holding_company and the common parent of a consolidated_group that owns all the stock of subs n-1 n-2 n-3 n-4 n-5 n-6 and n-7 all of which actively conduct activities related to business n prior to date ll n corp was not a part of distributing’s consolidated_group we have received financial information indicating that sub sub sub sub sub n-1 sub n-2 sub n-3 sub n-4 sub n-5 sub n-6 and sub n-7 have had gross_income and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years distributing has required that n corp have a substantially lower level of debt than comparable companies engaged in business n because corporations conducting business m generally have substantially lower debt for reasons relating to the conduct of business m that are not applicable to business n the proposed transaction will separate business n from business m to alleviate management and systemic problems arising from conducting these two businesses under the common ownership of distributing the following transactions are proposed or as indicated have been recently completed as part of the plan of separation i sub and sub recently contributed land and structures to partnership in exchange for partnership interests ii partnership recently distributed the stock of n corp to its partners sub sec_5a and in reduction of their partnership interests in partnership iii sub 5a will merge into sub with sub surviving iv sub 5b will merge into sub with sub surviving v sub will be merged into a new limited_liability_company wholly owned by distributing distributing llc the taxpayer represents that distributing llc will not elect to be treated as a corporation for federal_income_tax purposes see sec_301 b i ii of the income_tax regulations vi sub will be merged into distributing llc vii three inactive subsidiaries subs and will merge into distributing llc viii n corp will transfer assets including intercompany receivables and the stock of subsidiaries of n corp that do not meet the active_trade_or_business_requirement of sec_355 of the internal_revenue_code to n-1 n-2 n-3 n-4 n-5 n-6 and n-7 in deemed exchange for stock and the assumption_of_liabilities distributing represents that to the best of its knowledge and belief these transfers will qualify under sec_351 ix distributing will transfer the stock of aa corp and bb corp to distributing llc x distributing llc will distribute to distributing a the stock of n corp b debt obligations owed by distributing to now-dissolved sub sec_5 5a 5b and and c the assets of sub xi distributing will transfer to recently formed controlled a the stock of sub sec_1 and all conducting business m b various other assets related to business m including the stock of certain first-tier subsidiaries of distributing including sub the m assets and c distributing’s interest in distributing llc in exchange for all of controlled’s outstanding_stock and the assumption of all distributing’s liabilities other than certain commercial paper debt the cc notes and distributing’s debt to dd corp xii controlled will transfer the m assets to sub sec_1 and who may in turn assume related liabilities xiii distributing will distribute the stock of controlled to its shareholders pro_rata the distribution after the distribution it is expected that distributing will have six directors on its board_of directors while controlled will have twelve distributing and controlled will have two common directors neither of which is or will be an employee of distributing or controlled in connection with the distribution distributing and controlled will enter into a tax_sharing_agreement the tax_sharing_agreement that will set forth each party’s rights and obligations with respect to tax matters for periods before and after the date of the distribution the tax_sharing_agreement will detail distributing’s and controlled’s responsibilities relating to tax_payments and refunds the filing of returns and the conduct of audits the tax_sharing_agreement will also provide for cooperation with respect to certain tax matters and for the exchange of information and retention of records that may affect the tax_liability of either party certain payments might be made between distributing controlled or their respective subsidiaries pursuant to the tax_sharing_agreement after the distribution the following representations have been made concerning the merger of sub 5a described in step iii the merger of sub 5b described in step iv the merger of sub into distributing llc described in step v and the merger of sub into distributing llc described in step vi you request that each such merger be treated as a liquidation described in sec_332 with regard to each such transaction except where a specific corporation or other entity is referred to a subsidiary refers to sub 5a in step iii sub 5b in step iv sub in step v and sub in step vi and b parent refers to sub in steps iii and iv and distributing the sole owner of distributing llc in steps v and vi a parent on the adoption of the plan_of_liquidation and at all times until the final liquidating_distribution is completed will be the owner of at least percent of the single outstanding class of subsidiary stock b no shares of subsidiary stock will have been redeemed during the years preceding the adoption of the plan_of_liquidation of subsidiary c all distributions from subsidiary to parent pursuant to the plan of complete_liquidation will be made within a single taxable_year of subsidiary d as soon as the first liquidation distribution has been made subsidiary will cease to be a going concern and its activities will be limited to winding up its affairs paying its debts and distributing its remaining assets to its shareholder e subsidiary will retain no assets following the final liquidating_distribution f other than the distribution by partnership of the stock of n corp to sub 5a and sub in step ii sub 5a and sub will not have acquired assets in a nontaxable_transaction at any time except for acquisitions occurring more than years before adoption of the plan_of_liquidation g sub 5b did not acquire assets in a nontaxable_transaction at any time except for acquisitions occurring more than years before adoption of the plan_of_liquidation h other than the receipt of assets as a result of the liquidations of sub 5a and sub 5b sub will not have acquired assets in a nontaxable_transaction at any time except for acquisitions occurring more than years before adoption of the plan_of_liquidation i other than the merger of sub into distributing llc and the transactions described in steps x and xi above no assets of sub sub 5a sub 5b or sub have been or will be disposed of by either sub sub 5a sub 5b sub or distributing llc except for dispositions in the ordinary course of business and dispositions occurring more than years before adoption of the plan_of_liquidation j other than the merger of sub into distributing llc and the subsequent transfer by distributing of the interest in distributing llc to controlled the liquidation of sub sec_5a and sub 5b will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of each of sub 5a and sub 5b if persons holding directly or indirectly more than percent in value of sub 5a or sub 5b stock also hold more than percent in value of the stock of recipient for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 as modified by sec_304 the fair_market_value of the assets of each of sub 5a and sub 5b that will be retained by distributing llc when the interest in distributing llc is transferred to controlled will be less than jj percent of the fair_market_value of the total assets of each corporation immediately before the merger of sub 5a and sub 5b into sub llc k other than the transfer of the interest in distributing llc to controlled the liquidation of sub and sub will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of each of sub and sub if persons holding directly or indirectly more than percent in value of sub or sub stock also hold more than percent in value of the stock of recipient for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 as modified by sec_304 the fair_market_value of the assets of each of sub and sub that will be retained by distributing llc when the interest in distributing llc is transferred to controlled will be less than jj percent of the fair_market_value of the total assets of each corporation immediately before the merger of sub and sub into distributing llc l before adoption of the liquidation plan no assets of subsidiary have been distributed in_kind transferred or sold to parent except for transfers in the ordinary course of business and transactions occurring more than years before adoption of the liquidation plan m subsidiary will report all earned_income represented by assets that will be distributed to its shareholders such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc n the fair_market_value of the assets of subsidiary will exceed its liabilities both at the date of the adoption of the plan_of_liquidation and immediately before the time that the first liquidating_distribution is made o there is no intercorporate debt between sub and sub 5a or between sub and sub 5b and none has been canceled forgiven or discounted except for transactions that occurred more than two years before adoption of the liquidation plan or alternatively if such date is later except for transactions before the date sub initially acquired sub 5a stock or sub 5b stock as the case may be p as of date ee distributing owed approximately ff dollars to sub approximately gg dollars to sub 5a and approximately hh dollars to sub 5b sub will succeed to distributing’s obligations to sub 5a and sub 5b as a result of the liquidation of those two subsidiaries other than those obligations there is no intercorporate debt between distributing and sub and none has been canceled forgiven or discounted except for transactions that occurred more than two years before adoption of the liquidation plan or alternatively if such date is later except for transactions before the date distributing initially acquired sub stock q as of date ee distributing owed approximately mm dollars to sub other than this obligation there is no intercorporate debt between distributing and sub and none has been canceled forgiven or discounted except for transactions that occurred more than two years before adoption of the liquidation plan or alternatively if such date is later except for transactions before the date distributing initially acquired sub stock r parent is not an organization that is exempt from federal_income_tax under sec_501 or any other section of the code s all other transactions undertaken contemporaneously with or in anticipation of in conjunction with or in any other way related to the proposed liquidation of subsidiary have been fully disclosed the following representations have been submitted with respect to the liquidations of sub sub and sub described in step vii a2 distributing on the adoption of the plan_of_liquidation and at all times until the final liquidating_distribution is completed will be the owner of at least percent of the single outstanding class of each of sub sub and sub stock b2 no shares of sub sub or sub stock will have been redeemed during the years preceding the adoption of the plan_of_liquidation of each corporation c2 all distributions from sub sub and sub to distributing pursuant to the plan of complete_liquidation will be made within a single taxable_year of each liquidating corporation d2 as soon as the first liquidation distribution has been made each of sub sub and sub will cease to be a going concern and its activities will be limited to winding up its affairs paying its debts and distributing its remaining assets to its shareholder e2 neither sub sub or sub will retain any assets following the final liquidating_distribution f2 no assets of either sub sub or sub will have been acquired in a nontaxable_transaction at any time except for acquisitions occurring more than years before adoption of the plan_of_liquidation g2 no assets of sub sub or sub will have been or will be disposed of by either sub sub sub or distributing except for dispositions in the ordinary course of business and dispositions occurring more than years before adoption of the plan_of_liquidation h2 none of the liquidations of sub sub or sub will be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of each of sub sub and sub if persons holding directly or indirectly more than percent in value of each liquidating corporation also hold more than percent in value of the stock of recipient for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 as modified by sec_304 i2 before adoption of the liquidation plan no assets of sub sub or sub will have been distributed in_kind transferred or sold to distributing except for transfers in the ordinary course of business and transactions occurring more than years before adoption of the liquidation plan j2 sub sub and sub will report all earned_income represented by assets that will be distributed to their respective shareholders such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc k2 the fair_market_value of the assets of each of sub sub and sub will exceed its liabilities both at the date of the adoption of the plan_of_liquidation and immediately before the time that the first liquidating_distribution is made l2 as of date ee distributing owed approximately nn dollars to sub and approximately oo dollars to sub other than these amounts there is no intercorporate debt between distributing and sub sub and sub and none has been canceled forgiven or discounted except for transactions that occurred more than two years before adoption of the liquidation plan or alternatively if such date is later except for transactions before the date distributing initially acquired sub stock sub stock or sub stock as the case may be m2 distributing is not an organization that is exempt from federal_income_tax under sec_501 or any other section of the code n2 all other transactions undertaken contemporaneously with or in anticipation of in conjunction with or in any other way related to the proposed liquidation of sub sub and sub have been fully disclosed the following representations have been made in connection with the transfer by distributing of the stock of sub sec_1 and the m assets and the interest in distributing llc to controlled step xi a3 no stock_or_securities will be issued for services rendered to or for the benefit of controlled in connection with the proposed transaction and no stock_or_securities will be issued for indebtedness of controlled that is not evidenced by a security or for interest on indebtedness of controlled that accrued on or after the beginning of the holding_period of the transferor for the debt b3 none of the stock to be transferred is sec_306 stock within the meaning of sec_306 c3 the transfer is not the result of the solicitation by a promoter broker or investment house d3 distributing will not retain any rights in the property transferred to controlled e3 any debt relating to the stock being transferred that is being assumed or to which such stock was subject was incurred to acquire such stock and was incurred when such stock was acquired and the transferor is transferring all of the stock for which the acquisition_indebtedness being assumed or to which such stock was subject was incurred f3 the adjusted_basis and the fair_market_value of the assets transferred by distributing to controlled will in each instance be equal to or exceed the sum of the liabilities assumed by controlled plus any liabilities to which the transferred assets are subject g3 the liabilities of distributing to be assumed by controlled were incurred in the ordinary course of business and are associated with the assets to be transferred h3 there is no indebtedness between distributing and controlled and there will be no indebtedness created in favor of distributing as a result of the transaction i3 the transfers and exchanges will occur under a plan agreed upon before the exchange in which the rights of the parties are defined j3 all exchanges will occur on approximately the same date k3 there is no plan or intention on the part of controlled to redeem or otherwise reacquire any stock or indebtedness issued in the proposed transaction l3 taking into account any issuance of additional shares of controlled stock any issuance of stock for services the exercise of any controlled stock_rights warrants or subscriptions a public offering of controlled stock and the sale exchange transfer by gift or other_disposition of any of the stock of controlled to be received in the exchange distributing or its shareholders will be in control of controlled under sec_368 m3 distributing will receive stock approximately equal to the fair_market_value of the property transferred to controlled n3 controlled will remain in existence and retain and use the property transferred to it in a trade_or_business o3 other than the transfer of the m assets to sub sub and sub as described above there is no plan or intention by controlled to dispose_of the transferred property other than in the normal course of business operations p3 each of the parties to the transaction will pay its own expenses if any incurred in connection with the proposed transaction q3 controlled will not be an investment_company within the meaning of sec_351 and sec_1_351-1 of the income_tax regulations r3 distributing is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 and the stock_or_securities received in the exchange will not be used to satisfy the indebtedness of such debtor sec_3 controlled will not be a personal_service_corporation within the meaning of sec_269a the following representations have been made in connection with the transfer of the m assets from controlled to sub sub and sub step xii in each case the term transferee refers to sub sub or sub as appropriate a4 no stock_or_securities will be issued for services rendered to or for the benefit of transferee in connection with the proposed transaction and no stock_or_securities will be issued for indebtedness of transferee that is not evidenced by a security or for interest on indebtedness of the transferee that accrued on or after the beginning of the holding_period of the transferor for the debt b4 none of the stock to be transferred is sec_306 stock within the meaning of sec_306 c4 the transfer is not the result of the solicitation by a promoter broker or investment house d4 controlled will not retain any rights in the property transferred to transferee e4 any debt relating to the stock being transferred that is being assumed or to which such stock is subject was incurred to acquire such stock and was incurred when such stock was acquired and controlled is transferring all of the stock to which the acquisition_indebtedness being assumed or to which such stock was subject was incurred f4 the adjusted_basis and the fair_market_value of the assets transferred by controlled to transferee will in each instance be equal to or exceed the sum of the liabilities assumed by controlled plus any liabilities to which the transferred assets are subject g4 the liabilities of controlled to be assumed by transferee were incurred in the ordinary course of business and are associated with the assets to be transferred h4 there is no indebtedness between controlled and sub except for distributing’s debt to sub which was assumed by controlled pursuant to step xi above and there will be no indebtedness created in favor of controlled as a result of the transaction i4 there is no indebtedness between controlled and each of sub and sub and there will be no indebtedness created in favor of controlled as a result of the transaction j4 the transfers and exchanges will occur under a plan agreed upon before the exchange in which the rights of the parties are defined k4 all exchanges will occur on approximately the same date l4 there is no plan or intention on the part of transferee to redeem or otherwise reacquire any stock or indebtedness issued in the proposed transaction m4 taking into account any issuance of additional shares of transferee stock any issuance of stock for services the exercise of any transferee stock_rights warrants or subscriptions a public offering of transferee stock and the sale exchange transfer by gift or other_disposition of any of the stock of transferee to be received in the exchange controlled will be in control of transferee under sec_368 immediately_after_the_exchange n4 controlled will receive stock approximately equal to the fair_market_value of the property transferred to transferee o4 transferee will remain in existence and retain and use the property transferred to it in a trade_or_business p4 there is no plan or intention by transferee to dispose_of the transferred property other than in the normal course of business operations q4 each of the parties to the transaction will pay its own expenses if any incurred in connection with the proposed transaction r4 transferee will not be an investment_company within the meaning of sec_351 and sec_1_351-1 of the income_tax regulations sec_4 transferee is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 and the stock_or_securities received in the exchange will not be used to satisfy the indebtedness of such debtor t4 transferee will not be a personal_service_corporation within the meaning of sec_269a the following representations have been made in connection with the distribution of controlled stock by distributing a5 the indebtedness owed by controlled to distributing if any after the distribution of controlled stock will not constitute stock_or_securities b5 no part of the consideration distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than as a shareholder of the corporation c5 the five years of financial information submitted on behalf of distributing and its subsidiaries represents the corporations’ present operations and with regard to each corporation there have been no substantial operational changes since the date of the last financial statements submitted d5 immediately after the distribution the fair_market_value of the assets relied on by each of sub n-1 sub n-2 sub n-3 sub n-4 sub n-5 sub n-6 and sub n-7 to satisfy the active_trade_or_business_requirement on behalf of n corp and ultimately distributing will constitute at least percent of the fair_market_value of the gross assets of the corporation owning such assets in addition the fair_market_value of the assets relied on by each of sub sub sub and sub to satisfy the active_trade_or_business_requirement on behalf of controlled will constitute at least percent of the fair_market_value of the gross assets of the corporation owning such assets e5 immediately after the distribution at least percent of the fair_market_value of the gross assets of distributing n corp and controlled will consist of the stock and securities of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 f5 following the transaction distributing and controlled through their wholly owned subsidiaries will each continue the active_conduct of its business independently and with separate employees g5 the distribution of the stock of controlled is carried out for the corporate business_purpose of separating business n from business m to alleviate various management and systemic problems that are exacerbated by conducting two distinct business operations in a single group the distribution of the stock of controlled is motivated in whole or substantial part by this corporate business_purpose h5 there is no plan or intention by any shareholder who hold sec_5 percent or more of the stock of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock of either distributing or controlled after the transaction i5 none of distributing’ sec_5 percent shareholders will have actively participated in the management and operation of distributing or a related_entity before distributing’s distribution of controlled stock and none of such shareholders will participate actively in the management or operation of distributing or a related_entity or controlled or a related_entity after the distribution of controlled stock j5 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 transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 k5 except for the merger of a newly created subsidiary into distributing with distributing surviving in order to effectuate the change_of distributing’s name under state law 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 l5 the total adjusted bases and the fair_market_value of the assets transferred to controlled by distributing will each equal or exceed the amount of the liabilities assumed as determined under sec_357 by controlled m5 the liabilities assumed as determined under sec_357 in the transaction were incurred in the ordinary course of business and are associated with the assets being transferred n5 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 the amendment by public law title 104_stat_1388 if applicable to reflect an early disposition of the property o5 distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction p5 other than liabilities which might arise under the tax_sharing_agreement or the agreement regarding the distribution no intercorporate debt will exist between distributing and controlled at the time of or after the distribution of controlled stock q5 immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further distributing’s excess_loss_account if any with respect to the controlled stock will be included in income immediately before the distribution see sec_1_1502-19 r5 payments made in connection with any continuing transactions 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 sec_5 no two parties to the transaction are investment companies as defined in sec_368 and iv t5 no person holds and no person will hold as of the date of the distribution disqualified_stock as defined in sec_355 that constitutes a percent or greater interest in either distributing or controlled distributing is not aware of any persons acting in concert in connection with an acquisition of distributing stock that would cause these persons to be treated as a single_person under sec_355 that acquired a percent or greater interest as defined in sec_355 in either distributing or controlled nor is distributing aware of any person entering into a put or call option short_sale or other risk-limiting device or transaction involving distributing stock that would cause sec_355 to apply to suspend the five-year period of sec_355 during the period such risk-limiting device or transaction limits risk of loss u5 the distribution is not part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the combined voting power of all classes of stock of distributing or controlled entitled to vote or percent or more of the total value of shares of all classes of distributing or controlled stock acquisitions described in sec_355 will not be taken into account for purposes of the preceding sentence based solely on the information received and the representations set forth above we rule as follows liquidation rulings the merger of sub 5a into sub will be treated for federal_income_tax purposes as a complete_liquidation of sub 5a under sec_332 sec_1_332-2 sub will recognize no gain_or_loss on the receipt of the assets of sub 5a in complete_liquidation sec_332 sub 5a will recognize no gain_or_loss on the deemed_distribution of its assets to sub sec_337 the basis of each asset received by sub in the liquidation of sub 5a will equal the basis of that asset in the hands of sub 5a immediately before its liquidation sec_334 the holding_period of each asset in the hands of sub will include the period during which the asset was held by sub 5a sec_1223 sub will succeed to and take into account the items of sub 5a described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 if applicable and the regulations thereunder sec_381 and sec_1_381_a_-1 sub will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub 5a as of the date of complete_liquidation sec_381 and sec_1_381_c_2_-1 any deficit in earnings_and_profits of sub 5a or sub will be used only to offset earnings_and_profits accumulated after the date of complete_liquidation sec_381 the merger of sub 5b into sub will be treated for federal_income_tax purposes as a complete_liquidation of sub 5b under sec_332 sec_1_332-2 sub will recognize no gain_or_loss on the receipt of the assets of sub 5b in complete_liquidation sec_332 sub 5b will recognize no gain_or_loss on the deemed_distribution of its assets to sub sec_337 the basis of each asset received by sub in the liquidation of sub 5b will equal the basis of that asset in the hands of sub 5b immediately before its liquidation sec_334 the holding_period of each asset in the hands of sub will include the period during which the asset was held by sub 5b sec_1223 sub will succeed to and take into account the items of sub 5b described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 if applicable and the regulations thereunder sec_381 and sec_1_381_a_-1 sub will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub 5b as of the date of complete_liquidation sec_381 and sec_1_381_c_2_-1 any deficit in earnings_and_profits of sub 5b or sub will be used only to offset earnings_and_profits accumulated after the date of complete_liquidation sec_381 the merger of sub into distributing llc which is disregarded as an entity separate from its single owner distributing will be treated for federal_income_tax purposes as a complete_liquidation of sub under sec_332 sec_1_332-2 and sec_301_7701-3 distributing will recognize no gain_or_loss on the receipt of the assets of sub in complete_liquidation sec_332 sub will recognize no gain_or_loss on the deemed_distribution of its assets to distributing sec_337 the basis of each asset received by distributing in the liquidation of sub will equal the basis of that asset in the hands of sub immediately before its liquidation sec_334 the holding_period of each asset in the hands of distributing will include the period during which the asset was held by sub sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 if applicable and the regulations thereunder sec_381 and sec_1_381_a_-1 distributing will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of complete_liquidation sec_381 and sec_1_381_c_2_-1 any deficit in earnings_and_profits of sub or distributing will be used only to offset earnings_and_profits accumulated after the date of complete_liquidation sec_381 the merger of sub into distributing llc which is disregarded as an entity separate from its single owner distributing will be treated for federal_income_tax purposes as a complete_liquidation of sub under sec_332 sec_1_332-2 and sec_301_7701-3 distributing will recognize no gain_or_loss on the receipt of the assets of sub in complete_liquidation sec_332 sub will recognize no gain_or_loss on the deemed_distribution of its assets to distributing sec_337 the basis of each asset received by distributing in the liquidation of sub will equal the basis of that asset in the hands of sub immediately before its liquidation sec_334 the holding_period of each asset in the hands of distributing will include the period during which the asset was held by sub sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 if applicable and the regulations thereunder sec_381 and sec_1_381_a_-1 distributing will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of complete_liquidation sec_381 and sec_1_381_c_2_-1 any deficit in earnings_and_profits of sub or distributing will be used only to offset earnings_and_profits accumulated after the date of complete_liquidation sec_381 the merger of sub into distributing llc which is disregarded as an entity separate from its single owner distributing will be treated for federal_income_tax purposes as a complete_liquidation of sub under sec_332 sec_1_332-2 and sec_301_7701-3 distributing will recognize no gain_or_loss on the receipt of the assets of sub in complete_liquidation sec_332 sub will recognize no gain_or_loss on the deemed_distribution of its assets to distributing sec_337 the basis of each asset received by distributing in the liquidation of sub will equal the basis of that asset in the hands of sub immediately before its liquidation sec_334 the holding_period of each asset in the hands of distributing will include the period during which the asset was held by sub sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 if applicable and the regulations thereunder sec_381 and sec_1_381_a_-1 distributing will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of complete_liquidation sec_381 and sec_1_381_c_2_-1 any deficit in earnings_and_profits of sub or distributing will be used only to offset earnings_and_profits accumulated after the date of complete_liquidation sec_381 the merger of sub into distributing llc which is disregarded as an entity separate from its single owner distributing will be treated for federal_income_tax purposes as a complete_liquidation of sub under sec_332 sec_1_332-2 and sec_301_7701-3 distributing will recognize no gain_or_loss on the receipt of the assets of sub in complete_liquidation sec_332 sub will recognize no gain_or_loss on the deemed_distribution of its assets to distributing sec_337 the basis of each asset received by distributing in the liquidation of sub will equal the basis of that asset in the hands of sub immediately before its liquidation sec_334 the holding_period of each asset in the hands of distributing will include the period during which the asset was held by sub sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 if applicable and the regulations thereunder sec_381 and sec_1_381_a_-1 distributing will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of complete_liquidation sec_381 and sec_1_381_c_2_-1 any deficit in earnings_and_profits of sub or distributing will be used only to offset earnings_and_profits accumulated after the date of complete_liquidation sec_381 the merger of sub into distributing llc which is disregarded as an entity separate from its single owner distributing will be treated for federal_income_tax purposes as a complete_liquidation of sub under sec_332 sec_1_332-2 and sec_301_7701-3 distributing will recognize no gain_or_loss on the receipt of the assets of sub in complete_liquidation sec_332 sub will recognize no gain_or_loss on the deemed_distribution of its assets to distributing sec_337 the basis of each asset received by distributing in the liquidation of sub will equal the basis of that asset in the hands of sub immediately before its liquidation sec_334 the holding_period of each asset in the hands of distributing will include the period during which the asset was held by sub sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 if applicable and the regulations thereunder sec_381 and sec_1_381_a_-1 distributing will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of complete_liquidation sec_381 and sec_1_381_c_2_-1 any deficit in earnings_and_profits of sub or distributing will be used only to offset earnings_and_profits accumulated after the date of complete_liquidation sec_381 contribution rulings no gain_or_loss will be recognized on the transfer of the stock of sub sec_1 and the m assets and the assets within distributing llc from distributing to controlled in exchange for controlled stock and the assumption_of_liabilities the first contribution sec_351 and c sec_357 revrul_77_449 c b no gain_or_loss will be recognized by controlled on the first contribution sec_1032 the basis of each asset received by controlled in the first contribution will equal the basis of that asset in the hands of distributing immediately before the exchange sec_362 the holding_period of each asset received by controlled in the first contribution will include the period during which the transferor held the asset sec_1223 the basis of the controlled stock received by distributing in the first contribution will equal the basis of the transferred assets immediately before the transfer reduced by any assumed_liabilities sec_358 and d no gain_or_loss will be recognized on the transfer of the m assets from controlled to sub sub and sub respectively in exchange for stock of each respective corporation the second contribution sec_351 and c and rev_rul no gain_or_loss will be recognized by sub sub and sub on the second contribution sec_1032 the basis of each asset received by sub sub and sub in the second contribution will equal the basis of that asset in the hands of controlled immediately before the exchange sec_362 the holding_period of each asset received by sub sub and sub in the second contribution will include the period during which the transferor held the asset sec_1223 the respective bases of the stock of sub sub and sub owned by controlled will be increased by the basis of the assets transferred by controlled to such corporation in the second contribution immediately before that transfer sec_358 spin-off rulings no gain_or_loss will be recognized by distributing on the distribution of the stock of controlled to distributing’s shareholders pro_rata sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of a distributing shareholder on the distribution of controlled stock sec_355 the aggregate basis of the distributing and controlled stock in the hands of each distributing shareholder after the distribution will equal the basis of the distributing stock held by that shareholder immediately before the distribution allocated between the distributing and controlled stock in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 the holding_period of the controlled stock received by each distributing shareholder will include the holding_period of the distributing stock on which the distribution is made provided the stock is held as a capital_asset on the date of the distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 payments made between any of distributing controlled or their respective subsidiaries under the tax_sharing_agreement regarding tax_liabilities that i have arisen or will arise for a taxable_period ending on or before the distribution or for a taxable_period beginning before and ending after the distribution and ii will not become fixed or ascertainable until after the distribution will be treated as occurring immediately before the distribution caveats we express no opinion on the federal_income_tax treatment of the proposed transaction under other provisions of the code or regulations including the consolidated_return_regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings procedural statements this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in the transaction should attach a copy of this letter to the taxpayer's federal_income_tax return for the taxable_year in which the transaction is completed in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer by stephen p fattman assistant to the chief branch sincerely associate chief_counsel corporate