internal_revenue_service number release date index number ---------------------------- ------------------------------------- --------------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc pa plr-108071-11 date date legend partnership ---------------------------- parent -------------------------------------------------------------------------- dear ---------------------------- this is in response to your request dated date and supplemented on date and date for a private_letter_ruling under sec_6031 of the internal_revenue_code code specifically you request a ruling that partnership’s delivery in electronic format of substitute schedule k-1s that you represent satisfy the requirements of section of revproc_2010_21 under procedures that you represent satisfy the consent and notification requirements for electronic delivery of statements set forth in part b sec_3 of revproc_2010_24 will satisfy the requirements of sec_6031 of the code and sec_1 b - 1t a facts partnership is a calendar-year taxpayer and files form_1065 with the internal_revenue_service service electronically partnership currently satisfies its obligations under sec_6031 of the code to furnish information to its members by sending paper schedule_k-1 form_1065 partner’s shares of income deductions credits etc via united_states mail partnership also provides copies of schedule k-1s to its partners electronically via a secure website for information purposes only partnership currently provides certain electronic communications to its partners through a website maintained by its parent consents to electronic delivery of communications between partnership and its partners are set forth in a subscription agreement executed by the partners upon their initial investment in the partnership partners are notified via e-mail that electronic communications are available to be accessed through plr-108071-11 the website each partner then logs into the website with a user id and password and downloads the electronic communication this is also how a partner accesses the copy of the partner’s individual schedule_k-1 currently made available for information purposes only partners may revoke or suspend consent to electronic delivery or request paper copies of electronic communications at any time in the future partnership would like to furnish substitute schedule k-1s exclusively in electronic format to new partners who consent to electronic delivery under the procedures described below partnership represents that the substitute schedule k-1s will meet the requirement for substitute forms set forth in section of revproc_2010_21 2010_13_irb_473 in addition partnership represents that it will follow procedures regarding the delivery of substitute schedule k-1s that satisfy the consent and notification requirements for electronic delivery of other forms eg forms w-2 set forth in part b sec_3 of revproc_2010_42 2010_47_irb_715 specifically partnership states that it will adhere to the following procedures the partnership will obtain consent to electronic delivery from new partners pursuant to the subscription agreement each new partner will be sent an email requesting that the partner log on to parent’s website and consent to receive all account communications including the schedule_k-1 electronically if parent changes the hardware or software used to furnish the electronic form parent on behalf of the partnership will notify the partners of these changes and obtain a new consent prior to furnishing the schedule_k-1 prior to furnishing the schedule k-1s electronically to new partners parent on behalf of the partnerships will provide each recipient partner with a statement the 30-day e-mail that prominently displays the following information a that if the recipient does not consent to receive the schedule_k-1 electronically a paper copy will be provided b the scope and duration of the consent c how to obtain a paper copy of the schedule_k-1 after giving consent d how to withdraw the consent e that the consent may be withdrawn at any time by furnishing the withdrawal in writing electronically or on paper to the person whose name appears on the statement or by contacting the designated parent representative by telephone to verbally request withdrawal of consent at which time parent’s representative will withdraw the partner’s consent by adjusting the partner’s global preferences on parent’s website plr-108071-11 f that the partner can confirm withdrawal of consent by checking his or her global preferences set forth on the parent’s website and further that if the withdrawal was requested orally parent will contemporaneously send an e-mail to the recipient partner confirming their withdrawal request and providing instructions to contact parent if it was not their intention to withdraw their consent g notice of termination ie under what conditions the statements will no longer be furnished to the recipient h procedures to update the recipient’s information i a description of the hardware and software required to access print and retain the statement and a date the statement will not longer be available on the partnership website law furnishing of schedule k-1s sec_6031 of the code provides in part that every partnership shall make a return for each taxable_year stating specifically the terms of its gross_income and deductions and such other information as the secretary may by forms and regulations prescribe and shall include in the return the names and addresses of the individuals who would be entitled to share in the taxable_income if distributed and the amount of the distributive_share of each individual sec_6031 of the code provides in part that each partnership required to file a return for any partnership taxable_year shall on or before the day on which the return for such taxable_year was required to be filed furnish to each person who is a partner or who holds an interest in such partnership as a nominee for another person at any time during such taxable_year a copy of such information required to be shown on such return as may be required by regulations sec_1_6031_b_-1t of the income_tax regulations regulations provides in part that each partnership required to file a return for any partnership taxable_year shall on or before the day on which the return for such taxable_year is required to be filed furnish to each person who is a partner or who holds an interest in such partnership as a nominee for another person at any time during such taxable_year a written_statement containing the information prescribed by sec_1_6031_b_-1t and any additional information required by form or accompanying instructions this information includes the partner’s distributive_share of partnership income gain loss deduction or credit required to be shown on the partnership return plr-108071-11 the instructions for form_1065 u s return of partnership income provide in part that the partnership furnish a copy of schedule_k-1 to each partner substitute schedule k-1s revproc_2010_21 provides guidance on the requirements for forms accepted as substitutes for official internal_revenue_service forms section of revproc_2010_21 sets forth specific guidelines for substitute schedule k-1s section of revproc_2010_21 provides in part that substitute schedules k-1 should be as close as possible to exact replicas of copies of the official irs schedules the instructions for form_1065 u s return of partnership income provide in part that a partnership does not need irs approval to use a substitute schedule_k-1 if it is an exact copy of the irs schedule electronic furnishing of statements sec_6031 of the code and the treasury regulations are silent on whether electronic delivery of schedule k-1s is permitted sec_31_6051-1 of the employment_tax regulations and part b sec_3 of revproc_2010_42 2010_47_irb_715 set forth procedural consent and notification requirements for the electronic delivery of form w- wage and tax statement sec_4 of revproc_2009_49 2009_51_irb_879 sets forth procedural and notification requirements for the electronic delivery of forms and among others finally sec_1_6050s-2 of the income_tax regulations sets forth the procedural consent and notification requirements for the electronic delivery of statements required by sec_6050s regarding payments and reimbursements or refunds of qualified_tuition_and_related_expenses analysis sec_6031 and sec_1 6031-1t a provide that each partnership must furnish to each person who is a partner or who holds an interest in such partnership as a nominee for another person at any time during the taxable_year a copy of information required to be shown on the partnership return but does not prescribe the method of furnishing such information the service has issued regulations and revenue procedures authorizing the electronic furnishing of forms w-2 providing for procedural consent and notification that satisfy the needs of tax_administration in ensuring that recipients consent to receive these written statements electronically and that recipients actually receive these statements electronically the service has also issued similar regulations authorizing the electronic furnishing of statements required by sec_6050s as well as revenue procedures authorizing the electronic furnishing of forms and w-2g plr-108071-11 partnership represents that it will follow the procedures in furnishing electronic schedule k-1s to its partners that satisfy the procedural consent and notification requirements applicable to forms w-2 as set forth in revproc_2010_42 partnership further represents that the substitute k-1s furnished to its partners will meet the requirements for substitute forms set forth in section of revproc_2010_21 if the partnership electronically furnishes substitute schedule k-1s that satisfy the requirements of section of revproc_2010_21 under procedures that satisfy the consent and notification requirements for electronic delivery of statements set forth in part b sec_3 of revproc_2010_42 the partnership will satisfy the requirements of sec_6031 of the code and sec_1_6031_b_-1t the procedures outlined by partnership satisfy the consent and notification requirements for electronic delivery of statements set forth in part b sec_3 of revproc_2010_42 2010_47_irb_715 the regulations and revenue procedures authorizing electronic delivery of statements all require that the recipient of a statement must affirmatively consent to receive the statement in an electronic format the consent may be made electronically in any manner that reasonably demonstrates that the recipient can access the statement in the electronic format in which it will be furnished to the recipient see sec_31_6051-1 sec_1_6050s-2 revproc_2010_42 part b sec_3 and revproc_2009_49 sec_4 partnership has represented that new partners will be required to affirmatively consent to electronic delivery of the form k-1 by logging onto the parent’s web site and agreeing to receive a number of communications electronically including the form k-1 this satisfies the affirmative consent requirement in the area of withdrawal of consent the regulations and the revenue procedures all provide that consent may be withdrawn at any time by furnishing the withdrawal in writing electronically or on paper to the person whose name appears on the statement confirmation of the withdrawal also will be in writing electronically or on paper see sec_31 j v sec_1_6050s-2 revproc_2010_42 part b sec_3 revproc_2009_49 sec_4 partnership represents that partners may withdraw consent by furnishing the withdrawal in writing electronically or on paper to the person whose name appears on the statement in addition a partner may withdraw by contacting a designated parent representative by telephone to verbally request withdrawal of consent at which time parent’s representative will withdraw the partner’s consent by adjusting the partner’s global preferences on parent’s website if the withdrawal is requested orally parent will contemporaneously send an e-mail to the recipient partner confirming the withdrawal request and providing instructions to contact parent if he or she did not intend to withdraw consent this procedure is sufficient to meet the requirements of written withdrawal and confirmation although some partners will not request withdrawal in writing the contemporaneous written confirmation of electronic withdrawal is sufficient to protect those partners from an unwanted or inadvertent withdrawal plr-108071-11 conclusion based on the information provided and the representations made we conclude partnership’s proposed delivery in electronic format of substitute schedule k-1s satisfies the consent and notification requirements set forth in the regulations and revenue procedures authorizing electronic delivery of certain written statements thus these procedures will satisfy the requirements of sec_6031 of the code and sec_1_6031_b_-1t the partnership will not need service approval to use a substitute schedule_k-1 if it uses an exact copy of the services schedule_k-1 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely james coffey gibbons branch chief branch procedure administration cc


internal_revenue_service department of the treasury washington dc person to contact telephone number ret rapp to date feb q i999 s ln legend individual a individual b individual c individual d company a_trust b dear this is in response to your ruling_request dated date as supplemented by a letter dated date submitted on your behalf by your authorized representative in which several rulings were requested concerning sec_408 of the internal_revenue_code and the minimum distribution_requirements with respect to an individual_retirement_account ira described in sec_408 of the code your authorized representative submitted the following facts and representations individual a whose date of birth was date died on date he was survived by his spouse individual b whose date of birth is date he was also survived by two children of his marriage to individual b individuals c and d on date individual a entered into a living_trust agreement to form trust b individual a named himself grantor of trust b and designated himself and individual b as trustees at the time of individual a’s death trust b was a valid trust under state law trust b became irrevocable upon individual a’s death and the beneficiaries of trust b were who were beneficiaries with respect to trust b’s interest in individual a’s ira were identifiable from trust b’s trust instrument a copy of trust b’s trust instrument was delivered to the plan_administrator on date at the time of his death individual a was an owner of an ira whose custodian was company a pursuant to a beneficiary designation individual a designated himself and individual b trustees of trust b as the primary beneficiaries of the ira individual a had not begun to take any distributions from the ira as of the date of his death and had not made any election as to the form of distribution from his ira that could restrict the ability of the trustees of trust b with respect to their distribution election poohsr individual a’s will appointed individual b and company a as co-personal representatives of his estate the value of the estate exceeded dollar_figure the amount of the applicable credit dollar_figure minus a dollar_figure death_benefit provided individuals c and d pursuant to section dollar_figure of trust b individual b and company b became trust b’s co-trustees upon individual a’s death section dollar_figure of trust b divides the trust into two shares share no is allocated a percentage of trust b which is equal to the amount of individual a’s unused applicable credit_amount dollar_figure share no the balance of the value of trust b in excess of individual b’s unused applicable credit_amount is payable to a_trust designated in trust b as trust no trust qualified for a marital_deduction due to individual b’s general_power_of_appointment share no is payable to a_trust designated in trust b as trust no sec_4 a of trust b specifies the uses and purposes of trust no in particular during individual b’s lifetime sec_4 a i provides in part that i the income from trust no shall be paid in current installments not less frequently than quarter-annually to my wife individual b during her lifetime in addition the trustees shall pay or deliver to my said wife so much of the principal of trust no as she may from time to time request in writing sec_4 b of the trust b specifies the uses and purposes of trust no in particular sec_4 b i provides as follows the income from trust no shall be paid in current instaliments not less frequently than quarter-annuaily to my wife individual b during her lifetime in addition the trustee other than my said wife shall pay over to or use and apply for the benefit of my said wife so much of the principal of trust no to provide for the health support and maintenance of my said wife as such trustee shall in its sole discretion determine after taking into consideration other resources known by such trustee to be available to my said wife for the purposes hereinabove set forth section dollar_figure of trust b sets forth the beneficiaries of trust and trust individual b is the lifetime beneficiary of the income of trust with an unrestricted power_of_withdrawal and a general testamentary_power_of_appointment over the principal sec_4 a iii of trust b requires the distribution of the unappointed balance of trust if any at individual b’s death to individuals c and d subject_to a portion of such amounts being held in trust for them until they respectively attain age individual b is the lifetime beneficiary of the income of trust with the power to invade the principal under certain standards sec_4 b ii of trust b provides that the balance of trust no remaining after the death of individual b shall be paid over to such of individual a’s lineal_descendants and in such proportions as individual b shall designate by her last will and testament if individual b does not appoint a lineal descendant for any amount upon her death trust will be distributed to individuals c and d under the provisions relating to trust the trustees of trust b intend to fund trust no in the amount of dollar_figure the remaining applicable credit_amount with cash and other assets none of which consist of distributions from the ira the co-trustees of trust b intend to request a distribution from individual a’s ira of an amount equal to the entire account balance of his ira in excess of dollar_figure rollover amount to be distributed to trust b because section dollar_figure of trust b limits the value of trust no to individual a’s unused applicable credit_amount the trustees must allocate the rollover amount to trust no upon receipt by trust b of this amount from the ira into trust no individual b intends to withdraw an amount equal to the rollover amount from trust no and roll over such funds to an ira set up and maintained in her name the rollover will be made no later than days from the date that the distributions from individual b’s ira are made to trust b you represent that individual b has not rolled over any amounts from a qualified_plan or ira into another qualified_plan or ira within the last year the co-trustees do not intend to request a current_distribution of the amount of individual a’s ira equal to his applicable credit_amount dollar_figure the base_amount the co-trustees intend to allow the base_amount to remain in individual a’s ira until individual a would have attained age at which time the co-trustees intend to commence distributions from individual a’s ira over individual b’s life or over a period not extending beyond her life expectancy based on the above facts and representations the following rulings are requested individual b may be treated as the payee or distributee of individual a’s ira with respect to the rollover amount the rollover amount portion of individual a’s ira does not represent an inherited ira within the meaning of sec_408 of the internal_revenue_code with respect to individual b individual b is eligible to roll over the rollover amount into an ira set up and maintained in her own name pursuant to sec_408 of the code as long as the rollover of such distribution occurs no later than day after the date the rollover amount is received by trust b yarn ea individual b will not be required to include in gross_income for federal_income_tax purposes for the year in which the roll over of the rollover amount is timely made or any prior year any portion of the rollover amount rolled over from individual a’s ira to the ira set up and maintained in individual b’s name the base_amount portion of individual a’s ira may be held in his ira until the provision of sec_401 of the code require distributions to begin individual b is treated as the designated_beneficiary of the base_amount portion of individual a’s ira distributions of the base_amount are not required to be made from individual a’s ira until december of the calendar_year in which individual a would have attained age and may be paid out over individual b’s life or over a period not extending beyond her life expectancy as elected by the trustees at the time distributions begin if individual b dies before distributions begin she will be treated as the owner of individual a’s ira for purposes of computing the minimum distributions pursuant to section a of the code no party will be required to include any portion of the base_amount in gross_income for federal_income_tax purposes until the calendar_year in which sec_401 of the code requires distributions from individual a’s ira to commence unless any portion of the base_amount is withdrawn from his ira prior to such calendar_year with respect to the first four ruling requests sec_408 of the code provides in general that except as otherwise provided in sec_408 any amount_paid or distributed from an ira shal be included in gross_income by the payee or distributee as the case may be sec_408 of the code provides that sec_408 does not apply to a rollover_contribution if such contribution satisfies the requirements of sec_408 and b sec_408 of the code provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the account is maintained if the entire amount received including money and any other_property is paid into an ira other than an endowment_contract for the benefit of such individual not later than the day after the day on which he receives the payment or distributions sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 if at any time during the one-year period ending on the day of such receipt such individual received any other amount described in such subparagraph from an ira which was not includible in his gross_income because of the application of sec_408 sec_408 of the code provides in pertinent part that in the case of an inherited ira sec_408 shall not apply to any amount received by an individual from such account and no amount transferred from such account shall be excluded from income by reason of such transfer and such inherited account shall not be treated as an ira for purposes of determining whether any other amount is a rollover_contribution sec_408 of the code provides that an ira shall be treated as inherited if the individual for whose benefit the account is maintained acquired such account by reason of the death of another individual and such individual was not the surviving_spouse of such other individual thus pursuant to sec_408 of the code a surviving_spouse who acquires ira proceeds from and by reason of the death of her husband may elect to treat those ira proceeds as her own and roll them over into her own ira generally if a decedent’s ira proceeds pass through a third party eg a_trust and then are distributed to the decedent’s surviving_spouse said spouse will be treated as acquiring them from the third party and not from the decedent thus generally the surviving_spouse will not be eligible to roll over the ira proceeds into his or her own ira however if the trustee s of a_trust which distributes ira proceeds to a surviving_spouse has no discretion with respect to either the allocation of the ira proceeds to a_trust or a subtrust within the trust or to the payment of the ira proceeds to the surviving_spouse then for purposes of sec_408 of the code the internal_revenue_service will treat the surviving_spouse as having acquired the ira proceeds from the decedent and not from the trust individual b is the surviving_spouse of individual a because the trustees of trust b do intend to fund trust no with dollar_figure of assets not obtained from individual a’s ira pursuant to the allocation provisions in section dollar_figure of trust b which limits the amount allocated to trust no to dollar_figure the trustees are required to pay the funds distributed from individual a’s ira to trust no the co-trustee has no discretion with respect to the allocation of the rollover amount once the rollover amount is allocated to trust no pursuant to the terms of trust b individual b has the power to demand payment of the rollover amount thus the co-trustee has no discretion with respect to either the allocation of the ira proceeds to trust no or to the payment of the ira proceeds to individual b therefore individual b is treated as having acquired the rollover amount from individual a and not from trust b individual b will then roll over these ira amounts into an ira maintained by her the rollover will take place within sixty days of the date the distribution was made from individual a’s ira into trust no therefore in regard to ruling requests number one two three and four we concluded as follows individual b may be treated as the payee or distributee of individual’s a ira with respect to the rollover amount the rollover amount portion of individual a’s ira does not represent an inherited ira within the meaning of sec_408 of the code with respect to individual b individual b is eligible to rol over the rollover amount into an ira set up and maintained in her own name pursuant to sec_408 of the code as long as the rollover of such distribution occurs no later than day after the date the rollover amount is received by trust b individual b will not be required to include in gross_income for federal_income_tax purposes for the year in which the roll over of the rollover amount is timely made or any prior year any portion of the rollover amount rolled over from individual a’s ira to the ira set up and maintained in individual b’s name with respect to ruling requests five through nine sec_408 of the code defines an ira as a_trust which meets the requirements of sec_408 through a sec_408 of the code provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 of the code and the incidental death_benefit requirement of sec_401 of the code shall apply to the distribution of the entire_interest of an individual for whose benefit the trust is maintained sec_401 and ii of the code provide generally that a_trust will not constitute a qualified_trust unless the plan provides that the entire_interest of each employee will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary q a a-3 sec_1_408-8 of the proposed_regulations states that the term required_beginning_date means april of the calendar_year following the calendar_year in which the individual attains age t n u a j m c d e n e n r j e w sec_401 of the code provides in part that if an employee dies before the distribution of his interest in a qualified_plan has begun in accordance with sec_401 a participant's interest must be distributed either under the five year rule_of sec_401 or under the exception to the five year rule as set forth in sec_401giii sec_401 requires that the employee’s entire_interest be distributed within five year after his death sec_401 of the code concerning an exception to the 5-year rule provides that if any portion of the employee's interest is payable to or for the benefit of a designated_beneficiary such portion will be distributed in accordance with regulations over the life of such designated_beneficiary and requires such distributions to begin not later than year after the date of the employee's death or such later date as the secretary may by regulations prescribe if the designated_beneficiary is the employee’s spouse sec_401 of the code provides that distributions are not required to begin until the date on which the employee would have attained age and if the surviving_spouse dies before the distribution to such spouse begins sec_401 a shall be applied as if the surviving_spouse were the employee q a d-6 sec_1_401_a_9_-1 of the proposed_regulations provides that in the case in which a_trust is named as a beneficiary of an employee all beneficiaries of the trust with respect to the trust's interest in the employee's benefit are treated as designated beneficiaries of the employee under the plan for purposes of determining the distribution period under sec_401gii and iv of the code if the requirements of q a d-5 a are satisfied as of the date of the employee's death or in case of documentation described in q a d-7 of this section by the end of the ninth month beginning after the employee’s date of death if the requirements are satisfied distributions to the trust for purposes of sec_401 of the code will be treated as being paid to the appropriate beneficiary of the trust with respect to the trust's interest in the employee's benefit the requirements of q a d-5 sec_1_401_a_9_-1 of the proposed_regulations are in pertinent part as follows the trust is valid under state law or would be but for the fact that there is no corpus the trust is irrevocable or will by it terms become irrevocable upon the death of the employee the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee's benefit are identifiable from the trust instrument and the documentation described in q a d-7 has been provided to the plan_administrator q a d-7 of sec_1_401_a_9_-7 of the proposed_regulations identifies the trust documentation that must be provided to the plan_administrator both in the case of required distributions commencing before death and required distributions after death under q a d- joerc ubs relating to distributions after death the documentation requirement will be satisfied if the plan_administrator is provided with a copy of the actual trust document for the trust that is named as beneficiary of the employee under the plan by the ninth month beginning after the death of the employee q a e-5 a sec_1_401_a_9_-1 of the proposed_regulations states in general that if more than one individual is a designated_beneficiary the designated_beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the distribution period your authorized representative asserts that the requirements of q a d-5 were satisfied as of the date of individual a's death also a copy of trust instrument was provided to the plan_administrator of individual a’s ira on date which is within the nine month period provided under q a d-7 b of sec_1_401_a_9_-1 of the proposed_regulations individual b is the designated_beneficiary for purposes of determining the distribution period because she has the shortest life expectancy as provided by sec_401 of the code distributions are not required to begin until the date on which the employee would have attained if the designated_beneficiary is the surviving_spouse therefore in regard to ruling requests five through nine we conclude as follows the base_amount portion of individual a’s ira may be held in his ira until the provisions of sec_401 of the code require distributions to begin individual b is treated as the designated_beneficiary of the base_amount portion of individual a’s ira distributions of the base_amount are not required to be made from individual a’s ira until december of the calendar_year in which he would have attained age and may be paid out over the spouse’s life or over a period not extending beyond her life expectancy as elected by the trustees at the time distributions begin if individual b dies before distributions begin she will be treated as the owner of individual a’s ira for purposes of computing the minimum distributions pursuant to sec_401 of the code no party will be required to include any portion of the base_amount in gross_income for federal_income_tax purposes until the calendar_year in which sec_401 of the code requires distributions from individual a’s ira to commence unless any portion of the base_amount is withdrawn from his ira prior to such calendar_year or a this ruling letter is based on the assumption that individual a’s ira and the ira individual b will establish satisfy the requirements of sec_408 of the code at the time of the transactions described herein are completed a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours signed joyce bk loyd joyce e floyd chief employee_plans technical branch enclosures deleted copy of letter notice of intention to disclose


internal_revenue_service department of the treasury index number washington dc release date person to contact telephone number refer reply to cc dom corp 1-plr-115966-98 date date re legend corporation a corporation b state e agency p q date x date z r s dear mr this letter replies to your letter dated date requesting a ruling concerning the federal_income_tax consequences of a proposed transaction additional information was submitted in letters dated date october and date the information submitted is summarized as follows agency is a state e governmental agency corporation a is a non-profit public benefit corporation incorporated under the laws of state e which is exempt from federal_income_tax as an organization described in sec_501 and sec_509 corporation a is not controlled by agency or any other governmental agency corporation a is governed by a self-perpetuating board_of directors the bylaws and the articles do not impose any requirement that the board members be appointed by any governmental entity none of the current or past members of corporation a have been appointed by any governmental agency all vacancies on the corporation a board_of directors are filled through election by the members of the corporation a board then in office in general corporation a is devoted to the preservation of land natural_resources and biological communities for public enjoyment corporation b is a closely held for-profit sub-chapter c_corporation incorporated under the laws of state e corporation b owns approximately p acres of land corporation b is financially autonomous and is not subject_to the control of agency or any other governmental agency the parties have completed or propose to complete the following steps the transaction on date x corporation a became the optionee under a stock_option agreement to purchase all of corporation b’s stock for a total cost of dollar_figurer state e through agency will provide dollar_figures to corporation a which amount will be used to fund part of the purchase_price for corporation b the remaining portion of the purchase_price will be funded through donations by public and private organizations and individuals none of which are governmental entities on date y corporation a exercised the option and on date z the closing date the purchase was completed after the purchase corporation a will have control of corporation b and will ensure preservation of its real_property as a natural agricultural open space and recreational resource after date z corporation a will cause corporation b to amend its articles of incorporation to state that a it is organized for charitable purposes b its activities shall be conducted exclusively for those purposes c no part of its net_earnings shall inure to the benefit of or be distributable to any private individuals and d upon liquidation all of its remaining assets shall be distributed to corporation a if it is then an organization described in sec_501 or to other organizations so described if corporation a is not thereafter all of the corporation b stock will be canceled and corporation b will adopt substantially_all of the provisions of the state e public benefit corporations code applicable to non-member corporations to become a non- profit public benefit corporation corporation b will then apply to the internal_revenue_service for exempt status as a charitable_organization described in sec_501 and sec_509 corporation a represents that it is not acting as an agent of any entity or person the board_of directors of corporation a will appoint all of the board_of directors of corporation b a management plan will be formulated by corporation a in consultation with private consultants and other experts and interested parties in government agencies and educational institutions and with input from members of the general_public which plan will outline the use of corporation b’s real_property under the management plan corporation a may cause corporation b to convey a conservation_easement over all of the real_property in favor of a qualified_organization or organizations other than corporation a additionally corporation a expects to cause corporation b to donate a total of q acres to one or more governmental agencies and or non-profit organizations as necessary for the long term stewardship of the land any such transfers of the real_property will be determined after the acquisition by corporation a of the stock of corporation b the balance of the real_property will remain in corporation b to the extent that corporation b does not generate funds sufficient to cover operating_expenses corporation a will either provide funding to corporation b or obtain grants from private funding sources in any case corporation a will not seek operating funds for corporation b from any governmental agency based solely on the information submitted we rule as follows the transaction will not result in the recognition of gain_or_loss under sec_336 sec_337 or any other provision of the code no opinion is expressed about the tax treatment of the transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated sincerely yours assistant chief_counsel corporate by mark s jennings senior technician reviewer branch


department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ----------------- telephone number --------------------- refer reply to cc psi plr-149189-10 date date internal_revenue_service number release date index number ------------------------ ---------------------------------------- ------------------------------ in re ------------------------------------- ------------------------------- legend legend ------------------------ ---------------------- ------------------------------------------- ------------------------ ------------------------- ------------- ---- ----------------------------- ------------------------ ------------------------- -------------------------- -------------------- -------------------------- ----------------------------------------------------------- date trustor family_trust spouse individual state a x y date date daughter daughter trust ----------------------------------------------------------- trust date receiving trust family entity ------------------------------------------------------------ ---------------------------- ------------------------------------- ------------------------------------------------------------------------------------- dear ------------------ this letter responds to your authorized representative’s letter dated date and prior correspondence in which you request rulings concerning the income gift estate and generation-skipping_transfer gst tax consequences of the proposed transfer of assets of trust the facts submitted and representations made are as follows plr-149189-10 on date a date after date trustor established family_trust an irrevocable_trust for the benefit of the descendants of trustor and his wife spouse trustor was the initial trustee and individual was the initial special trustee pursuant to article unless terminated sooner by distribution of all trust assets the family_trust terminates on trustor’s death and all trust property will be divided into equal shares between the descendants of trustor and spouse descendant’s trust each such share will be distributed to the trustee of descendant’s trust for the benefit of the descendant and his or her descendants descendant’s trust is to be administered pursuant to article of family_trust article provides in part that the special trustee has sole discretion to direct trustee to distribute all or any part of the net_income or principal or both to or for the benefit of all or any then living descendants of trustor and spouse beneficiaries or to one or more trusts for the primary benefit of any of the beneficiaries article provides in part that the special trustee cannot direct the trustee to make any discretionary distributions of family_trust to the special trustee any person who has served as the special trustee or to a_trust in which the special trustee or a prior special trustee has a beneficial_interest article provides in part that if the descendant is alive when descendant’s trust is initially funded descendant shall have a special_power_of_appointment over trust property exercisable only in favor of any one or more living descendants of trustor and spouse or trusts for the exclusive benefit of any one or more living descendants of trustor and spouse if there are no living descendants of trustor and spouse the power may be exercised in favor of any person persons trusts or charities other than the descendant’s creditors descendant’s estate or creditors of descendant’s estate however any trust created by exercise of the descendant’s special_power_of_appointment cannot extend beyond the termination_date of the family_trust article provides in part that if not terminated sooner by distribution of all trust property a descendant’s trust shall terminate at the earlier of the death of the last surviving descendant of trustor and spouse or the expiration of the state rule_against_perpetuities if the last beneficiary to die is a descendant of trustor and spouse the trustee shall distribute any property that has effectively been appointed by the descendant through the exercise of the special_power_of_appointment any property not duly appointed by the descendant’s special_power_of_appointment shall be divided into shares per stirpes to the descendant’s trust if any of the then living descendants of trustor the expiration of the state rule_against_perpetuities is determined as the later of a years from date and years after the death of last to die of all descendants of x and y living on date plr-149189-10 trust became irrevocable after date it is represented that sufficient gst_exemption was allocated to family_trust so that family_trust has an inclusion_ratio of zero under sec_2642 on date trustor resigned as managing trustee and pursuant to article of the family_trust agreement trustor appointed spouse as successor managing trustee trustor died testate on date survived by spouse and his children daughter and daughter in accordance with article separate trusts were created for the primary benefit of daughter and her descendants trust and daughter and her descendants trust each of trust and trust which are governed by identical terms held one-half of the assets held by family_trust and retained the family trust’s zero inclusion_ratio for gst tax purposes under sec_2642 on date daughter died without descendants and without exercising her special_power_of_appointment over the assets of trust consequently all assets held in trust passed to trust pursuant to article it is represented that other than the transfer upon daughter 2’s death no additions have been made to trust since its initial funding accordingly trust has retained a zero inclusion_ratio for gst tax purposes individual as special trustee of trust desires to administer the various family entities including trust in a consistent manner as part of this effort individual proposes to direct spouse as managing trustee to transfer the assets of trust into receiving trust as is permitted under article of the family_trust agreement the terms of the proposed receiving trust will be substantially_similar to the terms of family_trust receiving trust provides as follows spouse will remain as the managing trustee and individual will remain as the special trustee of receiving trust receiving trust is to be for the primary benefit of daughter and her later born or adopted descendants beneficiaries the special trustee has sole discretion to direct the managing trustee to distribute income or principal to or for the benefit of any then living beneficiaries or to one or more trusts for the benefit of any beneficiary however if a distribution is made to a_trust the trust cannot extend beyond the termination_date of family_trust furthermore if there is more than one special trustee appointed their decisions must be unanimous excluding the vote of any special trustee who is prohibited from participating in the action by other specific provisions of the trust the special trustee is prohibited from directing discretionary distributions to or for the present or future benefit of the special trustee his estate his creditors or the creditors of his estate or any trust in which the special trustee his estate his creditors or the creditors of his estate has beneficial_interest further any special trustee who is plr-149189-10 not an independent person as defined in article of receiving trust cannot participate in any distribution to or for the benefit of any beneficiary who directly or indirectly in any way participated in the appointment of that person as special trustee there must be at least one independent person serving as special trustee if the trust holds any incident_of_ownership in family entity or all other special trustees are prohibited from directing distributions to daughter or any other beneficiary due to other specific provisions of the trust article of receiving trust provides in part that independent person is defined as any person or institution that is described under sec_672 as a_related_or_subordinate_party whether or not such person is adverse as defined in sec_672 spouse and daughter each have the power to remove or remove and replace the special trustee and appoint one or more successor persons other than spouse to act alone or jointly as the special trustee any person appointed by spouse to act as the special trustee must be an independent person as defined in article daughter will continue to have a testamentary special_power_of_appointment exercisable pursuant to the terms of article of family_trust however the duration of any trust created by daughter 1’s exercise of her special_power_of_appointment may not extend beyond the termination_date of receiving trust if not terminated sooner by distribution of all trust property receiving trust shall terminate at the earlier of the death of the last surviving descendant of trustor or january of the 20th year after the death of the last to die of all descendants of x and y living on date you request the following rulings after the proposed transfer of assets from trust to receiving trust receiving trust will retain a zero inclusion_ratio for purposes of chapter of the code no successor trustee or beneficiary of receiving trust will be considered to have a general_power_of_appointment over the trust under sec_2041 and sec_2514 the proposed transfer of assets from trust to receiving trust will not result in a transfer by any beneficiary that is subject_to gift_tax under sec_2501 the proposed transfer of assets from trust to receiving trust will not result in any beneficiary recognizing income under sec_61 or gain under sec_1001 and plr-149189-10 the proposed transfer of assets from trust to receiving trust will not result in any change in the basis or holding_period of any trust assets as determined under sec_1015 and sec_1223 ruling sec_2601 of the internal_revenue_code imposes a tax on every generation-skipping_transfer which is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip under sec_2602 the amount of tax imposed under sec_2601 is determined by multiplying the taxable_amount by the applicable_rate under sec_2641 the term applicable_rate means with respect to any gst the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 the inclusion_ratio with respect to any property transferred in a gst is the excess if any of over the applicable_fraction under sec_2642 in general the applicable_fraction is a fraction the numerator of which is the amount of gst_exemption allocated to the trust or in the case of a direct_skip allocated to the property transferred in such skip and the denominator of which is the value of the property transferred to the trust or direct_skip under sec_2631 for purposes of determining the inclusion_ratio every individual is allowed a gst_exemption amount that may be allocated by the individual or the individual’s executor to any property with respect to which the individual is the transferor sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 will not cause the trust to lose its exempt status these rules are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that the distribution of trust principal from an exempt trust to a new trust or retention of trust principal in a continuing trust will not cause the new or continuing trust to be subject_to the provisions of chapter if - either i the terms of the governing instrument of the exempt trust authorize distributions to the new trust or the retention of trust principal in a continuing trust without the consent or approval of any beneficiary or court or ii at the time the exempt trust became irrevocable state law authorized distributions to the new trust or retention of principal in the continuing trust without the consent or approval of any beneficiary or plr-149189-10 court and the terms of the governing instrument of the new or continuing trust do not extend the time for vesting of any beneficial_interest in the trust in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date the original trust became irrevocable extending beyond any life in being at the date the original trust became irrevocable plus a period of years plus if necessary a reasonable period of gestation sec_26_2601-1 example considers a situation where in grantor established an irrevocable_trust trust for the benefit of grantor’s child a a’s spouse and a’s issue at the time trust was established a had two children b and c a corporate fiduciary was designated as trustee under the terms of trust the trustee has the discretion to distribute all or part of the trust income to one or more of the group consisting of a a’s spouse or a’s issue the trustee is also authorized to distribute all or part of the trust principal to one or more trusts for the benefit of a a’s spouse or a’s issue under terms specified by the trustee in the trustee’s discretion any trust established under trust however must terminate years after the death of the last child of a to die who was alive at the time trust was executed trust will terminate on the death of a at which time the remaining trust principal will be distributed to a’s issue per stirpes in the trustee distributes part of trust’s principal to a new trust for the benefit of b and c and their issue the new trust will terminate years after the death of the survivor of b and c at which time the trust principal will be distributed to the issue of b and c per stirpes the terms of the governing instrument of trust authorize the trustee to make the distribution to a new trust without the consent or approval of any beneficiary or court in addition the terms of the governing instrument of the new trust do not extend the time for vesting of any beneficial_interest in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of trust extending beyond any life in being at the date of creation of trust plus a period of years plus if necessary a reasonable period of gestation therefore neither trust nor the new trust will be subject_to the provisions of chapter the instant case involves facts that are similar to example in sec_26_2601-1 except that family_trust was created and funded after date the rules in sec_26_2601-1 apply in the case of trusts that are exempt from gst tax because the trusts were in existence and irrevocable prior to date it is represented that sufficient gst_exemption was allocated to the family_trust so that the trust has an inclusion_ratio of zero under sec_2642 moreover other than the trust assets passing to trust upon daughter 2’s death it is represented that no additions have been made to trust since its initial funding accordingly trust continues to retain a zero inclusion_ratio for gst tax purposes no guidance has been issued concerning changes that may affect the status of trusts that are exempt from gst tax because sufficient gst_exemption was allocated to the trust to result in an inclusion_ratio of zero at a minimum a change that would not affect the plr-149189-10 gst status of a grandfathered trust should similarly not affect the exempt status of such a_trust the terms of family_trust which is the governing instrument of trust allow the special trustee to transfer trust assets to the trustee of any one or more other trusts for the primary benefit of any beneficiary in this case daughter receiving trust contains provisions to ensure that the time for vesting of any beneficial_interest does not extend beyond the time as provided under family_trust based on the facts presented and the representations made we conclude that the distribution of assets from trust to receiving trust is pursuant to the terms of the governing instrument family_trust authorizes distributions of principal to new trusts without the consent or approval of any beneficiary or court the terms of receiving trust will not extend the time for vesting of any beneficial_interest in receiving trust in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date the original trust became irrevocable extending beyond any life in being at the date the original trust became irrevocable plus a period of years plus if necessary a reasonable period of gestation accordingly based on the facts presented and the representations made the transfer of trust assets to receiving trust will not alter the inclusion_ratio of receiving trust for gst tax purposes so that after the transfer receiving trust will have an inclusion_ratio of zero under sec_2642 ruling sec_2041 provides that the value of the gross_estate shall include the value of all property with respect to which the decedent has at the time of his death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent’s gross_estate under sec_2035 to inclusive a general_power_of_appointment is defined in sec_2041 as a power which is exercisable in favor of the decedent possessing the power his estate his creditors or the creditors of his estate sec_20_2041-1 of the estate_tax regulations provides in part that if a_trust instrument provides that the beneficiary may appropriate or consume the principal of the trust the power to consume or appropriate is a power_of_appointment however the mere power of management investment custody of assets or the power to allocate receipts and disbursements as between income and principal exercisable in a fiduciary plr-149189-10 capacity whereby the holder has no interest therein except as an incidental consequence of the discharge of such fiduciary duties is not a power_of_appointment sec_2514 provides that a general_power_of_appointment is a power that is exercisable in favor of the individual possessing the power the possessor his estate his creditors or the creditors of his estate sec_25_2514-1 of the gift_tax regulations provides in part that a donee may have a power_of_appointment if he has the power to remove or discharge a trustee and appoint himself for example if under the terms of the instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and a another person has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself a is considered as having a power_of_appointment however the mere power of management investment custody of assets or the power to allocate receipts and disbursements as between income and principal exercisable in a fiduciary capacity whereby the holder has no power to enlarge or shift any of the beneficial interests therein except as an incidental consequence of the discharge of the fiduciary duties is not a power_of_appointment in revrul_95_58 1995_2_cb_191 the service held that a decedent grantor’s reservation of an unqualified power to remove a trustee and to appoint an individual or corporate successor trustee that is not related or subordinate to the decedent within the meaning of sec_672 is not considered a reservation of the trustee’s discretionary powers of distribution over the property transferred by the decedent grantor to the trust accordingly the trust corpus is not included in the decedent’s gross_estate under sec_2036 or sec_2038 the ruling notes that the eighth circuit in 973_f2d_1409 8th cir concluded that the decedent had not retained dominion and control_over assets transferred to a_trust by reason of his power to remove and replace the trustee with a party that was not related or subordinate to the decedent accordingly the court held that under sec_25_2511-2 the decedent made a completed_gift when he created the trust and transferred assets to it sec_672 defines the term related_or_subordinate_party to mean any nonadverse_party who is the grantor’s spouse if living with the grantor or any one of the following the grantor’s father mother issue brother or sister an employee of the grantor a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control a subordinate employee of a corporation in which the grantor is an executive under the proposed receiving trust at the time of daughter 1’s death she will have a testamentary_power_of_appointment over the trust assets that cannot be exercised in favor of her estate her creditors or the creditors of her estate provided that any appointee trust does not extend beyond the maximum term of family_trust plr-149189-10 accordingly because daughter 1’s testamentary_power_of_appointment cannot be exercised in favor of herself her creditors or the creditors of her estate this power will not constitute a general_power_of_appointment under sec_2041 and sec_2514 under the terms of receiving trust spouse and daughter each hold the power to remove or remove and replace the special trustee although a special trustee has the authority to direct discretionary distributions from receiving trust to or for the benefit of any living beneficiaries the special trustee is prohibited from directing distributions directly or indirectly to or for the present or future benefit of himself his creditors or the creditors of his estate or any trust in which any special trustee has a present or future beneficial_interest furthermore the terms of receiving trust prohibit any special trustee who is a_related_or_subordinate_party pursuant to sec_672 from directing distributions directly or indirectly to or for the present or future benefit of any beneficiary who at any time appointed or participated in the appointment of the special trustee consequently only a special trustee who is not related or subordinate to a beneficiary is permitted to direct trust distributions to or for the present or future benefit of the beneficiary if the beneficiary participated in the special trustee’s appointment if there are no special trustees empowered to direct trust distributions to any beneficiary due to the limitations imposed on special trustees at least one person or institution who is not related or subordinate to the beneficiary will also serve as special trustee the new independent special trustee holds sole discretion with regard to directing distributions to the beneficiary and the other special trustees are not able to prevent such distributions accordingly based on the facts presented and the representations made a beneficiary’s powers to remove and replace the special trustee are not general powers of appointment under sec_2041 and sec_2514 ruling sec_2501 imposes a tax for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that subject_to certain limitations the gift_tax applies whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is real or personal tangible or intangible sec_2512 provides that if the gift is made in property the value thereof at the date of the gift is considered the amount_of_the_gift sec_2512 provides that where property is transferred for less than an adequate_consideration in money or money’s worth then the amount by which the value of the property exceeded the value of the consideration is deemed a gift that is included in computing the amount of gifts made during the calendar_year plr-149189-10 in the present case all beneficial interests in trust assets will be the same before and after the proposed transfer to receiving trust the proposed transfer of trust assets to receiving trust as described above will not result in any change in the beneficial interests of any of the trusts’ beneficiaries accordingly based on the facts presented and representations made the transfer of assets from trust to receiving trust will not result in transfers of any beneficial_interest that is subject_to tax under sec_2501 ruling sec_4 and sec_61 provides that gross_income includes gains derived from dealings in property and under sec_61 from an interest in a_trust sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized sec_1001 states that the amount_realized from the sale_or_other_disposition of property shall be the sum of any money received plus the fair_market_value of the property other than money received under sec_1001 except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides that the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or loss sustained in 499_us_554 the supreme court ruled on the elements necessary to determine that under sec_1001 a sale_or_exchange resulting in realization of gain_or_loss had occurred the court held that realization under sec_1001 required a sale exchange or other_disposition and in the case of an exchange the receipt of property that was materially different from the property disposed of therefore because the transfer of assets from trust to receiving trust will be made under the authority granted to the special trustee under the express terms of the trust document the beneficiaries do not acquire their interests in receiving trust as a result of the exchange of their interests in family_trust but instead by reason of the exercise of the special trustee’s existing authority to make distributions in further trust in addition the special trustee’s modified administrative_powers do not constitute an exchange by the beneficiaries plr-149189-10 because no exchange has occurred it is unnecessary to analyze whether the materially different standard has been satisfied accordingly based on the facts presented and the representations made we conclude that the proposed transfer of assets from trust to receiving trust will not result in realization of gain_or_loss under sec_61 or sec_1001 by either trust or by any beneficiary sec_1015 provides that the basis in property acquired by a transfer in trust is the same as it would be in the hands of the grantor with adjustments for gain and loss recognized sec_1_1015-1 provides that property acquired by gift has a single uniform basis although more than one person may acquire an interest in the property the uniform basis of the property remains fixed subject_to proper adjustment for items under sec_1016 and sec_1017 sec_1_1015-2 provides that in the case of property acquired after date by a transfer in trust other than a transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor under the law applicable to the year in which the transfer was made sec_1_1015-2 provides that the principles in sec_1_1015-1 concerning the uniform basis are applicable in determining basis_of_property where more than one person acquires an interest in property by transfer in trust in this case because neither sec_1001 nor sec_61 applies to the proposed transaction the basis of each asset in the hands of receiving trust will be the same as the basis of that asset in the hands of trust immediately before the distribution in further trust under sec_1223 the taxpayer’s holding_period for property however acquired includes the period for which the property was held by any other person if for the purpose of determining gain_or_loss from a sale_or_exchange the property has the same basis in whole or in part in the taxpayer’s hands as it would in the hands of the other person we conclude that under sec_1223 the holding_period of receiving trust in each asset received from trust will include the respective holding_period of trust for each such asset plr-149189-10 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely james f hogan branch chief branch passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter cc


internal_revenue_service index no number release date department of the treasury p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si - plr-116651-98 date date re legend decedent spouse trust executor date date date this is in response to the letter from your authorized representative dated date in which you request an extension of time under sec_301_9100-1 of the procedure and administration regulations to make a reverse qualified_terminable_interest_property qtip_election under sec_2652 of the internal_revenue_code decedent died testate on date survived by spouse under the terms of decedent’s will his residuary_estate passed to trust pursuant to article viii paragraph of trust upon decedent’s death a marital trust is to be created in an amount equal to the maximum estate_tax_marital_deduction less the value for federal estate_tax purposes of the sum of a all other items of property includible in the decedent’s gross_estate for federal estate_tax purposes which qualify for the marital_deduction but which pass or have passed to spouse under other provisions of this trust under decedent’s will by right_of_survivorship with respect to jointly owned property under settlement arrangements relating to life_insurance_proceeds not payable to this trust or otherwise and b the amount necessary to increase decedent’s taxable_estate sufficiently to fully utilize all available credits for federal estate_tax purposes article viii paragraph of trust directs trustee to divide the marital trust into two separate trusts marital trust a and marital trust b the trustee is directed to place assets having a value of dollar_figure into marital trust a all remaining trust property is to be distributed to marital trust b trustee is directed to distribute the net_income from both marital trust a and marital trust b to spouse during spouse’s life in periodic installments not less frequently than annually in addition no person has a power to appoint any part of the property to any person other than the surviving_spouse therefore both marital trust a and marital trust b satisfy the requirements for a marital_deduction as qualified_terminable_interest_property under sec_2056 on schedule m of form_706 which was timely filed by the estate decedent’s executor listed the assets passing to the surviving_spouse which qualified for the marital_deduction under sec_2056 no indication was made on the schedule m that these assets were to be divided pursuant to the terms of the trust into a marital trust a with a value of dollar_figure and a marital trust b the trust agreement however was filed with the form_706 on date the estate filed an amended schedule m on which the assets were divided into marital trust a and marital trust b schedule r was filed with the federal estate_tax_return but no election was made under sec_2652 and no trust was listed under the gst_exemption allocation provisions of part thus the estate_tax_return did not evidence or otherwise unequivocally manifest an affirmative intent to make the reverse_qtip_election under sec_2652 with respect to either marital trust a or marital trust b on date the estate filed an amended schedule r that properly signifies that pursuant to the terms of the will the marital trust is being divided into two separate trusts designated as marital trust a and marital trust b and that a reverse_qtip_election is being made under sec_2652 for marital trust a the decedent's executor requests an extension of time under sec_301_9100-1 to make an election under sec_2652 with respect to marital trust a sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2056 provides that for purposes of the tax imposed by sec_2001 the value of the taxable_estate is to be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides the general_rule that no deduction shall be allowed for an interest passing to the surviving_spouse if on the lapse of time on the occurrence of an event or contingency or on the failure of an event or contingency to occur the interest will terminate or fail sec_2056 provides that in the case of qualified_terminable_interest_property the entire property shall be treated as passing to the surviving_spouse for purposes of sec_2056 and no part of the property shall be treated as passing to any person other than the surviving_spouse in a form described in sec_2056 sec_2056 defines qualified_terminable_interest_property qtip as property which passes from the decedent in which the surviving_spouse has a qualifying_income_interest_for_life and to which an election under sec_2056 applies sec_2056 provides that an election under sec_2056 with respect to any property is to be made by the executor on the return of tax imposed by sec_2001 the election once made is irrevocable under sec_2044 any property in which the decedent possessed a qualifying_income_interest_for_life and for which a deduction was allowed under sec_2056 is includible in the decedent’s gross_estate sec_2601 imposes a tax on every generation-skipping_transfer gst sec_2631 provides for a generation-skipping_transfer_tax gstt exemption of dollar_figure adjusted for inflation which may be allocated by the individual or the individual’s estate to any property of which the individual is the transferor under sec_2632 the allocation may be made at any time on or before the date prescribed for filing the individual's estate_tax_return including extensions any portion of an individual gstt exemption not allocated within the time prescribed in sec_2632 is allocated in accordance with sec_2632 sec_2632 provides that any portion of an individual’s gstt exemption that has not been allocated by the individual or the individual’s estate will be automatically allocated first to property which is the subject of a direct_skip occurring at the individual’s death and second to trusts with respect to which the individual is the transferor and from which a taxable_distribution or taxable_termination might occur at or after the individual’s death this automatic allocation is made among the direct skips and trusts in proportion to the respective amounts at the time of allocation of the nonexempt portions of the properties and trusts under sec_26_2632-1 of the generation-skipping_transfer_tax regulations no automatic allocation is made to a_trust that will have a new transferor with respect to the entire trust prior to the occurrence of any generation-skipping transfers with respect to the trust sec_2652 provides that for gst purposes the transferor_of_property is the decedent in whose gross_estate the property is included thus in the case of property subject_to a qtip_election that is subsequently includible in the surviving spouse’s gross_estate under sec_2044 the surviving_spouse would become the transferor of the property for gst purposes however sec_2652 states that with respect to any trust for which a deduction is allowed under sec_2056 the estate of the decedent the first spouse to die may elect to treat all of the property in the trust for purposes of the gst provisions as if the qtip_election had not been made this election is referred to as the reverse_qtip_election the consequence of the reverse_qtip_election is that the decedent remains for gst purposes the transferor of the qtip_trust for which the election is made as a result the decedent’s gst_exemption may be allocated to that qtip_trust sec_26_2652-2 provides that a reverse_qtip_election is not effective unless it is made with respect to all of the property in the trust to which the qtip_election applies however reference is made to sec_26_2654-1 under sec_26_2654-1 the severance of a_trust that is included in the decedent’s estate or created under the transferor’s will into two or more trusts is recognized for gst purposes if the trust is severed pursuant to a direction in the governing instrument providing that the trust is to be divided upon the death of the transferor under sec_301_9100-1 of the procedure and administration regulations the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i if the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer has acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the standards of sec_301_9100-1 and sec_301_9100-3 have been satisfied because decedent’s will directed that the marital trust be split into marital trust a and marital trust b the provisions of sec_26_2654-1 have been met thus the reverse_qtip_election under sec_26_2652-2 may be made with respect to either trust consequently an extension of time is granted until date for making an election under sec_2652 with respect to marital trust a we note that an extension of time to make the reverse_qtip_election under sec_2652 does not extend the time to make an allocation of any remaining gstt exemption since the time for making the allocation is expressly prescribed by the statute in the instant case the executor did not make any allocation of the gstt exemption on the estate_tax_return accordingly in view of the reverse_qtip_election decedent’s available gstt exemption is allocated in accordance with the rules of sec_2632 to marital trust a finally marital trust b for which a marital_deduction was allowed under sec_2056 and for which no reverse_qtip_election was made will be included under sec_2044 in the gross_estate of the surviving_spouse for federal estate_tax purposes thus pursuant to sec_2652 the surviving_spouse will be treated as the transferor of marital trust b for gstt purposes except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code a copy of this letter should be forwarded to the office where the estate filed the amended schedule r a copy is enclosed for that purpose in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours paul f kugler assistant chief_counsel passthroughs and special industries enclosures copy of letter copy for sec_6110 purposes


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc ita b05 conex-122638-13 number info release date uil ------------------------------------ ------------------------------ --------------------------------------- -------------- ----------------------------------------- dear ------------------ this letter responds to your request for information dated date regarding the income_tax treatment of payments from the ------------------------------------------------- fund to assist individuals in need as a result of the -------------------------------------------------------- ---------------------------------------------------------------------------------- you indicated that the fund was set up in response to the outpouring of public support for victims and their families based on the information provided the payments would constitute gifts that are excludible from the recipients’ gross_income gross_income means all income from whatever source derived except where otherwise provided by law sec_61 of the internal_revenue_code the code under sec_102 of the code property received by gift is excludible from gross_income while sec_102 does not define the term gift the supreme court has held that a gift is a transfer made out of detached and disinterested generosity duberstein v 363_us_278 in general a payment that is not compensatory is made without consideration therefor and does not proceed from any moral or legal duty to the recipient is motivated by detached and disinterested generosity the fund was funded with donations from the public the payments from the fund apparently will be made out of concern for the victims’ and their families’ needs and not out of any moral or legal duty to the victims that the fund sponsors or any particular donor may have in those circumstances the payments will be excludible from the recipients’ gross_income as gifts conex-122638-13 this letter has called your attention to certain general principles of the law it is intended for informational purposes only and does not constitute a ruling see revproc_2013_1 sec_2 2013_1_irb_7 date if you have any additional questions please contact me or ---------------------at ---------------------- sincerely andrew j keyso associate chief_counsel income_tax accounting


internal_revenue_service index no number release date cc dom p si - plr-116124-98 date x a date year dear this responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on date of year a as x’s president represents that it was the intent of x that x be an s_corporation effective for year its first taxable_year but a form_2553 election by a small_business_corporation was not timely filed for that year because of an error by the law firm handling x’s s election a represents that x filed its year return consistent with s_corporation status sec_1362 of the code provides that if - a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x’s first taxable_year accordingly provided x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x’s year taxable election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours j thomas hines senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes