tax_exempt_and_government_entities_division release number release date uil department of the treasury internal_revenue_service date date employer_identification_number person to contact id number contact numbers certified mail -- return receipt requested dear ‘ this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter dated january 19xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reasons sec_501 of the internal_revenue_code exempts from federal_income_tax corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or for the prevention of cruelty to children or animals sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if accomplish one or more of such exempt purposes specified in sec_501 of the code it engages primarily in activities which you have not established that your are operated exclusively for exempt purposes described in sec_501 of the code contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 those returns should be filed with the appropriate service_center processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia a petition or compliant in one of these three courts must be filed before the day after the date this determination was mailed to you if you wish to seek review of our determination please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the court at the following addresses united_states tax_court second street nw washington d c us court of federal claims madison place nw washington dc u s district_court for the district of columbia constitution ave n w washington dc you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law you have to file a petition in a united_states court the taxpayer_advocate can however see a tax matter that may not have been resolved through normal channels gets prompt and proper handling you can call and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions in regards to this matter please contact the person whose name and telephone number are shown in the heading of this letter thank you for your cooperation sincerely yours nanette m downing director eo examinations enclosure publication internal_revenue_service tax_exempt_and_government_entities_division department of the treasury uil date taxpayer_identification_number form tax_year s ended 20xx12 person to contact id number contact numbers manager’s name id number manager's contact number response due_date certified mail return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 c of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren't an organization described in sec_501 after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under section of the code lf we don't hear from you lf you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status catalog number 34809f letter rev if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn’t a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please cali the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you letter rev catalog number 34809f thank you for your cooperation enclosures report of examination form_6018 publication publication sincerely sanat m davee nanette m downing director eo examinations catalog number 34809f letter rev schedule number or exhibit form 886-a rev date name of taxpayer exp lanations of items tax identification_number year period ended 20xx issue whether continues to qualify for exempt status under sec_501 of the internal_revenue_code irc because the organization has no operations and does not meet the operational_test under sec_501 facts the - was incorporated in 19xx and received exemption from tax under sec_501 ruling date in january 19xx the organization is a religious_organization that supports the organization has not filed either a form_990 or form_990 ez since the last return filed for the year 20xx the organization did file form 990n for 20xx the organization stated in a letter received may 20xx that they had no donations received or expenses made the organization indicated that their activities have been temporarily suspended since 20xx law final-reg tax-regs sec_1_501_c_3_-1 organizational and operational tests in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt the term exempt_purpose or purposes’ as used in this section means any purpose or purposes specified in sec_501 as defined and elaborated in paragraph d of this section d exempt purposes-- in general i an organization may be exempt as an organization described in sec_501 if it is organized and operated exclusively for one or more of the following purposes a religious b charitable c scientific d testing for public safety e literary f educational or g prevention of cruelty to children or animals page -1- department of the treasury-internal revenue service form 886-a schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended 20xx’ sec_1_501_c_3_-1 of the income_tax regulations states that an organization will be regarded as ‘operated exclusively’ for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_6001 of the code provides that every person liable for any_tax imposed by the code or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 of the code provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6001-1 of the regulations in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 a of the code and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shail also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 of the regulations states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_1_6033-1 of the regulations provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the page -2- department of the treasury-internal revenue service form 886-a schedule number or exhibit 886-a form rev date name of taxpayer explanations of items tax identification_number year period ended 20xx service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status taxpayer's position the organization stated in a letter received may 20xx that they had no donations received or expenses made the organization indicated that their activities have been temporarily suspended since 20xx therefore they do not have no records of income or expenses for 20xx government's position the government contends that the internal_revenue_code clearly states that organizations exempt under internal_revenue_code irc c must establish that they meet both the organizational and operational tests of sec_501 per reg sec_1 c - a further sec_1_501_c_3_-1 provides that an organization will not be regarded to be under sec_501 unless it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 the internal_revenue_service asked the organization for concrete information about its actual and planned activities that was necessary for the determination of organization’s qualifications for sec_501 exemption due to the organization is no longer operates active and has not submitted documentation to indicate that it will resume activity the organization should be revocation conclusion it is the irs' position that failed to meet the operational_test of sec_501 because it had has no activities since 20xx so it failed the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under c of the internal_revenue_code accordingly the organization's exempt status should be revoked effective january 20xx page -3- department of the treasury-internal revenue service form 886-a


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 corp b04 plr-139523-05 date date ---------------- ------------------- ------------------- --------------------- --------------------- legend date a date j date k x y z aa bb cc dd country d sub --------------------------------------------------------- ------------------------------------------------------- ---------------------- ---------------------- ---------------- ---------------- --------------- ---------- ------------------------------------- sub ----------------------------------------------------- ----------------------------------------------- plr-139523-05 ------------------------------------------------- sub ----------------------------------------------------------- ------------------------------------------------- --------------------------------------------------------------------- sub ----------------------------------------------------- ------------------------------------------------- ------------------------------- sub --------------------------------------------------------- ------------------------------------------------- ------------------------------------- sub ----------------------------- --------------------------------------------------------- ------------------------------------------------------- sub --------------------------------------------------------- ------------------------------------------------------- ---------------------------------------------- sub ---------------------------------------------------------- ------------------------------------------------- ----------------------------------------------- sub ------------------------------------------------------------- ------------------------------------------------- ------------------------------------------------- sub ----------------------------------------------------------- ---------------------------------------- -------------------------------------------------- sub ---------------------------------------------------------- ------------------------------------------------- --------------------------------------------------------- sub ------------------------------ --------------------------------------------------------- ------------------------------------------------- sub --------------------------------------------------------- -------------------------------------- --------------------------------- plr-139523-05 sub --------------------------------------------------------- ------------------------------------------------- --------------------------------------------- sub ------------------------------------------------------------ -------------------------------------- ---------------------------------- sub -------------------------------------------------------- -------------------------------------- ---------------------------------------- sub --------------------------------------------------------- -------------------------------------- --------------------------------------- sub -------------------------------------------------------- -------------------------------------- ------------------------ ------------------------------------------------------- ----------------------------------------------- -------------------------------------------- sub --------------------------------------------------------- -------------------------------------- sub ------------------------------------------------------- -------------------------------------- sub -------------------------------------------------------- -------------------------------------- sub ------------------------------------------------------------- -------------------------------------------------- sub --------------------------------------------------------- -------------------------------------- dear ------------ ----------------------------------------- -------------------------------------------- plr-139523-05 this letter responds to your date request that we supplement our letter_ruling dated date plr-166869-03 the original letter_ruling as supplemented by our letter rulings dated date plr-154390-04 and date plr-165182-04 together the prior letter rulings the information submitted for consideration is summarized below capitalized terms not defined in this ruling have the meanings assigned to them in the original letter_ruling the rulings contained in this letter are based on information 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 requested ruling verification of the information representations and other data may be required as part of the audit process summary of facts the prior letter rulings address certain federal_income_tax consequences of the acquisition of target by acquiror and acquiror sub and the restructuring of target and transfer of certain of target’s subsidiaries to acquiror and certain subsidiaries of acquiror the acquisition was completed on date a the restructuring and transfers were completed on various dates as a result of these transactions and prior to the completion of steps i through x below acquiror directly owns all of the outstanding_stock of sub and sub and indirectly owns all of the outstanding_stock of sub sub sub and sub each of sub sub sub sub sub and sub is a corporation for u s federal_income_tax purposes a corporation sub owns all of the outstanding_stock of sub an entity that is disregarded as separate from its owner for u s federal_income_tax purposes under sec_301_7701-3 a disregarded_entity sub owns all of the outstanding_stock of sub a disregarded_entity sub owns all of the outstanding_stock of sub a disregarded_entity sub owns all of the outstanding_stock of sub a corporation sub owns all of the outstanding_stock of sub a corporation sub owns all of the outstanding_stock of sub and sub both corporations sub also owns all of the outstanding_stock of several other corporations including sub sub and sub such other corporations the sub subsidiaries sub owns all of the outstanding_stock of sub a corporation sub has a fair_market_value of approximately dollar_figurex for u s federal_income_tax purposes sub directly owns all of the outstanding_stock of sub a disregarded_entity and indirectly owns all of the outstanding partnership interests of sub sub is treated as a partnership for u s federal_income_tax purposes sub owns all of the outstanding_stock of sub a disregarded_entity sub owns all of the outstanding_stock of sub a disregarded_entity proposed transaction plr-139523-05 for valid business reasons acquiror proposes to engage in a further restructuring of certain of target’s former subsidiaries the proposed transaction the steps of the proposed transaction for u s federal_income_tax purposes include i sub will elect under sec_301_7701-3 to be treated as a disregarded_entity the sub election ii sub will elect under sec_301_7701-3 to be treated as a disregarded_entity the sub election iii sub sub sub and sub will loan a total of approximately dollar_figurey to sub the loan iv sub will loan substantially_all of the proceeds of the loan to sub v sub will contribute business_assets acquired in the sub election and the stock of the sub subsidiaries to sub a newly formed country d subsidiary of sub the first contribution sub will be a corporation in connection with the first contribution sub will assume the loan vi sub will contribute the stock of sub to sub a newly formed country d subsidiary of sub the second contribution sub will be a corporation vii sub will adopt a plan_of_liquidation which meets the requirements of sec_332 and sec_1_332-4 viii sub will declare and pay a distribution of approximately dollar_figurez plus the remainder of the proceeds of the loan to sub ix during date j sub will sell the stock of each of sub and sub to sub for approximately aa the sub sale and the sub sale respectively also during date j sub will sell the stock of sub to sub for approximately bb the sub sale x after step ix and on or prior to date k sub will pursuant to the plan_of_liquidation adopted in step vii above elect under sec_301_7701-3 to be treated as a disregarded_entity the sub election together with the distribution in step viii the sub liquidation xi during date j or following the proposed transaction sub plans to sell certain assets to sub or sub for an amount of cash equal to the fair_market_value of the assets sold plr-139523-05 representations in connection with its request for a supplemental ruling the taxpayer reaffirms the representations made in connection with the prior letter rulings as of the dates of the transactions to which such representations relate the taxpayers have made the following representations with respect to the sub election a sub on the effective date of the sub election will be the owner of at least percent of the single outstanding class of stock of sub b no shares of sub will have been redeemed during the period beginning on date a and ending with the effective date of the sub election c all distributions from sub pursuant to the sub election will be made within a single taxable_year of sub d for u s federal_income_tax purposes sub will retain no assets following its deemed liquidation pursuant to the sub election e sub will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring prior to date a f other than pursuant to the sub election and the sub election no assets of sub have been or will be disposed of by either sub or sub except for dispositions in the ordinary course of business and dispositions occurring prior to date a g provided the service rules as the taxpayer requests the deemed liquidation of sub will not be preceded or followed by the transfer of all or a part of the business_assets to another corporation i that is the alter ego of sub and ii which directly or indirectly is owned more than percent in value by persons holding directly or indirectly more than percent of the value of sub 22’s stock for purposes of this representation ownership will be determined by applying the constructive_ownership rules of sec_318 as modified by sec_304 h prior to the effective date of the sub election no assets of sub will have been distributed in_kind transferred or sold to sub except for i transactions occurring in the normal course of business and ii transactions occurring prior to date a i sub will report all earned_income represented by assets that will be distributed to its shareholder such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc plr-139523-05 j the fair_market_value of sub 22’s assets will exceed its liabilities on the effective date of the sub election k other than amounts owed by sub to sub in the amount of approximately cc that will be repaid in connection with the proposed transaction there is no intercorporate debt existing between sub and sub and none has been canceled forgiven or discounted except for transactions that occurred prior to date a l sub is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code m all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the sub election have been fully disclosed n as of the date of the sub election sub will not be a united_states_real_property_holding_corporation under sec_897 and its stock will not be treated as a united_states_real_property_interest under sec_897 o the applicable notice requirements of sec_1_897-2 will be met with respect to sub and the notice requirements of sec_1_1445-2 will be met with respect to the deemed transfer of the stock of sub by sub to sub p sub satisfies the 80-percent control requirement of sec_332 and sec_1504 with respect to sub and sub does not use the assets deemed to be distributed in a u s trade_or_business the taxpayers have made the following representations with respect to the sub election should the transaction be treated as a reorganization under sec_368 q no sub stock will be issued therefore sub has no plan or intention to reacquire any of its stock issued in the transaction r sub will be deemed to receive all of the assets of sub and thus will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by sub immediately prior to the transaction for purposes of this representation amounts paid_by sub to dissenters amounts used by sub to pay its reorganization expenses amounts paid_by sub to shareholders who receive cash or other_property and all redemptions and distributions except for regular normal dividends made by sub immediately preceding the transfer will be included as assets of sub held immediately prior to the transaction s sub has no plan or intention to sell or otherwise dispose_of the assets of sub deemed acquired in the transaction except for i dispositions made in the plr-139523-05 ordinary course of business ii transfers described in sec_368 iii the sub liquidation and iv the first contribution t the sub liabilities deemed assumed by sub and the liabilities to which the assets deemed transferred are subject were incurred by sub in the ordinary course of its business and are associated with the assets deemed transferred u following the transaction and other than the first contribution sub will continue the historic_business of sub or use a significant portion of each historic_business asset in a business v sub and sub will each pay their respective expenses if any incurred in connection with the transaction w other than amounts owed by sub to sub in the amount of approximately dollar_figuredd that will be repaid in connection with the proposed transaction no intercorporate indebtedness exists or will exist between sub and sub that was issued acquired or will be settled at a discount x no two parties to the transaction are investment companies as defined in sec_368 and iv y the fair_market_value of the sub assets deemed transferred to sub will equal or exceed the sum of the liabilities deemed assumed by sub plus the amount of the liabilities if any to which the assets deemed transferred are subject z the total adjusted bases of the sub assets deemed transferred to sub will equal or exceed the sum of the liabilities deemed assumed by sub plus the amount of the liabilities if any to which the assets deemed transferred are subject aa sub is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 bb disregarding the first contribution at least percent of the proprietary interest in sub will be preserved within the meaning of sec_1_368-1 by reason of an exchange of sub stock held by sub for a direct interest in the sub enterprise for u s federal_income_tax purposes cc sub will be a sec_1248 shareholder within the meaning of sec_1 b - b of sub and sub before the sub election and sub will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 of sub after the sub election dd the notice requirements of sec_1_367_b_-1 will be met with respect to the transaction ee sub will comply with sec_1_367_b_-4 rules for subsequent exchanges when and where applicable plr-139523-05 the taxpayers have made the following representations with respect to the sub election should the transaction be treated as a liquidation under sec_332 ff sub on the effective date of the sub election will be the owner of at least percent of each outstanding class of stock of sub gg no shares of sub will have been redeemed during the period beginning on date a and ending with the effective date of the sub election hh all distributions from sub pursuant to the sub election will be made within a single taxable_year of sub ii for u s federal_income_tax purposes sub will retain no assets following its deemed liquidation pursuant to the sub election jj except as disclosed and other than pursuant to the sub election sub will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring prior to date a kk other than pursuant to the first contribution the sub liquidation and the sub election the sub sale the sub sale and the sub sale no assets of sub have been or will be disposed of by either sub or sub except for dispositions in the ordinary course of business and dispositions occurring prior to date a ll provided the service rules as the taxpayer requests the deemed liquidation of sub will not be preceded or followed by the transfer of all or a part of the business_assets to another corporation i that is the alter ego of sub and ii which directly or indirectly is owned more than percent in value by persons holding directly or indirectly more than percent of the value of sub 21’s stock for purposes of this representation ownership will be determined by applying the constructive_ownership rules of sec_318 as modified by sec_304 mm prior to the effective date of the sub election no assets of sub will have been distributed in_kind transferred or sold to sub except for i transactions occurring in the normal course of business and ii transactions occurring prior to date a nn sub will report all earned_income represented by assets that will be distributed to its shareholder such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc oo the fair_market_value of sub 21’s assets will exceed its liabilities on the effective date of the sub election pp other than amounts owed by sub to sub of approximately dollar_figuredd that will be repaid in connection with the proposed transaction there is no intercorporate plr-139523-05 debt existing between sub and sub and none has been canceled forgiven or discounted except for transactions that occurred prior to date a qq sub is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code rr all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the sub election have been fully disclosed ss sub satisfies the 80-percent control requirement of sec_332 and sec_1504 with respect to sub and sub does not use the assets deemed to be distributed in a u s trade_or_business the taxpayers have made the following representations with respect to the first contribution tt no stock_or_securities will be issued for services rendered to or for the benefit of sub in connection with the first contribution and no stock_or_securities will be issued for sub indebtedness that is not evidenced by a security or for interest on sub indebtedness which accrued on or after the beginning of the holding_period of sub for the debt uu the transfer is not the result of the solicitation by a promoter broker or investment house vv sub will not retain any rights in the property transferred to sub ww the value of the sub stock received in exchange for accounts_receivable will be equal to the net value of the accounts transferred ie the face_amount of the accounts_receivable previously included in income less the amount of the reserve for bad_debts see revrul_78_280 1978_2_cb_139 xx the total adjusted bases of the assets being transferred by sub to sub will equal or exceed the sum of the liabilities assumed within the meaning of sec_357 by sub yy the fair_market_value of the assets being transferred by sub to sub will equal or exceed the sum of the liabilities assumed within the meaning of sec_357 by sub zz the aggregate adjusted bases of the assets of sub to be transferred to sub in the first contribution will not exceed their fair market values immediately following the first contribution plr-139523-05 aaa other than the loan the sub liabilities to be assumed within the meaning of sec_357 by sub were incurred in the ordinary course of business and are associated with the assets to be transferred bbb other than indebtedness created in connection with the proposed transaction including the loan there is no indebtedness between sub and sub and there will be no indebtedness created in favor of sub as a result of the first contribution ccc the transfers and exchanges will occur under a plan agreed upon before the transaction in which the rights of the parties are defined ddd all exchanges will occur on approximately the same date eee there is no plan or intention on the part of sub to redeem or otherwise reacquire any stock or indebtedness that will be issued as part of the first contribution fff taking into account any issuance of additional shares of sub stock any issuance of stock for services the exercise of any sub stock_rights warrants or subscriptions a public offering of sub stock and the sale exchange transfer by gift or other_disposition of any of the stock of sub to be received in the exchange sub will be in control of sub within the meaning of sec_368 rev_rul c b ggg sub will actually or constructively receive stock securities or other_property approximately equal to the fair_market_value of the property transferred to sub less the amount of the loan hhh sub will remain in existence and will retain and use the property transferred to it in a trade_or_business iii other than the sub sale the sub sale and the sub sale there is no plan or intention by sub to dispose_of the transferred property other than in the normal course of business operations jjj each of the parties to the transaction will pay its own expenses if any incurred in connection with the first contribution kkk sub will not be an investment_company within the meaning of sec_351 and sec_1_351-1 lll sub 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 mmm sub will not be a personal_service_corporation within the meaning of sec_269a plr-139523-05 nnn sub will be a sec_1248 shareholder within the meaning of sec_1 b - b of sub and sub before the first contribution and sub will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 of sub and sub after the first contribution ooo the notice requirements of sec_1_367_b_-1 will be met with respect to the transaction ppp sub will comply with sec_1_367_b_-4 rules for subsequent exchanges when and where applicable the taxpayers have made the following representations with respect to the second contribution qqq no stock_or_securities will be issued for services rendered to or for the benefit of sub in connection with the second contribution and no stock_or_securities will be issued for sub indebtedness that is not evidenced by a security or for interest on sub indebtedness which accrued on or after the beginning of the holding_period of sub for the debt rrr the transfer is not the result of the solicitation by a promoter broker or investment house sss sub will not retain any rights in the sub stock transferred to sub ttt no liabilities will be assumed by sub in the second contribution uuu the adjusted_basis of the sub stock to be transferred by sub to sub in the second contribution will not exceed its fair_market_value immediately following the second contribution vvv there is no indebtedness between sub and sub and there will be no indebtedness created in favor of sub as a result of the second contribution www the transfers and exchanges will occur under a plan agreed upon before the transaction in which the rights of the parties are defined xxx all exchanges will occur on approximately the same date yyy there is no plan or intention on the part of sub to redeem or otherwise reacquire any stock that will be issued as part of the second contribution zzz taking into account any issuance of additional shares of sub stock any issuance of stock for services the exercise of any sub stock_rights warrants or subscriptions a public offering of sub stock and the sale exchange transfer by gift or other_disposition of any of the stock of sub to be received in the exchange sub will be in control of sub within the meaning of sec_368 plr-139523-05 aaaa sub will actually or constructively receive stock securities or other_property approximately equal to the fair_market_value of the sub stock transferred to sub bbbb sub will remain in existence and will retain and use the property transferred to it in a trade_or_business cccc there is no plan or intention by sub to dispose_of the transferred property other than in the normal course of business operations dddd each of the parties to the transaction will pay its own expenses if any incurred in connection with the second contribution eeee sub will not be an investment_company within the meaning of sec_351 and sec_1_351-1 ffff sub 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 gggg sub will not be a personal_service_corporation within the meaning of sec_269a hhhh sub will be a sec_1248 shareholder within the meaning of sec_1 b - b of sub sub and sub before the second contribution and sub will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 of sub sub and sub after the second contribution iiii the notice requirements of sec_1_367_b_-1 will be met with respect to the proposed transaction jjjj sub will comply with sec_1_367_b_-4 rules for subsequent exchanges when and where applicable the taxpayers have made the following representations with respect to the sub liquidation kkkk for u s federal_income_tax purposes sub on the effective dates of the distribution described in step viii above and the sub election will be the owner of at least percent of the single outstanding class of stock of sub llll no shares of sub will have been redeemed during the period beginning on date a and ending with the effective date of the sub election mmmm all distributions from sub pursuant to the sub liquidation will be made within a single taxable_year of sub plr-139523-05 nnnn for u s federal_income_tax purposes sub will retain no assets following its deemed liquidation pursuant to the sub election oooo the aggregate adjusted bases of the assets distributed by sub to sub in liquidation including the assets acquired pursuant to the sub election will not exceed their fair market values immediately after the sub liquidation pppp except as disclosed and other than pursuant to the first contribution the second contribution and the sub election sub will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring prior to date a qqqq other than pursuant to the first contribution the second contribution and the sub liquidation no assets of sub have been or will be disposed of by either sub or sub except for dispositions in the ordinary course of business and dispositions occurring prior to date a rrrr provided the service rules as the taxpayer requests the deemed liquidation of sub will not be preceded or followed by the transfer of all or a part of the business_assets to another corporation i that is the alter ego of sub and ii which directly or indirectly is owned more than percent in value by persons holding directly or indirectly more than percent of the value of sub 11’s stock for purposes of this representation ownership will be determined by applying the constructive_ownership rules of sec_318 as modified by sec_304 ssss prior to the adoption of the plan_of_liquidation described in step vii above no assets of sub will have been distributed in_kind transferred or sold to sub except for i transactions occurring in the normal course of business and ii transactions occurring prior to date a tttt sub will report all earned_income represented by assets that will be distributed to its shareholder such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc uuuu the fair_market_value of sub 11’s assets will exceed its liabilities on the effective date of the sub election vvvv there is no intercorporate debt existing between sub and sub and none has been canceled forgiven or discounted except for transactions that occurred prior to date a wwww sub is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code xxxx all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the sub liquidation have been fully disclosed plr-139523-05 yyyy the notice requirements of sec_1_367_b_-1 will be met with respect to the transaction the taxpayers have made the following representations with respect to the sub sale the sub sale and the sub sale zzzz the aggregate adjusted bases of the stock of sub and sub to be transferred to sub in the sub sale and the sub sale will not exceed their fair market values immediately following the sub sale and the sub sale aaaaa the adjusted_basis of the stock of sub to be transferred to sub in the sub sale will not exceed its fair_market_value immediately following the sub sale rulings based solely on the information and representations submitted in the original and supplemental ruling requests we rule as follows with respect to the sub election the sub election will constitute a complete_liquidation of sub under sec_332 and sec_1_332-2 sec_301_7701-3 no gain_or_loss will be recognized by sub or sub as a result of the sub election sec_332 sec_337 and sec_336 sub 21’s basis in each asset deemed received from sub will be the same as the basis of that asset in the hands of sub immediately before the sub election sec_334 sub 21’s holding_period in each asset deemed received from sub in the sub election will include the period during which the asset was held by sub sec_1223 sub will succeed to and take into account as of the close of the effective date of the sub election 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 and the regulations thereunder sec_381 and sec_1_381_a_-1 sub will succeed to and take into account the earnings_and_profits of sub as of the close of the effective date of the sub election sec_381 and sec_1_381_c_2_-1 any deficit in the earnings_and_profits of sub or sub will be used only to offset earnings_and_profits accumulated after the date of the sub election sec_381 sub will not recognize gain on the deemed_distribution of its assets in liquidation to sub under sec_367 and sec_1_367_e_-2 plr-139523-05 based solely on the information and representations submitted in the original and supplemental ruling requests we rule as follows with respect to the sub election no gain_or_loss will be recognized by sub or sub as a result of the sub election sub 11’s basis in each asset deemed received from sub will be the same as the basis of that asset in the hands of sub immediately before the sub election sub 11’s holding_period in each asset deemed received from sub in the sub election will include the period during which the asset was held by sub sub will succeed to and take into account as of the close of the effective date of the sub election 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 and the regulations thereunder sub will succeed to and take into account the earnings_and_profits of sub as of the close of the effective date of the sub election any deficit in the earnings_and_profits of sub or sub will be used only to offset earnings_and_profits accumulated after the date of the sub election sub will not recognize gain on the deemed_distribution of its assets in liquidation to sub under sec_367 and the regulations thereunder sec_1_367_e_-2 no amount of gain will be recognized and no amount will be included in income under sec_367 as a result of the sub election sec_1_367_b_-4 based solely on the information and representations submitted in the original and supplemental ruling requests we rule as follows with respect to the first contribution sec_304 and not sec_351 and not so much of sec_357 and sec_358 as related to sec_351 will apply to the acquisition by sub from sub of that portion of the stock of the sub subsidiaries deemed exchanged for liabilities of sub assumed by sub attributable to the stock of the sub subsidiaries sec_304 the acquisition by sub from sub of the portion of the stock of the sub subsidiaries deemed exchanged for liabilities of sub assumed by sub attributable to the stock of the sub subsidiaries will be treated as a distribution in redemption of the corresponding portion of sub 11’s sub stock sub and sub will be treated in the same manner as if sub had transferred the portion of the stock of the sub subsidiaries so acquired to sub in exchange for a corresponding portion of sub stock in a transaction to which sec_351 applies and then sub had redeemed the corresponding portion of stock it was treated as issuing sec_304 the deemed redemption distribution will constitute a dividend to the extent of the earnings_and_profits of sub and the sub subsidiaries the balance of the deemed redemption plr-139523-05 distribution if any will reduce sub 11’s basis in the sub stock sec_301 the remaining balance of the deemed redemption distribution if any will be treated as gain from the sale_or_exchange of property sec_301 no gain_or_loss will be recognized by sub upon the transfer to sub of the stock of the sub subsidiaries not described in ruling and other assets solely in exchange for sub stock and the assumption by sub of liabilities of sub not attributable to the stock of the sub subsidiaries sec_351 and sec_357 sub 11’s basis in the sub stock received in the first contribution will equal the basis of the property transferred in exchange therefor reduced by i the sum of the liabilities assumed by sub or subject_to which assets transferred were taken other than liabilities attributable to the stock of the sub subsidiaries described in ruling and ii if applicable and to the extent applicable the amount specified in sec_301 as provided in ruling sec_358 and d the basis of the assets transferred by sub in the first contribution to sub will equal the basis of those assets in the hands of sub immediately before the first contribution sec_362 the holding_period of the assets received by sub as a result of the exchange in the first contribution will include the holding_period of the assets in the hands of sub sec_1223 no amount of gain will be recognized and no amount will be included in income under sec_367 as a result of the first contribution sec_1_367_b_-4 the order of the steps of the proposed transaction will be respected and therefore the first contribution and the second contribution will be treated as occurring prior to the sub liquidation based solely on the information and representations submitted in the original and supplemental ruling requests we rule as follows with respect to the second contribution no gain_or_loss will be recognized by sub on the transfer of the stock of sub to sub in exchange for sub stock as a result of the second contribution sec_351 no gain_or_loss will be recognized by sub on the receipt of the stock of sub from sub as a result of the exchange in the second contribution sec_1032 the basis of the sub stock held by sub will be equal to the basis of the sub stock transferred to sub in the second contribution sec_358 plr-139523-05 the basis of the sub stock transferred by sub in the second contribution to sub will equal the basis of the sub stock in the hands of sub immediately before the second contribution sec_362 the holding_period of the sub stock received by sub as a result of the exchange in the second contribution will include the holding_period of the sub stock in the hands of sub sec_1223 no amount of gain will be recognized and no amount will be included in income under sec_367 as a result of the second contribution sec_1_367_b_-4 based solely on the information submitted in the original and supplemental ruling requests we rule as follows with respect to the sub liquidation the sub liquidation will constitute a complete_liquidation of sub under sec_332 and sec_1_332-2 no gain_or_loss will be recognized by sub or sub as a result of the sub liquidation sec_332 sec_337 and sec_336 sub shall include in gross_income as a deemed_dividend the all_earnings_and_profits_amount attributable to the stock of sub sec_1_367_b_-3 sub 18’s basis in each asset deemed received from sub will be the same as the basis of that asset in the hands of sub immediately before the sub liquidation sec_334 sub 18’s holding_period in each asset deemed received from sub in the sub liquidation will include the period during which the asset was held by sub sec_1223 based solely on the information and representations submitted in the original and supplemental ruling requests we rule as follows with respect to the sub sale the sub sale constitutes an acquisition of stock by a related corporation within the meaning of sec_304 therefore sub will be deemed to receive a distribution in redemption of the stock of sub equal to the amount of cash received by sub sub and sub will be treated in the same manner as if sub had transferred the sub stock to sub in exchange for stock of sub in a transaction to which a applies and then sub had redeemed the corresponding portion of stock it was treated as issuing sec_304 the deemed redemption distribution will constitute a dividend to the extent of the earnings_and_profits of sub and sub the balance of the deemed redemption distribution if any will reduce sub 28’s basis in the sub stock sec_301 the remaining balance of the deemed redemption distribution if any will be treated as gain from the sale_or_exchange of property sec_301 plr-139523-05 the basis of the sub stock transferred by sub to sub in the sub sale equals the basis of the sub stock in the hands of sub immediately prior to the sub sale sec_1_304-2 and sec_362 sub 33’s holding_period of the sub stock received from sub in the sub sale will include the period during which the asset was held by sub sec_1223 based solely on the information and representations submitted in the original and supplemental ruling requests we rule as follows with respect to the sub sale the sub sale constitutes an acquisition of stock by a related corporation within the meaning of sec_304 therefore sub will be deemed to receive a distribution in redemption of the stock of sub equal to the amount of cash received by sub sub and sub will be treated in the same manner as if sub had transferred the sub stock to sub in exchange for stock of sub in a transaction to which a applies and then sub had redeemed the corresponding portion of stock it was treated as issuing sec_304 the deemed redemption distribution will constitute a dividend to the extent of the earnings_and_profits of sub and sub the balance of the deemed redemption distribution if any will reduce sub 28’s basis in the sub stock sec_301 the remaining balance of the deemed redemption distribution if any will be treated as gain from the sale_or_exchange of property sec_301 the basis of the sub stock transferred by sub to sub in the sub sale equals the basis of the sub stock in the hands of sub immediately prior to the sub sale sec_1_304-2 and sec_362 sub 33’s holding_period of the sub stock received from sub in the sub sale will include the period during which the asset was held by sub sec_1223 based solely on the information and representations submitted in the original and supplemental ruling requests we rule as follows with respect to the sub sale the sub sale constitutes an acquisition of stock by a related corporation within the meaning of sec_304 therefore sub will be deemed to receive a distribution in redemption of the stock of sub equal to the amount of cash received by sub sub and sub will be treated in the same manner as if sub had transferred the sub stock to sub in exchange for stock of sub in a transaction to which a applies and then sub had redeemed the corresponding portion of stock it was treated as issuing sec_304 the deemed redemption distribution will constitute a dividend to the extent of the earnings_and_profits of sub and sub the balance of the deemed redemption distribution if any will reduce sub 28’s basis in the sub stock sec_301 the remaining balance of the deemed plr-139523-05 redemption distribution if any will be treated as gain from the sale_or_exchange of property sec_301 the basis of the sub stock transferred by sub to sub in the sub sale equals the basis of the sub stock in the hands of sub immediately prior to the sub sale sec_1_304-2 and sec_362 sub 34’s holding_period of the sub stock received from sub in the sub sale will include the period during which the asset was held by sub sec_1223 caveats no opinion is expressed about the federal tax treatment of the proposed transaction under other provisions of the code or 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 ruling specifically no opinion is expressed regarding the following to the extent not otherwise specifically ruled upon above any other consequence under sec_367 on any internal restructuring transaction in this letter_ruling the application of sec_482 to the sale by sub of certain assets to sub or sub whether any or all of the above-referenced foreign_corporations are passive foreign investment companies within the meaning of sec_1297 of the code if it is determined that any or all of the above described foreign_corporations are passive foreign investment corporations no opinion is expressed with respect to the application of sec_1291 through to the proposed transaction in particular in a transaction in which gain is otherwise recognized regulations under sec_1291 may require gain recognition notwithstanding any other provision of the code to the extent not otherwise specifically ruled upon above the federal_income_tax consequences of step xi of the proposed transaction procedural statements this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter must be attached to the federal_income_tax return of each party involved in the proposed transaction for the taxable_year in which the proposed transaction is completed under the power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative plr-139523-05 cc sincerely richard k passales richard k passales senior counsel branch office of associate chief_counsel corporate


t c memo united_states tax_court vladimir d josephine m saric petitioners v commissioner of internal revenue respondent docket no filed date vladimir d saric pro_se gary m slavett for respondent memorandum opinion nameroff special_trial_judge respondent determined deficiencies in petitioners’ and federal income taxes in the amounts of dollar_figure dollar_figure and dollar_figure respectively unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue - after concessions the issue for decision is whether petitioners are entitled to deduct schedule a away from home expenses of dollar_figure dollar_figure and dollar_figure for and respectively background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time their petition was filed petitioners resided in rowland heights california from january through april of vladimir saric petitioner was unemployed he lived in rowland heights with his wife and three daughters through cdi corp or cdi personal services inc collectively referred to as cdi a temporary employment agency petitioner was assigned to work for raytheon service co raytheon as an electrical engineer for a federal aviation administration faa project raytheon’s office is located in manhattan beach california in obtaining the job with raytheon petitioner was interviewed by harry moreau mr moreau an engineer with faa who was overseeing a project in fremont california the fremont project the objective of the project was to install two diesel generators which would provide ' the parties submitted a stipulation of settled issues in which petitioners conceded all issues except for the issue stated above power for air flight controllers mr moreau asked petitioner to come to fremont to work on the project and petitioner agreed fremont is approximately miles from petitioner’s home petitioner stayed in fremont from monday through friday and he drove back to rowland heights every weekend to stay with his family while in fremont petitioner stayed ina motel eventually petitioner moved into an apartment with first a weekly lease and then a monthly lease according to petitioner mr moreau at any time could have told petitioner that he was no longer needed mr moreau would tell petitioner whether he was needed on the project from week to week during the years in issue petitioner was needed in fremont every week a project such as the fremont project usually takes about years to complete the fremont project consisted of two phases for the first_phase a building was constructed with all underground utilities to house the diesel generators this phase lasted from date to date the second_phase involved the installation of control panels switch gears and the two diesel generators petitioner was asked to stay on for the second_phase which lasted from date to date during the first_phase petitioner was considered an employee of cdi in between phases petitioner was hired as an employee of raytheon at no time was petitioner reimbursed for his expenses - petitioners claim they are entitled to schedule a away from home employee_business_expense deductions of dollar_figure dollar_figure and dollar_figure for years and respectively petitioner claims these expenses were for transportation to and from fremont and meals_and_lodging while in fremont respondent disallowed the away from home expenses discussion deductions are a matter of legislative grace see 292_us_435 taxpayers bear the burden of proving that they are entitled to their claimed deductions see 290_us_111 a taxpayer ordinarily may not deduct a personal_expense see sec_262 sec_162 however allows a taxpayer to deduct traveling expenses_incurred while away from home a taxpayer may deduct traveling expenses under sec_162 if he satisfies the following three conditions the expense must be reasonable and necessary it must be incurred while away from home and it must be incurred in the pursuit of a trade_or_business see 326_us_465 a taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceed sec_1 year sec_162 - respondent contends that petitioner was not away from home while he was working in fremont for purposes of sec_162 generally a taxpayer’s home is the vicinity of his principal place of employment not where his personal_residence is located see 74_tc_578 however if a taxpayer’s principal place of employment is temporary rather than indefinite the taxpayer’s residence may be considered the taxpayer’s home and the taxpayer may deduct the expenses associated with traveling to and living at a job site see 358_us_59 petitioners contend that even though petitioner’s employment on the fremont project lasted years it was temporary since it was possible mr moreau would have told him that he was not needed in that sense all employment is temporary in that employees unless tenured generally serve at the will of the employer a place of business is a temporary place of business if the employment is such that termination within a short_period of time could be foreseen see 13_tc_129 conversely employment is categorized as indefinite substantial or indeterminate if its termination cannot be foreseen within a fixed or reasonably short_period of time see 54_tc_355 affd f 2d - - cir employment which is temporary may become indefinite due to changed circumstances or the passage of time see 66_tc_467 whether a taxpayer’s employment is temporary or indefinite is a question of fact see peurifoy v commissioner supra pincite cf 283_f2d_491 cir revg 32_tc_1368 petitioner worked on the fremont project for months while petitioner was an employee of a temporary services agency cdi when first employed in fremont petitioner had no reason to believe that such employment would be temporary in fact it ended up becoming a matter of long duration thus his employment was of an indefinite nature in date after working on the project for months petitioner was hired as an employee of raytheon and was asked to stay for phase two of the project indeed petitioner remained in fremont until date petitioner stated that a project such as the fremont project usually lasts around years therefore there was a probability that petitioner would work on the project for its entire duration furthermore the statute specifically states that employment in excess of year is not temporary see sec_162 and petitioner’s employment exceeded this limitation at trial petitioner stated that he drove back to rowland heights every weekend for the personal purpose of being with his - wife and daughters petitioner also argued that he occasionally had to go into the raytheon office in manhattan beach because he was required to attend safety training or he had to pick up supplies petitioner has offered no evidence of the frequency if any of these office visits but they were not every weekend furthermore petitioner argued that he was assigned to the raytheon office which was his principal_place_of_business and therefore his tax_home petitioner may have been administratively assigned to the raytheon office however petitioner’s principal place of employment was at the fremont project where he was needed monday through friday for months based on the record we find that petitioner’s tax_home for purposes of sec_162 was in fremont during the years at issue we find that petitioner maintained his residence in rowland heights out of personal preference and not for business reasons see 326_us_465 accordingly we hold that petitioners are not entitled to claim deductions for traveling and living_expenses paid in connection in petitioners’ posttrial brief they state for the first time that petitioner had to bring in his time sheet to the raytheon office every friday petitioners offered no evidence at trial to support this contention and the record reflects otherwise --- - with petitioner’s employment since he was not away from home to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court michael e and linda s murray petitioners v commissioner of internal revenue respondent docket no filed date robert h culton ii for petitioners randall b pooler for respondent memorandum opinion laro judge this case was submitted to the court without trial under rule petitioners petitioned the court to redetermine a dollar_figure deficiency in their federal_income_tax a dollar_figure addition thereto under sec_665l1 a anda dollar_figure accuracy-related_penalty under sec_6662 following concessions by the parties ’ we must decide whether petitioners may deduct a loss purportedly attributable to worthless_stock we hold they may not section references are to the internal_revenue_code in effect for the applicable_year rule references are to the tax_court rules_of_practice and procedure background all facts were either stipulated or found from the exhibits which the parties submitted with their stipulations of fact those stipulations of fact and exhibits submitted therewith are incorporated herein by this reference and the stipulations of fact are found accordingly petitioners are husband and wife they resided in longwood florida when we filed their petition petitioners filed with the commissioner a joint federal_income_tax return on date they claimed on that return a dollar_figure capital_loss attributable to dollar_figure and dollar_figure of losses reportedly passing through to them from s_corporations named poinciana mobile home park inc poinciana ' petitioners allege in their petition in relevant part that respondent erred in determining michael e murray mr murray realized a gain on the foreclosure described herein and linda s murray is not an innocent spouse we consider petitioners to have conceded the latter allegation because they did not list the allegation as an issue when they informed the court at the calendar call of the issues still in dispute they have introduced into the record no evidence as to the allegation and their posttrial briefs include no reference to the allegation for the same reason we also consider petitioners to have conceded the addition_to_tax and accuracy- related penalty and franklin funding company of florida inc franklin respectively petitioners now concede that they may not deduct either loss mr murray is poinciana’s sole shareholder poinciana owned and operated a mobile home park the park until the park was foreclosed in petitioners realized a dollar_figure gain on the foreclosure but did not recognize this gain on their federal_income_tax return they reported instead the dollar_figure loss mentioned above discussion we must decide whether petitioners may deduct in an unreported loss on the claimed worthlessness of mr murray’s poinciana stock petitioners assert that the stock became worthless as a result of the park’s foreclosure and that mr murray’s basis in that stock at the time of worthlessness was dollar_figure ie the same amount as the gain realized on the foreclosure sec_165 provides that a taxpayer may deduct a loss on stock that becomes worthless during the taxable_year in order to deduct such a loss however the taxpayer must prove the basis of the stock and that the stock became worthless in the year claimed see 807_f2d_59 6th cir affg tcmemo_1985_369 50_tc_369 affd 424_f2d_1 6th cir 24_tc_656 see also 104_tc_1 fact that a case is fully stipulated does not lessen the burden_of_proof affd 103_f3d_104 10th cir the taxpayer to establish worthlessness must prove not only current balance_sheet insolvency but also the absence of any reasonable expectation that the assets of the corporation will exceed its liabilities in the future see steadman v commissioner supra pincite whether stock is worthless is a factual determination as is the determination of the year in which stock becomes worthless see 326_us_287 253_f2d_639 9th cir affg in part and revg in part tcmemo_1956_247 71_tc_955 we hold that petitioners have failed to meet their burden of proving that mr murray’s poinciana stock became worthless in petitioners rely primarily on their bald assertions on brief to the effect that the stock became worthless at the time of the foreclosure these assertions do not persuade us that the stock became worthless in see 56_tc_191 see also 32_tc_618 a taxpayer’s belief that the cost of stock cannot be recovered is not sufficient to establish that the stock is worthless nor are we persuaded by the mere fact that poinciana filed a tax_return with the commissioner in date reporting that on date it owned no assets owed no liabilities and had a retained deficit of dollar_figure cf 106_tc_268 n and the cases cited therein we hold for respondent to reflect concessions decision will be entered under rule


number release date legend org organization name xx date date date org address person to contact identification_number contact telephone number in reply refer to te_ge review staff ein last date for filing a petition with the tax_court dear this is a final adverse determination as to your exempt status under sec_501 of the internal_revenue_code our adverse determination was made for the following reasons you have failed to produce documents to establish that you are operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 and that no part of your net_earnings inure to the benefit of private shareholders or individuals you failed to respond to repeated reasonable requests to allow the internal_revenue_service to examine your records regarding your receipts expenditures or activities and have failed to file information returns as required by lr c sec_6001 sec_6033 and revrul_59_95 1959_1_cb_627 based upon the above we are revoking your organization's exemption from federal_income_tax under sec_501 of the internal_revenue_code effective january 20xx contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all years thereafter processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits for declaratory_judgment you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers you can call and ask for taxpayer_advocate assistance or you can contact the taxpayer_advocate from the site where the tax_deficiency was determined by calling or writing to internal_revenue_service taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to file a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours nanette m downing director eo examinations tax_exempt_and_government_entities_division org address department of the treasury internal_revenue_service te_ge eo examinations commerce st dallas texas date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication publication report of examination sincerely sunita lough director eo examinations letter catalog number 34809f form_8 a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service december 20xx org legend org organization name xx date emp-1 emp issue whether the organization should continue to qualify for exemption under internal_revenue_code sec_501 facts despite multiple attempts via correspondence the organization failed to comply with the request to schedule an appointment for examination of the organization’s books_and_records the organization was selected for examination for the period ending december 20xx the initial contact letter and information_document_request was sent to the organization on march 20xx the organization did not respond by the requested due_date and on april 20xx the initial contact letter was sent again certified mail return receipt requested the return receipt was signed for by emp-1 and received in the internal_revenue_service office on april 20xx due to no response in the letter dated may 20xx the organization was informed that failure to comply with the request to begin the examination by june 20xx could result in revocation of the organization’s exempt status the correspondence was returned to the internal_revenue_service office as unclaimed on june 20xx to date no appointment has been scheduled for the examination of the organization’s books_and_records law fund or foundation organized and operated exclusively for sec_501 of the internal_revenue_code describes corporations and any community chest charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office religious title sec_6001 of the internal_revenue_code provides that every person liable for any_tax imposed by this or for the collection thereof shall keep such records render such statements make such returns and comply with such rules and regulations as the secretary may from time to time prescribe whenever in the judgment of the secretary it is necessary he may require any person by notice served upon such person or by regulations to make such returns render such statements or keep such records as the secretary deems sufficient to show whether or not such person is liable for tax under this title form 886-a rev department of the treasury - internal_revenue_service page -1- form_8 a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service org december 20xx sec_1_501_c_3_-1 of the federal tax regulations describes organizations organized and operated for religious charitable scientific testing for public safety literary or educational_purposes or for the prevention of cruelty to children or animals federal tax regulation sec_1_501_c_3_-1 details an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section an organization fails to meet either the organizational_test or the operational_test it is not exempt be exempt as order to that in if federal tax regulation sec_1_501_c_3_-1 define the term exempt_purpose or purposes as used in this section means any purpose or purposes specified in sec_501 as defined and elaborated in paragraph d of this section the organizational_test is detailed in sec_1_501_c_3_-1 an organization is organized exclusively for one or more exempt purposes only if its articles of organization referred to in this section as its articles as defined in subparagraph of this paragraph a limit the purposes of such organization to one or more exempt purposes and b do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes section federal tax regulation sec_1_501_c_3_-1 states in order to be exempt as an organization described in both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt the term ‘exempt purpose or purposes’ as used in this section means any purpose or purposes specified in sec_501 as defined and elaborated in paragraph d of this section organization c must be an federal tax regulation sec_1_6001-1 states that in addition to such permanent books_and_records as are required by paragraph a of this section with respect to the tax imposed by sec_511 on unrelated_business_income of certain exempt_organizations every organization exempt from tax under sec_501 shall keep such permanent books of account or records including inventories as are sufficient to show specifically the items of gross_income receipts and disbursements such organizations shall also keep such books_and_records as are required to substantiate the information required by sec_6033 federal tax regulations sec_1_6001-1 states that the books_or_records required by this section all times available for inspection by authorized internal revenue officers or shall be kept at employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law form 886-a crev department of the treasury - internal_revenue_service page -2- f orm a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service december 20xx org federal tax regulations section sec_1_6033-2 states every organization which is exempt from tax whether or not it is required to file an annual information_return shall submit such additional information as may be required by the internal_revenue_service for the purpose of inquiring into its exempt status and administering the provisions of subchapter_f sec_501 and following chapter of subtitle a of the code sec_6033 and chapter of subtitle d of the code federal tax regulations sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district its exempt status and to director for the purpose of enabling him to inquire further into administer the provisions of subchapter_f sec_501 and the following chapter of the internal_revenue_code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 of the internal_revenue_code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the internal_revenue_code and federal tax regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax conclusion the not comply with internal revenue service's request for since the organization did examination we can not determine whether their activities are consistent with their exempt is the irs's position that the status under sec_501 of the internal_revenue_code it organization failed to meet the operational_test for an organization exempt under sec_501 of since the organization does not meet the requirements of the sec_1_501_c_3_-1 it is our position that their tax exempt status be revoked as an examination of the form_990 for the period ending december 20xx was not completed accordingly the organization's exempt status is revoked effective january 20xx internal_revenue_code form 886-acrev department of the treasury - internal_revenue_service page -3-