internal_revenue_service number release date index number ---------------------------------------------------------- ---------------------------------- ------------------------------ re -------------------------------- 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-104619-15 date august legend decedent date date date date child child date grandchild grandchild date dear -------------- ------------------- --------------------------- ----------------- ----------------- -------------------------- ------------------------ ------------------------------- --------------------------- ---------------------------- ------------------------------ --------------------------- this letter responds to the letter dated date submitted by your authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file pursuant to sec_26_2601-1 of the generation-skipping_transfer_tax regulations a qualified physician’s certification or other evidence that decedent was mentally incompetent at all times on and after date until her death the facts submitted and representations made are summarized as follows decedent created a revocable_trust trust on date which was amended and restated on date decedent executed six amendments to the restated trust the last amendment on date a date prior to date decedent died on date survived by child and child upon the death of decedent the remainder of trust plr-104619-15 was split into two equal shares and held in further trust the first share was for the benefit of child and the second share was for the benefit of child child possessed a limited power to appoint his share in his will to the extent that the power_of_appointment is not exercised then upon the death of child child 1’s share is to be divided into equal shares for each of child 1’s children then living and a share for the then living issue collectively of any deceased child each trust share created for a descendant of child is to be held in further trust child died on date survived by grandchild and grandchild the executors of decedent’s estate timely filed decedent’s form_706 united_states estate and generation-skipping_transfer_tax return on date the executors did not file with the form_706 a physician’s certificate or other evidence of decedent’s mental incompetency it is represented that decedent was incompetent at all times on and after date and did not regain competency to modify or revoke the terms of trust before her death you request an extension of time under sec_301_9100-3 to file pursuant to sec_26_2601-1 a qualified physician’s certification or other evidence demonstrating that decedent was mentally incompetent at all times on and after date until her death sec_2601 of the internal_revenue_code code imposes a tax on every generation-skipping_transfer a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip under b c of the tax_reform_act_of_1986 and sec_26_2601-1 if an individual was under a mental_disability to change the disposition of the individual’s property continuously from date until the date of death the provisions of chapter do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 to the extent such trust consists of property or the proceeds of property the value of which was included in the gross_estate of the individual sec_26_2601-1 defines the term mental_disability as mental incompetence to execute an instrument governing the disposition of the individual’s property whether or not there was an adjudication of incompetence and regardless of whether there has been an appointment of a guardian fiduciary or other person charged with either the care of the individual or care of the individual’s property sec_26_2601-1 provides that if there has not been a court adjudication that the decedent was mentally incompetent on or before date the executor must file with form_706 either a certification from a plr-104619-15 qualified physician stating that the decedent was mentally incompetent at all times on and after date and did not regain competence to modify or revoke the terms of the trust or will prior to his or her death or sufficient other evidence demonstrating that the decedent was mentally incompetent at all times on and after date as well as a statement explaining why no certification is available from a physician and any judgment or decree relating to the decedent’s incompetency that was made after date sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been met therefore we grant an extension of time of days from the date of this letter to file the required physician’s certification or other evidence the physician’s certification or other evidence should be attached to a supplemental form_706 for decedent’s estate the form_706 should be filed with the cincinnati service_center at the following address internal_revenue_service cincinnati service_center - stop cincinnati oh a copy of this letter should also be attached to the supplemental form_706 a copy of this letter is enclosed for this purpose 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 specifically we express no opinion as to whether decedent was under a mental_disability within the meaning of sec_26_2601-1 on and after date resolution of this factual matter would be under the audit jurisdiction of the area director 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 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 plr-104619-15 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely leslie h finlow senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures cc


t c memo united_states tax_court daniel v alfaro and irma l alfaro petitioners v commissioner of internal revenue respondent docket no filed date kenton be mcdonald for petitioners blizabeth owen and bruce m wilpon for respondent memorandum opinion swift judge respondent determined a deficiency in petitioners’ federal_income_tax for in the amount of dollar_figure unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and - - all rule references are to the tax_court rules_of_practice and procedure after concessions the remaining issue for decision is whether petitioners for are entitled to deduct as nonpersonal business_interest dollar_figure in interest that petitioners paid to respondent in with respect to petitioners’ federal individual income_tax liabilities for through background the facts of this case were submitted fully stipulated under rule and are so found at the time the petition was filed petitioners resided in corpus christi texas hereinafter all references to petitioner in the singular are to daniel v alfaro during through being the year in issue herein petitioner operated a law practice as a sole_proprietorship after an audit by respondent with respect to petitioners’ federal individual income_tax liabilities for through respondent determined and assessed against petitioners tax deficiencies for those years relating solely to additional income from petitioner’s law practice in petitioners entered into an agreement with respondent with respect to the above tax deficiencies and in petitioners paid to respondent a total of dollar_figure in accrued statutory interest relating thereto the parties have stipulated and we find that petitioners’ above income_tax liabilities for through are properly allocable to petitioner’s law practice the stipulation reads as follows the tax compromised by petitioners and respondent was tax on income received by petitioner in his schedule c law practice for legal fees earned in connection with the settlement of a personal injury lawsuit as such the tax arose entirely from petitioner’s trade_or_business on petitioners’ joint federal individual_income_tax_return for petitioners claimed an interest_expense_deduction on schedule c profit or loss from business relating to the above dollar_figure in interest that petitioners paid to respondent in after an audit relating to petitioners’ federal_income_tax return on date respondent issued to petitioners a notice_of_deficiency for in which respondent disallowed the above claimed dollar_figure interest_expense_deduction discussion sec_163 provides generally that taxpayers may deduct interest_paid on an indebtedness sec_163 however provides that individual taxpayers may not deduct personal_interest q4e- sec_163 h a provides that interest_paid on indebtedness properly allocable to a trade_or_business does not constitute personal_interest in sec_163 no distinction is made between interest_paid on business-related indebtedness owed by individual taxpayers and interest_paid on business-related indebtedness owed by other types of taxpayers respondent’s temporary_regulation however provides that interest_paid specifically on income_tax liabilities of individuals regardless of the source of the income or other adjustments to which the tax_liabilities relate is to be treated as personal_interest sec_1_163-9t a temporary income_tax regs fed reg date respondent argues that because the dollar_figure in interest that petitioners paid to respondent in relates to petitioners’ individual income_tax liabilities under sec_1_163-9t b a temporary income_tax regs supra that interest should be treated as nondeductible personal_interest petitioners contend that sec_1_163-9t a temporary income_tax regs supra is invalid that sec_163 h a calls for an allocation of interest_paid between business and nonbusiness interest without discrimination against taxpayers who are individuals and that because the income giving rise to petitioners’ tax_liabilities for through is indisputably allocable to petitioner’s trade_or_business namely - - to petitioner’s law practice under sec_163 and h the related dollar_figure in interest_paid on those tax_liabilities is likewise allocable to petitioner’s trade_or_business and should be deductible petitioners cite 106_tc_31 revd and remanded 141_f3d_936 9th cir and kikalos v commissioner tcmemo_1998_92 revd 190_f3d_791 7th cir and a body of pre sec_163 caselaw see 35_tc_571 affd 299_f2d_380 7th cir 31_tc_412 affd 276_f2d_601 10th cir and 28_tc_789 affd 259_f2d_450 4th cir in which cases it was held that individual taxpayers were entitled to deduct interest on their federal_income_tax liabilities relating to income from a sole_proprietorship business after trial and the filing of briefs in this case we decided 119_tc_44 which also involved the deductibility of interest_paid by an individual taxpayer to respondent with respect to the taxpayer’s federal_income_tax liability relating to income from the taxpayer’s law practice in robinson we concluded that sec_1 9t b a temporary income_tax regs supra is valid that pre sec_163 caselaw was inapplicable that we would no longer follow our opinion in 106_tc_31 - - and that interest_paid on individual tax_liabilities relating to income from a sole_proprietorship is to be treated as nondeductible personal_interest robinson v commissioner supra pincite our conclusion in robinson is in accord with opinions of the courts of appeals for the fourth sixth seventh bighth and ninth circuits and is controlling herein see 190_f3d_791 7th cir revg tcmemo_1998_92 180_f3d_721 6th cir 173_f3d_533 4th cir 141_f3d_936 9th cir revg and remanding 106_tc_31 65_f3d_687 8th cir although strong arguments are available in support of the claimed deductions at issue herein see the dissenting opinions in robinson v commissioner supra pincite we are compelled to conclude in the instant case that the dollar_figure in interest petitioners paid on their individual income_tax liabilities relating to income from petitioner’s law practice is to be treated as nondeductible personal_interest for the foregoing reasons decision will be entered for respondent


internal_revenue_service number release date index number ----------------------- ----------------------------------------------- ------------------------------------- --------------------------- -------------------------------------- --------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------ telephone number -------------------- refer reply to cc psi b01 plr-151996-05 date date --------------------- --------------------- ------------------------- legend legend x -------------------------------------------------- country d dear ------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-151996-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election 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 evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-151996-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code 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 mailed to your authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc


internal_revenue_service number release date index number ------------------------------------------ --------------------------------------------- -------------------------------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ----------------- telephone number -------------------- refer reply to cc psi b01 plr-103824-12 date june legend ---------------------------------------------- x ----------------------------------------- state ------------- dear ------------ this letter responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting a ruling under sec_7704 of the internal_revenue_code facts x is a limited_partnership organized under the laws of state x is a publicly_traded_partnership within the meaning of sec_7704 x through affiliated partnerships disregarded entities and corporate subsidiaries is principally engaged in the transportation processing storage and distribution of natural_gas natural_gas liquids ngl crude_oil and refined petrochemical and petroleum products x is building a facility facility that will convert --------- into ------------- through dehydrogenation or catalytic cracking in addition to creating -------------- this process will also create ------------------------------------------------------------------------------------------------ --------------- byproducts x will operate facility pursuant to long-term -------- agreements agreements under the terms of the agreements -------------- will deliver ---------------------- to facility and will receive ------------- in accordance with an agreed-upon yield ratio -------------------may purchase the --------- feedstock from x at --------------------------- or from third parties customers will pay x a formula-based cash fee for --------------- on a monthly basis x plr-103824-12 will retain --------------------as additional compensation and may in its sole discretion retain any ------------- produced in excess of the yield ratio x requests a ruling that income derived from its conversion of --------- into ------------- will constitute qualifying_income under sec_7704 law and analysis sec_7704 provides that except as provided in sec_7704 a publicly_traded_partnership will be treated as a corporation sec_7704 provides that the term publicly_traded_partnership means any partnership if interests in that partnership are traded on an established_securities_market or interests in that partnership are readily tradeable on a secondary market or the substantial equivalent thereof sec_7704 provides that sec_7704 does not apply to a publicly_traded_partnership for any taxable_year if such partnership meets the gross_income requirements of sec_7704 for the taxable_year and each preceding_taxable_year beginning after date during which the partnership or any predecessor was in existence sec_7704 provides that a partnership meets the gross_income requirements of sec_7704 for any taxable_year if percent or more of the gross_income of the partnership for the taxable_year consists of qualifying_income sec_7704 provides that the term qualifying_income includes income and gains derived from the exploration development mining or production processing refining transportation including pipelines transporting gas oil or products thereof or the marketing of any mineral_or_natural_resource including fertilizer geothermal_energy and timber conclusion based solely on the facts submitted and the representations made we conclude that the income derived by x from the conversion of --------- into ------------- will constitute qualifying_income within the meaning of sec_7704 except as expressly provided herein no opinion is expressed or implied concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular no opinion is expressed as to whether x meets the percent gross_income requirement of sec_7704 in any taxable_year for which this ruling may apply plr-103824-12 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 sincerely laura c fields laura c fields senior technician reviewer branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------------- ---------------------------- ------------------ -------------------------- department of the treasury washington dc person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b1-plr-106024-05 date february legend x --------------------------------------------------- date dear -------------- ----------------------- --------------------------- this responds to a letter dated date submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts x was incorporated on date the shareholder of x desired that x elect s_corporation treatment effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under ' b however if an s election is made after the first two and one-half months of plr-137393-03 a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no ' a election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and ' b shall not apply x did not timely file an election to be treated as an s_corporation under ' a x has however established reasonable_cause for not making a timely s election and is entitled to relief under ' b conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 effective date with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes the code provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer s requesting it sec_6110 of sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures cc copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp -plr date date legend company district selling shareholders date date date date state c xxx ppp project b ddd percent purchaser purchaser purchaser ccc plr hhh dollar_figurefff dollar_figureggg dollar_figureiii case j dear this letter responds to the date request for rulings submitted by your representative on behalf of company and the selling shareholders listed on the attached schedule a with respect to the transfer of certain water rights you have requested a ruling that for federal_income_tax purposes company's participation in the procedures by which the transfer of the water is accomplished in conjunction with the sales by the selling shareholders of their rights to the water will not constitute a sale_or_other_disposition of property by company nor a distribution_of_property by the company to the selling shareholders with respect to their stock additionally you have requested rulings on whether the water rights will constitute capital assets in the hands of the selling shareholders and whether certain_sales of these water rights will constitute sales or exchanges of capital assets the information submitted in the request and in a later submission is summarized below facts company was organized on date as a ditch and reservoir company and is subject_to state c's statutory requirements for mutual ditch companies company uses the cash_method_of_accounting and its fiscal_year ends on date approximately xxx of the company's shareholders are selling shareholders the other shareholders are not transferring any of their water rights and are not involved in the transactions described herein state c mutual ditch companies generally were created when a group of farmers banded together and formed the cooperative company for the express purpose of storing and conducting water for irrigation purposes company's primary function has been to deliver to and store the water of its shareholders the company's assets are limited to those necessary to deliver and store the water these assets include weirs canals dams water control devices and a storage reservoir the shareholders used the bylaws and shares to quantify each of their beneficial use rights in the water transported by the company the company owns no land on which to make use of the water it transports and stores although water is derived from two sources only the water from project b the project b water as described below is the subject of this ruling_request plr on date district a quasi-governmental corporation subject_to state c's statutory requirements for such entities entered into an agreement the repayment contract with the united_states bureau of reclamation the bureau for the development of project b project b emanates from the reclamation act of as amended the repayment contract grants district the right to allocate the project b water the district does so through allotment contracts that require the water users to pay their proportionate share of the district's costs to operate and maintain project b and to repay the federal government for its construction costs the operating reimbursements costs on date district entered into an allotment contract with company which provided that company would be entitled to receive an allocation of water for the beneficial use of its shareholders the project b water was then allocated pro_rata among the shareholders based on their shares in addition to paying on a pro_rata basis company's annual operating_expenses based on their respective allocation of project b water each shareholder pays his proportionate share of the operating reimbursements costs under the allotment contract conditions in state c are such that water is in great demand as such the selling shareholders intend to relinquish their beneficial_ownership of ddd percent of the project b water through three sales agreements the master sales agreements with purchaser purchaser and purchaser the master sales agreements with purchaser and purchaser provide they will acquire an aggregate of ccc units of project b water at dollar_figurefff per unit and dollar_figureggg per unit respectively the master sales agreement with purchaser provides for an allocation of hhh units of project b water at dollar_figureiii per unit in order to satisfy certain transfer requirements of the district the master sales agreement with purchaser includes an option for purchaser to take all or some of the units through a twenty-five year interruptible supply contract the interruptible supply contract under the interruptible supply contract the price for the units is the same as in the master sales agreement and it includes an option to purchase the units for a nominal fee by its terms the interruptible supply contract will remove beneficial_ownership of the units from the selling shareholders you have indicated that purchaser has elected to take all the units pursuant to the interruptible supply contract the selling shareholders will be paid in full for all units upon the closing of all three transactions including the transaction subject_to the interruptible supply contract to facilitate the negotiation of the master sales agreements and the interruptible supply contract the selling shareholders created ppp to act as their agent the only members of ppp are the selling shareholders the selling shareholders are not selling their shares in company but their shares will bear a legend to reflect that they are no longer entitled to their full allocation of the project b water plr you have indicated that company is not materially participating in the transactions described above company as a party to the allotment contract however will agree to the amendment of the allotment contract to reflect the reduced allotment of project b water the master sales agreements and the interruptible supply contract are conditioned on our rulings herein however the selling shareholders due to the crisis situation in state c have already transferred some of the project b water to the purchasers the emergency sales the consideration received by the selling shareholders from these emergency sales is being held in escrow pending our rulings herein according to the courts of state c mutual ditch companies are unique entities which are formed not under state c' s general corporation statutes but under special legislation reserved for ditch and reservoir companies in analyzing the relationship between the shareholders and mutual ditch companies in regards to water rights the supreme court of state c in case j has stated that a mutual ditch company is merely engaged in the business of transporting and storing the water for its shareholders benefit and the law of state c uniformly holds that the actual ownership of the water rights is in the shareholder the supreme court's analysis noted that a longstanding tenet of state c law is that ownership of a water right can be acquired only by the actual beneficial use of the water mere diversion is not sufficient to meet the requirements of state c's constitution finally the supreme court noted that it is well established that the water rights owned by the shareholders are property rights accordingly based on this supreme court's decision and other decisions by this court it is clear that under state c law company is not the beneficial_owner of any of the water it transports for the benefit of its shareholders including the project b water representations company has represented that it is not a party to the master sales agreements or the interruptible supply contract and shall not receive any proceeds or other consideration arising or resulting from the transactions described herein based on the information and representations submitted we rule as follows the selling shareholders for federal_income_tax purposes are the beneficial owners of the project b water rights and the sale of such rights including the short-term emergency sales described above will not be deemed to be a sale_or_other_disposition of property by the company or a distribution_of_property by the company to the selling shareholders with respect to their stock accordingly the company will not realize gain_or_loss as a result of the selling shareholders' transactions sec_1001 sec_301 sec_311 plr the beneficial rights in the project b water constitutes a capital_asset in the hands of the selling shareholders sec_1221 the transfer of the beneficial rights in the project b water under the master sales agreements and the interruptible supply contract constitute sales of capital assets by the selling shareholders sec_1222 caveat no opinion is expressed about the tax treatment of the transactions 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 transactions that are not specifically covered by the above ruling for example no opinion is expressed about whether the short-term emergency sales constitute sales or exchanges of capital assets nor are we opining on the selling shareholders' bases in these water rights the rulings contained in this letter are based upon information and a representation submitted by the company 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 procedural statements this ruling is directed only to the taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your taxpayer_representative sincerely steven hankin senior technical reviewer branch office of associate chief_counsel corporate


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 7-plr-107062-98 date date legend spouse a b decedent son c d a grandson granddaughter e f g h plr-107062-98 i court j dear sir in a letter dated you requested several rulings concerning the generation-skipping_transfer gst tax consequences of the exercise of a testamentary special_power_of_appointment this letter responds to your request the facts and representations submitted are summarized as follows spouse died testate on a spouse’s last will and testament is dated b after certain specific bequests article third paragraph a iii of spouse’s will directs the trustee to divide spouse’s residuary_estate after the deduction of specified expenses into two parts part a the marital trust and part b the by-pass trust article third paragraph e of spouse’s will provides that the income of the by-pass trust is to be paid quarterly to decedent during decedent’s lifetime on decedent’s death the principal of the by-pass trust and all accumulations thereon is to be paid to such person or persons as decedent may by decedent’s will designate by name and description or class from among the following son son’s spouse and any or all of the descendants of son and the spouses of those descendants article third paragraph e of spouse’s will further provides that in the event that decedent dies without exercising the testamentary special_power_of_appointment the principal of the by-pass trust and all accumulations thereon is to be paid over absolutely to son if he is then living if son is not then living the principal of the by-pass trust and all accumulations thereon is to be divided equally among such of spouse’s issue if any as are then living per stirpes and not per capita decedent died testate on c decedent’s will is dated d in paragraph fourth of decedent’s last will and testament decedent exercised the testamentary special_power_of_appointment granted to decedent under paragraph third subparagraph e of spouse’s will plr-107062-98 paragraph fourth of decedent’s will directs that if son survives decedent decedent’s residuary_estate including any property over which decedent had a special_power_of_appointment under spouse’s will is to be divided into two parts the exempt part and the non-exempt part the exempt part is to consist of an amount equal to the maximum federal gst tax exemption equivalent in decedent’s estate under sec_2631 of the internal_revenue_code which is not otherwise allocated during decedent’s lifetime or at death the non-exempt part is to consist of the excess of decedent’s residuary_estate over the exempt part the exempt part is to be held in trust for the benefit of son the trustees are to distribute all of the net_income from the exempt part to son in quarter-annual or more frequent intervals as the trustees may determine for the duration of son’s lifetime in addition the trustees are to pay over and distribute to son so much of the principal as the trustees deem necessary for his needs of health maintenance and support at any time during son’s lifetime and on son’s death the trustees are to pay over transfer convey assign and administer upon such estates in trust or otherwise in such amounts or share any part or all of the property then held in trust to among or on behalf of decedent’s grandchildren and their issue and son’s spouse a as son from time to time directs and appoints by instrument executed during his lifetime or under his last will and testament the exercise of the special_power_of_appointment whether during son’s lifetime or by his will is to refer specifically to the special_power_of_appointment granted under the exempt part on son’s death the remaining unappointed trust estate is to be paid over and distributed in accordance with the terms and conditions of paragraph fifth of decedent’s will the non-exempt part is to pass to son if surviving outright and free of trust in the event son is not surviving then the property in the non-exempt part is to pass to son’s issue in equal shares per stirpes subject_to the provisions of paragraph eighth of decedent’s will paragraph fifth of decedent’s will provides that on son’s death the remaining trust estate under subparagraph a or in the event son predeceases decedent decedent’s residuary_estate as the case may be is to be divided into two equal shares one share to be held for grandson or his issue collectively if he is not surviving and one share to be held for granddaughter or her issue collectively if she is not surviving provided however that if either grandchild is not then surviving and if the deceased grandchild leaves no issue then surviving then the deceased grandchild’s share is to be held under the provisions of paragraph fifth for the benefit of the surviving grandchild or his or her respective issue collectively if he or she is not surviving plr-107062-98 paragraph eighth of decedent’s will provides that if any legatee or distributee under the will has not attained the age of years at the time specified for the outright distribution of his or her share then and in such event notwithstanding such direction the distribution of the beneficiary’s share is to be postponed and the beneficiary’s parent or guardian is to hold the same in trust until the beneficiary attains the age of years until that time the parent or guardian is to apply so much of the net_income and if that is not sufficient so much of the principal as the parent or guardian deems to be necessary to meet the beneficiary’s needs of health maintenance support and education and is to accumulate any income not so applied the principal and accumulated income if any is nevertheless to vest in interest in the beneficiary and is to be distributed to the beneficiary upon his or her attaining the age of years or in the event of his or her death prior thereto is to be distributed to his or her surviving issue per stirpes and if there be no issue to his or her brothers or sisters if any in equal shares otherwise to decedent’s surviving issue per stirpes in any event the parent or guardian is to make the final distribution of principal and accumulated income no later than years after the last to die of spouse and decedent’s issue who are surviving at the time of decedent’s death son as a beneficiary and sole executor of the last will and testament of decedent petitioned court for the clarification of certain language contained within decedent’s will and a certain trust established under decedent’s will on j court ruled as follows the second sentence of paragraph fourth of decedent’s will which provided for the funding for the exempt part and the non-exempt part was stricken in its entirety and in its place the following sentence was inserted the exempt part shall consist of a all of the assets of the trust designated as part b under the last will and testament of spouse over which i decedent was granted a special_power_of_appointment which power i have exercised under the provisions of this paragraph fourth plus b an amount equal to the maximum federal generation skipping transfer_tax exemption equivalent in my estate under sec_2631 of the internal_revenue_code or such other section of like import which is not otherwise allocated during my lifetime or at my death subparagraph a of paragraph fourth of decedent’s will which granted son a special_power_of_appointment over the assets of the exempt part was stricken in its entirety and in its place the following was inserted at any time or times during the lifetime of son and upon the death of son the trustees shall pay over transfer convey assign and administer upon such estates in trust or otherwise in such amounts or shares any part or all of the property then in trust to among or on behalf of my grandchild plr-107062-98 grandson and his issue and my grandchild granddaughter and her issue and son’s spouse a as son shall from time to time direct and appoint by an instrument executed during the lifetime of son provided the vesting absolute ownership or power of alienation of an interest in the appointed property passing in trust or otherwise shall not be postponed or suspended beyond years after the last to die of son grandson and granddaughter the perpetuities savings_clause in the last sentence of paragraph eighth of decedent’s will which provided for the final distribution of principal and accumulated income no later then years after the last to die of spouse and decedent’s issue living at the time of decedent’s death was stricken in its entirety and in its place the following was inserted in any event such parent or guardian shall make the final distribution of principal and accumulated income no later than years after the last to die of son grandson and granddaughter it is represented that the by-pass trust created under spouse’s will was irrevocable on date and there have been no additions to it since that date it is also represented that at the time of decedent’s death decedent had not allocated any of decedent’s available gst tax exemption you have requested the following rulings the by-pass trust created under spouse’s will is exempt from the gst tax because it became irrevocable on or before date and no additions actual or constructive have been made to it since that date the exercise of decedent’s testamentary special_power_of_appointment to appoint the assets of the by-pass trust to the exempt part will not be considered a constructive_addition to the by-pass trust for purposes of the gst tax if the exempt part is funded with i all of the assets passing pursuant to decedent’s will net of federal estate_tax and other expenses limited by the available gst tax exemption and ii all of the assets of the by-pass trust as a result of the exercise of decedent’s special_power_of_appointment the exempt part will have an inclusion_ratio of zero for purposes of the gst tax sec_2601 imposes a tax on every generation-skipping_transfer made by the transferor to a skip-person sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides that the provisions of chapter do not apply to any generation-skipping plr-107062-98 transfer under a_trust as defined in sec_2652 that was irrevocable on date the rule_of the preceding sentence does not apply to a pro_rata portion of any generation-skipping_transfer under an irrevocable_trust if additions are made to the trust after date sec_26_2601-1 provides that except as provided in sec_26_2601-1 or c any trust as defined in sec_2652 in existence on date is considered an irrevocable_trust sec_26_2601-1 provides that the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment as defined in sec_2041 is not treated as an addition to a_trust if- such power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26_2601-1 and in the case of an exercise the power_of_appointment is not exercised 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 the trust extending beyond any life in being at the date of creation of the trust plus a period of years plus if necessary a reasonable period of gestation the perpetuities period for purposes of sec_26_2601-1 the exercise of a power_of_appointment that validly postpones or suspends the vesting absolute ownership or power of alienation of an interest in property for a term of years that will not exceed years measured from the date of creation of the trust will not be considered an exercise that postpones or suspends vesting absolute ownership or the power of alienation beyond the perpetuities period if a power is exercised by creating another power it is deemed to be exercised to whatever extent the second power may be exercised sec_2631 provides that for purposes of determining the inclusion_ratio every individual is allowed a gst_exemption of dollar_figure that may be allocated by that individual or his executor to any property with respect to which the individual is the transferor an allocation under sec_2631 once made is irrevocable sec_2632 provides that any allocation by an individual of his gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for the individual’s estate determined without regard to extensions regardless of whether the return is required to be filed sec_2641 provides that for purposes of chapter the term applicable_rate means with respect to any generation-skipping_transfer the product of-- the maximum_federal_estate_tax_rate and plr-107062-98 the inclusion_ratio with respect to the transfer sec_2642 provides that for purposes of chapter except as otherwise provided in sec_2642 the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer is the excess if any of over- a except as provided in subparagraph b the applicable_fraction determined for the trust from which the transfer is made or b in the case of a direct_skip the applicable_fraction determined for the skip sec_2642 provides that for purposes of sec_2642 the applicable_fraction is a fraction- a the numerator of which is the amount of the gst_exemption allocated to the trust or in the case of a direct_skip allocated to the property transferred in the skip and b the denominator of which is- i the value of the property transferred to the trust or involved in the direct_skip reduced by ii the sum of- i any federal estate_tax or state death_tax actually recovered from the trust attributable to the property and ii any charitable deduction allowed under sec_2055 or sec_2522 with respect to the property sec_2652 provides that except as provided in this subsection or sec_2653 the term transferor means- a in the case of any property subject_to the tax imposed by chapter the decedent and b in the case of any property subject_to the tax imposed by chapter the donor an individual shall be treated as transferring any property with respect to which the individual is the transferor sec_26_2652-1 provides that except as otherwise provided in plr-107062-98 sec_26_2652-1 the individual with respect to whom property was most recently subject_to federal estate or gift_tax is the transferor of that property for purposes of chapter an individual is treated as transferring any property with respect to which the individual is the transferor thus a person may be a transferor even though there is no transfer of property under local law at the time the federal estate or gift_tax applies sec_26_2654-1 provides that if there is more than one transferor with respect to a_trust the portions of the trust attributable to the different transferors are treated as separate trusts for purposes of chapter treatment of a single trust as separate trusts under this paragraph a does not permit treatment of those portions as separate trusts for purposes of filing of returns and payment of tax for purposes of computing any other tax imposed under the internal_revenue_code also additions to and distributions from such trusts are allocated pro_rata among the separate trusts unless otherwise expressly provided in the governing instrument sec_26_2654-1 provides that if an individual makes an addition to a_trust of which the individual is not the sole transferor the portion of the single trust attributable to each separate trust is determined by multiplying the fair_market_value of the single trust immediately after the contribution by a fraction the numerator of the fraction is the value of the separate trust immediately after the contribution the denominator of the fraction is the fair_market_value of all the property in the single trust immediately_after_the_transfer based on the information submitted and the representations made we conclude as follows the by-pass trust created under spouse’s will is exempt from the gst tax because it became irrevocable on or before date and no additions actual or constructive have been made to it since that date the exercise of decedent’s testamentary special_power_of_appointment to appoint the assets of the by-pass trust to the exempt part will not postpone or suspend vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of the creation of the by-pass trust extending beyond any life in being at the date of the creation of the by-pass trust plus a period of years therefore we conclude that decedent’s exercise of the testamentary special_power_of_appointment is not treated as an addition to the by-pass trust pursuant to sec_26_2601-1 spouse is the transferor for gst tax purposes of the portion of the exempt part attributable to the assets of the by-pass trust decedent is the transferor for gst tax purposes of the portion of the exempt part attributable to the assets from decedent’s estate the portion of the exempt part for which spouse is the transferor plr-107062-98 and the portion of the exempt part for which decedent is the transferor are treated as separate trusts for gst tax purposes pursuant to sec_26_2654-1 the portion of exempt part consisting of the trust for which spouse is the transferor is exempt from the gst tax therefore provided distributions from the exempt part are allocated pro_rata between the two separate trusts distributions from and terminations with respect to the portion of the exempt part for which spouse is the transferor will be exempt from the gst tax if the portion of the exempt part for which decedent is the transferor is funded with all of the assets passing pursuant to decedent’s will net of federal estate_tax and other expenses limited by the available gst tax exemption the portion of the assets of the exempt part for which decedent is the transferor will have an inclusion_ratio of zero therefore provided distributions from the exempt part are allocated pro_rata between the trust for which decedent is the transferor and the trust for which spouse is the transferor distributions from and terminations with respect to the portion of the exempt part for which decedent is the transferor will be exempt from the gst tax except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter under the cited provisions or any other provision of the code this ruling is directed only to the taxpayer s 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 the taxpayer sincerely yours christine e ellison christine e ellison office of assistant chief_counsel passthroughs and special industries chief branch no


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b01-plr-122929-01 date date legend x date this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on date the shareholder of x desired that x elect s_corporation treatment effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply plr-122929-01 x did not file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer s 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 sincerely david r haglund senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c no third party contacts u ll tax exempt ano government entities dwiaion number release date date date contact person identification_number telephone number employer_identification_number legent m r o dear this is in reply to your ruling_request dated date that you do not directly or indirectly control r within the meaning of sec_4942 of the intemal revenue code code you are exempt under sec_501 of the cade and are classified as a private_foundation under sec_509 r is a_trust that is exempt undar sec_501 and is classified as a private_operating_foundation within the meaning of sec_4942 over the past years r has promoted democratic govemance human rights and economic legal and social reform b the initial member is currently your sote member the initial member may appoint additional and or successor members the members serve as your class a directors and elect your class b directors it is expected that the initial member will bequeath a substantial portion of his estate to you distributions to r to further r's charitable purposes tis expected that after the death of the initial member you will make r has a board_of trustees that acts by majority vote the trustees of r from time to time may appoint additional and or successor trustees by majority vote your current directors also serve as trustees of r the trustees of r have established an executive committee which has full authority to act on behaff of the trustees in between meetings of the trustees the executive ‘committee will cease to exist upon the death of the initial member the executive committee of r passed resolutions effective upon the death of the initial member pursuant to these resolutions and at all times thereafter the majority of trustees and officers of r will be persons who are not your directors or otherwise disqualified persons with respect to you also no disqualified_person with respect to you will have any special voting rights with respect to r in addition if at any time after the death of the initial member the trustees of r re-establish an executive committee then at all times the majority of trustees who constitute the executive committee will be persons who are not your directors or otherwise disqualified persons with respect to you these resolutions may be amended only by approval of two-thirds of the trustees of r itis expected that grants from you will constitute a large majority of r’s funding after the initial member's death you represent that you will not impose any material restrictions or conditions on the grants to r that would prevent r from freely and effectively employing the transferred assets or the income therefrom in furtherance of its exempt purposes the following representations have been made atal times after the death of the initial member the majority of trustees of r will be persons who are not your directors or otherwise disqualified persons with respect to you atal times after the death of the initial member no disqualified_person with respect to you will have any special voting rights with respect to r ifthe trustees of r re-establish an executive committes of r then at all times the majority of trustees who constitute the executive committee will be persons who are not your directors or otherwise disqualified persons with respsct to you atall times after the death of the initial member a majority of r's officers will be persons who are not disqualified persans with respect to you and you will not impose any material restrictions ar conditions on the grants to r that would prevent r from freely and effectively employing the transferred assets or the income therefrom in furtherance of its exempt purposes ruling requestes that at all times after the death of the initial member you will not directly or indirectly control r within the meaning of sec_4942 of the code law sec_4942 of the code defines the term qualifying_distribution to mean any amount including reasonable and necessary administrative expenses paid to accomplish one or more purposes described in sec_170 c b other than any contribution to i an organization controlled directly or indirectly by the foundation or one or more disqualified persons as defined in sec_4946 which respect to the foundation except as provided in paragraph or ji a private_foundation which is not an operating_foundation as defined in subsection j except as provided in paragraph sec_53_4942_a_-3 of the foundation and similar excise_taxes regulations ‘regulations’ provides that an organization is controlled by a foundation ar one or more disqualified persons if any of such persons may by aggregating their votes or positions of authority require the donee organization to make an expenditure or prevent the donee organization from making an expenditure regardless of the method by which the control is exercised or exercisable 'control of a donee organization is determined without regard to any conditions imposed upon the donee as part of the distribution or any other restrictions accompanying the distribution as to the manner in which the distribution is to be used unless the conditions or restrictions are described in sec_1_507-2 of the incame tax regulations in general it is the donee not the distribution which must be controlled by the transferor private_foundation thus the furnishing of support to an organization and the consequent imposition of budgetary procedures upen that organization with respect to such support shall not in itself be treated as subjecting that organization to the transferor foundation's control such budgetary procedures include expenditure_responsibility requirements under sec_4945 the controlled organization need not be a private_foundation it may be any type of exempt or nonexempt organization including an operating_foundation sec_4946 of the code defines a disqualified_person with respect to a private_foundation as including a c d f a substantial_contributor a foundation_manager an owner of more than of the voting power of a corporation tha profits interest of a partnership or the beneficial_interest of a_trust if those entities are substantial contributors a family_member of any of the individuais described in a - c above any corporation if persons described in a - d above own mora than of its voting power any partnership if persons described in a - d above own more than of its profits interests and g any trust or estate if persons described in a - d above own more than of its beneficial interests sec_4946 of the code defines the term substantial contributor’ as a person described in sec_507 sec_507 defines substantial_contributor as the creator of a_trust and any person who contributed more than dollar_figure to a private_foundation if that amount is more than of the total contributions and bequests received in that taxable_year analysis amounts spent by a private_foundation must be in the form of a qualifying_distribution in order to meet the mandatory payout requirements however not all contributions or disbursements made by a foundation constitute qualifying distributions qualifying distributions as set forth in sec_4942 a of the code defines what constitutes a qualifying_distribution and also specifically excludes from that definition of a qualifying_distribution any contribution to an organization controlled directly or indirectly by the foundation or one or more disqualified persons since your directors are currently also the trustees of r r is considered to be controlled by you see sec_4946 however based on resolutions passed by r and representations made by you at all times after the death of the initial member the majority of trustees and officers of r will not be persons who are officers directors of you or otherwise disqualified persons as defined in sec_4946 with respect to you and neither you nor your disqualified persons will have any special voting rights with respect to r also if r's trustees re- establish its executive committee then at all times the majority its members will be persons who are not your directors or otherwise disqualified persons with respect to r you have also represented that at all times after the death of the initial member a majority of your officers will not impose any material restrictions or conditions on grants recaived that would prevent r from freely and effectively employing the transferred assets or the income therefrom in furtherance of its exempt purposes therefore neither you nor your disqualified persons can by aggregating their votes or positions of authority require r to make an expenditure or prevent r from making an expenditure therefore after the death of the initial member and implementation of the above representations and resolutions you will not directly or indirectly control r ruling based on the foregoing that after the death of the initial member you will not directly or indirectly control r within the meaning of sec_442 of the code this culing will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to discfose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolved questions conceming your federal_income_tax status this ruling should be kept in your permanent records this ruling does not address the applicability of any ifyou have any questions about this ruling please contact the person whose name and telephone number are shawn in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely ronald j shoemaker manager exempt_organizations technical group enclosure notice


internal_revenue_service number release date index number ----------------------------------- ------------------------------------------------------------- --------------------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-146178-10 date april legend x ------------------------------------------------------------- ----------------------------- y ------------------------------------------------- ---------------------------- state ------------ date1 -------------------------- date2 ----------------------- date3 ---------------------- date4 ---------------------- month ----------------- dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated under the laws of state date1 on date2 x executed and filed a form_2553 election by a small_business_corporation to be effective for the tax_year beginning date3 at the time this election was made one of x’s shareholders was y a corporation plr-146178-10 in month x discovered that y was an ineligible shareholder and that its s election filed on date2 was ineffective shortly thereafter y’s stock was transferred and assigned to the individual owners of y effective date4 x represents that x and x’s shareholders have filed tax returns consistent with x being an s_corporation from date3 x further represents that the circumstances resulting in the ineffectiveness of x’s s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive tax planning x and persons who were or are shareholders of x at any time since date3 agree to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to such period sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for the year sec_1361 provides that the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that meets the requirements specified in sec_1361 through d sec_1361 provides that s_corporations may not have as a shareholder a person other than an estate a_trust described in subsection c or an organization described in subsection c who is not an individual sec_1 f provides that except as otherwise provided in sec_1_1361-1 relating to nominees sec_1_1361-1 relating to certain trusts and for taxable years beginning after date sec_1361 relating to certain exempt_organizations a corporation in which any shareholder is a corporation partnership or trust does not qualify as a small_business_corporation sec_1362 provides that if an election under sec_1362 by a corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary plr-146178-10 based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election made on date2 was invalid because x had an ineligible shareholder at the time of the effective date of the election we further conclude that the ineffectiveness of that election was inadvertent within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as being an s_corporation beginning on date3 and continuing thereafter provided that x’s s_corporation_election was otherwise valid and the election is not terminated under sec_1362 for reasons not addressed in this letter except as specifically set forth above we express or imply no opinion concerning the federal_income_tax consequences of the facts described above under any other provision of the internal_revenue_code and the regulations thereunder specifically we express no opinion regarding whether x otherwise qualifies as a small_business_corporation under sec_1361 this ruling is directed only to the taxpayer requesting it sec_6110 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 x’s authorized representative sincerely melissa c liquerman branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


tcmemo_2010_260 united_states tax_court jason golditch petitioner v commissioner of internal revenue respondent docket no 21865-08l filed date jason golditch pro_se christina e ciu for respondent memorandum opinion morrison judge under sec_6330 of the internal_revenue_code_of_1986 as amended petitioner jason golditch seeks our review of the determination by the irs office of appeals to uphold a proposed levy on his assets golditch argue sec_1all subsequent section references are to the internal_revenue_code_of_1986 as amended u s c that the determination was erroneous in two respects first he argues that the office of appeals erred in failing to offer him a face-to-face meeting second he argues that the office of appeals erred in refusing to reconsider the amount of his tax_liabilities we sustain the determination of the office of appeals we also decide that the levy should not be suspended during the judicial appeal of the determination background the proposed levy is intended to collect unpaid income-tax liabilities for and golditch failed to file federal income-tax returns for the year sec_2001 sec_2002 and on date the irs sent a notice_of_deficiency to golditch determining that he was liable for income taxes for the and years the deficiency_notice was sent to golditch’s address on white road in watsonville california golditch received the notice see infra discussion part golditch did not file a petition in the tax_court to contest his tax_liabilities for the year sec_2002 through on date the irs sent golditch a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 notifiying him that it had filed a tax_lien to secure his tax_liabilities for the tax_year sec_2001 to golditch timely requested an administrative hearing regarding the filing of the lien believing that golditch’s request for the lien hearing was late the irs did not hold a lien hearing under sec_6320 guaranteeing each taxpayer a right to an administrative hearing after the filing of a tax_lien instead it held an equivalent_hearing on date the irs sent golditch a final notice_of_intent_to_levy and notice of your right to a hearing notifying him that it intended to levy to collect his assessed tax debts for the and tax years golditch timely requested an administrative hearing regarding the proposed levy in this request dated date golditch asserted that he wished to verify that the irs had followed proper procedures that he did not believe he was liable for the tax that he wished to challenge the tax_liabilities because he had not yet had a chance to do so and that if it could be proven that he owed the tax he wished to discuss collection alternatives his request also said it is not my intention to discuss any issues that the irs or the courts has considered to be frivolous if you have considered any of my prior issues that i’ve raised in the past to be frivolous i hereby abandon them 2the record does not contain information relating to the issuance of a notice_of_deficiency for the irs office of appeals assigned golditch’s request for a pre-levy hearing to settlement officer phillips on date phillips sent a letter to golditch informing him that a telephone conference had been scheduled for date pincite a m the letter stated that this telephone call would be golditch’s primary opportunity to discuss the reasons he disagreed with the levy and to discuss alternatives the letter advised golditch that the issues he raised in his request for a pre-levy hearing were frivolous the letter also stated you will be allowed a face-to-face conference on any non-frivolous issue however you will need to provide the non-frivolous issue in writing or by calling me within days from the date of this letter before a face-to-face conference will be scheduled you must be in full compliance with your filing_requirements the letter also stated that for phillips to consider alternatives to the levy such as an installment_agreement or an offer-in- compromise golditch needed to file all federal tax returns that he had not yet filed and complete a collection information statement on date phillips sent a letter to golditch informing him that she had called him at the scheduled conference time of a m that day but was unable to reach him golditch never provided a collection information statement nor did he file a tax_return for or on date the irs office of appeals issued a decision letter regarding the equivalent_hearing that it had offered to golditch after the lien was filed it sustained the lien filing on date the irs office of appeals determined that it was appropriate to collect the income-tax liabilities for and by levy the determination contained this statement the taxpayer does not want to be considered a taxpayer and feels he has no responsibility to file income_tax returns or to pay taxes the taxpayer does have a responsibility to file income_tax returns and pay tax furthermore he may not raise the underlying tax as an issue in this collection_due_process_hearing because he was issued and received a statutory_notice_of_deficiency which provided him with prior opportunity to dispute the tax golditch challenged the determination by filing a tax_court petition at the time that he filed the petition golditch lived in california at some point the irs office of appeals realized that golditch’s request for a lien hearing was timely it decided to conduct a regular sec_6320 hearing such a hearing had not yet taken place as of date the trial date in the tax_court case before trial the respondent whom we refer to here as the irs moved to show cause why its proposed stipulation of facts should not be accepted as established for the purposes of the case the proposed stipulation of facts which was attached as exhibit a of the motion contained paragraphs and referred to exhibits the preamble to the proposed stipulation of facts contained a proviso that either party has the right to object to the admission of any such facts and exhibits in evidence on the grounds of relevancy and materiality on date the court ordered golditch to show cause by date why the proposed stipulation of facts should not be accepted as established for purposes of the case on date the irs moved to permit levy under sec_6330 on date golditch submitted a motion for leave to file a late response to the order to show cause dated date he also lodged his response to the order to show cause the court denied the motion it ordered that the proposed stipulation of facts be accepted as established for the purposes of this case of the exhibits that were attached to the proposed stipulation of facts the court admitted of the exhibits into evidence golditch made relevancy objections to the remaining exhibits 1-j 5-j 7-r 8-r 9-r 10-r 11-r 3the order referred to the proposed stipulation of facts that was attached as exhibit a to the irs’s motion to show cause why its proposed stipulation of facts should not be accepted as established for the purposes of the case at trial the irs lodged a slightly different document with the court the unsigned document was another draft stipulation of facts which the irs had unsuccessfully asked golditch to execute it contained paragraphs and referenced exhibits it is not signed and it is not a document reflecting facts deemed established by court order it therefore has no legal effect 14-r 15-r 16-r 17-r 18-r 19-r 23-r 25-j and 27-j golditch was permitted to make relevancy objections to the exhibits that were attached to the proposed stipulation even though the proposed stipulation was deemed established because the proposed stipulation expressly reserved each party’s right to make relevancy objections to the exhibits at trial golditch declined to testify or introduce any documentary_evidence evidentiary issues discussion golditch’s objections to the exhibits are of two types first he claims that some exhibits were not part of the administrative record because they were not created by the hearing officer we overrule this objection a document need not be created by the hearing officer to be part of the administrative record second golditch objects to some of the exhibits on the grounds that they are related to the lien proceeding he argues that the lien hearing is irrelevant to the levy hearing we overrule this objection the lien hearing is relevant to golditch’s argument discussed below that we should delay the decision in this case because of the lien hearing the exhibits are admissible the irs office of appeals did not err in refusing to meet with golditch although sec_6330 requires the irs office of appeals to hold a pre-levy hearing if one is requested by the taxpayer the statute does not explain whether the hearing must include a face-to-face meeting with the taxpayer see 115_tc_329 holding that a similar provision sec_6320 does not address the issue of whether the hearing must be face-to-face guidance is found in sec_301_6330-1 q a-d7 proced admin regs which provides except as provided in a-d8 of this paragraph d a taxpayer who presents in the cdp hearing request relevant non-frivolous reasons for disagreement with the proposed levy will ordinarily be offered an opportunity for a face- to-face conference at the appeals_office closest to taxpayer’s residence also sec_301_6330-1 q a-d8 proced admin regs provides a face-to-face cdp conference concerning a taxpayer’s underlying liability will not be granted if the request for a hearing or other taxpayer communication indicates that the taxpayer wishes only to raise irrelevant or frivolous issues concerning that liability a face-to- face cdp conference concerning a collection alternative such as an installment_agreement or an offer to compromise liability will not be granted unless other taxpayers would be eligible for the alternative under similar circumstances for example because the irs does not consider offers to compromise from taxpayers who have not filed required returns or have not made certain required deposits of tax as set forth in form_656 offer_in_compromise no face-to- face conference will be granted to a taxpayer who wishes to make an offer to compromise but has not fulfilled those obligations in all cases a taxpayer will be given an opportunity to demonstrate eligibility for a collection alternative and to become eligible for a collection alternative in order to obtain a face-to-face conference in summary the regulation states a general_rule that a face-to- face meeting is ordinarily offered if the taxpayer’s request for a hearing contains relevant nonfrivolous reasons for the hearing two exceptions to the general_rule are expressed first no face-to-face meeting will be provided to determine the amount of the tax_liability if communications with the taxpayer including but not limited to the hearing request show that the taxpayer wishes to raise only issues that are irrelevant or frivolous second no face-to-face meeting will be provided to consider a collection alternative for which the taxpayer does not qualify the starting point for applying the regulation is the text of the request for a hearing in his request golditch expressed a desire for three things to make sure the irs had met all procedural requirements to contest his tax_liabilities and to discuss alternative collection methods all of these matters are within the scope of the statutorily prescribed subject matter for the hearing sec_6330 however as we explain below none of the three matters required a face-to-face meeting a golditch’s request that irs office of appeals perform mandatory verification of legal requirements did not require a face-to-face meeting golditch requested the pre-levy hearing in part to verify that the irs had complied with all procedures sec_6330 provides that the appeals officer shall at the hearing obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met this verification is mandatory unlike the requirement that the office of appeals consider certain issues raised by the taxpayer a requirement contained in sec_6330 the verification requirement of sec_6330 does not depend on which issues are presented by the taxpayer see eg 131_tc_197 holding that because verification is mandatory this court will review the appeals officer’s verification under sec_6330 without regard to whether the taxpayer raised it at the appeals hearing thus a face-to-face meeting with the taxpayer is not necessary for the office of appeals to obtain verification that the irs has met the legal and procedural requirements sec_6330 does not require a face-to-face meeting merely to obtain the verification b golditch’s request to contest the amount of his tax_liabilities did not require a face-to-face meeting the second reason that golditch requested the hearing was to contest his tax_liabilities we find it more_likely_than_not that golditch’s communications with phillips indicated that his challenge to his tax_liabilities including his challenge to penalties was based on frivolous arguments we base this finding on the date letter from phillips in which phillips explained that golditch’s position was that he did not want to be considered a ‘taxpayer’ and feels he has no responsibility to file income_tax returns or to pay taxes although golditch’s request for a hearing dated date purported to abandon any frivolous arguments this blanket disavowal does not cancel out the effect of prior frivolous communications because there is no evidence that golditch asserted any nonfrivolous arguments phillips did not err in refusing a face-to-face meeting to discuss the amounts of golditch’s tax_liabilities phillips was merely following 4two other pieces of evidence relate to the frivolous nature of golditch’s communications with the irs first golditch failed to respond to phillips’ request that he submit nonfrivolous issues to her within days in order to qualify for a face-to-face hearing second golditch wrote a letter to the irs in claiming that as a u s citizen he was exempt from the federal_income_tax even without considering these two pieces of evidence we are satisfied that golditch’s communications with the irs demonstrated that he wished only to raise irrelevant or frivolous issues regarding his tax_liabilities sec_301_6330-1 q a-d8 proced admin regs which provides that a face-to-face cdp conference concerning a taxpayer’s underlying liability will not be granted if the request for a hearing or other taxpayer communication indicates that the taxpayer wishes only to raise irrelevant or frivolous issues concerning that liability c golditch’s request for collection alternatives did not require a face-to-face meeting the third reason golditch requested the hearing was to discuss collection alternatives but golditch failed to show that he met the requirements for being considered for collection alternatives first he did not submit a collection information form second he failed to file his tax returns under the regulation golditch was not entitled to a face-to-face hearing regarding collection alternatives see id the office of appeals did not err in declining to redetermine golditch’s tax_liabilities a taxpayer may contest the underlying tax_liability at a pre-levy hearing but only if the taxpayer did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability sec_6330 golditch claimed in his brief that he did not receive the statutory_notice_of_deficiency but he declined to testify at trial the trial record establishes that golditch received the statutory_notice_of_deficiency a certified mail list with an official u s post office stamp showed that the statutory_notice_of_deficiency was given by the irs to the u s postal service the address to which the irs directed the notice was the same address used by the irs for all correspondence to golditch related to the notice_of_intent_to_levy the notice_of_federal_tax_lien and other notices the irs had verified golditch’s address in various telephone conversations with him from through the irs had no record that golditch had notified the irs of a change_of address golditch did not present any evidence in the form of either documents or testimony that he did not receive the statutory_notice_of_deficiency the preponderance_of_the_evidence shows that golditch received the statutory_notice_of_deficiency see 114_tc_604 applying preponderance-of-the-evidence standard golditch was therefore not entitled to raise the issue of the amounts of his tax_liabilities before the office of appeals the office of appeals did not err in declining to consider the amounts of golditch’s tax_liabilities the decision in this case should not be delayed golditch argues on brief that the court should delay the issuance of a decision in this case because of the lien hearing golditch believes that if this court sustains the determination of the office of appeals with respect to the levy he will be unable to appeal the determination of the office of appeals with respect to the lien golditch misconstrues sec_6330 which provides that a person shall be entitled to only one hearing under this section with respect to the taxable_period the phrase one hearing under this section refers to a hearing under sec_6330 meaning a pre-levy hearing thus sec_6330 bars a taxpayer from having a hearing each time the taxpayer faces the prospect of a new levy for the same taxable_period it does not prevent a taxpayer from having one hearing to discuss a prospective levy and a second hearing to discuss a lien filing the levy should not be suspended during golditch’s judicial appeal of the pre-levy determination of the irs office of appeals a taxpayer’s request for a pre-levy hearing automatically suspends the levy process sec_6330 the suspension ordinarily continues during the judicial appeal of the pre-levy determination of the office of appeals however the suspension does not apply while a judicial appeal is pending if a court determines that the irs has shown good cause why the levy should not be suspended and the underlying tax_liability is not at issue in the appeal sec_6330 we find that the irs has shown good cause that the levy should not be suspended we sec_6320 provides that the lien hearing will be held in conjunction with the levy hearing to the extent practicable only believe that golditch used the pre-levy appeal process to delay the irs’s collection efforts not to raise legitimate issues golditch’s underlying tax_liabilities are not at issue in the appeal as we explained supra part the irs’s motion to permit levy will be granted to reflect this opinion an appropriate order and decision will be entered