department of the treasury internal_revenue_service washington d c date number release date uil no spr-114575-99 cc it a memorandum for gaming isp from lewis j fernandez deputy associate chief_counsel income_tax accounting cc it a subject prenegotiated debt_discharge in gaming industry disclosure statement unless specifically marked acknowledged significant advice may be disseminated above this memorandum is not to be circulated or disseminated except as provided in ccdm d and e this document may contain confidential information subject_to the attorney-client and deliberative_process privileges therefore this document shall not be disclosed beyond the office or individual s who originated the question discussed in no event shall it be disclosed to taxpayers or their representatives issue whether under the circumstances described below a casino patron customer realizes discharge_of_indebtedness income when a casino accepts less than the face_amount of the customer’s marker a debt_instrument in full satisfaction of the marker pursuant to a prearranged agreement with the customer conclusion we conclude that the prearranged discount on a gaming customer’s marker should be treated as a purchase_price_adjustment under the facts presented purchase_price_adjustment treatment is appropriate in this case because the facts in this situation indicate that the intent and purpose of the parties was to effect a discount to the cost of the gambling services and entertainment ie the customer’s wagering losses among the salient facts so indicating are that the discount was negotiated prior to the customer’s visit to the casino for the purpose of inducing the customer’s visit to the casino and was noted in writing in the casino’s books prior to the signing of the marker although the absence of such prenegotiations and written record do not necessarily indicate that the discount results in cancellation_of_indebtedness_income we believe the presence of these factors offer a greater degree of support for our conclusion we prefer to consider other factual scenarios on a case by case basis we also express no opinion on the federal tax consequences of other amenities offered by casinos to attract and retain patrons facts according to representatives of the casino industry foreign gaming customers with significant wagering histories are often offered attractive incentives to visit casinos in the united_states one such incentive is the marker discount whereby the foreign customer may negotiate or be offered a discount at which he may settle his marker if in a net_loss position at the end of the visit the terms of the discount are set at or before the signing of the marker and the agreement is informally noted in the casino’s records if a customer wins the full amount of the marker is required to be paid the marker is generally paid within several months after the marker is signed if the customer does not pay the discounted marker the casino attempts to collect the full amount of the marker together with any interest allowed under local law the foreign customer signs a marker and receives chips equal to the face_amount of the marker the chips can be used only to wager in that casino and cannot be exchanged for cash that could be applied by the foreign customer to some other purpose for financial_accounting purposes the casino treats the face_amount of the marker as part of gross revenues and treats the prenegotiated marker discount as an adjustment to gross revenues in arriving at gross_income ie the amount of the prenegotiated discount is a separate entry for financial_accounting from the reserve for bad_debts law and analysis purchase_price_adjustment two inquiries must be addressed in determining whether the prenegotiated marker discount described above may be characterized as a purchase_price discount first is a casino a purveyor of goods and services such that a consumer has purchased something the price of which may be discounted and assuming that the answer to the first inquiry is affirmative second was the purpose and intent of the parties to provide a formula for adjusting the price with respect to the first inquiry we believe that a casino is in the business of providing entertainment and gambling services and that a customer’s wager may be likened to the purchase of such services although the purchase_price discount authorities our research uncovered deal mostly with adjustments to the purchase_price of property the theory is likewise applicable to the purchase of services see gunn alan another look at the zarin case tax note sec_893 date one might argue that a casino is merely providing a gaming forum so that customers may gamble against each other and against the house if such a view is accepted then a gaming customer is not purchasing goods or services when the customer engages in wagering activity and any rebate would simply be a reimbursement of wagering losses by a third party however we believe an observation of the gaming industry belies that characterization and that the better approach is to treat the casinos as providers of entertainment see the tax_court opinion in 92_tc_1084 pincite rev’d on other grounds 916_f2d_110 3d cir in which the court characterizes the gambler as purchasing the opportunity to gamble as well as incidental services see also marroni mark j zarin v commissioner does a gambler have income from the cancellation of a casino debt new eng l rev summer with respect to the second inquiry the standard for determining whether a payment from a vendor to a customer is a purchase_price discount or a payment for separate consideration may be found in 26_tc_707 acq 1962_2_cb_2 in that case the tax_court concluded that amounts paid_by a milk producer to buyers were purchase_price discounts because the intention and purpose of the allowance was to provide a formula for adjusting a specified gross price to an agreed net price pittsburgh milk pincite thus what distinguishes purchase_price discounts from payments for other purposes or separate consideration is the purpose and intent of the parties this purpose and intent test has been followed in other cases for example in sun microsystems inc v commissioner 66_tcm_997 the tax_court determined that stock warrants granted in order to induce the purchase of computer workstations should be treated as sales discounts and should be excludible from the seller’s gross_income the stock warrants were granted if the purchaser purchased a certain number of workstations within a certain period of time and the court states it is unlikely that the deal would have been consummated without that further inducement sun microsystems pincite the court concludes that the stock warrants should be treated as sales discounts in spite of the fact that the amount of the discount was not determinable at the inception of the agreement and notes that the negotiations clearly show that the warrants were included as an incentive to the purchase of the workstations sun microsystems pincite this conclusion was based on a finding that under the facts and circumstances the purpose and intent of the parties was to adjust the sales_price of the workstations see also computervision v commissioner 71_tcm_2450 similarly in freedom newspapers inc v commissioner 36_tcm_1755 a payment made by a party other than the seller but intimately tied to the purchase agreement to induce the purchase of property was held to be a purchase_price reduction that reduced the purchaser’s basis in the purchased property rather than ordinary_income in that case a broker promised to pay dollar_figure to a purchaser of newspapers if the broker failed to sell one of the purchased newspapers within a one year period the sale failed to occur and the dollar_figure was paid to the purchaser in finding that the payment constituted a reduction to the basis of the purchased newspapers even though the agreement to pay the dollar_figure was separate from the purchase agreement the court stated in view of the circumstances it is obvious that the agreement with the broker was intended to and succeeded in inducing petitioner’s purchase of the jackson county floridan freedom newspapers pincite under these facts the payment received by petitioner pursuant to the agreement even though made several years after the purchase of the floridan was sufficiently tied to the purchase that its characterization must be made by reference to the original transaction id pincite based upon these authorities we believe that the prearranged discount described above should be characterized as a purchase_price_adjustment or rebate granted to the customer by the casino the facts and circumstances indicate that the discount is granted in order to provide an incentive and inducement to the customer to frequent a particular casino in the same manner as a purchase_price discount is given as an incentive to a purchaser of goods or services the fact that the discount was prenegotiated strengthens this characterization as will be discussed more fully below the discharge of debt is the means by which the vendor creditor effects the purchase_price reduction or rebate to the customer debtor consistent with the authorities cited above we note that because the discount is treated as a purchase_price_adjustment it will reduce the amount of the gaming customer’s losses by the amount of the adjustment thus for example if the gaming customer prearranges a ten percent discount and gambles and loses chips in the amount of dollar_figure the customer is treated as having paid dollar_figure for the gambling opportunity and the customer’s loss under sec_165 is limited to dollar_figure discharge_of_indebtedness income as discussed above we conclude that the prenegotiated discount should not be treated as discharge_of_indebtedness income in general gross_income includes income from the discharge_of_indebtedness sec_61 284_us_1 however in some cases in which the creditor and debtor also have an additional relationship a debt_discharge is used as a medium of payment of another type of obligation between a debtor and creditor this principle was enunciated in 82_tc_638 as follows the rule_of kirby lumber is clearly applicable where the only relationship between the parties is that of debtor and creditor and where the creditor is willing to accept less than full payment in discharge of the debt because of his concerns about the debtor’s solvency or because a rise in interest rates has devalued the loan however in many cases the parties’ transactions involve more than just a debtor-creditor relationship see eustice cancellation of indebtedness and the federal_income_tax a problem of creeping confusion tax l rev the cancellation of a debt may not be in and of itself the source_of_income but may simply be the method by which a creditor makes a payment to a debtor whether such payment is ordinary_income to the debtor depends upon the nature of the payment for example a discharge_of_indebtedness may constitute a payment for services or a constructive_dividend in which cases such discharge is ordinary_income on the other hand a discharge_of_indebtedness may constitute a contribution_to_capital or a gift in which cases the forgiveness of indebtedness is not income to the debtor okc corp pincite the tax_court in okc corp also noted that courts have on occasion recognized an exception to the kirby lumber principle where the buyer of property negotiates with the seller creditor for a discharge of all or part of the purchase money indebtedness to reflect a decline in the value of the property the resulting discharge_of_indebtedness has been characterized not as income but as a retroactive reduction of the purchase_price okc corp pincite the service in revrul_92_99 declined to follow cases permitting a purchase_price_adjustment by third party lenders because the seller has received the entire purchase_price from the purchaser and is not a party to the debt reduction agreement 1992_2_cb_35 however this case does not involve a third-party lender because the casino which provided the purchased services is also the lender therefore we conclude that it is appropriate to treat the debt reduction in this case as a purchase_price_adjustment and as the means by which the seller of the services and or entertainment the casino makes a payment to the purchaser of the services the gaming customer in 92_tc_1084 rev’d 916_f2d_110 3d cir the tax_court determined that settlement of a gambling debt gave rise to discharge_of_indebtedness income in that case the facts and circumstances clearly indicated that the purpose and intent of the parties was not to effect a purchase_price discount or rebate because the debt was forgiven after the casino attempted but failed to collect the full amount of the debt in zarin the tax_court determined that the taxpayer received full value for his debt in addition the court notes that zarin bargained for and received the opportunity to gamble and incidental services lodging entertainment meals and transportation zarin pincite however this case may be distinguished from zarin because in this case the taxpayer bargained for and received the opportunity to gamble at a reduced cost of less than the face_amount of the chips received we agree that discharge_of_indebtedness income results when as in zarin a taxpayer bargains for the opportunity to gamble at the full face_amount of the chips received and the debt is later reduced under circumstances that do not reveal the intent to effect a rebate however we believe that when a taxpayer bargains for and receives the opportunity to gamble at a cost of less than the face_amount of the chips received discharge_of_indebtedness income does not result we believe that there is a significant difference between the settlement of a debt for less than its full amount and the reduction in the purchase_price of goods or services the fact of prenegotiation in this case makes the contrast even starker in zarin the tax_court also determined that sec_108 did not apply to the transaction sec_108 treats a debt reduction as a purchase_price reduction if a the debt of a purchaser of property to the seller of such property which arose out of the purchase of such property is reduced b such reduction does not occur in a title_11_case or when the purchaser is insolvent and c but for this paragraph such reduction would be treated as income to the purchaser from the discharge_of_indebtedness the tax_court noted that the ‘opportunity to gamble’ would not in the usual sense of the words be ‘property’ transferred from a seller to a purchaser the terminology used in sec_108 is readily understood with respect to tangible_property and may apply to some types of intangibles abstract concepts of property are not useful however in deciding whether what petitioner received is within the contemplation of the section we conclude that petitioner’s settlement with resorts cannot be construed as a ‘purchase-money debt reduction’ arising from the purchase of property within the meaning of sec_108 zarin pincite we do not rest our conclusion in this case upon the application of sec_108 to this transaction in this transaction we view the gaming customer as purchasing services from the casino although a customer may negotiate a purchase_price reduction for services sec_108 by its terms applies only to a reduction of debt for the purchase of property therefore like the tax_court in zarin we would not view sec_108 as applicable to a gambling debt in addition it may be questioned whether the rationale we adopt ie that a purchase_price_adjustment rationale under case law applies to a prenegotiated discount when the debt proceeds are used to gamble may be applied to a factual situation in which the debt reduction was not prenegotiated we believe that this rationale may apply to a debt reduction that is not prenegotiated but the burden upon the parties to establish the existence of a rebate agreement will be a difficult one the fact that the discount is prenegotiated is strong and convincing evidence that the purchaser and provider of the services are negotiating to adjust a specific gross purchase_price to an agreed net price for the services the determination as to whether or not a discount results in an adjustment to the purchase_price of goods or services is essentially a factual determination that must take into account all the facts and circumstances of the situation see thomas shoe co v comm 1_bta_124 acq iv-1 c b pittsburgh milk v comm pincite accordingly we express no opinion on factual scenarios other than those described in this memorandum1 this approach is consistent with 499_us_573 in that case the supreme court determined whether a discharge_of_indebtedness existed for sec_108 an exclusionary provision rather than as in this case for purposes of sec_61 an inclusionary provision the supreme court found there was no discharge_of_indebtedness under sec_108 when a bank paid less than the amount deposited on a certificate of deposit because the depositor owed an early withdrawal penalty to the bank the court held that a discharge_of_indebtedness occurs for purposes of sec_108 when a creditor agrees to release a debtor from an obligation assumed at the outset of the relationship u s pincite and determined that it is necessary to look both at the end result of the transaction and the repayment terms agreed to by the parties at the outset of the debtor-creditor relationship to determine if the debtor has realized income by reason of a discharge_of_indebtedness u s pincite the court went on to find that there was no discharge for purposes of the statute therefore the bank could not exclude from income the early withdrawal penalties in addition the court found that the difference between the amount deposited with the bank and the amount repaid to the customer while not discharge_of_indebtedness income was an accession to income if such a rationale were to be applied in this case the prearranged discount given to the gaming customers would not be characterized as discharge_of_indebtedness income because at the outset the terms of the debtor-creditor relationship do not obligate the debtor to repay the full amount of the debt in the event that the debtor is in a net_loss position at the end of his visit to the casino however under centennial the difference between the amount borrowed by the foreign gambler the face_amount of the markers or chips and the amount repaid is arguably an in this memorandum we address only the prearranged discount on certain markers and not complimentary goods or services comps provided by a casino to a customer 2the bank argued that the amount was discharge_of_indebtedness income under sec_108 because it would have been able to exclude the income under sec_108 accession to income by the gaming customer as it was to the bank in centennial however because we conclude that this difference should be considered a rebate or purchase_price_adjustment it is not includible in income


cca-02191058-16 id uilc number release date from --------------- sent friday date am to ------------------------ cc ----------------- bcc subject consumer credit reports this email responds to your request for a counsel opinion regarding consumer credit reports we understand the relevant facts presented by your request for assistance to be as follows a case advocate from tas requested that field collection conduct a financial review to determine whether a taxpayer is experiencing a financial hardship such that the taxpayer’s account should be placed in currently not collectible cnc status in order to conduct the financial review the revenue_officer ro would ordinarily request and analyze a credit bureau report to support the financial analysis you have asked us whether under these circumstances it is permissible for the ro to request the credit report of the taxpayer without a summons and to include findings from the credit report in the financial determination that the ro will share with tas under these circumstances the ro’s request for and use of a credit report is permissible under the fair credit reporting act fcra u s c section 1681e a requires prospective users of consumer report information identify themselves certify the purposes for which the information is sought and certify that the information will be used for no other purpose under u s c h the service may request a consumer report to collect a claim compromise a claim or terminate collection action on a claim in this situation because the ro would be using a credit report to determine whether a taxpayer’s account should be placed in cnc status the ro has a permissible purpose to obtain the credit report moreover sharing the credit report with tas as part of this process would not violate the fcra furthermore the ro’s transmission to tas of the financial determination that references or contains a credit report does not violate sec_6103 since tas is part of the department of the treasury the applicable disclosure provision is sec_6103 which authorizes disclosure of return_information to officers and employees of the department of treasury whose official duties require such disclosure for tax_administration as long as the tas employee needs the information for his official duties the disclosure to tas is permissible under sec_6103 need in this context means helpful and appropriate please let us know if you have any further questions or if we can be of additional assistance


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-142598-08 date march legend x ------------------------------------------ ------------------------------ trust ------------------------- ---------------- --------------------------------------------------------------------------------------------------- trust ------------------------------------------ --------------------------------------------------------------------------------------------------- trust ------------------------- ---------------- --------------------------------------------------------------------------------------------------- trust ----------------------------------------- --------------------------------------------------------------------------------------------------- trust ----------------------------------------- --------------------------------------------------------------------------------------------------- trust ----------------------------------------- --------------------------------------------------------------------------------------------------- trust ------------------------------------------ --------------------------------------------------------------------------------------------------- state ------------- date ---------------------- date ---------------------- plr-142598-08 date ---------------------------- date ------------------------- date -------------------------- dear ------------ this letter responds to a letter dated date submitted on behalf of x requesting rulings under sec_1362 of the internal_revenue_code x was incorporated under the laws of state x elected under sec_1362 to be an s_corporation effective date x’s s election inadvertently terminated on date when trust trust and trust became shareholders of x because the trustees of the trusts failed to make valid electing_small_business_trust esbt elections for the trusts x also represents that x’s s election would also have terminated when trust and trust became shareholders of x on date and date respectively because the trustees of the trusts failed to make valid esbt elections for the trusts trust and trust became shareholders of x on date and the trustees of the trusts made valid esbt elections for the trusts however these elections were ineffective because x’s s election had already terminated x represents that the terminating event was not motivated by tax_avoidance nor retroactive tax planning x and its shareholders including all of x’s trust shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation furthermore x and each person or trust who is or was a shareholder of x at any time since date have filed their income_tax returns consistent with the treatment of x as an s_corporation and consistent with the trusts being valid esbts sec_1362 provides that if -- an election under sec_1362 by any 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 such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken -- a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder in 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 plr-142598-08 required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination such corporation shall be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x's s_corporation_election on date was inadvertent within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter provided x's s_corporation_election was valid and was not otherwise terminated under sec_1362 trust trust trust trust trust trust and trust will be treated as esbts from the date that each trust became a shareholder of x respectively provided that the trusts are otherwise eligible to be esbts until the trusts’ esbt status terminates this ruling is conditioned upon the trustees of the seven trusts filing properly completed esbt elections for each trust’s intended effective date with the appropriate service_center within days following the date of this letter and upon the trusts filing any initial or amended returns that are necessary to comply with this ruling within days following the date of this letter a copy of this letter should be attached to the esbt election and any relevant initial or amended_return if trust does not comply with these conditions this letter is null and void all of x's shareholders in determining their respective income_tax liabilities during the termination period and thereafter must include their pro_rata share of the separately_stated items of income including tax-exempt_income loss deduction or credit and non-separately stated computed items of income or loss of x as provided in sec_1366 make any adjustments to basis provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code specifically no opinion is expressed on whether x is otherwise eligible to be treated as an s_corporation or trusts’ eligibility to be esbts 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 plr-142598-08 pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representatives sincerely melissa c liquerman chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


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 corp plr-149284-06 date date ---------------------------------------- ------------------------------------ -------------------------- target ---------------------------------------------------------- -------------------------------------------------- acquiring ---------------------------------------------------------- -------------------------------------------------- sub -------------------------------------------------------- -------------------------------------------------- sub ---------------------------------------------------------- -------------------------------------------------- sub ----------------------------------------------------- -------------------------------------------------- sub -------------------------------------------------------- -------------------------------------------------- state a state b ------------- -------- ------------------------------- ---------------------------------- ------------------------------------------------ plr-149284-06 state c business x business y business z ------ ------------------------------------------------------------------------------------------ ----------------------------------------------------------------- ------------------------------------ ------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------- -- -------- -------- ---------------------- d f g date dear --------------- we respond to your request dated date for rulings on the federal_income_tax consequences of a proposed transaction the information submitted for consideration is summarized below group target engages in business x through its wholly owned subsidiary sub1 a state b corporation target also owns all of the stock of sub a state a corporation engaged in business y target has d shareholders that own directly or indirectly percent or more of target none of target' sec_5 percent shareholders own more than f percent of the outstanding target stock target originally owned g percent less than percent of acquiring a state a holding_company engaged in business z through its wholly owned subsidiary sub a state c_corporation acquiring also owns all of the stock of sub a state b corporation acquiring has one class of stock issued and outstanding on date target owned percent of acquiring and acquiring and each member of its consolidated_group sub and sub became members of target’s consolidated_group the target group both acquiring and target have a pre-existing right to require an acquiring or target shareholder respectively to offer to sell its shares to acquiring or target as appropriate before such shareholder sells such shares to an unrelated third party target is a state a holding_company and the common parent of a consolidated i ii iii a plr-149284-06 acquiring’s right_of_first_refusal and target’s right_of_first_refusal the managements of acquiring and target are unaware that either acquiring or target has ever exercised its right_of_first_refusal neither acquiring nor target has exercised its respective right_of_first_refusal within the past five years the managements of acquiring and target are unaware of any plans or intention on the part of target’s shareholders to sell the acquiring stock they receive in the merger for what have been represented as valid business purposes taxpayer proposes that in a statutory merger pursuant to the laws of state a target merge with and into acquiring with acquiring surviving the following will occur as a result of the merger target will transfer all of its assets to acquiring solely in exchange for voting shares of acquiring including fractional shares and acquiring’s assumption of target’s liabilities the stock of target will be converted to the right to receive voting shares of acquiring stock and cash in lieu of fractional shares and target will cease to exist and acquiring will change its name to target new target the taxpayer has made the following representations with respect to steps i and ii of the proposed transaction the fair_market_value of acquiring stock and other consideration received by each target shareholder will be approximately equal to the fair_market_value of the target stock surrendered in the exchange b c d acquiring will issue newly issued shares of its stock to the target shareholders in the merger target will not distribute any of its existing shares of acquiring stock in the transaction acquiring 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 target immediately prior to the transaction for purposes of this representation amounts paid_by target to any dissenters amounts paid_by target to shareholders who received cash and other_property amounts used by target to pay its reorganization expenses and all redemptions and distributions except for regular normal dividends made by target immediately preceding the transfer will be included as assets of target held immediately prior to the transaction after the transaction target shareholders will be in control of acquiring within the meaning of sec_368 of the internal_revenue_code plr-149284-06 e f g h i j k l there is no plan or intention for acquiring to redeem any of its outstanding_stock there is no plan or intention for acquiring or a party related to acquiring within the meaning of sec_1_368-1 of the income_tax regulations to reacquire any of its stock issued in the transaction for consideration other than stock of acquiring except that acquiring will continue to have its right_of_first_refusal to purchase stock from shareholders who desire to sell their shares cash_flow regulatory and other business concerns would limit acquiring’s ability to exercise its right_of_first_refusal with respect to the acquiring shares issued in the merger accordingly acquiring has no current plan or intention to exercise the acquiring right_of_first_refusal to redeem an amount of acquiring shares issued to target shareholders in the merger with a fair_market_value greater than percent of the fair_market_value of the target shares surrendered pursuant to the merger acquiring has no plan or intention to sell or otherwise dispose_of any of the assets of target acquired in the transaction except for dispositions made in the ordinary course of business the liabilities of target assumed by acquiring plus the liabilities if any to which the transferred assets are subject were incurred by target in the ordinary course of its business and are associated with the assets transferred following the transaction acquiring will continue the historical business of target or use a significant portion of target’s historical business_assets in a business at the time of the transaction acquiring will not have any outstanding warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in acquiring that if exercised or converted would affect the target shareholders’ acquisition or retention of control of acquiring as defined in sec_368 acquiring target and the shareholders of target will pay their respective expenses if any incurred in connection with the transaction there is no intercorporate indebtedness existing between acquiring and target that was issued acquired or will be settled at a discount plr-149284-06 m no two parties to the transaction are investment companies as defined in sec_368 and iv n o p q r the fair_market_value of the assets of target that are transferred to acquiring will equal or exceed the assets’ aggregate adjusted_basis the fair_market_value of the assets of target transferred to acquiring will equal or exceed the sum of the liabilities assumed by acquiring plus the amount of liabilities if any to which the transferred assets are subject the fair_market_value of acquiring’s assets will exceed the amount of acquiring’s liabilities immediately after the proposed transaction target is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 the payment of cash in lieu of fractional shares of acquiring stock is solely for the purpose of avoiding the expense and inconvenience to acquiring of issuing fractional shares and does not represent separately bargained-for consideration the total cash consideration that will be paid in the merger to the target shareholders instead of issuing fractional shares of acquiring stock will not exceed one percent of the total consideration that will be issued in the merger to the target shareholders in exchange for their shares of target stock the fractional share interests of each shareholder will be aggregated and no target shareholder will receive cash in an amount equal to or greater than the value of one full share of acquiring stock the taxpayer has made the following representations with respect to step iii of the proposed transaction the fair_market_value of new target stock received by each acquiring shareholder approximately will equal the fair_market_value of the acquiring stock surrendered in the exchange immediately following the name change the shareholders of acquiring determined after the merger with target will own all of the outstanding shares of new target and will own such stock by reason of their ownership of acquiring stock immediately prior to the name change new target has no plan or intention to issue additional shares of its stock following the name change other than those issued to reflect its new name s t u plr-149284-06 v w x y z immediately following the consummation of the name change new target will possess the same assets and liabilities except for those used to pay expenses_incurred in connection with the proposed transaction as those possessed by acquiring immediately prior to the name change assets used to pay expenses will constitute less than one percent of the net assets of acquiring the liabilities of acquiring assumed by new target plus the liabilities if any to which the transferred assets are subject were incurred by acquiring in the ordinary course of its business and are associated with the assets transferred at the time of the name change acquiring will not have any outstanding warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in acquiring except to the extent of the shareholders’ right of second refusal if acquiring declined to purchase stock from a selling shareholder the shareholders of acquiring will pay their respective expenses if any incurred in connection with the name change acquiring is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 based solely on the information submitted and on the representations set forth above we rule as follows with respect to the proposed transaction the acquisition by acquiring of all of the assets of target in exchange for the common_stock of acquiring and the assumption of target liabilities followed by the distribution of the acquiring stock to the shareholders of target in complete_liquidation of target will constitute a reorganization pursuant to sec_368 acquiring and target each will be a party to the reorganization within the meaning of sec_368 acquiring’s name change from acquiring to new target will qualify as a reorganization pursuant to sec_368 and each of acquiring and new target will be a party to the reorganization within the meaning of sec_368 target will recognize no gain_or_loss on the transfer of all of its assets to acquiring in exchange for acquiring stock and acquiring’s assumption of target liabilities if any sec_361 and sec_357 plr-149284-06 acquiring will not recognize any gain_or_loss on its receipt of all of the assets of target in exchange for acquiring stock and its assumption of target liabilities if any sec_1032 acquiring’s and after the name change new target’s basis in the assets received from target will equal the basis of such assets in the hands of target immediately before their transfer to acquiring sec_362 acquiring’s and after the name change new target’s holding_period in the assets received from target will include the period during which target held the assets sec_1223 target will recognize no gain_or_loss on its deemed_distribution of the acquiring stock received in the transfer to target shareholders pursuant to the plan_of_reorganization sec_361 target shareholders will recognize no gain_or_loss and will not include any amount in income except for the cash received in lieu of fractional shares upon the exchange of their target shares for shares of acquiring sec_354 acquiring shareholders will recognize no gain_or_loss upon the exchange of acquiring stock for shares of new target stock sec_354 a target shareholder’s basis in the stock of acquiring received and after the name change the stock of new target received will equal the basis of the target stock that such target shareholder held immediately before the proposed transaction sec_358 a target shareholder’s holding_period of the stock of acquiring received and after the name change the stock of new target received will include the holding_period of the stock of target and the stock of acquiring surrendered in the exchange provided that the target shareholder held such target stock and acquiring stock as a capital_asset on the date of the exchanges sec_1223 the target group will remain in existence with acquiring and after the name change new target being the parent of the target group and its tax_year will not close after the proposed transaction sec_1_1502-75 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 plr-149284-06 this ruling is directed only to the taxpayer requesting it sec_6110 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 alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely filiz a serbes chief branch office of associate chief_counsel corporate


internal_revenue_service number release date index number ------------------------ ------------- ---------------------- ---------------------------- ---------------------------------- legend 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-118401-11 date date ---------------------- x state ------------ d1 d2 d3 ---------------------- -------------------------- ------------------- 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 x was incorporated under the laws of state and elected subchapter_s status effective d1 on d2 x filed an amendment to its articles of incorporation to divide its capital stock into voting and nonvoting shares the amendment permitted x’s board_of directors to declare a dividend payable to either one or both classes of capital stock on d3 x filed an amendment to its articles of incorporation eliminating the right to declare a dividend x represents it never declared a disproportionate dividend all dividends_paid were proportional to stock ownership x represents that it did not intend to create a second class of stock x and its shareholders represent that all allocations of income losses deductions and credits for x were made on a pro_rata basis among all of the shareholders of both classes of stock as though all shares were one class of stock for all years at issue x represents that it and its shareholders timely and consistently filed their tax returns with the treatment of x as an s_corporation x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation plr-118401-11 law and analysis sec_1361 of the code 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 such year sec_1361 provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not have more than one class of stock sec_1_1361-1 of the income_tax regulations provides that a corporation is generally treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds differences in voting rights among shares of stock of the corporation are disregarded for purposes of determining whether a corporation has more than one class of stock sec_1_1361-1 provides that the determination of whether all outstanding shares of stock confer identical rights to distribution and liquidation proceeds is made based on the corporate charter articles of incorporation bylaws applicable state law and binding agreements relating to distribution and liquidation proceeds collectively the governing provisions a commercial contractual agreement such as a lease employment agreement or loan agreement is not a binding agreement relating to distribution and liquidation proceeds and thus is not a governing provision unless a principal purpose of the agreement is to circumvent the one class of stock requirement although a corporation is not treated as having more than one class of stock so long as the governing provisions provide for identical distribution and liquidation rights any distributions including actual constructive or deemed distributions that differ in timing or amount are to be given appropriate tax effect in accordance with the facts and circumstances sec_1362 provides that a in general an election under sec_1362 shall be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation and b any termination under sec_1362 shall be effective on and after the date of cessation plr-118401-11 sec_1362 provides that if an election under sec_1362 by any 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 each 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 based on the information submitted and the representations made we conclude that x’s s_corporation_election was terminated because x had more than one class of stock however we conclude that such termination was inadvertent within the meaning of sec_1362 of the code consequently we rule that x will be treated as an s_corporation from d2 and thereafter provided that x’s s election otherwise is not terminated under sec_1362 except as expressly ruled above we express no opinion concerning the consequences of the transaction described above under any other provision of the code in particular we express no opinion as to whether x otherwise qualifies as a subchapter_s_corporation under sec_1361 this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representative sincerely curt g wilson associate chief_counsel by melissa c liquerman branch chief branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------- --------------------------- --------------------------- ------------------------------------------- in re department of the treasury washington dc third party communication date of communication month dd yyyy person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc intl b02 plr-143657-08 date date legend taxpayer corporation a corporation b corporation c_corporation d corporation e corporation f corporation g corporation h corporation i a percentage b percentage country country country country product x raw materials year -------------------------- ------------------------------------------ -------------- -------------------------------- -------------------------------------- --------------- ----------- ---------------- ---------- ---------------- ---------- ---------- -------- ----------- ----------------- ---------------- -------------------- ------------------------------------ ------- dear ------------------------- 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 plr-143657-08 the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is in response to a letter dated date submitted on behalf of taxpayer by its authorized representative requesting a ruling regarding the application of sec_1_954-3 and c and the calculation of the actual and hypothetical effective tax_rates that should be applied with respect to the manufacturing and sales branches of a controlled_foreign_corporation cfc the information submitted for consideration is set forth below facts taxpayer is a us corporation engaged in the manufacture of product x in year wishing to expand its international business presence taxpayer purchased a number of manufacturing facilities from an unrelated corporation as a part of its recent purchase taxpayer intends to reorganize its corporate structure to improve control_over its supply chain for exports from country this restructure will combine its operations in country with those in country the operations in country are operated under a wholly owned corporation a located in country taxpayer has stipulated that corporation a is a cfc for purposes of us taxation corporation a will wholly own the stock of corporation b corporation c and corporation d which are all located in country and have elected to be treated as disregarded entities for purposes of us taxation as part of this restructure corporation b will issue a note payable to corporation a corporation b wholly owns the stock of corporation e located in country which is a disregarded_entity for purposes of us taxation corporation e wholly owns corporation f located in country which is a disregarded_entity for purposes of us taxation corporation f wholly owns corporation g located in country which is a disregarded_entity for purposes of us taxation corporation f and corporation g wholly own the stock of corporation h located in country which is treated as a disregarded_entity for purposes of us taxation in a percentage and b percentage respectively corporation h will own a minority interest in corporation i located in country which is a disregarded_entity for purposes of us taxation and the remaining interest is owned by corporation f corporation f and its country affiliates manufacture product x using raw materials and taxpayer has stipulated that the operations in country constitute manufacturing as defined under sec_1_954-3 corporation f and its country affiliates sell product x to the operations in country then the entities in country sell product x to unrelated persons outside country plr-143657-08 corporation f and its country affiliates will be subject_to country corporate_income_tax on the net taxable_income derived from the manufacture and sale of finished goods to corporation b however because country does not have a consolidation regime each entity will be treated as a separate taxable entity for country tax purposes in computing their respective taxable_income corporation f and its country affiliates generally will be entitled to a deduction for interest on net equity subject_to a limit of of the corporation’s net profit after taking into account all items of income and expense including the deduction for interest on net equity the taxable_income of each entity will be subject_to a country income_tax rate of corporation b will derive income from the purchase of finished goods from corporation f and sales to third party customers located outside country and country in addition corporation b will likely receive dividends from corporation e these dividends will be funded by dividends from corporation f the dividend income earned by corporation b is subject_to a participation_exemption in country further in computing its taxable_income for country corporate_income_tax purposes corporation b will take into account interest_expense paid_or_accrued with respect to the note held by corporation a the total taxable_income of corporation b will be subject_to country corporate_income_tax of rulings requested taxpayer requests a ruling on two separate issues first for purposes of determining the effective rate_of_tax to which the sales income derived by corporation b is subject under sec_1_954-3 taxpayer asks whether interest_expense incurred by corporation b with respect to the note payable held by corporation a should be taken into account second for purposes of determining the hypothetical effective rate_of_tax under sec_1_954-3 and c taxpayer asks whether the country deemed deduction for interest on net equity as well as other deductions incurred that are reasonably allocated or apportioned to the income including the sales income should be taken into account if so may taxpayer use the deductions in a hypothetical scenario where the income derived by corporation b would be subject under sec_1_954-3 and c if the income was derived from doing business in country through and allocable to corporation f located in country law sec_1_954-3 provides that if a cfc carries on purchasing or selling activities by or through a branch_or_similar_establishment located outside the country under the laws of which such corporation is created or organized and the use of such branch_or_similar_establishment for such activities has substantially the same tax effect as if the branch_or_similar_establishment were a wholly owned subsidiary plr-143657-08 corporation of such cfc the branch_or_similar_establishment and the remainder of the cfc will be treated as separate corporations for the purposes of determining fbcsi sec_1_954-3 provides that the use of a branch_or_similar_establishment for selling activities will be considered to have substantially the same tax effect as if it were a wholly owned subsidiary_corporation of the cfc if the income attributed to the activities of the sales branch_or_similar_establishment is taxed in the year when earned at an effective rate_of_tax that is both less than of and at least percentage points less than the effective rate_of_tax that would apply to such sales branch_income if earned from sources within the cfc’s country of incorporation through a permanent_establishment therein sec_1_954-3 provides that if a cfc carries on manufacturing by or through a branch_or_similar_establishment branch located outside the country under the laws of which the cfc is created or organized and the use of such branch has substantially the same tax effect as if the branch were a wholly owned subsidiary_corporation of the cfc then the branch will be treated as a separate corporation for purposes of determining fbcsi sec_1_954-3 provides that use of a manufacturing_branch will have substantially the same tax effect as if the branch were a wholly owned corporation of the cfc if the effective_tax_rate imposed on the sales income earned by the remainder ie location s where the manufactured property is being sold is less than percent of and at least percentage points less than the effective_tax_rate of the manufacturing_branch location if there is income_tax disparity between the two locations then the branch is treated as a separate corporation for purposes of determining fbcsi consequently under sec_1_954-3 one must then test the income earned by the remainder to see whether it is fbcsi under sec_954 sec_1_954-3 provides that tax determinations shall be made by taking into account only the income war profits excess profits or similar tax laws or the absence of such laws of the countries involved analysis for purposes of determining the effective rate_of_tax to which the sales income derived by corporation b is subject under sec_1_954-3 the effective rate_of_tax is determined by applying local law the effective rate_of_tax in country with regards to corporation b is calculated by taking the country income taxes paid_by corporation b attributable to its fbcsi which may require adjustments to allocate or apportion expenses in accordance with the laws of country this will include the allocation or apportionment of corporation b’s interest_expense between its income categories in accordance with country tax law thus corporation b will compute its plr-143657-08 country income_tax_liability with respect to the sales income taking into account its items of expense or deduction including deductions attributable to interest on the note held by corporation a for purposes of determining the hypothetical effective rate_of_tax to which the income derived by corporation b would be subject under sec_1 b ii b and c one must divide the hypothetical income_tax that would have been imposed on an item of fbcsi by the item of fbcsi taking into account all deductions properly allocable thereto under sec_1_954-3 the country branch should be treated as a separate cfc for purposes of applying the tax_rate_disparity_test of the branch_rule also sec_1_954-3 provides that tax determinations shall be made by taking into account only the income war profits excess profits or similar tax laws of the countries involved the hypothetical effective rate_of_tax is computed by considering the deductions available under the local law to which the sales income of corporation b is hypothetically superimposed consequently the country deductions for interest on net equity if any as well as other deductions that are reasonably allocated and apportioned to corporation b’s fbcsi are considered when calculating the hypothetical rate_of_tax to the extent that these deductions are currently available in country however this hypothetical calculation is an annual event and taxpayer may only account for the special deduction in a year that a qualifying_distribution has been distributed except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being provided to your authorized representative sincerely ethan atticks senior technical reviewer international


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc p si 2-plr-132559-00 date date legend x a b c d d1 d2 d3 year dear this letter responds to your letter dated date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the represented facts are as follows x was incorporated on d1 a b and c the initial shareholders of x intended x to be an s_corporation effective for the year taxable_year but form_2553 election by a small_business_corporation was not filed timely this intent is evidenced by a resolution of the shareholders of x dated d2 of year which states that x will elect to be taxed under subchapter_s on d3 c sold some stock to d who thought he was acquiring stock in a valid s_corporation accordingly x requests a ruling that it will be treated as an s_corporation effective d1 sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x’s year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x sincerely yours j thomas hines chief 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 commissioner tax_exempt_and_government_entities_division u i l xxxxxxxxxxxxxxxxxxaxxk xxxxxxxaxaxxakxakxkkx xxxxxxxaxxxxxxxxaxxxaxx jan t ep ck tf legend taxpayer a ira x bank b bank c amount d individual f individual h amount e dear xxxxxxxxxxx xxxxxxxxxxxxxxxxaxxxxxxxxxxxk - xxxxxxxxxxxxxxxxaxxxxxxxaxxxxxk xxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxaxxxaxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxaxxaxxxaxxax xxxxxxxxxxxxxaxxxaxxxaxxxaxxxxaxxk xxxxxxxxxxxxxaxxxxxxxxxxxxxxxk xxxxxxxxxxxxxxxxxxxxxxaxxxxaxxxk this letter is in response to your letter dated xxxxxxxxx as supplemented by correspondence dated xxxxxxxxxxxxxxxxxxx submitted on your behalf by your authorized representative in which you request a waiver of the day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalties of perjury in support of your request you assert that your failure to accomplish a rollover of amount d into an ira within the 60-day period prescribed by sec_408 of the code was due to an error committed by individual f of bank b you further assert that you relied on the statement of individual f of bank b who mistakenly advised you that you could rollover the retirement_funds within a period of days you state that you maintained ira x with bank b on xxxxxxxxxx you withdrew amount d from ira x intending to select a new higher yielding retirement investment you further state that at the time of withdrawal individual f advised you that the rollover period wa sec_90 days with a view to evaluating alternative retirement investments on xxxxxxxxxx you temporarily deposited amount d into your checking account with bank c on xxxxxxxxxxxxxxx you by coincidence had a conversation with individual h concerning your third quarter estimated_tax returns and further concerning the investment of amount d your retirement_funds you assert that it was individual h who advised you that the rollover period was only days and not days as individual f had told you in error upon learning that the rollover period was only days on xxxxxxxxxxxxxx you deposited amount e back into your ira x with bank b you assert that the delay in making a valid rollover arose by reason of the erroneous advice of individual f of bank b you further assert that you relied upon individual f’s statement that amount d could be rolled over into a rollover account within days you state that amount d remained with bank c until it was deposited into ira x with bank b on xxxxxxxxxx the day following the day you learned that the rollover period was just days based upon the foregoing facts and representations you request that the service waive the day rollover requirement with respect to the distribution of amount e from ira x sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distribute as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual received the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending in the day of such receipt such individual received any other amount described in sec_408 from an ira which was not included in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity and good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occur after date are eligible for the waiver under sec_408 of the code revproc_2003_16 i r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability or hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by you is consistent with your assertion that your failure to accomplish a rollover of amount e was caused by your reliance on individual f’s false statement about the time period required for a valid rollover therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount e from ira x provided all other requirements of code sec_408 except the 60-day requirement are met with respect to such ira contribution the service will treat the contribution of amount e to an ira account with bank b as a rollover_contribution within the meaning of code sec_408 no opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you have any questions concerning this ruling please contact xxxxxxxxxxxxxxx se t ep ra t3 at xxxxxxxxxxxxxxxxx oy yours m7 rances v sloan manager employee_plans technical group enclosures deleted copy of letter_ruling notice


internal_revenue_service number release date index number ------------- ------------------------ ------------------------------- --------------------------------- ----------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ---------------------- id no ------------ telephone number -------------------- refer reply to cc ita b03 plr-120052-14 date july taxpayer ------------------------------------------------- property ------------------------------------------------------- state a ------------ state b ------------- authority ----------------------------------------------------------------------------------------------------- ----------------- act ------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- corporation --------------------------------------------------------------- not-for-profit corporation -------------------------------------------- project_area ------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------- park ---------------------------- city ------------- plr-120052-14 date ---------------- date ----------------- date --------------------- date ----------------- date ------------------------- date ----------------- ground lease agreement ------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- agreement --------------------------------------------------------------------------------------------------- ------------------------------------------------------ dear ----------- this is in response to your letter dated ------------------ in your letter you requested a private_letter_ruling that certain payments in_lieu_of_taxes pilot are deductible under sec_164 of the internal_revenue_code as real_property_taxes under the circumstances described below facts taxpayer is a limited_liability_company created under the laws of state a to consummate development of the property state b created authority pursuant to the act as a state b corporate governmental agency and public benefit corporation for the purpose of financing constructing and improving industrial manufacturing commercial educational recreational and cultural facilities and housing accommodations for persons and families of low income the legislative purpose of the act is stated to be as follows to promote the development of such plants and facilities reasonably accessible to residential facilities in those areas where substantial unemployment or underemployment exists to the end that the industrial and commercial development of our urban areas will proceed in sound fashion and in coordination with development of housing mass transportation and public services and that job opportunities will be available in those areas where people lack jobs plr-120052-14 to promote the safety health morals and welfare of the people of the state and to promote the sound growth and development of our municipalities through the correction of such substandard insanitary sic blighted deteriorated or deteriorating conditions factors and characteristics by the clearance replanning reconstruction redevelopment rehabilitation restoration or conservation of such areas including the provision of educational recreational and cultural facilities and the encouragement of participation in these programs by private enterprise the act provides that authority may acquire construct reconstruct rehabilitate improve alter or repair lands buildings improvements real and personal properties including a residential project an industrial project a land use project a civic project or multi-purpose project the act also provides that the authority and its subsidiaries shall not be required to pay any taxes other than assessments for local improvements upon or in respect of a project or of any property or moneys of the authority or its subsidiaries levied by any municipality or political_subdivision of the state thus under the authority’s originating legislation authority’s real_property is exempt from real_property_taxes authority has the right under the act to exercise and perform its powers and functions through one or more subsidiary corporations pursuant to this right authority formed corporation on date to implement development of the park with respect to corporation property within the project_area that is exempt from real_property_taxes pursuant to the act or otherwise the act requires payment to the authority of periodic amounts equal to the amount of real_property_taxes that otherwise would be paid or payable with respect to the property if the corporation were not exempt from real_property_taxes after giving effect to any real_property tax abatements and exemptions which would be applicable to the property if corporation did not hold title to the property under the act these payments must be used to improve operate and maintain the park unless the corporation city and state b through an entity designated by the governor of state b agree to set_aside such payments in appropriate and reasonable reserve accounts taking into account all other revenue received or anticipated by the corporation from properties in the project_area for expenses to improve operate and maintain the park or transfer such payments into the general fund of the city to be used for its general_public purposes state b and city entered into a memorandum of understanding dated date in which state b and city agreed in principle to jointly create develop and operate the park as a sustainable park providing recreational cultural and educational opportunities for residents and visitors and for developing portions of the park with appropriate commercial uses provided that all revenues derived therefrom be used exclusively for maintenance and operation of the park plr-120052-14 on date corporation as fee owner and ground lessor entered into a master ground lease with not-for-profit corporation as tenant and ground lessee with respect to the project_area the master ground lease was subsequently replaced with a ground lease agreement dated date and which expires on date not-for-profit corporation selected taxpayer to develop construct maintain and operate the particular development parcel designated as the property accordingly not-for-profit corporation as landlord and taxpayer as tenant entered into an agreement dated date which commenced on date and expires on date the agreement is subject and subordinate to the ground lease taxpayer at its election but subject_to the terms of the agreement may convert its leasehold interest in the property to a qualified leasehold condominium and sell apartment units in the condominium to third parties pursuant to a leasehold condominium offering plan approved by state b’s attorney_general each purchaser of a unit will acquire from taxpayer a qualified leasehold condominium interest in the unit and a proportionate undivided_interest in the common elements of the condominium for the balance of the leasehold term the agreement implements the provisions of the act regarding payments of pilot specifically the agreement requires taxpayer to pay to not-for-profit corporation an annual sum equal to the pilot that not-for-corporation must pay with respect to the property taxpayer intends to submit its interest in the property to a condominium regime pursuant to the laws of state b and to assign to condominium unit purchasers the taxpayer’s interests in the units and proportionate undivided interests in the common elements taxpayer represents that after the property is converted to condominium ownership the corporation’s exemption under the act will exempt each unit of the property from real_property tax_assessment the terms of the agreement provide that once the property is converted to the condominium form of ownership pilot shall be paid_by the condominium unit owners pro_rata in accordance with their interest in the common elements which amounts shall be included with their proportionate common charges for their units and paid directly to the condominium board rulings requested you ask us to rule that the pilot obligations to be made pursuant to the agreement to not-for-profit corporation or to city should it reacquire the project_area constitute real_property_taxes allowable as a deduction to the taxpayer under sec_164 and following the submission of the leasehold estate in the property to condominium ownership the unit owners will be entitled to deduct as real_property_taxes under sec_164 that portion of the common charges paid_by them to the condominium board as are applied by the condominium board towards the pilot obligations but only to the plr-120052-14 extent such payments represent the owner’s proportionate share of the total amount of pilot imposed on the condominium unit the owner has purchased a taxpayer may not rely on a private_letter_ruling that has been issued to another taxpayer section dollar_figure of revproc_2012_1 2012_1_irb_50 therefore a private_letter_ruling addresses only the tax_liability of taxpayers who are party to the ruling_request however taxpayer will be the owner of units in the condominium until the units are sold and as such will be liable for pilot until the units are sold we consider taxpayer’s second ruling_request in that context law and analysis sec_164 allows as a deduction the state local and foreign real_property_taxes paid_or_accrued in the taxable_year sec_1_164-3 of the income_tax regulations defines real_property_taxes as taxes imposed on interests_in_real_property that are levied for the general_public welfare assessments for local benefits are not treated as real_property_taxes see sec_1_164-2 and sec_1_164-4 of the regulations whether a particular charge is a tax within the meaning of sec_164 depends on its true nature as determined under federal_law the designation given by local law is not determinative a charge will constitute a tax if it is an enforced contribution exacted pursuant to legislative authority in the exercise of taxing power and imposed and collected for the purpose of raising revenues to be used for public or governmental purposes see revrul_71_49 1971_1_cb_103 revrul_61_152 1961_2_cb_42 revrul_71_49 involved tax equivalency payments to the new york city educational construction fund a public benefit corporation by a cooperative_housing_corporation the payments were applied to debt service on obligations funding public school construction the ruling holds that the cooperative_housing_corporation may deduct the payments as real_property_taxes under sec_164 because the payments are measured by and are equal to the amounts imposed by the regular taxing statutes the payments are imposed by a specific state statute even though the vehicle of a lease agreement is used and the proceeds are designated for a public purpose rather than for some privilege service or regulatory function or for some other local benefit tending to increase the value of the property upon which the payments are made accordingly each tenant-stockholder of the cooperative_housing_corporation may deduct the payments in the amount of the stockholder’s proportionate share the pilot obligations in this case will satisfy the three-prong test of revrul_71_49 because they are imposed at the same general rate at which real_property_taxes are imposed are imposed pursuant to the act as implemented by the agreement and may only be used by the authority for public purposes including the improvement maintenance and operation of the park plr-120052-14 accordingly we hold as follows the pilot payments to be made pursuant to the site lease to the authority or to city should it reacquire the project_area will constitute real_property_taxes allowable as a deduction to the payor under sec_164 taxpayer as a unit owner will be entitled to deduct as real_property_taxes under sec_164 that portion of the common charges paid_by taxpayer to the condominium board as applied by the condominium board towards the pilot obligations 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 your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely christopher f kane chief branch office of associate chief_counsel income_tax accounting cc


internal_revenue_service number release date index number --------------------------- ------------------------------------------------------------ ---------------- ---------------------------------- -------------------------------- in 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 b05 plr-153333-06 date date legend taxpayer project ----------------------------------------------- ---------------------------------------------------------- date dear ------------- -------------------------- -------------------------------------------------------------------------- ------------------------ ----------------- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of taxpayer requesting an extension of time to make an election under sec_42 of the internal_revenue_code pursuant to sec_301_9100-1 of the procedure and administration regulations taxpayer through the error of its external tax advisor did not make a proper election for project under sec_42 for the taxable_year ending on date sec_42 provides that generally a new_building shall be treated as federally_subsidized for any taxable_year if at any time during such taxable_year or and prior taxable_year there is or was outstanding an obligation the interest on which is exempt from tax under sec_103 or any below market federal loan the proceeds of which are or were used directly or indirectly with respect to such building or the operation thereof sec_42 provides that a loan or tax-exempt_obligation shall not be taken into account under sec_42 if the taxpayer elects to exclude from the eligible_basis of the building the principal_amount of any such loan and the proceeds of any such tax-exempt_obligation sec_301_9100-7t of the temporary procedure and administration plr-153333-06 regulations provides that the election under sec_42 must be made for the taxable_year in which the project is placed_in_service and shall be made in the certification required to be filed pursuant to sec_42 sec_301_9100-7t provides that the election under sec_42 is irrevocable sec_42 provides that following the close of the first taxable_year in the credit_period with respect to any qualified_low-income_building the taxpayer shall certify to the secretary at such time and in such form and in such manner as the secretary prescribes such information as the secretary may require sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 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 subtitles e g h and i 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 in the instant case based solely on the facts submitted and the representations made by the taxpayer we conclude that the requirements of and have been met accordingly taxpayer is granted an extension of time to make the election under sec_42 for project by filing within days from the date of this letter for all open taxable years through amended forms that include the intended elections note amended forms are not required to be filed for taxable years after the amended forms for taxable years prior to are to be filed with the service_center where taxpayer files its return the amended forms for taxable_year are to be filed at the following address plr-153333-06 internal_revenue_service p o box attn lihc unit dp south philadelphia pa in addition a copy of this letter should be submitted with the amended forms a copy of this letter is enclosed for this purpose no opinion is expressed or implied regarding the application of any other provisions of the code or regulations specifically we express no opinion on whether the taxpayer's low-income_housing project otherwise qualifies for the low-income_housing tax_credit under sec_42 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file a copy of this letter is being sent to taxpayer's authorized representative enclosures copy of this letter copy for sec_6110 purposes sincerely s william p o’shea william p o’shea associate chief_counsel passthroughs and special industries


id office uilc cca_2010011119485732 -------------- number release date from -------------------- sent monday date pm to ---------------------- cc --------------------------- subject re query about disclosure of ex wife's tax_return ----------- -- you are directly on track during an exam which is an administrative tax proceeding the transactional relationship provision of h c allows for the disclosure of third party returns and return_information if it directly relates to a transactional relationship like you have here payment from one to the other between person who is a party to the proceeding ex-husband and a taxpayer ex-wife which directly affects the resolution of an issue in the proceeding whether ex-husband is entitled to the deduction taken take care to ensure that only that information that meets the statutory standard is disclosed similarly if you are disclosing items from the return ensure that only those items on the third party's return that are directly related to resolving an issue in the exam be disclosed let me know if you have any more questions -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- ---------------