tax_exempt_and_government_entities_division release number release date legend org name org date xx department of the treasury internal_revenue_service te_ge - eo mandatory review commerce street mc 4920-dal dallas tx date employer_identification_number person to contact uil contact telephone number in reply refer to te_ge review staff dear - this is a final adverse determination as to your exempt status under sec_501 of the internal_revenue_code our adverse determination was made for the following reasons org failed to establish that they meet the requirement for exemption under sec_501 sec_1_501_c_4_-1 and of the treasury regulations reads in part a civic organizations in general -a civic_league_or_organization may be exempt as an organization described in sec_501 if operated for profit and ii it is operated exclusively for the promotion of social welfare promotion of social welfare i in general -an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community an organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements i it is not organized or as a result of our recent audit of your organization's activities for the period ended december 19xx it was determined that your organization operates a bar for its members as well as for the general_public an organization is not organized and operated primarily for the promotion of social welfare if its primary activity is operating a social_club for the benefit pleasure or recreation of its members or is carrying on a business with the general_public in a manner similar to organizations which are operated for profit therefore we are revoking your organization's exemption from federal_income_tax under sec_501 of the internal_revenue_code effective january i 19xx you are required to file form_1120 u s_corporation income_tax return these returns should be filed with the appropriate service_center for all years beginning after date form_1120 must be filed by the day of the third month after the end of your annual_accounting_period a penalty of dollar_figure a day is charged when a return is filed late unless there is reasonable_cause for the delay however the maximum penalty charged cannot exceed dollar_figure or percent of your gross_receipts for the year whichever is less this penalty may also be charged if a return is not complete so please be sure your return is complete before you file it you are required to file form_1120 with the appropriate internal revenue campus you have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers you can call and ask for taxpayer_advocate assistance or you can contact the taxpayer_advocate from the site where the tax_deficiency was determined by writing to internal_revenue_service taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to file a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely marsha a ramirez director eo examinations department of the treasury internal_revenue_service tege eo examinations tax_exempt_and_government_entities_division date legend org name of org date xx address name of address org address taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe an adjustment of your organization's exempt status is necessary if you do not agree with our position you may appeal your case the enclosed publication the examination process explains how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process if you request a conference we will forward your written_statement of protest to the appeals_office and they will contact you for your convenience an envelope is enclosed if you and appeals do not agree on some or all of the issues after your appeals_conference or if you do not request an appeals_conference you may file suit in united_states tax_court the united_states court of federal claims or united_states district_court after satisfying procedural and jurisdictional requirements as described in publication letter catalog number 34801v you may also request that we refer this matter for technical_advice as explained in publication exempt_organization appeal procedures for una greed issues if a determination_letter is issued to you based on technical_advice no further administrative appeal is available to you within the irs on the issue that was the subject of the technical_advice if you accept our findings please sign and return the enclosed form_6018 consent to proposed adverse action we will then send you a final letter modifying or revoking exempt status if we do not hear from you within days from the date of this letter we will process your case on the basis of the recommendations shown in the report of examination and this letter will become final in that event you will be required to file federal_income_tax returns for the tax period s shown above file these returns with the ogden service_center within days from the date of this letter unless a request for an extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you letter catalog number 3480iv thank you for your cooperation sincerely r c johnson director eo examinations enclosures publication publication forta 6048-r- report of examination envelope letter catalog number 34801v ' department of the treasury- internal_revenue_service form 886a explanation of items schedule no or exhibit name of taxpayer org legend org name of org date xx as a result of our examination of your form_990 filed for the period ended december 19xx we are proposing a revocation of your organization's exempt status our records show that in november of 19xx you were granted exempt status under sec_501c of the internal_revenue_code sec_5010 applies to an organization which has a purpose and activities that promote the common good and betterment of members of the community your organization operates a post for war veterans of military service in foreign campaign you conduct charitable activities including fundraising events such as poppy sales and raffles the proceeds are donated to charitable organizations you also conduct patriotic and community activities your organization operates a bar for its members as well as for the general_public you hold a class b liquor license which entitles you to be open for public patronage sec_1 -1 of the income_tax regulations provides that a civic league or social_welfare_organization may be exempt as an organization described in sec_5010 if it is not organized for profit and it is operated exclusively for the promotion of social welfare an organization is not organized and operated primarily for the promotion of social welfare if its primary activity is operating a social_club for the benefit pleasure or recreation of its members or is carrying on a business with the general_public in a manner similar to organizations which are operated for profit in view of the foregoing it is held that your organization no longer qualifies for exempt status under sec_5010 as a social_welfare_organization therefore we ate proposing a revocation of your organization's exempt status we considered whether you would qualify for exempt status under sec_5010 of the internal_revenue_code sec_5010 applies to a social_club which is organized and operated exclusively for the pleasure recreation and other nonprofitable purposes of its members sec_1 501c -1 b of the income_tax regulations states that a club which engages in business such as making its social and recreational facilities available to the general_public or by selling real_estate timber or other products is not organized and operated exclusively for pleasure tecteation and other nonprofitable purposes and is not exempt under sec_501 a as your organization has converted to a class b you do not qualify for exempt status under sec_5010 of the internal_revenue_code liquor license entitling you to serve the general_public at large we considered whether you would qualify for exempt status under sec_501c of the internal_revenue_code sec_501c applies to a war veterans’ organization of which at least of the members are war veterans substantially_all of the other members must be either veterans cadets or spouses widows or widowers of wat veterans veterans or cadets war veterans are defined as persons who have served in the united_states armed_forces during a period of war as your organization does not satisfy these membership requirements you do not qualify for exempt status under sec_5010 as you do not qualify for exempt status under any other section of the internal_revenue_code we are proposing a revocation of your current exempt status effective january 19xx please note that this is not a final report this report is subject_to review by our mandatory review staff who may modify the report form 886-a department of the treasury- intemal revenue service explanation of items schedule no or exhibit name of taxpayer org page of whereas your organization appears to be carrying on a business with the general_public in a manner which is similar to organizations which are operated for profit your income is considered as taxable in its entirety in the event that the proposed revocation of your exempt status is not upheld by our mandatory review staff and you continue to be exempt tax adjustments to your filed forms 990-t may be proposed for all open years if you owe any taxes after allowable expense deductions are applied then you may receive a bill from our service_center for any taxes owed form at department of the treasury - internal_revenue_service --rey page -i


ignificant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division aug epma tt ap in re request for waiver of the minimum_funding_standard for ein company _ new company dear this letter constitutes notice that a conditional waiver of the minimum_funding_standard has been granted for the above-named pension_plan for the plan_year beginning date the original waiver request dated date was amended by a letter dated date to increase the amount of the requested waiver to include the entire amount of the minimum_funding_standard for the plan_year the conditional waiver has been granted in accordance with sec_412 of the internal_revenue_code code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the amount for which the conditional waiver has been granted is the contribution that would otherwise be required to reduce the balance in the funding_standard_account of the plan to zero as of the end of the plan_year for which the waiver has been granted the company is a privately held corporation that manufactured products having two principal business segments of and vitreous china fixtures were manufactured in three facilities and brass faucets and fittings were manufactured in the other facility the majority of the assets of the company were sold in date and most of the employees of the company were reemployed by the new company the company had four manufacturing facilities the company experienced substantial temporary hardship as evidenced by losses from operations and net losses for each of the years through because of the consecutive years of losses the company's line of credit was canceled with temporary extensions granted for reduced amounts effectively reducing the _ company's credit facility steps taken by the company to effect recovery included retaining an investment banking firm to develop a comprehensive marketing program with a detailed prospectus on the company and represent the company in its efforts in the infusion of private capital and or potential sale of the company retaining a multi-disciplined management consulting company to evaluate the company's operations and business plan and provide recommendations for improvement and hiring a principal of this company as a chief restructuring officer implementing marketing and manufacturing initiatives to improve profitability including the outsourcing of both vitreous china and brass products and the introduction of products to appeal to the price-conscious consumers withholding wage increases since date not paying dividends to shareholders since date obtaining a one-year extension of the collective bargaining agreement with local extending vendor payments closing one of the vitreous china facilities reducing salaried headquarters staff by deferring capital expenditures and significantly reducing or eliminating most business travel entertainment advertising and product promotions hiring two new top executives in with extensive experience in effecting turnarounds of troubled companies subsequently in date the majority of the assets of the company were sold to the new company including the name of the company most of the employees of the company were reemployed by the new company the terms of the asset sale provided that although the assets and liabilities of the plan remain with the company the new company wouid share in certain of the company's legacy costs which include funding of the pension plans the new company would contribute up to at least dollar_figure million over time to a fund legacy fund from which amounts necessary to pay the required minimum_funding payments for the plan would be paid to the company for this purpose as of date the ratio of the actuarial value of assets of the plan to current liabilities under the plan is approximately because of the facts described above this waiver is granted subject_to the following conditions for each of the plan years beginning date date and date the company will timely satisfy the minimum_funding_standard for the plan for the plan_year including waiver amortization payments for the waiver granted for the plan_year beginning date by august following the close of each plan_year for each of the plan years beginning date and date the funding_standard_account for the plan will have a credit balance of not less than the outstanding balance of the amortization base established under sec_412 of the code for the plan to amortize this waiver if either of these conditions is not satisfied the waiver granted by this letter is retroactively null and void the company has agreed to these conditions your attention is called to sec_412 of the code and sec_304 of erisa which describes the consequences which result in the event the plan is amended to increase benefits to change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived amount remains unamortized 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 when filing form_5500 for the plan_year beginning date the date of this letter should be entered on schedule b actuarial information we have sent a copy of this letter to the manager ep classification in ’ and to your authorized representatives form on file with this office if you have any questions concerning this letter please contact oo in any correspondence relating to this letter please refer to se t ep ra t a2 as well sincerely martin l pippins manager employee_plans actuarial group cc manager ep classification


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc intl plr-163657-01 date date do ty a country b country c date d date e year f dear this is in response to a letter date submitted by a’s authorized representative requesting a ruling under sec_877 of the internal_revenue_code_of_1986 code that a’s loss of long-term_resident status did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by penalty of perjury statements 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 the information submitted for consideration is substantially as set forth below a a long-term_resident of the united_states within the meaning of sec_877 relinquished her u s lawful permanent resident status expatriated on date d a has been a citizen of country b during her entire life by reason of her birth on date e in country b a’s spouse was born in and is a citizen of country c a became a permanent resident of the u s and obtained her green card in year f on the date of plr-163657-01 a’s expatriation her net_worth exceeded the net_worth required under sec_877 sec_877 generally provides that a citizen who loses u s citizenship or a u s long- term resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be taxed under sec_877 and the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former citizen or former long term-resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual's average income_tax_liability or the individual's net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen or former long term-resident whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary's determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 under notice_98_34 1998_2_cb_29 modifying notice_97_19 1997_1_cb_394 a former long-term_resident whose net_worth or average tax_liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax_avoidance if that former resident is described within certain categories and submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes notice_98_34 requires that certain information be submitted with a request for a ruling that an individual's expatriation did not have for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_98_34 because on the date of expatriation a was a resident and fully liable to income_tax in country c the country where a’s spouse was born a submitted all the information required by notice_98_34 including any additional information requested by the service after review of the submission based solely on the information submitted and the representations made we conclude that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 therefore a will not be presumed under sec_877 to have as one of her principal purposes for expatriating the avoidance of plr-163657-01 u s taxes it is further concluded that a will not be treated under sec_877 as having as one of her principal purposes of expatriating the avoidance of u s taxes 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 in addition no opinion is expressed as to a’s u s tax_liability for taxable periods prior to his loss of permanent residence status or for taxable periods after his loss of permanent residence status under sections of the code other than sec_877 sec_2107 and sec_2501 a copy of this letter must be attached to a’s u s income_tax return for the year in which a obtained the ruling 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 a’s representative sincerely yours w edward williams senior technical reviewer branch office of the associate chief_counsel international cc


internal_revenue_service department of the treasury number release date ndex number washington dc person to contact telephone number refer reply to cc psi b01 plr-117618-00 date oct legend x state d1 this responds to the letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated under state law x’s shareholders intended that x be a subchapter_s_corporation effective d1 however an s_corporation_election under sec_1362 was not timely filed 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 if an s election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made 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 made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed for making such election for such taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year cc psi b01 plr-117618-00 x did not timely file an election under sec_1362 to be treated as an s_corporation effective d1 x however has established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and assuming that x otherwise qualifies as a subchapter_s_corporation as of d1 we conclude that x will be recognized as an s_corporation effective as of d1 x should file a completed form_2553 with a copy of this ruling attached reflecting its election of subchapter_s_corporation status as of d1 with the applicable service_center within days of the date of this letter the form_2553 submitted with the ruling_request is returned herewith 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 specifically no opinion is expressed concerning whether x otherwise satisfies the s_corporation eligibility requirements 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 with this office a copy of this ruling is being sent to the taxpayer’s authorized representative sincerely dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes form_2553


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 b09 plr-165188-02 date date - legend grantor original trust date date x date child child date trust a_trust b date court date date state date date trust c trust d date dear sir ------------------------------- ----------------------------------------------------------------------- ------------------ ------------------------- -------- --------------------------- -------------------------- -------------------------------- ------------------ --------------------------------------------------------------------------------------------- ------------------------- --------------------------------------------------------------------------------------------- ------------------------ ----------------------- -------------------------------------- ----------------- ------------------- ------------ ----------------- ---------------------- -------------------------------- -------------------------------- -------------------------- article first of the original trust agreement provides that the trust income shall this is in response to your letter dated date and prior correspondence article third paragraph of the original trust agreement provides that after the plr-165188-02 requesting rulings under sec_1001 sec_2501 and sec_2601 of the internal_revenue_code grantor created original trust an inter_vivos_trust on date original trust was restated in its entirety by an amended trust agreement on date no additions actual or constructive have been made to original trust after date be paid to grantor during grantor’s life distribution of certain specific bequests discretionary distributions of the trust income may be payable to grantor s children in equal parts up to dollar_figurex per year until the child reaches the age of thirty after that the child is entitled to her proportionate share of the entire trust income in no event may the amount_paid to a child exceed her proportionate share of the income as long as other children of the grantor are living or have died leaving issue surviving at the end of the calendar_year any portion of the trust income not paid shall be added to the trust principal on the death of the last survivor of grantor s children all the income of the trust estate shall immediately become principal of the trust estate article third paragraph of the original trust agreement provides that on the death of the last survivor of grantor s children the residue of the trust estate shall be distributed to the lawful issue then living of the grantor s children then deceased equally and by representation in default of issue as to any of grantor s children the interest of the child shall accrue equally to the brothers and sisters of the deceased child living at the time of distribution and to the lawful issue of any brother or sister who shall have theretofore died article third paragraph of the original trust agreement provides that anything contained to the contrary notwithstanding the trustee with the consent and approval of the advisers to the trustee is authorized and directed at any time and from time to time during the continuance of the trust to expend part of the income and of the principal of the share or shares of the trust estate to which any remote issue of the grantor for the time being shall be presumptively entitled as the trustee with the consent and approval of the advisers to the trustee in their uncontrolled discretion shall deem proper for the support maintenance education use and benefit of the presumptive beneficiary and or pay the same to the beneficiary or his or her parent or guardian without being liable to see to the application thereof and except as above provided the part of the trust estate as the trustee shall see fit may be accumulated and at any time or from time to time thereafter be distributed and paid out as income or in its discretion added to and invested with the principal plr-165188-02 grantor died on date survived by child and child original trust became irrevocable on her death on date after grantor s death the trustee divided original trust into two separate shares that were subsequently separately administered trust a and trust b_trust a was administered for the benefit of child and trust b was administered for the benefit of child the trustee obtained separate tax identification numbers for the shares and filed separate tax returns no principal was ever distributed from either trust child died on date after child 1's death the trustee petitioned court for instructions because it concluded that the provisions of paragraph under article third may require some portion of the trust a income be accumulated for later distribution to the issue of both children the parties to the petition which included guardians ad litem for minor and unborn beneficiaries filed cross motions for summary_judgment the matter was fully briefed and argued in court court issued its decision on date and its final order on date holding that the separate trust accounts created on date constitute one trust account namely the original trust the original trust should be administered and ultimately distributed as a single trust accordingly one-half of the income from the account should be distributed to child at the end of each calendar_year during her lifetime the other half of the income must under the language of the original trust agreement be added back into the principal of the trust for the ultimate benefit of the issue of both child and child finally the court held that the trustee may with the approval and consent of the advisers to the trustee distribute income and principal from the original trust to the presumptive beneficiaries of the original trust during child 2's lifetime court s decision was affirmed by the state supreme court on date order and subsequently entered into lengthy negotiations to avoid additional litigation in particular the questions of who is a presumptive beneficiary and how is a presumptive beneficiary’s share to be calculated for purposes of discretionary principal distributions were left open as a result of the negotiations the parties reached a settlement agreement among other things the settlement included the formal division of the trust into two separate trusts one each for the benefit of child and child and their respective issue court approved the settlement agreement on date court s date order however prevents implementation of the settlement agreement until a private_letter_ruling has been received from the internal_revenue_service that the implementation will not result in adverse income gift estate or generation-skipping_transfer_tax consequences to the trust or the beneficiaries additional changes were made to the settlement agreement during the private_letter_ruling process the terms of the new settlement agreement are reflected in the proposed amended order discussed below each of the parties to the settlement agreement has agreed to the changes made during the private_letter_ruling process the terms of the settlement agreement are described in the proposed amended order paragraph of the proposed amended order provides that the original trust will be divided into two separate trusts trust c and trust d trust c will benefit child 1's the parties disagreed as to the appropriate way to implement court s date paragraph of the proposed amended order provides that the trustee has paragraph of the proposed amended order provides that the income from paragraph of the proposed amended order provides that the income from plr-165188-02 family and trust d will benefit child and her family each separate trust shall be equal in value as of date trust d will be paid to child during her lifetime upon child 2's death trust d will be distributed to the then living issue of child by right of representation in the event that there are no living issue of child at the time of her death trust d shall be distributed to the then living issue of child by right of representation trust c will be accumulated and added to trust c principal during child 2's lifetime there shall be an annual distribution to trust d from trust c equal to one-half of the income from trust c the distribution amount upon the death of child trust c shall be distributed to the then living issue of child by right of representation in the event that there are no living issue of child at the time of child 2's death trust c shall be distributed to the then living issue of child by right of representation determined that in order to provide child 2’s family with a reasonable income in accordance with state law the trustee will distribute from the principal of trust c such amount if any as may be necessary in order for the distribution amount to be not less than one percent of the fair_market_value of trust c determined as of the last business_day of the year preceding the year in which distribution of the distribution amount occurs and trustee is authorized to make distributions accordingly nothing in this paragraph or in any future state legislation that might afford the trustee a so-called power to adjust shall be interpreted to require the trustee to take any_action in regard to the distribution amount other than authorized herein nor shall anything in this paragraph preclude the trustee from taking such other or further action in regard to the distribution amount paragraph of the proposed amended order provides that during child 2's lifetime grantor s remote issue may receive discretionary distributions of principal solely out of the trust for the benefit of the child of grantor who is the remote issue s ancestor paragraph of the proposed amended order provides that except as may be otherwise provided in the order or by further order of the court each of trust c and trust d shall be held administered and distributed under the terms of the original trust of the original trust into trust a and trust b in accordance with the terms of the proposed amended order will not affect the status of original trust or the resulting trusts as exempt from the generation-skipping_transfer_tax under b a of the tax_reform_act_of_1986 no taxable gift will be made by any party as a result of the implementation of the proposed amended order and neither the original trust nor the trustees of original trust have requested the following rulings division sec_2601 imposes a tax on every generation-skipping_transfer sec_2611 defines the term generation-skipping_transfer as a taxable plr-165188-02 any beneficiary will realize gain_or_loss as a result of compliance with the terms of the proposed amended order ruling distribution a taxable_termination and a direct_skip under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply to any generation skipping transfer under a_trust as defined in sec_2652 that was irrevocable on date but only to the extent that the transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 provides that except as provided in sec_26 b ii b or c any trust in existence on date is considered an irrevocable_trust except as provided in sec_26_2601-1 or c which relate to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 the grantor’s generation therefore distributions from original trust may be subject_to the generation-skipping_transfer_tax in the present case original trust is considered to have been irrevocable on date because neither sec_2038 nor sec_2042 applies the trustees represent that no additions have been made to the original trust after date original trust therefore is exempt from the generation- skipping transfer_tax pursuant to sec_26_2601-1 judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 fide issue regarding the administration of a_trust or the construction of terms of the governing instrument will not cause an exempt trust to be subject_to the provisions of chapter if - the settlement is the product of arm’s length negotiations and the sec_26_2601-1 provides rules for determining when a modification potential beneficiaries include individuals who are two or more generations below sec_26_2601-1 provides that a court-approved settlement of a bona the interests of all the parties to the settlement agreement including the based on the facts submitted and the representations made and pursuant to plr-165188-02 settlement is within the range or reasonable outcomes under the governing instrument and applicable state law addressing the issues resolved by the settlement a settlement that results in a compromise between litigating parties and reflects the parties’ assessments of the relative strengths and their positions is a settlement that is within the range of reasonable outcomes interests of any unborn heirs have been represented in the litigation and negotiations that preceded the proposed settlement agreement the terms of the proposed settlement agreement are based on arms-length negotiations among all the interested parties to a bona_fide controversy and fairly reflect the relative merits of the claims made by the parties sec_26_2601-1 we conclude that the settlement agreement as proposed will not affect the exempt status of the original trust or cause the resulting trusts trust a and trust b to lose exempt status for generation-skipping_transfer_tax purposes furthermore implementation of the settlement agreement will not result in a transfer of property that will subject original trust or the resulting trusts or distributions thereunder to the generation-skipping_transfer_tax imposed under sec_2601 ruling gift during the calendar_year by any individual whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is real or personal tangible or intangible which an interest in property is gratuitously passed or conferred upon another regardless of the means or device employed constitutes a gift subject_to tax depends on whether the settlement is based on a valid enforceable claim asserted by the parties and to the extent feasible produces an economically fair result see 674_f2d_761 9th cir citing 387_us_456 thus state law must be examined to ascertain the legitimacy of each party s claim if it is determined that each party has a valid claim the service must determine that the distribution under the settlement reflects the result that would apply under state law if there is a difference it is necessary to consider whether the difference may be justified because of the uncertainty of the result if the question were litigated sec_25_2511-1 of the gift_tax regulations states that any transaction in sec_2501 imposes a tax for each calendar_year on the transfer of property by sec_2511 provides that subject_to certain limitations the gift_tax applies whether an agreement settling a dispute is effective for gift_tax purposes as stated above all the parties who hold an interest in the original trust based on the information submitted and the facts as described in the various based on the information submitted a bona_fide controversy existed between the plr-165188-02 court documents a bona_fide controversy existed between the parties pertaining to the administration of original trust during the time period between the death of child and the death of child the date court opinion held that presumptive beneficiaries were eligible to receive discretionary distributions during that time but acknowledged that ambiguity existed as to who was a presumptive beneficiary and how a presumptive beneficiary’s share should be calculated including any unborn heirs have been represented in the litigation and negotiations that preceded the proposed settlement agreement the terms of the proposed settlement are based on arms-length negotiations among all the interested parties parties pertaining to the administration of the original trust between the death of child and child specifically it is unclear which remote beneficiaries were eligible to receive discretionary distributions as presumptive beneficiaries and how each presumptive beneficiary’s share should be calculated the parties have agreed to divide the trust into a share for each child of grantor and that child’s remote issue distributions will be made from trust c to trust d in order to comply with the requirements of the date court order after the division of the original trust the remote issue of child will be eligible to receive discretionary distributions of principal from trust c during child 2’s lifetime the remote issue of child will be eligible to receive discretionary distributions of principal from trust d during child 2’s lifetime the terms of the settlement agreement are reflective of the rights of the parties under applicable state law that would be applied by the highest court of that state accordingly based on the facts submitted and the representations made we conclude that implementation of the proposed settlement agreement will not cause the parties to the settlement agreement to have made a taxable gift_for purposes of the federal gift_tax under sec_2501 ruling sec_61 provides that gross_income includes all income from whatever source derived sec_61 specifically includes gains derived from dealings in property property is the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 over the amount_realized sec_1001 provides that except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale or other exchange of property shall be recognized that the gain_or_loss realized from the conversion of property into cash or from the sec_1_1001-1 of the income_tax regulations provides as a general_rule sec_1001 provides that the gain from the sale_or_other_disposition of in the present case under the terms of the original trust and on the basis of plr-165188-02 exchange of property for other_property differing materially either in_kind or in extent is treated as income or loss sustained for purposes of sec_1001 in an exchange of property each party to the exchange gives up a property interest in return for a new or additional interest such an exchange is a disposition under sec_1001 an exchange of property results in the realization of gain only if the properties exchanged materially differ 499_us_554 a material difference exists when the exchanged properties embody legal entitlements different in_kind or extent or if they confer different rights and powers id pincite the critical determination is whether there is a change in the actual legal entitlements see also revrul_56_437 1956_2_cb_507 other information submitted by the trustee’s representative - as well as specific representations made by the trustee we conclude that there is no significant or material_change in the actual legal entitlements of the original trust as compared to the contemplated altered administration of that trust the language in the proposed amended order does not affect the entitlements of the parties in_kind or extent child and the respective issue of child and child will possess the same income and remainder interests before and after establishment of the new court-ordered trust arrangements consequently because the interests of the beneficiaries will not materially change no gain_or_loss will be realized under sec_61 or sec_1001 concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 being sent to your attorney pursuant to the power_of_attorney on file with this office a copy of this letter is except as expressly provided herein no opinion is expressed or implied the rulings contained in this letter are based upon information and plr-165188-02 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer s requesting it sec_6110 sincerely james f hogan james f hogan acting chief branch office of associate chief_counsel passthroughs special industries enclosure cc -------------------------------- copy for sec_6110 purposes ----------------------------------- ---------------- ------------------------------- --------------------------------------------------- ----------------------- -----------------------------


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 tege eoeg eo plr-120376-12 date september legend employer ----------------------------------------------------------------------------------------------------- trust ---------------------------------------------------------------------------------- plan ----------------------------------------------------------------------------------- state ------------- members ----------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- dear -------------- this letter responds to a letter from your authorized representatives dated date submitted on behalf of the employer requesting rulings that the trust’s income is excludable from gross_income under internal_revenue_code irc sec_115 and the trust is not required by sec_6012 to file a federal_income_tax return the employer represents the facts as follows facts the employer is a political_subdivision of state it intends to establish the trust to fund a health and welfare plan providing post-employment health care benefits or medical insurance coverage for eligible retirees the assets of the trust consist solely of contributions from the employer and the derivative earnings no contributions will be made to the trust by employees former employees or other employers retirees of the employer their spouses and eligible dependents will be the exclusive beneficiaries of the trust the trust will be used plr-120376-12 solely to pay for the retiree health care benefits or medical insurance coverage provided under the plan as well as to cover the reasonable administrative expenses of the trust the trust is governed by the board_of trustees the board comprised of the members each member’s term of service ends when his term of office or employment ends the board holds all powers necessary to carry out the purpose of the trust including the investment management protection and control of the assets of the trust the board_of trustees may amend_or_terminate the trust if circumstances change if the purposes of the trust can no longer be accomplished or if necessary to conform to legal requirements the trust will terminate if the plan is terminated or discontinued such that the funding of benefits under the plan is no longer needed any assets of the trust remaining after termination will be distributed to the employer or its designee which shall be state a political_subdivision of state or an entity the income of which is excluded from gross_income under sec_115 law analysis - ruling_request sec_115 provides that gross_income does not include income derived from any public_utility or the exercise of any essential government function and accruing to a state or any political_subdivision thereof revrul_77_261 1977_2_cb_45 holds that income generated by an investment fund that is established by a state to hold revenues in excess of the amounts needed to meet current expenses is excludable from gross_income under sec_115 because such investment constitutes an essential_governmental_function the ruling explains that the statutory exclusion is intended to extend not to the income of a state or municipality resulting from its own participation in activities but rather to the income of an entity engaged in the operation of a public_utility or the performance of some governmental function that accrues to either a state or political_subdivision of a state the ruling points out that it may be assumed that congress did not desire in any way to restrict a state’s participation in enterprises that might be useful in carrying out projects that are desirable from the standpoint of a state government and that are within the ambit of a sovereign to conduct revrul_90_74 1990_2_cb_34 holds that the income of an organization formed funded and operated by political subdivisions to pool various risks eg casualty public liability workers’ compensation and employees’ health is excludable from gross_income under sec_115 because the organization is performing an essential_governmental_function in revrul_90_74 private interests neither materially participate in the organization nor benefit more than incidentally from the organization plr-120376-12 the trust will fund health care benefits and medical insurance coverage for retired employees and their eligible dependents providing health and welfare benefits to former public employees constitutes the performance of an essential_governmental_function within the meaning of sec_115 see revrul_77_261 and revrul_90_74 the income of the trust will accrue to the employer a political_subdivision of state no private interests will participate in or benefit from the operation of the trust other than as providers of goods or services the dedication of the assets of the trust for the exclusive benefit of retiree participants and their spouses and eligible dependents will satisfy an obligation of the employer to provide health and welfare benefits to its retired employees the benefit to retirees of the employer will be incidental to the public benefit upon dissolution no trust assets will be distributed to an entity other than a state a political_subdivision of a state or an entity the income of which is excluded from gross_income under sec_115 see revrul_90_74 law analysis - ruling_request sec_301_7701-1 of the procedure and administration regulations provides that the classification of organizations that are recognized as separate entities is determined under sec_301_7701-2 through -4 unless a provision of the code provides for special treatment of that organization sec_301_7701-4 provides in general that an arrangement will be treated as a_trust under the code if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and therefore are not associates in a joint enterprise for the conduct of business for profit contributions to the trust are to be used to pay retiree health benefits for eligible retired employees and their spouses and eligible dependents the board_of trustees is charged with the responsibility of protecting and conserving trust property for the benefit of the beneficiaries of the trust the beneficiaries of the trust cannot share in the discharge of the board's responsibility for the protection and conservation of property and therefore are not associates in a joint enterprise for the conduct of business for profit assuming that the trust is recognized as a separate_entity under sec_301_7701-1 we conclude that the trust is an ordinary_trust under sec_301_7701-4 sec_6012 provides that every trust having taxable_income for the tax_year or having gross_income of dollar_figure or more for that year regardless of the amount of taxable_income must file a return with respect to income taxes under subtitle a conclusions plr-120376-12 based solely on the facts and representations submitted on behalf of the employer we conclude that because the income of the trust will derive from the exercise of an essential_governmental_function and will accrue to a state or a political_subdivision thereof the trust’s income will be excludable from gross_income under sec_115 the trust will be classified as a_trust within the meaning of sec_7701 and sec_301_7701-4 because the income of the trust will be excludable from gross_income under sec_115 the trust will not be required by sec_6012 to file an annual income_tax return no opinion is expressed concerning the federal tax consequences under any irc provision other than the one specifically cited above this ruling concerns only the federal tax treatment of the trust’s income and may not be cited or relied upon as to any matter relating to the taxation of accident or health contributions or benefits in particular no opinion is expressed regarding whether contributions or premiums_paid on behalf of or benefits received by employees former employees retirees spouses dependents or others will or will not be taxable except as explicitly 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 who requested it sec_6110 provides that this ruling may not be used or cited as precedent in accordance with the power_of_attorney on file with this office your authorized representative will receive a copy of this letter sincerely kenneth m griffin chief exempt_organizations branch_tax exempt government entities enclosure 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 intl b06 plr-110175-09 date july legend ----------------------------------- ----------------------- ------------------------ ------------------ ---------------------- ------------------------ ---------------------------- -------------------------------------------------------- ------------------------------------- ----------------------- ------------------------- --------------------------- -------------------------- ------------------------- taxpayer parent accounting firm x y date date date date date dear ---- --------- this responds to the letter from your authorized representative dated date requesting a ruling that taxpayer be permitted an extension of time under treas plr-110175-09 reg sec_301_9100-1 and sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc including the shareholder’s consent statement in accordance with temp sec_1_921-1t and sec_1_992-2 to be effective as of date the rulings given in this letter are based on facts and representations submitted by taxpayer and other parties and accompanied by penalties of perjury statements this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process facts taxpayer is a domestic_corporation wholly owned by parent also a domestic_corporation parent manufactures x and holds intangible_property y used in the manufacture of x taxpayer was incorporated on date and was intended to be treated as an interest charge domestic_international_sales_corporation ic-disc from the date of inception both taxpayer and parent use the accrual_method of accounting with a calendar taxable year-end accounting firm is a certified public accounting firm that provides tax services to parent and advised parent on the benefits and requirements of forming and ic-disc accounting firm had internal correspondence by email on date of the need for taxpayer to file form 4876-a within days of date accounting firm believes it prepared a form 4876-a however due to a miscommunication between accounting firm and taxpayer a form 4876-a was not filed on date accounting firm prepared and taxpayer filed a form 1120-ic-disc for the tax_year ended date on date taxpayer received correspondence from the internal_revenue_service that indicated that a form 4876-a had not been filed taxpayer represents that it intended all along to qualify as a ic-disc and cites the filing of form 1120-ic-disc as evidence of this intent the period of limitations on assessment under sec_6501 has not expired for taxpayer’s taxable years for which the election is being made or any taxable years that would have been affected by the election had taxpayer made a timely election taxpayer has requested a ruling that grants an extension of time to file form 4876-a so that the form will be treated as timely filed within days after the beginning of its first taxable_year law and analysis sec_992 provides that an election by a corporation to be treated as a disc shall be made by such corporation for a taxable_year at any time during the 90-day plr-110175-09 period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate sec_992 provides that such election shall be made in such manner as the secretary shall prescribe and shall be valid only if all persons who are shareholders in such corporation on such first day of the first taxable_year for which such election is effective consent to such election temp sec_1_921-1t provides in part that a corporation electing disc status must file form 4876-a and that a corporation electing to be treated as a disc for its first taxable_year shall make its election within days after the beginning of that year temp sec_1_921-1t further provides that the rules contained in sec_1_992-2 b and b shall apply to the manner of making the election and the manner and form of shareholder consent to the election sec_1_992-2 provides that except as otherwise provided in paragraphs b and c of that section the election to be treated as a domestic_international_sales_corporation shall be valid only if the consent of every person who is a shareholder of the corporation as of the beginning of the first taxable_year for which such election is effective is on or attached to the form 4876-a when filed with the service_center sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion may 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 under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that a regulatory election is an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin for this purpose an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interest of the government in the present situation the election described in temp sec_1_921-1t is a regulatory election as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant plr-110175-09 taxpayer an extension of time provided that taxpayer satisfies the standards for relief set forth in sec_301_9100-3 based on the facts and representations submitted with taxpayer’s ruling_request we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file form 4876-a and the shareholder consent statement required by temp sec_1_921-1t and sec_1_992-2 such filing will be treated as a timely election to be treated as a ic-disc for taxpayer’s first taxable_year the granting of an extension in this ruling letter is not a determination that taxpayer is otherwise eligible to make the election to submit shareholder consent statements or to claim disc status or benefits see sec_301_9100-1 a copy of this letter_ruling should be filed with the form 4876-a and shareholder consent statement this ruling is directed only to the taxpayer that requested it sec_6110 provides that written determinations may not be used or cited as precedent except as expressly provided herein this ruling neither expresses nor implies any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this ruling letter pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representatives sincerely ________________ john e hinding senior technical reviewer office of associate chief_counsel international enclosure copy for purposes


department of the treasury internal_revenue_service p o box irs cincinnati oh number release date uil dear date date employer id number contact person id number contact telephone number form you must file tax years this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final because you don’t qualify as a tax-exempt_organization under sec_501 of the code donors can’t deduct contributions to you under sec_170 of the code you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we'll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action we'll also notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed determination_letter under sec_6104 of the code you should contact your state officials if you have questions about how this determination will affect your state responsibilities and requirements letter rev catalog number 47632s if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 sincerely stephen a martin director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 c redacted letter final adverse determination under sec_501 - no protest letter rev catalog number 47632s department of the treasury internal_revenue_service cincinnati oh legend b date c date d family name dear date date employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issues do you qualify for exemption under sec_501 of the code no for the reasons stated below facts you submitted form 1023-ez streamline application_for recognition of exemption under sec_501 of the internal_revenue_code on b form 1023-ez indicates you were formed as an unincorporated association on c you attest to have the necessary organizing document limiting your purposes to one or more exempt purposes within the meaning of sec_501 of the code you also attest your organizing document does not empower you to engage other than insubstantially in activities that are not in furtherance of one or more exempt purposes you attest your organizing document contains the dissolution provision required under sec_501 and the provisions required if necessary by sec_508 you attest to be organized and operated exclusively to further charitable purposes and you have not and will not conduct prohibited activities under sec_501 further within form 1023-ez you attest you will refrain from supporting or opposing candidates in political campaigns in any way ensure your net_earnings do not inure in whole or in part to the benefit of private shareholders or individuals not further non-exempt purposes such as purposes that benefit private interests more than insubstantially not be organized or operated for the primary purpose of conducting a trade_or_business not related to your exempt_purpose s e e e e not devote more than an insubstantial part of your activities attempting to influence legislation or if you made a sec_501 election not normally make expenditures in excess of expenditure limitations outlined in sec_501 not provide commercial-type_insurance as a substantial part of your activities your form 1023-ez was identified for technical review within part iii where you were asked to describe your mission and activities you stated you were formed to host a fundraiser for the five children of the d family after the loss of both of their parents to tragic circumstances within a year of each other the event will offset living_expenses for these orphans law sec_501 of the code provides in part for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable religious or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 states that in order to qualify under sec_501 of the code an organization must be both organized and operated exclusively for one or more exempt purposes if an organization fails to meet either the organizational or operational_test it is not exempt sec_1_501_c_3_-1 states that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 states that an organization is not operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest it must not be operated for the benefit of designated individuals or the persons who created it revrul_67_367 1967_2_cb_188 describes an organization whose sole activity was the operation of a scholarship plan for making payments to pre-selected specifically named individuals the organization established a plan whereby it entered into agreements with subscribers the subscribers deposited a certain amount of money with a designated bank the subscriber also named a specific child to be the recipient of the scholarship money the recipient received the scholarship around the time he or she were to begin college the organization did not qualify for exemption under sec_501 of the code because it was serving the private interests of its subscribers rather than serve public charitable and educational interests revproc_2018_5 provides that a favorable determination_letter or ruling will be issued to an organization only if its application and supporting documents establish that it meets the particular requirements of the section under which exemption from federal_income_tax is claimed a determination_letter or ruling on exempt status is issued based solely upon the facts and representations contained in the administrative record the applicant is responsible for the accuracy of any factual representations contained in the application in 326_us_279 66_sct_112 90_led_67 c b the supreme court of the united_states interpreted the requirement in sec_501 of the code that an organization be operated exclusively by indicating that an organization must be devoted to letter rev catalog number 47630w exempt purposes exclusively the presence of a single non-exempt purpose if more than insubstantial in nature will destroy the exemption regardless of the number and importance of truly exempt purposes wendy l parker rehabilitation foundation inc v commissioner of internal revenue 855-85x -in this case thirty percent of the petitioner’s income is expected to be expended for the benefit of wendy l parker the daughter of an officer and organizer of the corporation an adverse determination was made because a child of the founder and chief operating officer of the foundation is a substantial beneficiary of the services contemplated by the organization this constitutes inurement which is prohibited under code sec_501 and the regulations there under to qualify under c an organization inter alia must operate exclusively for exempt purposes and no part of its net_earnings can inure to the benefit of any private individual application of law you are not operated exclusively for one or more exempt purposes under sec_501 of the code as described in sec_1_501_c_3_-1 because you are operated for the private benefit of one family rather than operating to provide a public benefit despite the fact that funds are raised and expensed for orphaned children the beneficiaries are pre-selected and all from one family this serves private rather than public purposes you have not established that you are operated exclusively for one or more exempt purposes as required in sec_1_501_c_3_-1 your funding will be used to pay for the living_expenses of one family this results in a substantial private benefit to this family you have not established that you are organized and operated for the benefit of public rather than private interests as required in regulation c -1 d ii like the organization denied exemption in revrul_67_367 you have established a plan to award funds to members of a preselected group of individuals you were formed and operate to benefit one family and were formed to allow for the flow of funds directly to the d children your activities are the same as those described in wendy l parker rehabilitation foundation inc v commissioner you have set up a process whereby pre-named beneficiaries are able to collect funding regardless of whether the d children are related to any board members or meet the definition of needy they have been predetermined to receive your funding without documented cause making them a direct beneficiary and recipient of your income resulting in inurement as in better business bureau a single substantial non-exempt purpose is sufficient to prevent exemption although you plan to pay for the living_expenses of orphans you have the substantial purpose of providing funds only to a limited number of individuals from one family which results in private benefit because you failed to provide that your activities are exclusively charitable you have not established that you meet the requirements for exemption under sec_501 of the code as required by revproc_2018_5 conclusion based on the information submitted we conclude that you are not an organization described in sec_501 of the code because you are operated for the substantial private benefit of one family therefore you do not qualify for exemption under sec_501 letter rev catalog number 47630w if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include e e e e e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with anexplanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative one of the following declarations for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we’ll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we'll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address letter rev catalog number 47630w u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements enclosure publication letter rev catalog number 47630w


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person telephone number identification_number employer_identification_number release number release date date date uil no legend a b c llc dear sir or madam this is in reply to your request for a ruling concerning the proposed merger of c into llc facts you are an organization described in sec_501 of the internal_revenue_code and a public charity described in sec_509 and sec_170 your amended articles of incorporation state that your purposes are to conduct scientific research study train and disseminate information regarding the disease a and to provide indirect patient services to victims of a accordingly you provide research medical treatment and financial support regarding the cure and control of a and provide emotional support to persons diagnosed with a as part of your activities you have set up treatment centers known as b at major teaching and community hospitals throughout the country which provide diagnostic services and comprehensive treatment for people with a although you do not own or operate b physicians at b must follow your strict medical standards for treatment of patients in order for you to financially support b patients at b often volunteer for clinical trials for new treatment methods you maintain a patient registry to use in a research and most of the data is derived from b you own percent of c a for-profit corporation c’s sole activity is to operate and manage a national internet-based specialty pharmacy the pharmacy that sells a-related prescription pharmaceuticals a-related durable medical equipment and non-prescription a-related vitamins and a-related supplements collectively a-related products the pharmacy serves persons who have been diagnosed with a the pharmacy services a large percentage of the a patients in the united_states and is approved as a provider by many insurance plans and by most state medicaid programs you state that the pharmacy maintains a large inventory of a-related products that are either too specialized for other pharmacies to profitably stock or that are exclusive products sold only by the pharmacy the pharmacy also helps a patients receive insurance reimbursement for these pharmaceuticals the pharmacy maintains a website through which it carries on these activities you have provided documentation that many commercial pharmacies including internet-based pharmacies do not stock a-related products because many must be refrigerated delivered in cold packages and are too expensive to purchase and hold in inventory you also provided information that commercial pharmacies provide many a-related products only through special ordering resulting in substantial delays before they can be delivered to a patients you maintain that such delay poses substantial health risks to a patients who need these items on a timely basis you state that all a-related products are immediately available through the pharmacy by overnight shipment you maintain that commercial pharmacies often do not have the necessary expertise concerning all a-related products to serve a patients proficiently and expeditiously you also state that some commercial pharmacies have referred a patients to the pharmacy to buy a-related products all of the pharmacy’s sales are derived from the sale of a-related products although not required_by_law the pharmacy does not sell any a-related product without a doctor’s prescription the pharmacy does not sell non-medical items and sells certain a-related products exclusively the pharmacy receives nearly all of its prescription referrals from doctors working at b anyone diagnosed with a having a prescription may purchase a-related products from the pharmacy all a-related products the pharmacy sells that are required to have fda approval have such approval although not all of the products it sells require such approval the pharmacy assists a patients in obtaining third-party insurance payments and acts as an advocate for a patients to assist in obtaining insurance coverage of a-related products the pharmacy’s employees have the knowledge and expertise in dealing with insurance_companies to assist a patients so they can receive the a-related products quickly and in a cost-effective manner while an a patient seeks insurance coverage or other third-party reimbursement the pharmacy carries open accounts_receivable from a patients without charging interest the pharmacy also participates in patient assistance programs operated by several pharmaceutical companies that manufacture a-related products these programs provide free medications to individuals who meet specific criteria for assistance the pharmacy also provides free emergency supplies of a-related products to patients who may have periodic lapses in their insurance coverage the pharmacy makes charitable and educational contributions for a patients it provides direct financial assistance to help patients purchase their a-related products it also contributes educational grants and makes other contributions to support an annual conference on ways to treat and cure a the pharmacy contributes to drug research and clinical trials directed toward finding new pharmaceuticals to improve the quality of life of a patients recently you reviewed the structure and operation of c and the pharmacy based on this review you concluded that by realigning your corporate structure you would realize significant improvements in efficiency and productivity which would benefit a patients as a result you formed llc a limited_liability_company under state law of which you are the sole member you propose to merge c into llc thereafter llc will continue to operate the pharmacy previously operated by c in the same manner as c and will carry on the same charitable activities as c thus llc will sell only a-related products and a-related services exclusively to individuals who have been diagnosed with a and who are patients at a b you have represented that llc will not file form_8832 to elect under sec_301_7701-3 of the income_tax regulations to be classified other than as a disregarded_entity under sec_301_7701-3 of the regulations you have also represented and acknowledge that sec_337 of the code applies to the merger of c into llc and that following the merger you c and llc will comply with the requirements of sec_337 and sec_1_337_d_-4 of the regulations including the payment of any applicable federal income taxes rulings requested the merger of c into llc will not adversely affect your current status as an organization described in sec_501 of the code llc’s sales of a-related products will not generate unrelated_business_taxable_income to you under sec_512 of the code law sec_501 of the code provides an exemption from federal_income_tax for organizations described in sec_501 sec_501 of the code describes organizations that are organized and operated exclusively for one or more exempt purposes such as charitable educational or scientific purposes sec_1_501_c_3_-1 of the regulations states that the term charitable as used in sec_501 of the code is to be construed in its generally accepted legal sense sec_511 of the code imposes income_tax on the unrelated_business_taxable_income of organizations_exempt_from_taxation under sec_501 including those organizations described in sec_501 sec_512 of the code provides that the term unrelated_business_taxable_income means the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the deductions directly connected with the carrying on of such trade_or_business sec_513 of the code and sec_1_513-1 of the regulations state that the term unrelated_trade_or_business means any trade_or_business the conduct of which is not substantially related to the exercise or performance by the organization of its charitable educational or other exempt_purpose or function that constitutes the basis for its exemption under sec_501 of the code sec_1_513-1 of the regulations provides that for purposes of sec_513 of the code the term trade_or_business has the same meaning as in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or the performance of services sec_1_513-1 of the regulations also provide that these activities do not lose their identity as a trade_or_business merely because they carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which may or may not be related to the organization’s exempt purposes for example the regular sale of pharmaceutical supplies to the general_public by a hospital pharmacy does not lose its identity as a trade_or_business merely because the pharmacy also furnishes supplies to the hospital and patients of the hospital consistent with its exempt purposes or in compliance with sec_513 of the code sec_1_513-1 of the regulations provides that a trade_or_business is related to exempt purposes only where the conduct of the business activities has a causal relationship to the achievement of the organization’s exempt_purpose this regulations also provides that a trade_or_business is substantially related only if the causal relationship is a substantial one thus the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of the organization exempt purposes sec_301_7701-3 of the regulations provides that for federal tax purposes an entity with a single owner unless it otherwise elects is disregarded as an entity separate from its owner sec_301_7701-3 of the regulations provides that an such an entity may elect to be classified other than as a disregarded_entity under sec_301_7701-3 by filing form_8832 revrul_78_435 1978_2_cb_181 involved a hospital that provided various rehabilitation services to handicapped persons including those with hearing deficiencies the organization tested and evaluated the hearing of individuals with hearing deficiencies and recommended the types of hearing aids as may be necessary in each case individuals could purchase hearing aids from the organization if they did the organization fitted the hearing aids to insure maximum assistance to the individuals in the correction or alleviation of their hearing deficiencies this ruling concluded that the sale of hearing aids as an integral part of an organization’s program to test and evaluate individuals with hearing deficiencies contributed importantly to its tax-exempt purpose of promoting the health of such persons therefore under these circumstances the sale of hearing aids was substantially related to the purpose constituting the basis for the organization’s exemption and was not an unrelated_trade_or_business or business within the meaning of sec_513 of the code analysis ruling no you are an organization described in sec_501 of the code accordingly you provide research medical treatment and financial support regarding the cure and control of the disease a and provide emotional support to persons diagnosed with a following the proposed merger of c into llc you will continue to carry on these same activities in ruling no we conclude that llc’s pharmacy activities will not constitute an unrelated_trade_or_business within the meaning of sec_513 of the code because they will contribute importantly to the achievement of your tax-exempt purposes within the meaning of sec_1_513-1 of the regulations thus following the proposed merger your current activities together with llc’s pharmacy activities which will be treated as a component part of your activities will continue to further your tax-exempt purposes within the meaning of sec_1_501_c_3_-1 of the regulations therefore the proposed merger will not adversely effect your current status as an organization described in sec_501 of the code ruling no sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations_exempt_from_taxation under sec_501 including those organizations described in sec_501 sec_512 of the code provides that the term unrelated_business_taxable_income means the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the deductions directly connected with the carrying on of such trade_or_business the term unrelated_trade_or_business means any trade_or_business the conduct of which is not substantially related to the exercise or performance by the organization of its charitable educational or other exempt_purpose or function that constitutes the basis for its exemption under sec_501 of the code see sec_513 and sec_1_513-1 of the regulations the term trade_or_business has the same meaning as in sec_162 of the code it generally includes any activity carried on for the production_of_income from the sale of good or performance of services thus the sale_of_goods does not lose its identity as a trade_or_business merely because this activity is carried on within a larger context of activities that are related the organization’s exempt_purpose see sec_1_513-1 of the regulations sec_1_513-1 of the regulations provides that a trade_or_business is substantially related to an exempt organization’s tax-exempt purposes if contributes importantly to the accomplishment of the organization’s tax-exempt purposes for example in revrul_78_435 supra the sale of hearing aids by a tax-exempt healthcare organization which was an integral part of its program to test and evaluate individuals with hearing deficiencies contributed importantly to its tax- exempt_purpose of promoting the health of such persons following the proposed merger of c into llc you will be the sole member of llc therefore under sec_301_7701-3 of the regulations llc will be disregarded as an entity separate from you you have represented that llc will not file form_8832 to elect under sec_301_7701-3 to claim classification other than as a disregarded_entity under sec_301_7701-3 thus following the proposed merger all of llc’s activities will be treated as a component part of your activities following the proposed merger llc will continue to operate the pharmacy previously operated by c in the same manner as c and will carry on the same charitable activities as c thus llc will provide only a-related products and a-related services exclusively to individuals who have been diagnosed with a and who are patients at a b therefore although llc’s pharmacy will be treated as a component part of you it will not lose its separate identity and will constitute a separate trade_or_business sec_1_513-1 of the regulations your amended articles of incorporation state that your purposes are to conduct scientific research study train and disseminate information regarding the disease a and to provide indirect patient services to victims of a therefore similar to the organization in revrul_78_435 supra llc’s pharmacy will contribute importantly to the achievement of your tax-exempt purposes within the meaning of sec_1_513-1 of the regulations as a result the pharmacy will not constitute an unrelated_trade_or_business within the meaning of sec_513 of the code ruling sec_1 the merger of c into llc will not adversely affect your current status as an organization described in sec_501 of the code llc’s sales of a-related products will not generate unrelated_business_taxable_income to you under sec_512 of the code this ruling is based on the understanding there will be no material changes in the facts upon which it is based this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described this ruling is directed only to the organization that requested it sec_6110 of the code provides it may not be used or cited by others as precedent this ruling 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 disclose 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 if you have any questions about this ruling please contact the person whose name and telephone number are shown 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 steven b grodnitzky manager exempt_organizations technical group enclosure notice