of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date conex-140040-07 uil the honorable dennis j kucinich member u s house of representatives parmatown mall day drive parma ohio attention ----------------- dear congressman kucinich i am responding to your inquiry dated date on behalf of your constituent --- ------------------------------------- he wrote about the income_tax treatment of a bonus he received from the united_states army in exchange for his agreement to a reduction in his retirement benefits a career status bonus -----------------------------elected to receive a career status bonus of dollar_figure before his service in a combat_zone but actually received it during his service in a combat_zone the materials submitted indicate that -----------------------------believed based on advice from other military personnel that he would be able to exclude the career status bonus from compensation if it was actually paid while he was in the combat_zone the army payroll office did not treat the payment as combat_zone compensation and therefore excludable from his gross_income instead they included it in his gross_income and it was subjected to income_tax_withholding at the rate of while we understand ------- -------------------------------unhappiness with this result the actions of the army payroll office were correct and in accordance with the governing statute and regulations described below combat_zone compensation sec_112 of the internal_revenue_code a member of the military can exclude from his or her gross_income compensation received for active_service in the armed_forces_of_the_united_states in a combat_zone in order to be excludable from gross_income the payments must represent compensation_for active_service in a combat_zone see 179_f3d_123 4th cir in the waterman case a military member who accepted an early separation_from_service offer which included a special separation payment while serving in a combat_zone was not entitled to exclude the separation payment from his income because the payment did not fall within the definition of compensation received for active_service in a combat_zone instead the court determined that the payment represented an inducement to leave military service and thus it did not qualify as excludable combat_zone compensation the income_tax regulations provide that the time and place of payment are irrelevant in determining whether the member can exclude the compensation rather the time and place of entitlement to the compensation determine whether the compensation is excludible thus the member can exclude the compensation whether or not he or she receives it outside a combat_zone or in a year different from when he or she rendered the service for which the compensation is paid if the military member’s entitlement to the compensation fully accrued in a month during which the member served in a combat_zone for this purpose entitlement to compensation fully accrues when the member completes all actions required of him or her to receive the compensation income_tax regulations sec_1_112-1 conversely a military member cannot exclude the compensation if the member’s entitlement to the compensation fully accrued during a month in which he or she did not serve in a combat_zone even if the member received the compensation while serving in a combat_zone the regulations contain the following example to illustrate this point in july while serving outside a combat_zone an enlisted member voluntarily reenlisted in february of the following year the member while performing services in a combat_zone received a bonus as a result of the july reenlistment the reenlistment bonus cannot be excluded from income as combat_zone compensation although received while serving in the combat_zone since the member completed the necessary action for entitlement to the reenlistment bonus in a month during which the member had neither served in the combat_zone nor was hospitalized for wounds incurred while serving in a combat_zone regulations sec_1_112-1 example similarly if a member completes the necessary action for entitlement to a career status bonus during a month in which he or she did not serve in a combat_zone he or she cannot exclude the bonus from income even if he or she actually received it while serving in a combat_zone the department of defense dod financial management regulations provide that in order to be eligible for a career status bonus a member must submit an election form dd form not later than the date the member attain sec_15 years of active military service or months after the secretary of the military department concerned notifies the member that he or she is eligible to make an election for the bonus whichever is later additionally the dod financial management regulations provide that the career status bonus is considered to be excludable combat_zone compensation if the effective date of the election falls within a month in which the member is serving in a combat_zone if a member signs the election prior to attaining fifteen years of active military service the effective date of the election is the date when the member has attained fifteen years_of_service if the member signs the election on or after the date he or she attains fifteen years of active military service the effective date of the election is the date that the member signs it supplemental wage withholding -----------------------------also asked why the career status bonus was subjected to income_tax_withholding at a rate of the employment_tax regulations distinguish between regular wages paid for a payroll_period and supplemental_wages for purposes of income_tax_withholding supplemental_wages are wages paid in addition to regular wages for services an employee performs for the employer bonuses are supplemental_wages an employee’s remuneration may consist of both regular wages paid for a payroll_period and supplemental_wages such as bonuses paid for the same or a different period or without regard to a particular period employment_tax regulations sec_31 g - generally two procedures are available to an employer for withholding income taxes on a payment of supplemental_wages the aggregate procedure and optional flat rate withholding under the aggregate procedure employers calculate the amount of withholding due by aggregating the amount of supplemental_wages with the regular wages paid for the current payroll_period or the most recent payroll_period of the year of the payment and treating the aggregate as if it were a single wage payment for the regular payroll_period employment_tax regulations sec_31_3402_g_-1 optional flat rate withholding on supplemental_wages allows employers to disregard the amount of regular wages paid to an employee and the withholding_allowances claimed by an employee on form_w-4 employee’s withholding allowance certificate and use a flat percentage rate in calculating the amount of withholding the flat percentage rate currently in effect for supplemental_wages of dollar_figure or less i sec_25 employment_tax regulations sec_31 a i hope this information is helpful the general principles of law set forth in this letter are intended for informational purposes only and do not constitute a ruling see revproc_2007_1 sec_2 2007_1_irb_1 date if you have any questions please contact me at ----- --------------or --------------------of my office at ----- ------------- sincerely nancy j marks division counsel associate chief_counsel tax exempt government entities


internal_revenue_service number release date index number --------------------------- ------------------------ -------------------------------------------- in re ruling_request department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------- id no ----------- ----------------- telephone number ---------------------- refer reply to cc psi b04 plr-123619-15 date december taxpayer spouse trust date date date date date x y z --------------------------- ----------------------------- -------------------------------------------------- --------------------------- ------------------------ ------------------------ -------------------------- -------------------------- ---------- ---------- ---------- dear --------------------- this letter responds to your personal representative’s letter of date and subsequent correspondence requesting an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to allocate generation-skipping_transfer gst_exemption to transfers to a_trust on date spouse established an irrevocable_trust trust trust has gst potential on date spouse transferred dollar_figurex in cash to trust on date spouse transferred dollar_figurey in cash to trust on date spouse transferred dollar_figurez in cash to trust date sec_1 through are prior to date spouse died on date taxpayer and spouse retained an accountant to prepare their respective form sec_709 united_states gift and generation-skipping_transfer_tax returns to report the transfers and allocate gst_exemption to trust on the form sec_709 taxpayer and spouse consented to treat all gifts as made one-half by each pursuant to sec_2513 however on the form sec_709 the accountant failed to allocate taxpayer’s and spouse’s gst_exemption to the transfers plr-123619-15 the failure to allocate gst_exemption was discovered when taxpayer retained an attorney to revise her estate_planning documents taxpayer represents that no gst distributions or terminations have occurred and that she has sufficient gst_exemption to allocate to the portion of the transfers for which she is the transferor taxpayer is requesting an extension of time under sec_2642 and sec_301_9100-1 and sec_301_9100-3 to allocate gst_exemption to the portion of the transfers for which she is the transferor law and analysis sec_2513 provides generally that for gift_tax purposes if the partys consent a gift made by one spouse to any person other than his or her spouse shall for gift_tax purposes be considered as made one-half by the donor spouse and one-half by his or her spouse sec_2601 imposes a tax on every gst which is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 as in effect for the dates at issue provided that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual's estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 as in effect for the dates at issue provided that except as provided in sec_2642 if the allocation of the gst_exemption to any property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 or is deemed to be made under sec_2632 then the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter and such allocation shall be effective on and after the date of such transfer sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting plr-123619-15 comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted into law on date sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute sec_2652 provides that if under sec_2513 one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of such individual such gift shall be so treated for purposes of chapter notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the deemed_allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax plr-123619-15 professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to allocate her gst_exemption to the portion of the transfers for which she is the transferor the allocations will be effective as of the date of each transfer taxpayer should make the allocations on supplemental form sec_709 and file the forms with the internal_revenue_service cincinnati service center-stop cincinnati ohio taxpayer should attach a copy of this letter to each form except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries karlene m lesho by _____________________________ karlene m lesho senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes


internal_revenue_service uil number release date cc el ct-121851-98 ctmonica date memorandum for assistant regional_counsel criminal tax from barry j finkelstein assistant chief_counsel criminal tax subject identity theft and assumption deterrence act of this memorandum provides analysis and review of the identity theft and assumption deterrence act of and the impact it may have in the area of criminal tax law background on date president clinton signed into law the identity theft and assumption deterrence act of hereinafter referred to as the act the act amends u s c making it illegal to steal another person’s personal identification information with the intent to commit an unlawful act previously under u s c only the production or possession of false identification documents was prohibited now because of the rapid expansion of information_technology criminals may not require actual documents to assume an identity as amended the new statute directly addresses what congress perceived as a gap in the law and an impediment to law enforcement when prosecuting identity fraud cases a brief legislative_history on march sen jon kyl r-az first introduced in the senate the identity theft and assumption deterrence act referred to the senate committee on the identity theft and assumption deterrence act of pub_l_no 112_stat_3007 amending u s c see eg cong rec sec_9501 daily ed date statement of sen kyl s the identity theft and deterrence act 104th cong cc el ct-121851-98 judiciary the bill criminalized the theft of identity information and set out restitution provisions for individual victims of identity theft subsequently the bill was referred to the senate subcommittee on technology terrorism and government information which held legislative hearings on march and date testimony was received from the united_states secret service the federal trade commission and two victim advocates on date the subcommittee unanimously voted to amend the bill in the form of a substitute bill the amended bill was ordered reported out of the full senate committee on the judiciary by unanimous consent on date the senate passed the bill on date and then referred it to the house of representatives a proposed bill nearly identical to the senate bill had previously been introduced in the house of representatives by rep shadegg r-az on date this bill was amended to match the senate bill debated on the floor of the house of representatives and passed on date the bill was then referred to the senate where it passed on date finally the bill was signed into law by the president on date the act was widely supported by both the public and private sectors proponents included the department of justice federal bureau of investigation treasury_department united_states secret service federal trade commission united_states postal inspectors american bankers association associated credit bureaus visa and mastercard and the united_states public interest research group in contemplating the legislation the drafters relied upon a briefing report released by the general accounting office in may of entitled identity fraud information on id the testimony of the u s secret service indicated that law enforcement is currently frustrated that the unlawful use of personal information is not a crime since identity theft is often perpetrated by organized criminals who know these crimes can be committed with relative impunity s rep no pincite original cosponsors of the bill were senators kyl leahy hatch feinstein dewine faircloth harkin d’amato grassley and abraham id pincite h_r 105th cong identity theft and assumption deterrence act of pub_l_no 112_stat_3007 amending u s c s rep no pincite cc el ct-121851-98 prevalence cost and internet impact is limited dollar_figure the report documented the increasing rise of identity fraud in the united_states as well as the severe financial impact upon the victims of the crime and the national economy the vast amount of information contained in the report was accumulated from federal agencies and private entities such as the u s secret service social_security administration u s post office trans union corporation a national credit bureau and visa and mastercard most importantly it provided a definition for identity fraud which served as the nucleus for the creation of the act a the new u s c analysis in general terms identity fraud involves stealing another person’s personal identifying information eg social_security_number date of birth and mother’s maiden name criminals use such information to fraudulently establish credit run up debt or to take over existing financial accounts ggd-98-100br date pincite as amended u s c establishes the offense of identity theft by criminalizing the conduct of one who knowingly transfers or uses without lawful authority a means of identification of another person with the intent to commit or to aid or abet any unlawful activity that constitutes a violation of federal_law or that constitutes a felony under any applicable state or local law u s c a dollar_figure the act broadly defines means of identification to include a ny name or number that may be used alone or in conjunction with any other information to identify a specific individual including any- a name social_security_number date of birth official state or government issued driver’s license or identification_number alien registration number government passport number employer or taxpayer_identification_number b unique biometric data such as fingerprint voice print retina or iris image or other unique physical representation ggd-98-100br date the act also includes a provision making a ny person who attempts or conspires to commit any offense under this section subject_to the same penalties as those prescribed for the offense the commission of which was the object of the attempt or conspiracy u s c f cc el ct-121851-98 c unique electronic identification_number address or routing code or d telecommunication identifying information or access device as defined in section e id at d legislative intent demonstrates that this definition is a key aspect of the new law for it is intended to capture the varieties of individual identification information technologically feasible which can be compromised and criminally transferred or used the definition is intended to incorporate other means of identification which may be developed in the future but are not currently available s rep no pincite from a law enforcement perspective the amended statute now allows cases to be prosecuted which may involve fraud occurring in connection with identification informationdollar_figure under the old statute only fraud occurring in connection with identification documents was a crime this forced law enforcement agencies to investigate fraud cases only after the stolen identity information had been used many times indirect charges involving mail fraud wire fraud or money laundering would be prosecuted when in actuality it was the theft of an individual’s personal information which was the impetus for the crimedollar_figure now based on the new statute a more pro- active approach to combating identity theft may be employed in terms of penalties the transfer or use of one or more means of identification which results in the individual committing the offense obtaining anything of value aggregating dollar_figure or more during any one year period is punishable by a fine it is important to note that the act contains a rule_of construction which seeks to clarify that each means of identification in any one identification or fake identification document can not be treated as a separate offense under u s c a see eg cong rec sec_9504 daily ed date statement of sen hatch cc el ct-121851-98 or up to years of imprisonment or bothdollar_figure in the event that the use or transfer of a person’s means of identification does not meet these monetary and time requirements then a fine or up to years of imprisonment or both is authorizeddollar_figure enhanced penalties are also available if the identity theft offense is committed to facilitate a drug trafficking crime in connection with a crime of violence to facilitate an act of international terrorism or after a prior conviction of violating the new statute becomes finaldollar_figure in addition a provision for criminal forfeiture was enacted which allows for the forfeiture to the united_states of any personal_property used or intended to be used to commit the offense of identity theft u s c b finally the act directs the united_states sentencing commission to review and amend as appropriate the federal sentencing guidelines and policy statements which relate to u s c as amendeddollar_figure in an effort to assist the victims of identity theft the act directs the federal trade commission to establish a centralized complaint and consumer education service not later than one year after enactmentdollar_figure this organization will receive and log complaints of individuals who demonstrate a reasonable belief that one or more of their means of identification have been stolen provide information to these individuals and refer complaints to law enforcement authorities and to the three major national credit reporting agencies b application to criminal tax the following analysis is provided to demonstrate how the identity theft and assumption deterrence act of may impact the area of criminal tax law the examples and factual u s c b id as defined in u s c a as defined in u s c sec_924 as defined in u s c u s c b u s c sec_4 id at sec_5 cc el ct-121851-98 scenarios used are only illustrative and are not to be construed as conclusive of the act’s application to criminal tax one area in which the act should have immediate and significant impact with respect to criminal tax law is in the filing of false claims for tax refunds u s c makes it illegal to conspire to defraud the united_states with respect to claims while u s c criminalizes the making or presentment of a claim upon the united_states which is known to be false fictitious or fraudulentdollar_figure the filing of a false tax_return pursuant to a scheme to obtain unjustified tax refunds has been held to establish a violation united_states v miller 545_f2d_1210 ndollar_figure 9th cir cert_denied 430_us_930 see eg 568_f2d_1091 5th cir defendant filed two returns one real and one false claiming refunds on both - the defendant was not entitled to any refund and 409_f2d_814 8th cir multiple filing of false tax returns for actual individuals with refund checks mailed to an address controlled by the defendant the fact pattern from kercher demonstrates the clearest example of how the unauthorized use of another person’s personal identity information used in order to file false income_tax returns would violate the act and in kercher the defendant was convicted of violating u s c for presenting to the department of the treasury fraudulent claims for tax refunds the claims were in the form of tax returns for ten actual individual taxpayers in the previous tax_year the taxpayers had authorized the defendant to prepare their tax returns however for the following year the taxpayers did not authorize the defendant to prepare their tax returns without their knowledge or authority the defendant used their names and personal information to file 1040a tax returns which claimed refunds the returns were processed by the internal_revenue_service and the refunds were sent to addresses controlled by the defendant by unlawfully using their names the defendant knowingly used a means of identification of another person with the intent to commit a violation of law clearly this conduct would substantiate a violation of the identity theft and assumption deterrence act of another area of criminal tax law where the act may have far reaching ramifications is that of money laundering in violation of u s c in general terms if a bank account is established through the unauthorized use of another person’s name social u s c provides that w hoever makes or presents to any person or officer in the civil military or naval service of the united_states or to any department or agency thereof any claim upon or against the united_states or any department or agency thereof knowing such claim to be false fictitious or fraudulent shall be imprisoned for not more than five years and shall be subject_to a fine in the amount provided in this title cc el ct-121851-98 security number or other means of identification and it is then used as a depository to conceal money which represents the proceeds of some unlawful activity then the money laundering statute as well as the act will have been violated the recent case of 159_f3d_401 9th cir demonstrates a more specific example of how the act may be implicated in the realm of money laundering in akintobi the defendants obtained credit cards stolen from the mails and proceeded to make purchases and draw cash advances until the available credit limits were exhausted then using the stolen credit cards and illegally obtained credit information on the cardholders the defendants opened checking accounts in the cardholders’ names subsequently they withdrew the money used to open the checking accounts leaving zero balances finally the defendants used blank starter checks issued to them when the checking accounts were opened to pay down the balances on the original stolen credit cards in a multi-count indictment the defendants were charged with money laundering inter alia in violation of u s c a a i the ninth circuit ruled that the fraudulently obtained starter checks could be proceeds under u s c a a i and that submission of these checks to credit card companies in order to pay down illegally obtained credit card accounts constituted money laundering in terms of identity theft by establishing checking accounts in the cardholders’ names with the intent to commit a violation of law the actions of the defendants would have easily justified an added charge of violating the new act conclusion the identity theft and assumption deterrence act of is an effective and preemptive weapon to be employed against the crime of identity fraud in an age of technological innovation where the latest computer and scientific inventions are exploited by criminal minds the act permits law enforcement authorities to combat identity fraud on an equal playing field if you have any further questions regarding the identity theft and assumption deterrence act of its new implications or legislative_history please contact chris monica of the criminal tax_division on


number release date id office uilc cca_2009012114243853 ---------------------------- from ---------------- sent wednesday date pm to --------------------- cc subject re code sec_7508 question hello --------- in response to your question facts trust fund recovery penalties tfrp were assessed in ------- and ------- against a service member and spouse both were determined to be responsible parties in a business venture that closed over a year prior to the service member’s first deployment in late ------- under sec_7508 the service member qualifies for assessment and collection postponement for each period of combat_zone service and the following days does sec_7508 relief include already-assessed tfrp liabilities should this relief apply to the spouse of a combat_zone taxpayer response employment_and_excise_taxes were added to the category of taxes and related acts included under sec_7508 by the katrina emergency tax relief act ketra of p l only those employment and excise tax-related assessment and collection activities falling on or after the effective date of this act date can be postponed under sec_7508 as the assessments in this case were made in ------- and ------- collection activities correctly continue to run from the assessment_date until any period of combat_zone deployment beginning on or after date in general tfrp assessments are included under employment_taxes and are therefore included in sec_7508 relief tfrp assessment and collection activities are postponed in accordance with for both the combat_zone taxpayer and spouse as of date analysis public law extended sec_7508 relief to the spouse of any qualified combat_zone taxpayer there are only two statutory exclusions for the spousal application of sec_7508 time extensions are not applicable to a spouse for the period in which a combat_zone service member is hospitalized inside the united_states and time extensions are not applicable to a spouse for any_tax year more than two years after the termination of combatant activities in any combat_zone other than that designated during the vietnam conflict in any other circumstance the spouse of a qualifying combat_zone taxpayer receives equal sec_7508 postponements tfrp liabilities are included in sec_7508 relief through the katrina emergency tax relief act of a broad interpretation as is typically used when applying this section for the benefit of taxpayers serving in a combat_zone includes tfrp liabilities in employment_taxes irm instructs service employees to cease both assessment and investigative activities relating to tfrp liabilities when handling combat_zone taxpayer accounts an important distinction must be made however between employment and excise liabilities incurred prior to and after the effective date of the katrina emergency tax relief act of date irm states that for purposes of employment and excise liabilities penalties and interest will accrue for payments due before date in this situation sec_7508 has no effect on the accrual of interest and penalties or any collection efforts made prior to date with respect to tfrp liability sec_7508 relief is available to the combat_zone taxpayer and spouse only with respect to interest penalties and other actions occurring during combat_zone service after date if any tfrp or other employment or excise tax-related assessments are made on or after that date those assessment and subsequent collection activities are postponed for the combat_zone taxpayer and spouse for the period of combat_zone service and the following days please let me know if you have any further questions on this matter -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- ----------------


cca-06120638-15 id uilc number release date from------------------ sent fri pm to --------------------- cc subject sec_7425 notice by ups or fedex ok - gl-107155-15 you requested our views on whether notices of non-judicial sale may be delivered under sec_7425 by private delivery services such as fedex and ups in lieu of united_states certified and registered mail in your case the notice of sale was delivered by up sec_2nd day air to the building mailroom for the address listed in publication on date for a non-judicial sale held on date subsequently advisory received an application_for a release of the right_of_redemption based on prior counsel advice advisory has taken the position that the release should not be granted advisory concludes that the right_of_redemption didn’t arise and the property was sold subject_to the nftls because the notice of non-judicial sale wasn’t delivered in the required manner you requested our views on whether this conclusion reflects our current position for the reasons stated below we conclude that the ups delivery did not satisfy sec_7425 in this case under sec_7425 notice of sale must be given per regulations prescribed by the service in writing by registered or certified mail or by personal service not less than days prior to sale we have always interpreted registered or certified mail as referring to the registered or certified mail services provided by the united_states postal service usps and not to refer to any alternative mailing services sec_301_7425-3 a provides that t he provisions of sec_7502 relating to timely mailing treated as timely filing apply in the case of notices required to be made under this paragraph sec_7502 allows the service to define within certain parameters designated delivery services that serve as equivalents to united_states mail service also provides that the service may provide a rule similar to the rule_of paragraph related to regular mail with respect to any service provided by a designated_delivery_service which is substantially equivalent to united_states registered or certified mail sec_7502 in addition sec_301_7502-1 provides that the commissioner may in guidance published in the internal_revenue_bulletin see sec_601_601 of this chapter prescribe procedures and additional rules to designate a service of a pds for purposes of the postmark rule_of sec_7502 it sec_7502 does not apply here with regard to defining registered and certified mail for purposes of sec_7425 the service has never provided rules pursuant to sec_7502 the applicable revenue_procedure regarding designation of delivery services specifically states that the designation rules in the revenue_procedure apply only with respect to regular mail not for purposes of sec_7502 related to delivery services to be deemed equivalent to united_states registered or certified mail revproc_97_19 sec_3 furthermore the service has not to date designated any services as equivalent to united_states registered and certified mail see notice_2015_38 date as such even if sec_7502 could be construed to expand the definition of registered and certified mail for purposes of sec_7425 no private delivery services are currently treated under sec_7502 as equivalent to registered or certified mail in addition we considered whether delivery by private delivery services satisfies the requirement of delivery by personal service neither the code nor the regulations specifically indicate whether delivery by private delivery services satisfies the requirement of delivery by personal service in fact by personal service is not defined in the code or in the regulations nor is it currently addressed in the internal_revenue_manual publication instructions for preparing a notice of nonjudicial_sale of property and application_for consent to sale repeats the code in our view personal service means delivery by the submitter of the notice not a third party the code section anticipates that any third-party delivery must be by usps certified or registered mail in your case the ups delivery did not satisfy the personal service or the registered certified mail requirement if you would like to discuss this further please contact me


t c summary opinion united_states tax_court magdalena pacheco petitioner v commissioner of internal revenue respondent docket no 7183-05s filed date ned leiba for petitioner daniel w layton for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated all section references are to the internal_revenue_code code as in effect for the years at issue and all rule references are to the tax_court rules_of_practice and procedure petitioner seeks review of respondent’s notice_of_determination dated date denying her relief from joint_and_several_liability under sec_6015 and f for and after a concession the issues for decision are whether the doctrine_of res_judicata under sec_6015 bars petitioner from raising relief under sec_6015 for and and if not whether petitioner is entitled to relief from joint_and_several_liability under sec_6015 for and and whether petitioner is entitled to relief from joint_and_several_liability under sec_6015 for 1the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_734 repealed sec_6013 and replaced it with sec_6015 sec_6015 applies to any_tax arising after date and to any liability for tax arising on or before date and unpaid as of that date rra sec_3201 112_stat_740 sec_6015 therefore applies in this case 2petitioner concedes that she is not entitled to relief from joint_and_several_liability under sec_6015 for and 3the consolidated appropriations act publaw_106_544 app g sec a a stat 2763a-640 enacted on date redesignated subsec g of code sec_6015 as subsec h and inserted the language of code sec_6015 in new subsec g the effective date of this change is the date of enactment id sec f stat 2763a-643 background the stipulated facts and the exhibits received into evidence are incorporated herein by reference at the time the petition was filed petitioner resided in stockton california juan pacheco mr pacheco petitioner’s spouse was born in mexico he died in california on date mr pacheco completed the third grade in mexico and he did not speak read or write english petitioner was also born in mexico she graduated from high school in mexico and she came to the united_states in mr pacheco obtained a california farm labor contractor’s license and started a farm labor contracting business in in mr pacheco lost his license and in that same year petitioner started to work as a farm labor contractor in petitioner obtained a california farm labor contractor’s license and the name of mr pacheco’s former business was changed to magdalena pacheco farm labor contractor contractor during and petitioner and mr pacheco operated contractor in stockton california operators of farms or vineyards would contact contractor when they needed temporary farm labor contractor would provide the requested workers and the farm or vineyard would pay contractor which would in turn pay the workers during petitioner also worked as a food packaging machine operator at safeway markets taxable years and examination of the returns petitioner and mr pacheco filed jointly for and form sec_1040 u s individual_income_tax_return prepared by a paid preparer in the returns were selected for examination and the case was assigned to revenue_agent patrick lunny ra lunny during the examination process ra lunny interacted only with petitioner or with one of her representatives it is not disputed that ra lunny never met with or spoke with mr pacheco during the audit because mr pacheco did not speak english ra lunny determined that petitioner and mr pacheco had unreported income from contractor on the basis of the third party information returns that the farmers filed with the internal_revenue_service irs ra lunny also determined that certain business_expense deductions for contractor were not substantiated on the schedules c profit or loss from business for and on date respondent issued to petitioner and mr pacheco a statutory_notice_of_deficiency determining for and respectively deficiencies in federal income taxes of dollar_figure and dollar_figure and sec_6662 accuracy-related_penalties of dollar_figure and dollar_figure tax_court proceeding on date petitioner and mr pacheco petitioned the court docket no seeking a redetermination of the deficiencies and the sec_6662 accuracy-related_penalties for and prior proceeding the court entered a stipulated decision in the prior proceeding on date with respect to the deficiencies and penalties for and and no appeal was filed the parties have stipulated that relief under sec_6015 was not raised as an issue at any time during the prior proceeding taxable_year petitioner and mr pacheco filed jointly for a form_1040 prepared by a paid preparer ra lunny subsequently expanded the scope of his audit to include on date petitioner and mr pacheco consented to the assessment of an additional tax_liability of dollar_figure plus interest for no penalties were assessed collection action on date petitioner filed a petition for levy action with the court docket no 9654-02l in response to a notice_of_determination concerning collection action s under sec_6320 and or dated date for and the court entered a decision on date in docket no 9654-02l pursuant to a stipulation between petitioner and respondent relating to the collection of petitioner’s income_tax liabilities for request for innocent spouse relief respondent received from petitioner on date a form_8857 request for innocent spouse relief in which petitioner requested relief from joint_and_several_liability under sec_6015 and f for and a notice_of_determination concerning your request for relief from joint_and_several_liability under sec_6015 notice_of_determination denying petitioner’s request was issued to petitioner on date present proceeding on date petitioner filed with the court a petition seeking a review of the notice_of_determination denying her request for relief from joint_and_several_liability under sec_6015 for and respondent filed a motion to file answer out of time to allege the application of res_judicata under sec_6015 for and petitioner filed an objection and respondent filed a response to petitioners’s objection a hearing was held and the court granted respondent’s motion to file an answer out of time to allege the application of sec_6015 respondent subsequently amended his answer without objection from petitioner to allege actual knowledge of the items giving rise to the deficiencies for the years in issue discussion generally married taxpayers may elect to file a joint federal_income_tax return sec_6013 after making the election each spouse is jointly and severally liable for the entire tax due sec_6013 sec_6015 provides however that a spouse may seek relief from joint_and_several_liability on a joint_return under certain circumstances a spouse requesting spouse may seek relief from joint_and_several_liability under sec_6015 or if eligible may allocate liability according to sec_6015 if relief is not available under sec_6015 or c the requesting spouse may seek equitable relief under sec_6015 sec_6015 114_tc_276 petitioner claims that she is entitled to relief from joint_and_several_liability under sec_6015 for and respondent argues that petitioner’s claim for relief under sec_6015 with respect to and is barred by the doctrine_of res_judicata by operation of sec_6015 respondent contends that sec_6015 applies because the court entered a final_decision for and in the prior proceeding petitioner participated meaningfully in the prior proceeding and petitioner could have raised relief under sec_6015 in the prior proceeding since the stipulated decision entered in the prior proceeding did not include sec_6015 does not bar petitioner’s claim for relief under sec_6015 from joint_and_several_liability for application of sec_6015 to and under sec_6015 the requesting spouse bears the burden_of_proof except where that section otherwise provides see rule a 119_tc_306 affd 101_fedappx_34 6th cir 118_tc_106 affd 353_f3d_1181 10th cir see also sec_6015 c d c sec_6015 does not provide that the commissioner bears the burden_of_proof under sec_6015 monsour v commissioner tcmemo_2004_ the requesting spouse therefore bears the burden_of_proof under sec_6015 huynh v commissioner tcmemo_2006_180 the doctrine_of res_judicata may preclude a requesting spouse from obtaining relief under sec_6015 see sec_6015 generally where a court of competent jurisdiction enters a final judgment on the merits of a cause of action the parties to the action are bound by every matter that was or could have been offered and received to sustain or defeat the claim 333_us_591 121_tc_43 because federal income taxes are determined on an annual basis each year is a separate cause of action and res_judicata is applied to bar subsequent proceedings involving the same tax_year commissioner v sunnen supra pincite 91_tc_14 tax_court decisions reached by agreement constitute a final judgment on the merits for purposes of res_judicata see 10_f3d_305 5th cir trent v commissioner tcmemo_2002_285 the court entered a stipulated decision in the prior proceeding with respect to the tax_liabilities for and the decision is final because petitioner and mr pacheco did not appeal the stipulated decision within the requisite time under the statute see sec_7481 sec_7483 sec_6015 however modifies the common_law doctrine_of res_judicata with regard to claims under sec_6015 sec_6015 provides in relevant part sec_6015 credits and refunds -- res_judicata -- in the case of any election under subsection b or c if a decision of a court in any prior proceeding for the same taxable_year has become final such decision shall be conclusive except with respect to the qualification of the individual for relief which was not an issue in such proceeding the exception contained in the preceding sentence shall not apply if the court determines that the individual participated meaningfully in such prior proceeding therefore a requesting spouse cannot make an election under sec_6015 or c for any taxable_year that is the subject of a final court decision unless the requesting spouse’s qualification for relief under sec_6015 or c was not an issue in the prior court_proceeding and the requesting spouse did not participate meaningfully in the prior proceeding 116_tc_272 sec_1_6015-1 income_tax regs imposes an additional requirement for the application of sec_6015 the requesting spouse must show that she could not have raised relief under sec_6015 in the prior proceeding id sec_1 e income_tax regs provides e res_judicata and collateral_estoppel --a requesting spouse is barred from relief from joint_and_several_liability under sec_6015 by res_judicata for any_tax year for which a court of competent jurisdiction has rendered a final_decision on the requesting spouse’s tax_liability if relief under sec_6015 was at issue in the prior proceeding or if the requesting spouse meaningfully participated in that proceeding and could have raised relief under sec_6015 taxable years and are the subject of a final court decision and respondent agrees that petitioner’s qualification for relief was not raised as an issue in the prior proceeding the parties dispute whether petitioner could have raised relief under sec_6015 in the prior proceeding and whether she participated meaningfully in the prior proceeding whether petitioner could have raised relief under sec_6015 in the prior proceeding sec_6015 encompasses three types of relief subsection b provides full or apportioned relief from joint_and_several_liability subsection c provides proportionate tax relief to divorced or separated taxpayers and subsection f provides equitable relief from joint_and_several_liability in certain circumstances if neither subsection b nor c is applicable noons v commissioner tcmemo_2004_243 petitioner argues that she could not have raised relief under sec_6015 in the prior proceeding because relief under subsection c was not available to her until the death of mr pacheco on date respondent counters that petitioner could have raised relief under subsections b and f respondent argues that the language under sec_1_6015-1 income_tax regs could have raised relief under sec_6015 means that if petitioner could have raised relief under any of subsections b c and f at any point in the prior proceeding the requirement is met 4for purposes of determining eligibility for relief under sec_6015 a widow or widower is treated as a taxpayer who is no longer married see 118_tc_106 affd 353_f3d_1181 10th cir rosenthal v commissioner tcmemo_2004_89 in the prior proceeding petitioner and mr pacheco were represented by arthur leiba mr leiba mr leiba submitted a statement in lieu of testimony at trial admitting that before the death of mr pacheco he was generally aware of innocent spouse relief but not specific provisions to the best of my knowledge and recollection if petitioner benefitted from the tax returns she couldn’t take advantage of it before the death of mr pacheco relief under subsection c was not yet available to petitioner nevertheless petitioner could have raised relief under subsections b and f but her counsel in his judgment decided not to do so upon the death of mr pacheco on date however petitioner became eligible to elect relief under subsection c at the time the prior proceeding was still pending the proper time to elect relief under sec_6015 is at any point after a deficiency has been asserted by the irs see vetrano v commissioner supra pincite ‘this is the least disruptive for both the taxpayer and the irs since it allows both to focus on the innocent spouse issue while also focusing on the items that might cause a deficiency ’ id quoting h conf rept pincite it also permits every issue including the innocent spouse issue to be resolved in a single administrative and judicial process id moreover in vetrano this court held that once the taxpayer became eligible for sec_6015 relief under a particular subsection she had to file an election id pincite if a taxpayer failed to make an election in the first proceeding and attempted to make an election in a subsequent proceeding after the first proceeding became final she would be barred by res_judicata from making an election in the subsequent proceeding id pincite petitioner argues that she could not have raised relief under subsection c in the prior proceeding because her counsel at the time did not inform her that such relief was available and the and taxes were definitively settled before mr pacheco’s death petitioner claims that she was not informed by her counsel that she could have sought relief under subsection c and that she would not have signed the stipulated decision had she known mr leiba acknowledged in his statement that after mr pacheco died i don’t remember considering innocent spouse relief i didn’t reevaluate the situation after he died because they both agreed to the liability and there was no dispute the quality of advocacy and the actual knowledge of the litigants are not special circumstances in determining whether a prior judgment is a bar in subsequent litigation trent v commissioner tcmemo_2002_285 therefore mr leiba’s failure to inform petitioner that she could seek relief under subsection c is insufficient to overcome the bar of res_judicata petitioner’s counsel contends that a month before mr pacheco’s death petitioner and mr pacheco had definitively settled the taxes for and with ra lunny on date ra lunny completed the tax examination_report and the file was sent to the appeals_office petitioner’s counsel argues that the prior proceeding effectively concluded at the point when the file left ra lunny’s office therefore petitioner did not have an opportunity to raise relief under subsection c in the prior proceeding ra lunny testified that his role was to make recommendations and it was up to the appeals_office to make the final call on whether to accept them the court after reviewing the evidence presented by petitioner and respondent agrees with respondent that the prior proceeding was not final at the time the file left ra lunny’s office petitioner could have raised relief under subsection c in the prior proceeding at any time between mr pacheco’s death on date and the entry of the decision document on date even after the decision has been entered under rule petitioner could have moved to vacate the decision within days after the decision had been entered petitioner however did not raise relief under subsection c during the prior proceeding whether petitioner participated meaningfully in the prior proceeding petitioner bears the burden of proving by a preponderance_of_the_evidence that she did not participate meaningfully in the prior proceeding see monsour v commissioner tcmemo_2004_ at trial petitioner’s counsel conceded that petitioner participated meaningfully in the prior proceeding relating to and up to april of or about a month before the death of mr pacheco petitioner’s counsel argued that after april of petitioner did not participate meaningfully because the remaining actions that were required to conclude the proceeding for and were ministerial court cases have not clearly defined meaningful participation in all respects huynh v commissioner tcmemo_2006_180 nevertheless the court has held that signing court documents and participating in settlement negotiations are indicators of meaningful participation id monsour v commissioner supra it is not disputed that petitioner communicated with respondent on numerous occasions in the prior proceeding in person and by phone to discuss settlement and to voluntarily sign court documents the court on the evidence offered finds that petitioner participated meaningfully throughout the prior proceeding exception from res_judicata absent an exception from res_judicata petitioner is barred under sec_6015 from seeking relief under subsection c in this proceeding petitioner’s counsel cites 998_f2d_238 5th cir revg tcmemo_1991_87 arguing that the court_of_appeals for the fifth circuit relied on common sense to craft an exception to ameliorate the strict application of res_judicata this case is not bound by the law of the fifth circuit and in any event smaczniak is distinguishable in smaczniak the commissioner voluntarily redetermined the taxpayer’s liability after a final_decision was entered id pincite the court_of_appeals held that this was akin to a subsequent modification of the significant facts so as to render inapplicable the effect of res_judicata for the same taxable years in a subsequent proceeding id pincite in the prior proceeding however respondent did not voluntarily redetermine petitioner’s liabilities after the entry of the final_decision therefore smaczniak is not applicable the court has considered the remaining arguments raised in petitioner’s trial memorandum and supplement trial memorandum and finds that they are unconvincing the court has no authority to override sec_6015 or vary its terms see vetrano v commissioner t c pincite accordingly the court concludes that sec_6015 precludes petitioner from seeking relief from joint_and_several_liability under sec_6015 for and application of sec_6015 relief for upon the satisfaction of certain conditions sec_6015 relieves the requesting spouse of liability for the items making up the deficiency that would have been allocated solely to the nonrequesting spouse if the spouses had filed separate tax returns for the taxable_year sec_6015 a 282_f3d_326 5th cir affg 115_tc_183 117_tc_279 sec_6015 applies only to taxpayers who are no longer married are legally_separated or have been living apart for over a 12-month_period sec_6015 a widow or widower is treated as a taxpayer who is no longer married see jonson v commissioner t c pincite respondent received from petitioner a form_8857 request for innocent spouse relief for on date the partie sec_5under sec_6015 an election for relief from joint_and_several_liability under sec_6015 is to be made at any time after a deficiency is asserted but not later than years after the date on which the commissioner has begun collection action respondent has not raised any issue as to the timeliness of petitioner’s election under sec_6015 stipulated that petitioner is entitled to seek relief under sec_6015 for relief under sec_6015 is not available if the commissioner demonstrates that the requesting spouse had actual knowledge at the time the return was signed of any item giving rise to a deficiency or portion thereof that is not allocable to such individual sec_6015 121_tc_73 116_tc_189 petitioner has the burden of proving which items would not have been allocated to her if the spouses had filed separate returns see mora v commissioner supra pincite levy v commissioner tcmemo_2005_92 while the taxpayer generally has the burden_of_proof in order to preclude relief under sec_6015 the commissioner must carry the burden of demonstrating by a preponderance_of_the_evidence that the requesting spouse had at the time she signed the return actual knowledge of any item giving rise to a deficiency rule a culver v commissioner supra pincite 114_tc_333 sec_1_6015-3 income_tax regs item means an item_of_income deduction or credit cheshire v commissioner supra pincite the items giving rise to the deficiency are unreported income from farmers who paid contractor for the workers provided and disallowed business_expense deductions for failure to provide substantiation the commissioner must show that the requesting spouse had an actual and clear awareness of omitted income cheshire v commissioner supra pincite n cook v commissioner tcmemo_2005_22 rowe v commissioner tcmemo_2001_325 knowledge of the item includes knowledge of the receipt of the income sec_1_6015-3 income_tax regs at trial petitioner admitted that she cashed or deposited the checks from the farmers representing the omitted income on her return therefore petitioner had actual knowledge of the omitted income in the case of an erroneous deduction knowledge of the item means knowledge of the facts that made the item not allowable as a deduction sec_1_6015-3 income_tax regs see rowe v commissioner supra citing 116_tc_198 at trial petitioner testified that she handled the receipts made deposits wrote checks reviewed bank statements and kept track of income and expenses for contractor the business account was not held jointly but was held solely in petitioner’s name doing business as contractor petitioner was also responsible for dealing with the bookkeeping company that kept track of contractor’s payroll mr pacheco was not involved in managing the finances of contractor because his education was limited petitioner’s counsel agrees that petitioner was involved in the business he argues however that the individual adjustments were small and that petitioner could not have actually known of every single transaction that had occurred at the time she signed the return under counsel’s reasoning petitioner would be required to have a tax professional’s level of expertise for the court to find actual knowledge under sec_6015 in cheshire v commissioner t c pincite the court rejected this knowledge standard petitioner testified that she reviewed all canceled checks for contractor separated the checks into business related or personal and made notes of what each check was for petitioner agreed that she knew whether a given expense was business or personal therefore she had knowledge of the facts as to whether an item was allowable as a deduction see sec_1 c i b income_tax regs these admissions are sufficient for the court to find that petitioner had actual knowledge of the pertinent items at the time that she signed the return in addition respondent asserts that petitioner has held herself out as the owner of contractor in support respondent produced copies of form_943 employer’s annual tax_return for agricultural employees for and form 940-ez employer’s annual federal unemployment futa_tax return for and and state of california employment development department form de7 annual reconciliation return for and petitioner admitted that she had signed the foregoing documents and had represented herself as the owner of contractor because she was the owner of contractor the entire deficiency is allocable to her see sec_1_6015-3 income_tax regs the court has reviewed all the evidence presented and finds that petitioner had actual knowledge of the items giving rise to the deficiency for the court holds that respondent did not err in denying petitioner relief from joint_and_several_liability under sec_6015 for in his notice_of_determination dated date to reflect the foregoing decision will be entered for respondent


internal_revenue_service index number 468a 468a department of the treasury washington dc person to contact telephone number refer reply to cc dom p se6 date gun plr-105878-99 re request for a revised schedule of ruling amounts taxpayer plant location commission a commission b commission c district fund dear this letter responds to the request of taxpayer dated date and supplemental information submitted on behalf of taxpayer for a revised schedule of ruling amounts in accordance with sec_1_468a-3 of the income_tax regulations taxpayer was previously granted a revised schedule of ruling amounts on date information for the schedule of ruling amounts was submitted on behalf of the taxpayer pursuant to sec_1_468a-3 taxpayer represents the facts and information relating to its request for a revised schedule of ruling amounts as follows taxpayer has a direct ownership_interest of percent in plant as a tenant-in-common with other electric utility companies which is situated at location taxpayer is under the audit jurisdiction of the district_director of district plant's operating license expires in of commission a which covers commission b which covers taxpayer is subject_to the jurisdiction percent of the taxpayer's total electric sales percent and commission c which covers 5o plr-105878-99 a percent for a total of percent these percentages may vary slightly from year to year the total of the jurisdictional percentages exceed percent due to the measurements being made at different points in time the estimated base cost for decommissioning the plant is based on an independent study and is premised on the prompt removal immediate dismantlement method commission a in case no effective authorized nuclear decommissioning costs to be included in the taxpayer's cost of service for tatemaking purposes for the plant in the amount of commission a also determined the total estimated cost of decommissioning its jurisdictional portion to be an estimated annual rate of cost of commission a's jurisdictional portion of rates were estimated after taking into consideration the tax and investment changes made to sec_468a of the internal_revenue_code made by of the energy policy act of the assumed after-tax rate of return on the assets of the fund is percent this base cost escalated using percent results in an estimated future decommissioning these there are no proceedings pending before either commission a commission b or commission c that may result in an increase or decrease in the amount of decommissioning costs for the plant to be included in taxpayer's cost of service for ratemaking purposes amounts for commission b and commission c are not specifically reviewed herein the funding_period and level_funding limitation period for the plant extends from the estimated period for which the fund will be in effect is the estimated_useful_life of the plant is thus the taxpayer has caiculated its qualifying percentage to be percent sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the taxable_year or the ruling_amount applicable to that year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any taxable_year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund fo ’ plr-105878-99 is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the taxable_year if the payment is made on account of the taxable_year within months after the close of the taxable_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest’ in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any taxable_year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such taxable_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the taxable years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a taxable_year plr-105878-99 oe sec_1_468a-3 of the regulations permits the internal_revenue_service to provide a schedule of ruling amounts that is identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any taxable_year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier taxable_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the funding_period for a nuclear decommissioning fund is the period that begins on the first day of the first taxable_year for which a deductible payment is made or deemed to be made to such nuclear decommissioning fund and ends the later of i the last day of the taxable_year that includes the estimated date on which decommissioning costs of the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's cost of service for ratemaking purposes or ii the last day of the taxable_year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning the plant multiplied by the taxpayer's qualifying interest in the plant plr-105878-99 a sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant sec_1_468a-3 of the regulations provides that the estimated period for which a nuclear decommissioning fund is to be in effect begins on the later of the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund or deemed made or the first day of the taxable_year that includes the date that the nuclear power plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that the estimated_useful_life of a nuclear power plant begins on the first day of the taxable_year that includes the date that the plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant under sec_1_468a-3 this separate determination shall be based on the reasonable assumptions and determinations used by the relevant public_utility commission and shal take into account only that portion of the total estimated cost of decommissioning that is properly rn lf bs plr-105878-99 allocable to the ratepayer whose rates are established or approved by the public_utility commission according to sec_1_468a-3 the ruling amounts for any taxable_year is the sum of the ruling amounts for such taxable_year determined under the separate schedules of ruling amounts sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant to which the nuclear decommissioning fund relates has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if a any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates increases the proposed period over which decommissioning costs of the nuclear power plant will be included in cost of service for ratemaking purposes adjusts the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes or reduces the amount of decommissioning costs to be included in cost of service for any taxable_year and b the taxpayer's most recent request for a schedule of ruling amounts did not provide notice to the service of such action by the public_utility commission sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year plr-105878-99 we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in the sec_468a of the code and the regulations thereunder the following conclusions based solely on these representations of the facts we reach taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commissions a has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations taxpayer has determined that pursuant to sec_1_468a-3 of the regulations the qualifying percentage is percent taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commission a and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund the maximum amount of cash payments made or deemed made to the fund during any taxable_year is restricted to the lesser amount of the decommissioning costs applicable to the fund or the ruling_amount applicable to the fund as set forth under sec_1_468a-2 of the regulations taxpayer subject_to the jurisdiction of three public_utility commissions for ratemaking purposes has calculated its share of the total decommissioning costs allocable to commissions a b and c as required by sec_1_468a-3 of the regulations based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code b2 plr-105878-99 approved schedule of ruling amounts taxable years commissions a b and c year comm a comm 8b comm c' total ' amounts for commission b and commission c are not specifically reviewed herein and are merely reprinted to arrive at the amount for the total annual ruling_amount for purposes of the review and revision under sec_1_468a-3 of the regulations the date of the schedule of ruling amounts approved by the service on date governs the review period for the commission b and commission c ruling amounts tf e y plr-105878-99 approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time this ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated above payments made to the fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to the fund or the ruling amounts applicable to the fund in the taxable_year this letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that this ruling may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to your authorized legal representatives pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each taxable_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours ae al thedllligon peter c friedman assistant to the branch chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy


number release date id office uilc cca_2013030515082153 ---------------------- from --------------- sent tuesday march pm to ------------------------------------ cc subject recap case ---------- here is suggested language for the first few paragraphs of the law section up to sec_1_368-1 sec_61 provides the general_rule that gross_income means all income from whatever source derived sec_354 provides that no gain_or_loss shall be recognized if stock_or_securities in a corporation a_party_to_a_reorganization are in pursuance of the plan_of_reorganization exchanged solely for stock_or_securities in such corporation or in another corporation a party to the reorganization sec_356 provides that if sec_354 or sec_355 would apply to an exchange but for the fact that the property received in the exchange consists not only of property permitted by sec_354 or sec_355 to be received without the recognition of gain but also of other_property or money then the gain if any to the recipient shall be recognized but in an amount not in excess of the sum of such money and the fair_market_value of such other_property sec_356 provides that for special rules for a transaction described in sec_354 sec_355 or this section but which has the effect of the payment of compensation see sec_61 sec_368 provides that a recapitalization is a reorganization sec_368 provides that a party to the reorganization includes a corporation resulting from a reorganization sec_1032 provides that no gain_or_loss shall be recognized to a corporation on the receipt of money or other_property in exchange for stock including treasury_stock of such corporation sec_1036 provides that no gain_or_loss shall be recognized if common_stock in a corporation is exchanged solely for common_stock in the same corporation or if preferred_stock in a corporation is exchanged solely for preferred_stock in the same corporation ------------------ ---------------------------------------- ---------------------------- ---------------- ----------------------------- --------------------------


internal_revenue_service number release date index number -------------------------- ------------------------------------------------------------ ------------------------------------------ --------------------------------- -------------------------------------- ---------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b2 plr-153877-12 date date legend x -------------------------------------------- ---------------------------------------------------------------------- country -------------- date --------------------------- dear --------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity under sec_301_7701-3 the facts submitted and representations made are summarized as follows x was formed on date under the laws of country x is a foreign_entity eligible to elect to be treated as a disregarded_entity effective date however x inadvertently failed to timely file a form_8832 entity classification election sec_301_7701-3 provides guidance on the classification of a foreign_entity for federal_income_tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if the foreign eligible_entity has one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 plr-153877-12 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as 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 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on the owners of x filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief these returns may include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns 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 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-153877-12 pursuant to a power_of_attorney on file with this office copies of this letter are being sent to x’s authorized representative sincerely associate chief_counsel passthroughs and special industries by __________________ bradford poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc