t c memo united_states tax_court h richard shutts petitioner v commissioner of internal revenue respondent docket no filed date on date p and r reached a basis of settlement in a deficiency case two days later p filed for bankruptcy on date during the pendency of the bankruptcy action this court entered decision pursuant to the parties’ agreement r now files a motion for leave to file a motion to vacate and lodges a motion to vacate p objects to the granting of the motion held the date decision is void because it was entered in violation of the automatic_stay of u s c sec_362 r’s motion for leave and r’s motion to vacate shall both be granted h richard shutts pro_se lisa m oshiro for respondent memorandum opinion armen special_trial_judge this matter is before the court on respondent’s motion for leave to file a motion under rule to vacate the stipulated decision entered on date and now final under sec_7481 at issue is whether the court lacked jurisdiction to enter the stipulated decision because petitioner had filed a petition in bankruptcy on date giving rise to the automatic_stay imposed by u s c sec_362 background petitioner resided in the state of idaho when the petition was filed on date on date petitioner and respondent’s appeals_office reached a basis of settlement thereafter petitioner’s then-attorney and counsel for respondent signed the stipulated decision which decision was entered by the court on date on date just days after the basis of settlement had been reached but before the stipulated decision had been signed by counsel for the parties and entered by the court petitioner filed a petition in bankruptcy under chapter of the unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure bankruptcy code the bankruptcy court issued a discharge on date as stated above respondent filed the motion for leave to file respondent’s motion to vacate decision out of time on date on that same day respondent also lodged a motion to vacate decision in response to an order of the court dated date petitioner filed an objection to respondent’s motion for leave on date petitioner concurrently has a case pending before the court that is the collection action that commenced upon entry of the decision in the present case petitioner objects to the granting of the motion for leave in this case on the grounds that the motion was filed in the wrong action and that resolution of the collection case would render the motion moot discussion respondent desires to file a motion to vacate the stipulated decision entered on date because neither party filed a notice of appeal or a timely motion to vacate or revise that decision it became final on date days after it was entered see sec_7459 sec_7481 presumably neither petitioner’s tax counsel nor counsel for respondent was aware of the bankruptcy filing at the time that the stipulated decision was entered the court was first advised of that matter by respondent upon the filing of his motion for leave rule provides that a party seeking to vacate a decision must file an appropriate motion within days after the decision is entered unless the court allows otherwise because respondent did not file his motion to vacate within the 30-day period respondent has requested leave from the court to file that motion at this time the disposition of a motion for leave to file a motion to vacate or revise a decision lies within the sound discretion of the court see 872_f2d_245 8th cir affg tcmemo_1987_1 see also 441_f2d_930 9th cir byrne j dissenting vacating 52_tc_295 304_f2d_136 9th cir where a party legitimately challenges the jurisdiction of this court however the court should freely exercise that discretion notwithstanding the time of the challenge and even if the decision under attack is otherwise final see 69_tc_999 the court has jurisdiction to vacate a decision that is void 90_tc_103 which naturally means that the court also has jurisdiction to grant a motion for leave to file a motion to vacate a void decision adkins v commissioner tcmemo_2005_260 under the present setting we shall grant respondent’s motion for leave to file respondent’s motion to vacate we now turn to respondent’s motion to vacate once a decision of this court becomes final we may vacate the decision only in certain narrowly-circumscribed situations see 293_us_191 113_f3d_670 7th cir affg tcmemo_1995_209 curtis v commissioner tcmemo_1996_371 the courts of appeals have consistently held that the tax_court lacks the authority to vacate or revise an otherwise final_decision on grounds such as newly-discovered evidence or excusable neglect 859_f2d_115 9th cir affg 86_tc_1319 the courts of appeals have generally allowed an exception to the usual rule_of finality of sec_7481 for fraud on the court id pincite in addition the courts of appeals and in particular the court_of_appeals for the ninth circuit the court to which this case is appealable has held that the tax_court may vacate a final_decision if that decision is shown to be void or a legal nullity for lack of jurisdiction over the subject matter 868_f2d_1081 9th cir see also 175_f3d_889 n 11th cir in the present case respondent contends that the decision entered on date is void because it was entered in violation of the automatic_stay of u s c sec_362 a bankruptcy filing generally triggers an automatic_stay of tax_court proceedings concerning the debtor actions that are subject_to the automatic_stay are set forth in u s c sec_362 at the time petitioner filed for bankruptcy u s c sec_362 provided in relevant part sec_362 automatic_stay a except as provided in subsection b of this section a petition filed under sec_301 sec_302 or sec_303 of this title or an application filed under sec_5 of the securities investor protection act of operates as a stay applicable to all entities of-- the commencement or continuation of a proceeding before the united_states tax_court concerning the debtor the automatic_stay generally operates to temporarily bar actions against or concerning the debtor or property of the the bankruptcy abuse prevention and consumer protection act of publaw_109_8 119_stat_127 amended sec_362 of the bankruptcy code by striking out the debtor and inserting a corporate debtor’s tax_liability for a taxable_period the bankruptcy court may determine or concerning the tax_liability of a debtor who is an individual for a taxable_period ending before the date of the order for relief under this title this provision became effective with respect to petitions for relief under the bankruptcy code filed on or after date see id sec_1501 119_stat_216 because petitioner filed his bankruptcy case on date this amendment does not apply here debtor or the bankruptcy_estate 97_tc_544 in a chapter bankruptcy such as that of petitioner and as applicable here an automatic_stay is generally lifted only at the time a discharge is granted or denied u s c sec_362 the court_of_appeals for the ninth circuit has stated that actions in violation of the automatic_stay are void and not merely voidable 954_f2d_569 9th cir see also 847_f2d_549 9th cir one of those actions is the continuation of a proceeding before the united_states tax_court concerning the debtor u s c sec_362 petitioner filed his tax_court petition on date on date petitioner filed a petition in bankruptcy which temporarily barred the continuation of petitioner’s pending tax_court case see u s c sec_362 petitioner was granted a discharge on date bringing to an end the automatic_stay see id sec_362 but the stipulated decision was entered on date during the period of time that the automatic_stay was in effect thus the entering of the decision violated the automatic_stay and that decision is therefore void given that the stipulated decision is void we shall grant respondent’s motion to vacate the decision conclusion finally in reaching the conclusions described herein we have considered all arguments made by petitioner and to the extent not mentioned above we find them to be moot irrelevant or without merit to reflect the foregoing an appropriate order will be issued


number release date id office uilc cca_2010012510104437 ---------- from ------------------- sent monday date am to ------------------------------------------- cc --------------------------------------------------- subject re report there is no legal limit on securing forms in sequence to keep the refund statute open ----------------- -------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------


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 b03 plr-123171-18 date date legend x ----------------------------------------- ------------------------ date ---------------------------- date ---------------------- state trust trust date date ---------- ------------------------------------ ----------------------------------------- ------------------------ --------------------------- ---------------------- date --------------------------- date date ---------------------- ---------------------- a b n ------------------ ----------------- -------------- plr-123171-18 dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the code facts x was organized on date as a corporation under the laws of state effective date x elected to be treated as an s_corporation trust a revocable_trust created by a and trust a revocable_trust created by b both owned stock in x as of date a died on date and b died on date x represents that both trust and trust are eligible to be electing small_business trusts esbts under sec_1361 x represents that trust intended to elect esbt treatment effective date which is two years after date and that trust intended to elect esbt treatment effective date which is two years after date however no esbt elections were timely filed by the trustees of trust or trust and x’s s_corporation_election terminated on date x represents the failure_to_file the esbt elections for trust and trust was inadvertent and was not motivated by tax_avoidance or retroactive tax planning x has filed all returns consistent with x’s status as an s_corporation since date x and its shareholders agree to make any adjustments required as a condition of obtaining relief under the inadvertent_termination_rule as provided in sec_1362 of the code law and analysis sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states is an eligible shareholder sec_1361 provides that a_trust which was described in sec_1361 immediately before the death of the deemed owner and which continues in existence after such death is an eligible shareholder but only for the 2-year period beginning on the day of the deemed owner’s death sec_1361 provides that an esbt is an eligible shareholder plr-123171-18 sec_1361 provides that except as provided in sec_1362 an esbt means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in sec_170 or or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1_1361-1 provides that the trustee of the esbt must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of sec_1_1361-1 sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary conclusion based solely on the facts and representations submitted we conclude that x’s s_corporation_election was terminated on date because of the failure of trust to file an esbt election and that this termination was inadvertent within the meaning of sec_1362 we hold that pursuant to the provisions of sec_1362 x will be treated as an s_corporation from date and thereafter provided x was otherwise eligible to make an s_corporation_election and provided that any such election would not have otherwise been terminated under sec_1361 trust will be treated as an esbt effective date trust will be treated as an esbt effective date the shareholders of x must include their pro-rata share of the separately_stated and nonseparately computed items of x as provided in sec_1366 make any adjustments to basis as provided in sec_1367 and take into plr-123171-18 account any distributions made by x as provided in sec_1368 if x or its shareholders fail to treat themselves as described above this ruling is null and void this ruling is conditioned upon the trustees of trust filing an appropriately completed esbt election for trust effective date and upon trust and its beneficiaries filing timely amended federal_income_tax returns consistent with the treatment of trust as an esbt effective date this ruling is further conditioned upon the trustees of trust filing an appropriately completed esbt election for trust effective date and upon trust and its beneficiaries filing timely amended federal_income_tax returns consistent with the treatment of trust as an esbt effective date the elections must be made and the amended returns must be timely filed within days following the date of this letter and a copy of this letter should be attached to the election and the returns furthermore as an adjustment under sec_1362 a payment of dollar_figuren and a copy of this letter_ruling must be sent to the following address internal_revenue_service kansas city service_center w pershing road kansas city mo stop manual deposit the payment and a copy of this letter must be sent no later than date except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representative sincerely adrienne m mikolashek branch chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court janet kline petitioner v commissioner of internal revenue respondent docket no filed date peter driscoll for petitioner diane d helfgott for respondent memorandum opinion panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined additions to petitioner' sec_1 unless otherwise indicated all section references are to the internal_revenue_code in effect for the tax_year in issue and all rule references are to the tax_court rules_of_practice income_tax pursuant to sec_6653 and in the amounts of dollar_figure and dollar_figure respectively the additions to tax are attributable to a partnership loss from the american indian venture capital partnership the partnership that was claimed on the joint income_tax return and carried forward to the return the underlying adjustments relating to the partnership were resolved in american indian venture capital v commissioner docket no a timely petition was filed in response to the statutory notice issued on date at the time of filing the petition herein petitioner resided in ellicott city maryland petitioner through her attorney peter driscoll filed a petition for redetermination on date petitioner argued that she is not liable for the additions to tax because she is an innocent spouse within the meaning of sec_6013 petitioner also argues that the statute_of_limitations bars assessment and collection of the tax on date respondent filed an answer to the petition in which she denied all substantive allegations of fact and error and affirmatively alleged as a defense that the statute_of_limitations does not bar assessment and collection of the deficiency due for the taxable_year respondent alleged as follows and procedure a the notice_of_deficiency at issue herein asserts additions to tax arising from the loss claimed by petitioner and frank kline as their distributive_share of the partnership loss reported by american indian venture capital partnership for the taxable_year b petitioner and frank kline claimed a loss from american indian venture capital on their return and carried forward a net_operating_loss based on the partnership loss to their return c the net_operating_loss claimed by petitioner and frank kline on their return is an affected_item as defined by a arising from the partnership loss reported by american indian venture capital partnership for the taxable_year 87_tc_783 d the notice_of_deficiency at issue herein asserts additions to the tax for the taxable_year arising from the partnership loss carried forward by petitioner and frank kline from to e these additions to tax asserted by respondent are also affected items as defined in sec_6231 and sec_301 a - d arising from the partnership loss claimed by american indian venture capital for the taxable_year f pursuant to sec_6501 and g the applicable_period of limitations for the assessment of additions to tax arising from partnership items is provided by i r c g american indian venture partnership filed its partnership return of income on date h a notice of partnership administrative adjustment setting forth respondent's determination of the adjustments to partnership items for american indian venture capital for the taxable_year was mailed to each partner on date which date was prior to the expiration of the three-year period for assessment and collection under i r c a i a timely petition contesting the partnership adjustments was filed on date j a decision was entered on date and became final on date k a notice_of_deficiency was mailed to petitioner with respect to the additions to the tax affected items on date which date was prior to the expiration of the one-year period for assessment and collection under i r c f on date respondent served a copy of her answer upon attorney driscoll on date respondent filed a motion for entry of an order that the undenied allegations in her answer be deemed admitted in accordance with rule c attorney driscoll was served with a copy of the motion also on date attorney driscoll was served with a notice from the clerk of the court that respondent had filed a motion for entry of an order the notice indicated that if petitioner files a reply as required by rule a and b of this court's rules on or before date respondent's motion will be denied if petitioner does not file a reply as directed herein the court will grant respondent's motion and deem admitted for purposes of this case the affirmative allegations in the answer no reply was filed by petitioner and accordingly respondent's motion was granted on date this case was originally set for trial on date respondent filed a motion for continuance which was granted by the court on date the case was then set for trial on date respondent filed a motion for continuance which was granted by the court on date the two motions to continue referred to related cases under submission involving the deductibility of petitioner's claimed partnership losses on date a notice setting this case for trial on date in baltimore maryland along with a standing pre-trial order were served upon attorney driscoll the notice clearly indicated that your failure to appear may result in dismissal of the case and entry of decision against you on date approximately weeks before the date set for trial of this matter respondent filed a motion for an order to show cause why judgment should not be entered against petitioner on the basis of kline v commissioner tcmemo_1994_397 by order dated date petitioner was ordered to show cause in writing on or before date why respondent's motion should not be granted and a decision entered in accordance therewith attorney driscoll was served with a copy of this order on date no response was filed to the order to show cause when the case was called for trial on date neither petitioner nor attorney driscoll appeared or otherwise communicated with the court counsel for respondent appeared at the hearing in kline v commissioner supra the court considered whether petitioner was entitled to relief as an innocent spouse for the additions to tax determined for the and tax years the additions to tax were attributable to a partnership loss claimed in and carried back to we held that petitioner was not entitled to relief as an innocent spouse because she had failed to prove that she satisfied the lack of knowledge requirement pursuant to sec_6013 we did not address whether petitioner had satisfied the remaining requirements of sec_6013 discussion as in the prior case kline v commissioner supra the additions to tax here are affected items 93_tc_730 it is well established that the commissioner's deficiency determination carries with it a presumption of correctness and the taxpayer bears the burden of proving that the determination is erroneous rule a 290_us_111 our rules provide that the failure of a party to appear at trial may result in entry of decision against that party specifically rule provides in pertinent part b dismissal for failure of a petitioner properly to prosecute or to comply with these rules or any order of the court or for other cause which the court deems sufficient the court may dismiss a case at any time and enter a decision against the petitioner the partnership american indian venture capital partnership is the identical partnership involved in this case dismissal of a case is a sanction resting in the sole discretion of the trial_court 99_tc_533 furthermore-- dismissal may properly be granted where the party's failure to comply with rules and orders of the court is due to willfulness bad faith or any fault as contrasted with mere inadvertence or inability 357_us_197 fed r civ p b 82_tc_592 rule c a case may be dismissed for failure properly to prosecute when petitioner or counsel on petitioner's behalf fails to appear at trial and does not otherwise participate in the resolution of petitioner's claim 86_tc_110 id we look to the legal standards for dismissal under rule b of the federal rules of civil procedure as guidance for involuntary dismissals in the tax_court under our rule b 86_tc_110 the court_of_appeals for the fourth circuit to which dismissal of this case would be appealable has held that a court considering whether to dismiss a case under rule b of the federal rules of civil procedure for failing to prosecute must consider the following factors the degree of personal responsibility of the plaintiff the amount of prejudice caused the defendant the existence of a 'drawn out history of deliberately proceeding in a dilatory fashion' and the existence of sanctions less drastic than dismissal 877_f2d_267 4th cir quoting 669_f2d_919 4th cir applying these factors we conclude that dismissal of this case is proper under rule b with respect to the first factor petitioner is responsible for attorney driscoll's actions under ordinary principles of agency 370_us_626 938_f2d_33 4th cir but this must always be done with an eye to the realities of a client's practical ability to supervise and control his attorney's litigation conduct as indicated petitioner filed her petition with this court through attorney driscoll we do not know the circumstances surrounding this attorney-client relationship nevertheless petitioner had an obligation to inquire about the status of her case petitioner is not unfamiliar with the proceedings of this court as evidenced by the previous case litigated the remaining factors also warrant dismissal respondent would be prejudiced if we were to continue this case for trial on another date particularly in light of the fact that petitioner has not requested a continuance in spite of this court's warning in its notice setting this case for trial and its pretrial order petitioner failed to appear at the hearing and trial on date petitioner also failed to show cause why judgment should not be entered in accordance with kline v commissioner supra finally we believe that dismissal is warranted because petitioner has through her own fault failed to properly prosecute her case accordingly we discharge the order to show cause and we dismiss this case pursuant to rule b and we sustain respondent's determination respecting the additions to tax to reflect the foregoing an order of dismissal and decision for respondent will be entered


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 b6 plr-106101-11 date date legend legend taxpayer investor ----------------------------------------- ------------------------ ------------------------ ----------------------- ------------------------------------------------ ----------------------------------------------- ---------------------------------------------------- ------------------------------------------------- -------------------------------------------- ---------------------------- ---------------------- --------------------------------- --------------------------------- ---------------------------------------------------- corp a corp b corp c corp d corp e corp f corp g corp h corp i corp j location a -------------------------- location b -------------------------- ------------- state a ------------ state b ------------ state c ------------- state d -------------------- state e --------------------------------------- plant --------------------- additive additive ------------------------------------ test rep ----------------------------------- test rep ------------------------------ test rep ------------------------------- plr-106101-11 coal seam ------------------------------------ coal seam ---------------------------------------------------- a mines b mines dollar_figure x dollar_figure y date date date date date date date date date ------------------------------------------- --------------------------------------------------------------------------------- -------- -------- -------------------------- ---------------------- ------------------------ -------------------------- ------- ------------------- -------------- ------------------- ----------------------- dear -------------- this is in response to your request for rulings submitted by your authorized representative concerning the federal_income_tax consequences of the transaction described below taxpayer a state a limited_liability_company is a calendar_year taxpayer and employs the accrual_method of accounting for both book and tax purposes investor is a state a limited_liability_company that is classified as a partnership for federal tax purposes investor is percent owned by corp j a state e trust company and percent owned by corp f a state e corporation corp f is wholly owned by corp j corp j formed investor to acquire a membership interest in taxpayer the members of taxpayer are investor and corp a a state a limited_liability_company corp a is a wholly-owned subsidiary of corp b and has elected to be taxable as a corporation for federal tax purposes effective date corp b is wholly owned by corp c which is wholly owned by corp d corp b is engaged in the business of developing and managing various energy-related projects throughout the united_states including backup power generation projects power-house operations cogeneration facilities coke batteries and similar energy-related projects corp d is the holding_company for a number of operating companies engaged in energy-related businesses corp d is also the parent company of corp e the regulated public electric utility for a portion of state b other subsidiaries of corp d sell coal and coal transportation services throughout the united_states corp d and its affiliates are calendar-year taxpayers and employ the accrual_method of accounting for book and tax purposes plr-106101-11 on date investor purchased of the class b membership interests in taxpayer from corp a in a transaction treated as a taxable sale of a proportionate share of all of taxpayer’s assets from corp a to investor followed by a contribution of taxpayer’s assets by both investor and corp a to a newly formed partnership taxpayer constructed a facility consisting of three parallel independent production lines that are designed to produce refined_coal the three production lines presently are located at plant corp e owns plant as originally designed and constructed each of the three production lines is capable of being operated as a separate_unit to produce refined_coal plant is composed of six coal-fired generating units with an electric generating capacity of approximately big_number megawatts in the aggregate plant consumes approximately million tons of coal a year prior to the transaction with investor described above taxpayer sold production line to corp h and sold production line to corp i taxpayer retained ownership of production line the facility which it operates to produce refined_coal that is sold to corp e all of the refined_coal is used as a fuel at plant to produce steam for the generation of electricity taxpayer contracted a designer to design engineer and construct the facility certain material handling equipment and a building to enclose the facility and equipment mechanical completion of the facility was achieved on date taxpayer assumed care custody and control of the facility from the designer on that same day mechanical completion in date included the completion of all mechanical and electrical equipment necessary to the operation of the facility for the production of refined_coal final completion of the facility was achieved in date a report the relocation report prepared by an outside consultant describes the components and design of the facility the relocation report concludes that the major mechanical electrical and control equipment certain auxiliary equipment and the structural steel support for each production line is independent of the other production line and can be relocated without affecting the capability of either production line to produce refined_coal many of the items of common equipment are very site specific and generally would not be compatible with a new site and disassembly of a production line and installation at a new site is a routine project that can be easily accomplished and relocation of one of the production lines would only require the duplication of certain common equipment civil works foundations and filed piping and wiring which are relatively minor in the context of the complete production line description of the process and feedstock the process at issue for production of refined_coal currently employed at the facility involves the mixing of proprietary chemicals additives with feedstock coal prior plr-106101-11 to combustion the process the patent for the process is owned by corp g and is licensed to taxpayer test results have shown that when mixed with coal the proprietary additives result in reduced nox so2 and mercury emissions during combustion different chemicals are targeted at specific pollutants based on the characteristics of the feedstock coal burned at plant taxpayer has chosen a combination of additives that target the reduction of nox and mercury in the case of nox taxpayer understands that additive is believed to cause a portion of the nox to adhere to or react with the additive so that it can be captured and is not emitted in the case of mercury taxpayer understands that additive is believed to react with the elemental mercury in the feedstock coal so that it is converted into a chemical species of mercury mercury oxide that can be effectively captured by particulate control devices emissions reduction testing for purposes of determining emissions reductions under sec_45 partnership will arrange for pilot-scale combustion testing and laboratory analysis for redetermination purposes and will not rely on any continuous emissions monitoring system or other field testing corp c engaged the research center of a prominent university the center to conduct tests on behalf of taxpayer at its pilot-scale combustion furnace ctf to determine the emission reductions associated with burning the refined_coal compared to the feedstock coal corp c has been working with center for several years in order to investigate and understand the ability of the additives to reduce emissions center reports described below state the ctf has been extensively used to research and investigate sox and nox emissions and the transformation of toxic trace metals hg mercury as and pb during the combustion of coal and other fuels or waste materials the ctf is capable of producing gas and particulate samples that are representative of those produced in industrial and full-scale pulverized coal-fired boilers for purposes of qualifying the refined_coal produced at the facility center conducted pilot-scale combustion tests at its ctf in date on the blend of feedstock coals of the type typically burned at plant because the facility was not yet operational at the time of that test center reports that it mixed the coal and additives in a manner consistent with the mixing that would occur at the facility the center reports explain that combustion gas analysis is provided by continuous emission monitors cems at two locations the furnace exit which is used to monitor and maintain a specified excess air level for all test periods and the outlet of the particulate control device which is used to assess any air inleakage that may have occurred so that emissions of interest sampled at the back end of the system can be corrected for the dilution caused by the inleakage flue gas analyses were obtained plr-106101-11 from the duct at the outlet of the electrostatic precipitator esp flue gas mercury measurements were obtained separately by a continuous mercury monitor located at the flue gas ducting at the exit of the particulate control device center conducted a series of tests on the feedstock and refined_coal blends measuring the emissions with these devices test rep states that the test results indicate that the blend of coal and additives achieved the required reductions in both nox and total mercury emissions both determined on a lb btu basis to satisfy the requirements of at least nox reduction and at least mercury reduction test rep states that it is expected the emissions reduction reported would be achieved at full scale using the additive levels tested in addition corp c engaged center to conduct tests in date on feedstock and refined_coal samples collected from the facility during normal operations test rep states that the test results indicate the refined_coal samples achieved the required reductions in both nox and total mercury emissions both determined on a lb btu basis to satisfy the requirements of at least nox reduction and at least mercury reduction test rep states that it is expected the emission reduction reported would be achieved at full scale using the additive levels in the refined_coal more recently corp c engaged center to conduct tests in date on feedstock and product samples collected from the facility during normal operations test rep states that the test results indicate the refined_coal samples achieved the required reductions in both nox and total mercury emissions both determined on a lb btu basis to satisfy the requirements of at least nox reduction and at least mercury reduction test rep states that it is expected the emission reduction reported would be achieved at full scale using the additive levels in the refined_coal tested coal plant currently burns subbituminous coals from a number of mines in location a located in state c and state d and location b coals while plant uses both location a and location b coals to generate electricity taxpayer currently produces the refined_coal using only location a coals the coal rank of all of the location a coal burned at plant is classified by the american society of testing materials as subbituminous c coal with a gross calorific value of big_number to big_number btu lb the source of all of the state c location a coal burned at plant is coal seam the specific mines on coal seam at which the coal is currently mined are the a mines the source of all of the state b location a coal burned at plant is coal seam and splits of those seams the specific mines on coal seam and splits of those seams at which the coal is currently mined are the b mines the location a coal blend used by taxpayer as feedstock for the process contain sec_80 to plr-106101-11 state c location a coal and to state d location a coal variations in the coal blend result from the supply and availability of the state c location a and state d location a coals corp c requested that center test blends of location a coal that represent the range of location a coal blends to be used at plant as described above the location a coal blend burned at plant contain sec_80 to state c location a coal and to state d location a coal accordingly center tested a state c location a coal state d location a coal blend a state c location a coal and two blends within that range for purposes of this ruling_request the term tested coal refers to coal or a blend of coals from to state c location a coal and to state d location a coal center reports that based on numerous test results over the past year refined_coal produced from all possible fuel blends are expected to meet the emissions reduction requirements outlined in sec_45 center reported that the emission reduction requirements were met for fuels representing state c coal state c state d coal blend and blends within that range the endpoint fuels were prepared at center for testing while the blends were produced at plant in each case center states that the refined_coal met the required emission reduction requirements when compared with the feedstock coal center further reports that it analyzed the variability of fuel n2 and fuel hg contents between coals from state c and coals from state d since nox and hg emissions are of primary concern in each case center states that it is expected that higher fuel n2 and hg contents will lead to higher emissions of both nox and hg respectively center concluded that the n2 and hg levels from the many samples tested appear typical for many location a coals and would not be expected to change dramatically from one shipment to another after reviewing the average levels of n2 and hg against the combustion test results center concluded that any fuel blend tested would represent the range of fuels commonly fired by plant and could be expected to achieve the required reductions taxpayer expects to continue to operate with the blends and additive levels discussed in the center reports which would be consistent with long-term patterns for coal consumed by plant if so samples will be taken for redetermination testing within six months after the last emissions test satisfying the qualified_emission_reduction requirement thereafter within six months after such date another set of samples will be taken for redetermination testing in each case samples of feedstock and samples of refined_coal will be obtained from the facility using automatic samplers although taxpayer does not currently anticipate making changes to its coal feedstock or additive levels or using location b as feedstock for the refined_coal additional testing will be conducted prior to i adding coal from any other coal seam or plr-106101-11 rank to the facility’s coal feedstock mix ie using location b ii changing the minimum or maximum percentages of the coal feedstock blend ie using less than state c or more than state d or iii changing the minimum levels of additives such testing will include testing of samples at the endpoints of the new coal feedstock blend and at intermediate blends between the endpoints as the qualified expert advises is necessary to conclude that a qualified emissions reduction would be expected for any combination within the limits of the blend in the case of a change in additive levels tests will also be run at the new minimum levels of additive as the qualified expert advises is necessary to conclude that a qualified emissions reduction will be expected for the new levels of additive the process license agreement under the process license agreement corp g granted a license to taxpayer to use the process taxpayer will make royalty payments to corp g equal to i dollar_figure y per ton of coal feedstock subjected to the process through date and ii dollar_figure x per ton thereafter the initial term of the process license agreement is through date the initial term automatically extends for an additional ten year period unless earlier terminated for cause as set forth in the agreement rulings requested base on the foregoing taxpayer and investor have requested that we rule as follows the refined_coal produced by using the process constitutes refined_coal within the meaning of sec_45 of the code provided that such refined_coal is produced_by_the_taxpayer from feedstock coal that is the same source or rank as the tested coal and provided further that the refined_coal satisfies the qualified_emission_reduction test stated in sec_45 of the code testing by center for qualified emissions reduction as set forth in its test reports satisfies the requirements of notice_2010_54 taxpayer may rely on the pilot scale testing conducted at center and subsequent permitted laboratory testing as required for a redetermination described in section a or b of notice to satisfy the qualified_emission_reduction test of sec_45 of the code regardless of subsequent normal fluctuations in operating conditions and emissions at plant provided that the feedstock coals during any determination_period are from the same coal seams and of the same rank as tested coal all feedstock coal that satisfies that criteria shall be treated as feedstock coal of the same plr-106101-11 source and rank for purposes of section dollar_figure of notice_2010_54 regardless of the mine from which such feedstock coal is purchased pursuant to section b of notice_2010_54 taxpayer may satisfy the redetermination requirement of section dollar_figure of notice_2010_54 by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and the refined_coal on average do not vary by more than percent from the sulfur and mercury content of the feedstock coal and the refined_coal used in the most recent determination that meets the requirements of section dollar_figure of notice_2010_54 law and rationale sec_45 of the code generally provides a credit against federal_income_tax for_the_use_of renewable or alternative resources to produce electricity or fuel for the generation of steam sec_45 of the code provides that in the case of a producer of refined_coal the credit available under sec_45 of the code for any taxable_year shall be increased by an amount equal to dollar_figure5 per ton of qualified refined_coal i produced_by_the_taxpayer at a refined_coal_production_facility during the 10-year period beginning on the date that the facility was originally placed_in_service and which is ii sold by the taxpayer to an unrelated_person during such 10-year period and such taxable_year for purposes of sec_45 of the code section dollar_figure of notice_2010_54 provides that the term refined_coal means a fuel which -- i is a liquid gaseous or solid fuel including feedstock coal mixed with an additive or additives produced from coal including lignite or high carbon fly ash including such fuel used as a feedstock ii is sold by the taxpayer with the reasonable expectation that it will be used for purpose of producing steam and iii is certified by the taxpayer as resulting when used in the production of steam in a qualified_emission_reduction section dollar_figure of the notice provides that the term qualified_emission_reduction means in the case of refined_coal produced at a facility placed_in_service after date a reduction of at least twenty percent of the emissions of nitrogen oxide and at least of the emissions of either sulfur dioxide or mercury released when burning the refined_coal excluding any dilution caused by materials combined or added during the production process as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of date in the case of production at a facility placed_in_service before date a reduction of at least percent of the emissions of nox and at least percent of the emissions of either so2 or mercury released when burning the refined_coal excluding any dilution caused by materials combined or added during the production process as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of date plr-106101-11 sec_45 of the code generally provides that the term refined_coal_production_facility means a facility which is placed_in_service after date and before date section dollar_figure of notice_2010_54 generally provides that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining as defined in sec_613 a c or i if performed by the mine owner or operator accordingly in determining whether a qualified_emission_reduction has been achieved the emissions released when burning the refined_coal must be compared to the emissions that would be released when burning the feedstock coal feedstock coal is the product resulting from processes that are treated as mining and are actually applied by a taxpayer in any part of the taxpayer's process of producing refined_coal from coal sec_613 of the code describes treatment processes that are not considered as mining unless they are provided for in sec_613 or any necessary or incidental to a process provided for in sec_613 any cleaning process such as a process that uses ash separation dewatering scrubbing though a centrifugal pump spiral concentration gravity concentration flotation application of liquid hydrocarbons or alcohol to the surface of the fuel particles or to the feed slurry provided such cleaning does not change the physical or chemical structure of the coal and drying to removed free water provided such drying does not change the physical or chemical identity of the coal will be considered as mining section of the notice provides in part that emissions reduction may be determined using continuous emission monitoring system cems field testing section a provides in part that cems field testing is testing that meets all the following requirements i the boiler used to conduct the test is coal-fired and steam-producing and is of a size and type commonly used in commercial operations ii emissions are measured using a cems iii if epa has promulgated a performance standard that applies at the time of the test to the pollutant emission being measured the cems must conform to that standard iv emissions for both the feedstock coal and the refined_coal are measured at the same operating conditions and over a period of at least hours during which the boiler is operating at a steady state at least percent of full load v a qualified_individual verifies the test results in a manner that satisfies the requirement of section b section of the notice provides that methods other than cems field testing may be used to determine the emissions reduction if a method other than cems field testing is used the service may require the taxpayer to provide additional proof that the emission reduction has been achieved the permissible methods include a testing using a demonstration pilot-scale combustion furnace if it established that the method accurately measures the emission reduction that would be achieved in a boiler plr-106101-11 described in section a a i and a qualified_individual verifies the test results in a manner that satisfies the requirements of section c i ii v and vi of the notice b a laboratory analysis of the feedstock coal and the refined_coal that complies with a currently applicable epa or astm standard and is permitted under section b i or ii section of the notice provides that a taxpayer may establish that a qualified_emission_reduction determined under section dollar_figure applies to production from a facility by a determination or redetermination that is valid at the time the production occurs a determination or redetermination is valid for the period beginning on the date of the determination or redetermination and ending with the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of feedstock coal that occurs after the date of such determination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination section of the notice provides that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure must use a method that meets the requirements of section in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that - a the sulfur s or mercury content of the amount of refined_coal necessary to produce an amount of useful energy has been reduced by at least percent percent in the case of facilities placed_in_service after date in comparison to the s or mercury content of the amount of feedstock coal necessary to produce the same amount of useful energy excluding any dilution caused by materials combined or added during the production process b the s or mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the s and mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the notice finally section dollar_figure of the notice provides that the certification requirement of sec_3 c of the notice is satisfied with respect to fuel for which the refined_coal credit is claimed only if the taxpayer attached to its tax_return on which the credit is claimed a certification that contains the following a a statement that the fuel will result in a qualified emissions reduction when used in the production of steam b a statement indicating whether cems field testing was used to determine the emissions reduction if cems field testing was not used to determine the emissions reduction a description of the method used a statement that the emissions reduction was determined or redetermined within the six months preceding the production of the fuel and that there have been no changes in the source or rank of feedstock coal used or in the process of producing refined_coal from the feedstock coal since the emissions reduction was determined or was most recently determined and a declaration plr-106101-11 signed by the taxpayer in the following form under penalties of perjury i declare that i have examined this certification and to the best of my knowledge and belief it is true correct and complete with respect to the first issue the process starts with several chemical additives added to the feedstock coal prior to its combustion in a furnace the additives provide the chemical structure that results in the reduction of emissions from nox so2 and mercury during combustion section dollar_figure of the notice provides generally that a qualified_emission_reduction does not include any reduction attributable to mining processes or processes that would be treated as mining as further defined in the code if performed by the mine owner or operator sec_613 describes certain treatment processes that are not considered as mining unless they are provided for in sec_613 or are necessary or incidental to a process provide for in sec_613 of the code for example section of the notice provides in part that any cleaning process such as the application of liquid hydrocarbons or alcohol to the surface of the fuel particle or to the feed slurry provided such cleaning does not change the physical or chemical structure of the coal will be considered mining in the instant case the process is not a mining process further section dollar_figure of the notice clarifies sec_45 of the code and specifically provides that refined_coal includes feedstock coal mixed with an additive or additives thus additive processes which mix certain chemicals or other additives with the coal in order to achieve emission reductions may qualify for the production_tax_credit for refined_coal additionally section dollar_figure defines comparable coal as coal that is of the same rank as the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal accordingly we conclude that the coal produced by using the process constitutes a refined_coal within the meaning of sec_45 of the code provided that the refined_coal i is produced_by_the_taxpayer from feedstock coal that is the same source or rank as the tested coal and ii satisfies the qualified_emission_reduction test stated in sec_45 of the code with respect to the second issue section of the notice provides that any permissible testing method provided for in the notice can be used in emission testing for any pollutant that is a taxpayer can use different testing methods for each of nox so2 or mercury provided the method used for any pollutant is a permissible method section provides that an emission test establishing a qualified_emission_reduction qualifies the refined_coal for a six-month period provided there is no change in the process for producing the refined_coal or in the source or rank of the feedstock coal therefore a taxpayer must redetermine the emission reductions to qualify for the succeeding six-month period using one or more approved methods section provides that in the context of redetermination that the redetermination requirement may be satisfied by laboratory analysis establishing either that i the sulfur or mercury content of the amount of refined_coal necessary to produce an amount of useful energy has been reduced by at least in the case of facilities placed_in_service after date in comparison to the sulfur or mercury content of the amount of useful thermal energy excluding any dilution used by materials combined or added plr-106101-11 during the production process or ii the sulfur or mercury content of both the feedstock coal and the refined_coal do not vary by more than from the sulfur or mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the testing methods for emissions reductions in section dollar_figure of the notice in the instant case partnership will arrange for pilot-scale combustion testing and laboratory analysis for redetermination purposes and will not rely on any continuous emissions monitoring system or other field testing which is permitted under dollar_figure of the notice specifically corp c engaged the center to conduct testing at its ctf to determine the emission reductions associated with burning the refined_coal product compared to the feedstock for purposes of qualifying the refined_coal produced at the facility the center conducted pilot-scale combustion tests at its ctf in test rep on the blend of feedstock coals burned at the plant because the facility was not yet in service the center mixed the coal and additives in a manner consistent with the mixing that would occur at the facility in test rep the center conducted tests on feedstock and refined_coal product samples collected from and produced by the facilities in test rep the center reported that the test results indicated that the blend of coal and additives achieved the required emissions reductions the test results in test rep indicated that the refined_coal samples achieved the required emissions reductions based on the foregoing we conclude that testing by the center for qualified emission reductions as set forth in its test reports satisfies the requirements of notice_2010_54 taxpayer may establish a qualified_emission_reduction through testing by the center at its combustion research facility or similar pilot-scale combustion testing facilities under notice_2010_54 regardless of subsequent normal fluctuations in operating conditions at the plant with respect to the third issue the emissions profile of the refined_coal product is compared to the emissions profile of either the feedstock coal or a comparable coal predominantly available in the market place as of date section dollar_figure of the notice provides that a comparable coal is defined as coal that is of the same rank as the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal section dollar_figure provides that a determination or redetermination of a qualified emissions reduction is valid until the occurrence of the earliest of the following events six months have passed since the date of such determination or redetermination a change in the source or rank of feedstock coal that occurs after the date of such determination or redetermination or a change in the process of producing refined_coal that occurs after the date of such determination or redetermination accordingly we conclude that provided that the feedstock coals during any determination_period are from the same coal seams and of the same rank as tested coal all feedstock coal that satisfies that criteria shall be treated as feedstock plr-106101-11 coal of the same source or rank for purposes of section dollar_figure of notice_2010_54 regardless of the mine from which such feedstock coal is purchased with respect to the fourth issue section of the notice provides in part that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure must use a method that meets the requirements of section in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that - b the sulfur or mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the s and mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the notice accordingly we conclude that taxpayer may satisfy the redetermination requirement of section dollar_figure of notice_2010_54 by laboratory analysis establishing that the s and mercury content of both the feedstock coal and the refined_coal on average do not vary by more than percent from the sulfur and mercury content of the feedstock coal and the refined_coal used in the most recent determination that meets the requirements of section dollar_figure of notice_2010_54 no opinion is expressed regarding any other issue not specifically addressed in this ruling letter in particular no opinion is expressed with respect to whether taxpayer investor or any of their affiliates is the producer of the refined_coal for purposes of sec_45 of the code or the facility was in fact placed_in_service prior to date in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives a copy of this ruling must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent we are sending a copy of this letter_ruling to the industry director sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs special industries


cca-992014-14 id uilc number release date third party communication date of communication month dd yyyy from --------------------------------------------------------------------------- sent date pm to --------------------------------------------------------------------------- cc --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- bcc subject re request for legal advice from sb gordon the code is specific about what kinds of documents are subject_to the penalty generic correspondence is not


internal_revenue_service number release date index number ---------------- -------------------- --------------------------- --------------------------------------- ------------------------ department of the treasury washington dc third party communication date of communication month dd yyyy person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc corp plr-119312-06 date date legend oldco ----------------------------- ----------------------------- ----------------------------------------------------------- a shareholders ----------------------------------------- ---------------------------------------------- --------------------- ------------------------- partnership -------------------------------------------------------------------- ----------------------------------------------------------- llc ------------------------------------------------------------------------------------ ----------------------------------------------------------- llc ------------------------------------------------------------------------------------ ----------------------------------------------------------- qsub ------------------------------------------------------------------------------------ ----------------------------------------------------------- qsub ----------------------------------------------------------------------------- ----------------------------------------------------------- ----------------------------------- ------------------------- --------------------- -------------- ----------------------- ---------------------------- ----------------------------------- plr-119312-06 qsub ----------------------------------------------------------------------------- qsub ------------------------------------------------------------------------------------ ----------------------------------------------------------- qsub ------------------------------------------------------------------------------------ ----------------------------------------------------------- llc ------------------------------------------------------------------------------------ ----------------------------------------------------------- llc ------------------------------------------------------------------------------------ ----------------------------------------------------------- llc ------------------------------------------------------------------------------------ ----------------------------------------------------------- business a ----------------------------------------------------------------------------------------------------------- business b ---------------------------------- ---------------------------- ------------------- -------------------------------------------- -------------------------------------- --------------------------------------------------------------------------------- ------------- -- ---- ------ --------------------------------- ---------------------- state a a b c dollar_figureg date plr-119312-06 dear --------------- this letter responds to your date letter requesting rulings as to the federal_income_tax consequences of a proposed transaction the information submitted in that request and subsequent correspondence is summarized below the rulings contained in this letter are based on the facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may required as part of the audit process summary of facts oldco which was originally incorporated as a c_corporation made a subchapter_s_corporation election as of date all of the stock of oldco is owned directly and indirectly by the a shareholders oldco is a holding_company that owns all of llc and llc which are disregarded entities for federal_income_tax purposes oldco indirectly through llc and llc owns qsub which owns a of qsub and qsub oldco also owns qsub which in turn owns b of qsub and qsub and all of qsub additionally qsub owns llc llc and llc each of which is a disregarded_entity for federal_income_tax purposes oldco also owns a limited_partnership_interest in partnership qsub qsub llc and llc are engaged in business a oldco qsub and qsub own investments unrelated to business a partnership and llc own no significant assets the a shareholders want to dispose_of business a by selling their stock in oldco however potential buyers have raised concerns about certain contingent and remote liabilities of oldco related to business b which was formerly conducted by oldco accordingly oldco has proposed to enter into a series of transactions in which the investments unrelated to business a and the contingent and remote liabilities of business b will be separated from business a proposed transaction to achieve this objective oldco has proposed and partially completed the following steps the proposed transaction i the a shareholders will form newco in state a plr-119312-06 disregarded for federal_income_tax purposes ii newco will form a new limited_liability_company newllc which will be iii oldco will merge with and into newllc the merger in the merger each whole or fractional share of oldco stock will be converted into one whole or fractional share of newco stock and immediately following the merger the a shareholders will own newco in the same proportions as they owned oldco iv under the laws of state a newllc will succeed to all of the assets and liabilities of oldco either prior to or following the merger oldco or newco may dispose_of certain investments unrelated to business a the fair_market_value of such investments currently represents less than c of the total fair_market_value of oldco’s assets v following the merger newllc will transfer its interests in llc and llc to newco additionally qsub will transfer its interests in qsub qsub llc and llc to newllc which will then transfer these interests to newco collectively the transfers vi the a shareholders have entered into a contract to sell the stock of newco after the merger and before such sale is consummated newco will make a pro_rata distribution of the assets of newllc to the a shareholders the distribution at the time of such distribution newllc will have dollar_figureg of assets and little or no actual liabilities representations oldco makes the following representations with respect to the proposed transaction a the fair_market_value of the newco stock received in the merger by the a shareholders will be approximately equal to the fair_market_value of the oldco stock surrendered in the exchange b immediately following the merger the a shareholders will own all of the outstanding newco stock and except for a nominal amount of stock if any issued to the a shareholders on the formation of newco the a shareholders will own such stock solely by reason of their ownership of oldco stock immediately prior to the merger c immediately following the merger newco will possess the same assets and liabilities as those possessed by oldco immediately prior to the merger except for assets used to pay expenses_incurred in connection with the merger assets of oldco used to pay expenses will constitute less than one percent of the net assets of oldco none of the a shareholders is expected to dissent to the merger plr-119312-06 d newco has no plan or intention to issue additional shares of newco stock following the merger e at the time of the merger oldco will not have outstanding any warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in oldco newco has no plan or intention to reacquire any of its stock issued in the f merger g the liabilities of oldco that will be transferred to newco were incurred in the ordinary course of business and will be associated with the assets transferred h the a shareholders will pay their respective expenses if any incurred in connection with the merger i oldco is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 rulings based on the information submitted and the representations made we rule as follows steps iii iv and v of the proposed transaction will be treated for federal_income_tax purposes as a transfer of the assets and liabilities of oldco to newco and therefore will qualify as a reorganization collectively the reorganization under sec_368 of the internal_revenue_code the code oldco and newco will each be a party to the reorganization under sec_368 the distribution described in step vi will not prevent the reorganization from qualifying as a reorganization under sec_368 no gain_or_loss will be recognized by oldco upon the transfer of its assets to newco in the reorganization in exchange for the newco stock and newco’s assumption of oldco’s liabilities in the reorganization sec_361 and sec_357 no gain_or_loss will be recognized by newco upon the receipt of oldco’s assets in exchange for newco stock as described above sec_1032 the basis of the oldco assets held by newco will be the same as oldco’s basis in such assets immediately prior to the reorganization sec_362 plr-119312-06 the holding_period of the oldco assets held by newco will include the periods during which assets were held by oldco sec_1223 no gain_or_loss will recognized by the a shareholders upon their exchange of the shares of oldco stock for shares of newco stock as described above sec_354 the basis of newco stock received by the a shareholders will be the same as the basis of the share or shares of the oldco stock exchanged therefore allocated in the manner described in sec_1_358-2 the holding_period of the newco stock received by the a shareholders will include the holding_period of oldco stock exchanged therefor provided the oldco stock is held as a capital_asset on the date of the reorganization the tax_year of oldco will not close as of the date of the reorganization and newco will be treated just as oldco would have been treated if there had been no reorganization sec_1_381_b_-1 and rev_rul newco will succeed to and take into account the tax_attributes of oldco described in sec_381 sec_381 and sec_1 a newco will succeed to oldco’s accumulated_adjustments_account at the close of the date of the reorganization oldco’s s election will not terminate as a result of the reorganization and will continue for newco provided that newco meets the requirements of a small_business_corporation under sec_1361 of the code rev_rul the qsub elections for qsub qsub qsub qsub or qsub will not terminate as a result of the reorganization and will remain in effect for newco however the distribution will terminate the qsub elections of qsub and qsub rev_rul newco will not recognize any built-in_gain under sec_1374 as a result of the sale of the newco stock by the a shareholders the distribution will be treated as a distribution_of_property from newco to the a shareholders separate from the reorganization rev_rul and sec_1 l caveats except as specifically set forth above we express no opinion concerning the tax consequences of the proposed transaction under any other provision of the code or regulations or the tax treatment of any conditions existing at the time of or effects plr-119312-06 resulting from the proposed transaction that are not specifically covered by the above rulings procedural statements this letter_ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling pursuant to a power_of_attorney on file in this office a copy of this letter_ruling will be sent to your authorized representative sincerely ____________________________ lewis k brickates branch chief branch office of the associate chief_counsel corporate


internal_revenue_service number release date index number ------------------- ----------------------------------------- ----------------------------------------- ----------------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number ------------------- refer reply to cc corp plr-113039-15 date date legend parent ------------------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------- sub -------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------ sub ------------------------------------------------------------------- ------------------------------------------------------------ ------------------- sub ------------------------------------------------------------------- -------------- date date date a b c ------------------- -------------------------- --------------------------- --------------- --------------- ------------- company official ----------------------------------------------------------------------------- ---------------------------------------------- plr-113039-15 tax professional ----------------------------------------------------------- dear ------------- ------------------------------------------------------------------- this letter responds to a letter dated date requesting on behalf of parent an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file an election parent is requesting an extension of time to file an election under sec_1_1502-32 of the income_tax regulations to treat a portion of the loss_carryovers of sub as expiring immediately before sub became a member of the parent consolidated_group additional information was received in subsequent correspondence dated date the material information is summarized below 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 for the year at issue parent was the common parent of a consolidated_group parent wholly owned sub before date sub was a stand-alone entity on or before date sub formed sub as a wholly owned subsidiary on date sub acquired the stock of sub by merging sub into sub the date acquisition was a qualifying cost_basis transaction within the meaning of sec_1_1502-32 the parent consolidated_group filed a consolidated federal_income_tax return for the taxable_year that ended date sub had loss_carryovers from separate_return limitation years within the meaning of sec_1_1502-1 of dollar_figurea that were limited by sec_382 parent has supplied information demonstrating that of the dollar_figurea total of sub 2’s loss_carryovers no more than dollar_figureb of those losses usable absent the dissolution of sub 2’s business operations under sec_382 parent has requested an extension of time to make an election under sec_1_1502-32 to treat dollar_figurec the excess of dollar_figurea over dollar_figureb of sub 2’s loss_carryovers as expiring immediately before sub became a member of the parent consolidated_group the election parent has represented that the parent consolidated_group is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time of the ruling_request the election was due on date for various reasons however parent failed to make the election in a timely manner subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election plr-113039-15 sec_1_1502-32 provides rules for adjusting the basis of the stock of a subsidiary s owned by another member m to reflect s’s distributions and s’s items of income gain deduction and loss taken into account for the period that s is a member of the consolidated_group sec_1_1502-32 provides that m's basis in s’s stock is adjusted to reflect among other things s’s noncapital nondeductible expenses sec_1_1502-32 provides that an expiring loss carryover attributable to s is a noncapital nondeductible expense sec_1_1502-32 provides that if a corporation has a loss carryover from a separate_return_limitation_year when it becomes a member of a consolidated_group the group may make an irrevocable election to treat all or any portion of the loss carryover as expiring for all federal_income_tax purposes immediately before the corporation becomes a member of the consolidated_group sec_1_1502-32 provides that the election for each member whose loss carryover is deemed to expire must be made in a separate statement filed with the consolidated group's income_tax return for the year the corporation becomes a member sec_301_9100-1 states that sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-2 provides automatic extensions of time for making certain elections while sec_301_9100-3 provides for extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests 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 that granting relief will not prejudice the interests of the government the time for filing an election to treat all or a portion of the loss_carryovers of a corporation as expiring before it becomes a member of a consolidated_group is fixed by the regulations ie sec_1_1502-32 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent to file the election provided parent establishes that it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and plr-113039-15 that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent has established it acted reasonably and in good_faith in failing to timely file the election the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for parent to amend its consolidated federal_income_tax return for the taxable_year that ended date to include the election as described above the above extension of time is conditioned on the taxpayers’ parent and the members of its consolidated_group tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the federal_income_tax returns involved we express no opinion with respect to whether parent qualifies substantively to make the election the amount of any net operating losses of sub the amount of any sec_382 limitation or the amount of net operating losses that could be utilized prior to their expiration no opinion is expressed as to the tax effects or consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by parent and its representatives however all of the essential facts must be verified in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply 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 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling plr-113039-15 in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely _ken cohen____________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc