internal_revenue_service number release date index number ---------------------------------------- ------------------- ----------------------------------- ------------------------------ department of the treasury washington dc person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 - plr-152219-08 date may re ----------------------------------------------------------- legend grantor ------------------------------------------------ daughter ---------------------- date ------------------------- date --------------------------- trust --------------------------------------------------------------------- state ------------- state court ---------------------------------------------------------- state law ----------------------------------------------------------- dear ------------ this responds to a letter dated date from your authorized representative requesting gift estate and generation-skipping_transfer_tax rulings with respect to a proposed modification of trust on date grantor established four separate trusts one for the primary benefit of each of grantor’s children this ruling_request applies to trust established for the benefit of daughter and her issue daughter is over age under the terms of trust daughter may request that any and all trust income be distributed to her each year each year daughter may also request distributions of corpus not to exceed the greater of dollar_figure or five percent of the value trust at the time of the request upon the death of daughter the entire trust is to be distributed in equal shares to her then living children provided that if a child is under age the child’s share will remain in trust for that child if daughter dies without living issue the trust estate is to be plr-152219-08 divided equally among the then living children of grantor and to the children per stirpes of any deceased child of the grantor pursuant to state law grantor daughter and daughter’s children have petitioned state court to modify trust the modification provides that no child of the beneficiary shall receive or continue to receive any distribution of principal or income from the trust if prior to entering into marriage or any legally recognized union he or she does not execute a valid premarital agreement under the relevant state’s law declaring that the trust property is and shall remain his or her separate_property if a child of the beneficiary enters into any marriage without having executed such a premarital agreement protecting the trust property which premarital agreement shall remain effective during the marriage he or she shall as of the date of the marriage be deemed to have predeceased the beneficiary and this trust shall be read accordingly the purpose of this provision is to preserve and protect the trust property for the benefit of the beneficiary’s children the modification further clarified that the terms child and children include only the immediate offspring of the person so designated and does not include any further descendants or issue on date state court approved the modification pending internal_revenue_service approval trust became irrevocable prior to date and it is represented that no additions have been made to trust after said date you have requested rulings that the modification of trust will not affect the exempt status of trust under sec_2601 of the internal_revenue_code result in any gift_for federal gift_tax purposes by grantor daughter or other trust beneficiaries and result in any estate_tax liability to the grantor ruling_request sec_2601 imposes a tax on every generation-skipping_transfer gst which is defined under sec_2611 as a taxable_distribution a taxable_termination or a direct_skip under section of the tax_reform_act_of_1986 the act gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the tax does not apply to a transfer under a_trust that was irrevocable on date except to the extent the transfer is made out of corpus added to the trust by an actual or constructive_addition after date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is plr-152219-08 exempt from the generation-skipping_transfer_tax under sec_26_2601-1 will not cause the trust to lose its exempt status these rules are applicable only for purposes of determining whether an exempt trust retains exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraph b i a b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 then the person or person who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust state law provides that a non-charitable irrevocable_trust may be modified if upon petition the court finds that the settler and all beneficiaries consent to the proposed modification in the instant case the modification of trust pursuant to state court order provides that if any child of a beneficiary fails to execute a premarital agreement declaring that the trust property is and shall remain his or her separate_property then such child will be treated as predeceasing said beneficiary in that case the interest of a child will be distributed to grantor’s children according to the terms of trust in no event will property pass to a lower generation by reason of the modification further the modification does not extend the time for vesting of any beneficial_interest under these circumstances based on the facts submitted and the representations made we conclude that the modification as approved by state court order will not cause trust to lose its exempt status for generation-skipping_transfer_tax purposes ruling_request sec_2 and sec_2501 imposes a tax on the transfer of property by gift by any individual sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-1 of the gift_tax regulations provides that the gift_tax also applies to gifts indirectly made thus any transaction in which an interest in property is gratuitously passed or conferred upon another regardless of the means or device employed constitutes a gift subject_to tax sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2033 provides that the value of the gross_estate includes the value of all property to the extent of the interest there of the decedent at the time of his death plr-152219-08 sec_2035 provides that if the decedent transferred an interest in property or relinquished a power with respect to any property during the 3-year period ending on the date of the decedent's death and the value of the property or interest therein would have been included in the gross_estate under sec_2036 sec_2037 sec_2038 or sec_2042 if the interest or power had been retained by the decedent on the date of death then the value of the gross_estate includes the value of any property or interest therein that would have been so included under sec_2035 the gross_estate shall be increased by the amount of any gift_tax paid_by the decedent or his estate on any gift made by the decedent or his spouse during the three year period ending on the date of decedent's death sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in the case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period that does not in fact end before his death possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income from the property sec_2037 provides that the value of the gross_estate includes the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth by trust or otherwise if possession or enjoyment of the property can through ownership of such interest be obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property and the value of such reversionary_interest immediately before the death of the decedent exceed sec_5 percent of the value of such property sec_2038 provides that the value of the gross_estate includes the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona fine sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power either by the decedent alone or in conjunction with any person to alter amend or revoke or where the decedent relinquished any such power during the 3-year period ending on the date of the decedent's death in this case the grantor and beneficiaries have not made taxable_gifts by consenting to the modification the beneficial interests in the trust subsequent to the modifications are identical to those prior to the modification therefore based on the facts submitted and representations made we conclude that the modification will not result in any gift_for federal gift_tax purposes by grantor daughter or other trust beneficiaries in order for sec_2035 through to apply the decedent must have made a transfer of property or any interest therein except in the case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth under which the decedent retained an interest in or power over the income or corpus of the transferred property in the present case grantor has not retained any interest in the income or corpus of the trust assets plr-152219-08 thus based on the facts submitted and representations made we conclude that the modification will not result in any estate_tax liability to the grantor under sec_2035 through except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code this ruling is directed only to the taxpayer who requested it sec_6110 provides that it 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 representative sincerely lorraine gardner senior counsel branch passthroughs and special industries enclosure copy for sec_6110 purposes copy of this letter


id office uilc cca-101413-08 cc psi b06 25d number release date from ------------- sent date am to ------------- cc subject energy tax_credit questions for feature story in opelika-auburn news homeseeker the questions below are very unclear and confusing assumption that the questions relate to sec_25d answers could be different i answered the questions below with an if that is not the correct code section the taxpayers receive the credit in the year the qualifying costs are incurred if a homeowner had credit that he could not use fully in then the homeowner may carryover the remaining amount of credit to then the homeowner gets the carried over credit from and the new credit for if the homeowner has additional qualifying expenditures_for see answer to the tax_credits are based upon the qualified_expenditures incurred by the taxpayer for the particular year see my answer to i don't understand this question


internal_revenue_service national_office technical_advice_memorandum index number control number tam-115431-98 number release date district_director taxpayer’s name taxpayer’s address taxpayer_identification_number quarters involved date of conference issue whether additional charges for failure to pay a bill on time late charges paid_by customers of cellular telephone_companies are subject_to the excise_tax on communications_services under sec_4251 of the internal_revenue_code conclusion late charges paid_by customers of cellular telephone_companies are subject_to the excise_tax on communications_services under sec_4251 facts taxpayer is a provider of cellular telephone service which is a communications service subject_to excise_tax under sec_4251 taxpayer collects the tax every month on amounts that it bills its customers for the telephone service it provides during the month taxpayer accrues and remits the tax regardless of when it actually receives payment when customers fail to pay their bill by the identified due_date a late charge is imposed equal to a fixed percentage of the customers’ outstanding balance from previous months taxpayer states that the purpose of the late charge is to compensate taxpayer for the lost time_value_of_money and to offset separate administrative expenses that arise as a result of taxpayer’s efforts to collect past due amounts taxpayer has not collected or paid excise_tax on these late charges law and analysis sec_4251 imposes a tax on amounts paid for taxable communications_services pursuant to sec_4251 the tax shall be paid_by the person paying for the services under sec_4291 the district_director telephone company furnishing the services is responsible for collecting the tax and paying it over to the united_states sec_4252 defines local_telephone_service as access to a local telephone system and the privilege of telephonic quality communication with substantially_all persons having telephone or radio telephone stations constituting a part of such local telephone system and any facility or service provided in connection therewith sec_49_4252-1 of the facilities and services excise_tax regulations states that where the charge for telephone service includes an additional_charge for not making payment within a specified time the total amount_paid including the additional_charge is the basis for computing the amount of tax due the regulation does not define the term local_telephone_service however prior to the term general telephone service included local_telephone_service thus the regulation which does define general telephone service applies equally to local_telephone_service the term general telephone service was ultimately replaced in sec_4251 and sec_4252 with the term local_telephone_service by the excise_tax reduction act of etra 1965_2_cb_568 the legislative_history of etra states in part that the term local_telephone_service was adopted in place of general telephone service in order to make it clear that it is the service as such which is being taxed and not merely the equipment being supplied thus in the case of local_telephone_service it is the right of access to a local telephone system and the privilege of telephonic quality communication which is taxed together with facilities or services provided with this service h_r rep no 89th cong 1st sess 1965_2_cb_643 s rep no 89th cong 1st sess 1965_2_cb_676 when sec_4251 and sec_4252 were amended in late charges were not specifically excluded from the tax_base even though the regulations clearly included these amounts in the tax_base if congress had wanted a different result it would have insured it by changing the law accordingly late charges paid_by customers are subject_to the tax imposed by sec_4251 as amounts paid for local_telephone_service caveats a copy of this technical_advice_memorandum is to be given to the taxpayer sec_6110 provides that it may not be used or cited as precedent under sec_6110 names addresses and identifying numbers have been deleted


internal_revenue_service department of the treasury index numbers washington dc person to contact telephone number refer reply to cc ebeo - plr-106254-99 date date number release date key x y church dear sir or madam this is in response to your letter dated date and subsequent correspondence in which x requested a ruling that y constitutes a religious_order for federal tax purposes the information submitted discloses that x is a nonprofit organization that exists for the purpose of propagating the gospel of jesus christ it has received a determination from the internal_revenue_service that it is exempt from federal income taxes under sec_501 of the internal_revenue_code x has also been recognized by the service as an ordaining institution and has a group_exemption_letter from the service x operates y to carry out the goals of x y is under the control and supervision of church church is the mother church of the numerous churches operating under x church and other churches operated under x provide the funding of y prospective members of y go through a six year training program and a probationary period before they are admitted as members the training program include sec_15 hours of instruction per week daily prayer and study and daily participation in the ministry members are held to a strict level of moral and spiritual discipline which requires daily prayer and communion with other members and prohibits the ownership of material possessions they pledge to work full-time on behalf of x for the rest of their lives during which time their lives are not their own but are to be separated sacrificially and entirely in dedication to the goals of x they are to live their lives in servitude and in obedience to all the commands of god members reside within two miles of church in parsonages owned by church there the members conduct themselves as a community by participating daily with plr-106254-99 each other in the spiritual disciplines of prayer study and communion members give themselves continually to prayer study teaching counseling care of the weak missionary work and evangelism revproc_91_20 1991_1_cb_524 states that the service will use the following characteristics in determining whether an organization is a religious_order the organization is described in sec_501 of the code the members of the organization vow to live under a strict set of rules requiring moral and spiritual self-sacrifice and dedication to the goals of the organization at the expense of their material well-being the members of the organization after successful completion of the organization’s training program and probationary period make a long-term commitment to the organization normally more than two years the organization is directly or indirectly under the control and supervision of a church_or_convention_or_association_of_churches or is significantly funded by a church_or_convention_or_association_of_churches the members of the organization normally live together as part of a community and are held to a significantly stricter level of moral and spiritual discipline than that required of lay church members the members of the organization work or serve full-time on behalf of the religious educational or charitable goals of the organization the members of the organization participate regularly in activities such as public or private prayer religious study teaching care of the aging missionary work or church reform or renewal y possesses all the characteristics in revproc_91_20 to a substantial degree accordingly based on our consideration of all the facts and circumstances we conclude that y is a religious_order for federal tax purposes no opinion is expressed on the tax consequences of the above transaction under any other section of the code this ruling is directed only to the taxpayer that requested it sec_6110 of plr-106254-99 the code provides that it may not be used or cited as precedent sincerely paul accettura senior technical reviewer branch office of the associate chief_counsel employee_benefits and exempt_organizations enclosure copy for sec_6110 purposes


t c summary opinion united_states tax_court ron william thompson petitioner v commissioner of internal revenue respondent docket no 19372-16s filed date ron william thompson pro_se jeri l acromite and miles b fuller for respondent summary opinion lauber judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursu- 1all statutory references are to the internal_revenue_code code in effect for the tax_year in issue and all rule references are to the tax_court rules_of_practice and procedure we round all monetary amounts to the nearest dollar ant 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 with respect to petitioner’s federal_income_tax for the internal reve- nue service irs or respondent determined a deficiency of dollar_figure this deficien- cy is attributable to the disallowance of miscellaneous deductions that petitioner claimed on schedule a itemized_deductions finding that he has substantiated the underlying expenses in part we will sustain the deficiency in part background the parties filed a stipulation of facts that is incorporated by this reference petitioner resided in arizona when he timely petitioned this court petitioner is a biologist who was semi-retired during he specializes in the ecology and predatory habits of mountain lions and to a lesser extent jag- uars and pumas in desert areas of mexico new mexico and texas one issue of interest to him is the extent to which these predators prey on livestock as opposed to wild animals such as deer elk and rabbits needless to say this issue is also of concern to ranchers who own livestock in these areas petitioner engages in field research concerning birth rates survival popula- tion density migratory patterns and predatory habits of mountain lions and jag- uars near the u s -mexico border he and his fellow researchers seek to do this in various ways one technique involves installation of stationary cameras that track the animals’ activity at key locations another technique involves catching and sedating the animals then putting radio-collars around their necks by which their activities can be tracked using gps monitoring petitioner has published a number of scholarly articles documenting the results of his research petitioner engaged in his research under the auspices of two universities sul ross state university sul ross in alpine texas and the university of ari- zona in tucson arizona petitioner made numerous trips to mexico texas and new mexico in conducting his research he made these trips to assist in setting up cameras and collaring mountain lions and jaguars meeting with ranchers who had lost livestock visiting ranches to observe killed prey meeting with research- ers in mexico and training graduate students from mexico city petitioner timely filed jointly with his wife form_1040 u s individual in- come tax_return for the tax_year as relevant here he reported wage income of dollar_figure from sul ross and included a schedule c profit or loss from business for an activity described as border study he reported on schedule c gross_receipts of dollar_figure apparently reflecting a contract fee or grant from one of 2petitioner’s wife brenda l thompson did not join the petition seeking redetermination of the deficiency and is not a petitioner in this court the universities that supervised his research the only expenses reported on his schedule c were car and truck expenses of dollar_figure reflecting a mileage allow- ance of dollar_figure5 per mile for big_number business miles driven on a vehicle placed_in_service on date respondent has not questioned the deduction for peti- tioner’s schedule c vehicle expense separately petitioner reported on schedule a miscellaneous expenses of dollar_figure these consisted of dollar_figure of unreimbursed employee business expen- ses including dollar_figure of car and truck expenses dollar_figure of tax preparation fees and dollar_figure of other expenses the other expenses included union and profes- sional dues of dollar_figure equipment expenses of dollar_figure and expenses of dollar_figure some- how related to mountain lions after applying the floor prescribed by sec_67 petitioner claimed a miscellaneous itemized_deduction of dollar_figure in a timely notice_of_deficiency the irs disallowed this deduction in full for lack of substantiation petitioner timely petitioned for redetermination 3petitioner included with hi sec_2013 return a schedule e supplemental in- come and loss reporting a nonpassive loss of dollar_figure attributable to his distribu- tive share of a loss incurred by primero conservation outfitters llc although that entity also had activities in mexico petitioner credibly testified that all of its income and expenses were reported on its form_1065 u s return of partnership income and that none of the expenses at issue here were connected with its activi- ties discussion a governing statutory framework the irs’ determinations in a notice_of_deficiency are generally presumed correct and the taxpayer bears the burden of proving those determinations erro- neous rule a 290_us_111 petitioner does not contend that the burden_of_proof shifts to respondent under sec_7491 as to any issue of fact sec_162 allows the deduction of all the ordinary and necessary ex- penses paid_or_incurred during the taxable_year in carrying on any trade or busi- ness deductions are a matter of legislative grace the taxpayer bears the burden of proving his entitlement to deductions allowed by the code and of substantiating the amounts of expenses underlying claimed deductions sec_6001 503_us_79 sec_1_6001-1 income_tax regs the failure to keep and present accurate records counts heavily against a taxpay- er’s attempted proof rogers v commissioner tcmemo_2014_141 108_tcm_39 sec_274 imposes relatively strict substantiation requirements for de- ductions claimed for among other things listed_property listed_property in- cludes any passenger_automobile sec_280f no deduction is allowed under sec_274 unless the taxpayer substantiates by adequate_records or by sufficient evidence corroborating his own statements the amount time and place and business_purpose for each expenditure sec_1_274-5t b and c temporary income_tax regs fed reg date b analysis respondent conceded at trial that petitioner had substantiated payment of dollar_figure for tax preparation fees we find that the balance of the expenses at issue or dollar_figure although reported on schedule a as miscellaneous deductions actually related to petitioner’s schedule c business of researching predator activity along the u s -mexico border we find that he has substantiated these expenses in part car and truck expenses because passenger automobiles constitute listed_property petitioner’s re- ported car and truck expenses are subject_to the heightened substantiation require- ments described above see fernandez v commissioner tcmemo_2011_216 102_tcm_242 to satisfy these requirements the taxpayer generally must keep a contemporaneous mileage log or a similar record such as a diary or 4the mischaracterization of these expenses may be attributable to the fact that petitioner’s longstanding return preparer died while the return was being prepared petitioner explained that a lot of these figures were moved around as a result and that he was not entirely comfortable with which schedule they sup- posedly went on trip sheets that substantiates the extent to which the vehicle was actually used for business rather than personal purposes see 53_tc_269 flake v commissioner tcmemo_2014_76 107_tcm_1399 sec_1_274-5t temporary income_tax regs supra lacking contemporaneous_records the taxpayer must produce other credible evi- dence sufficient to corroborate his own statements concerning business use ibid petitioner reported dollar_figure of vehicle costs as an unreimbursed employee_business_expense we find that no portion of this amount is deductible for two reasons first petitioner maintained no contemporaneous mileage log or similar records of his travel rather he estimated the mileage to three destinations--moc- tezuma mexico las cruces new mexico and alpine texas--and multiplied that mileage by the number of trips he thought he had taken to each destination second and more importantly we find that the mileage deduction petitioner claimed on schedule a duplicates the mileage deduction that he claimed and the irs allowed on schedule c on schedule a he reported vehicle expenses of dollar_figure reflecting big_number business miles driven in a vehicle placed_in_service on date on schedule c he reported vehicle expense of dollar_figure reflect- ing big_number business miles driven in a vehicle placed_in_service on date the trips for which he claimed a mileage_allowance deduction on schedule a moreover were to the same destinations in mexico new mexico and texas that were logical destinations for his schedule c border study activity for these reasons we conclude that petitioner has not substantiated any car and truck ex- penses beyond those the irs has already allowed on schedule c travel_expenses the dollar_figure balance of the expenses petitioner categorized as unreimbursed employee business_expenses chiefly reflected costs incurred during his research- related trips to mexico on which his wife occasionally accompanied him these expenses included the cost of hotels restaurant meals camping equipment food consumed while camping out and jaguar-themed hats for mexican research par- ticipants after a careful review of the record evidence we find that petitioner has substantiated dollar_figure of deductible schedule c expenses in these categories other expenses the dollar_figure balance of the claimed miscellaneous expenses chiefly reflected other costs petitioner incurred during his predator monitoring activity at trial he documented dollar_figure of such expenses for dollar_figure for the purchase of wild- life cameras and dollar_figure for satellite phone rental and service which we find to have been an ordinary_and_necessary_expense in remote desert areas of mexico we find that petitioner is entitled to schedule c deductions for these amounts in sum we find that petitioner has substantiated dollar_figure of miscellaneous ex- penses for tax_return preparation and in addition to the dollar_figure of vehicle costs he originally reported dollar_figure of expenses connected with his schedule c busi- ness namely dollar_figure for travel_expenses in mexico and dollar_figure for satellite phone rental and service and the purchase of research-related wildlife cameras we sus- tain respondent’s disallowance of the remaining miscellaneous itemized deduc- tions to reflect the foregoing decision will be entered under rule 5at trial petitioner produced five invoices for satellite phone expenses that together totaled dollar_figure however one invoice in the amount of dollar_figure was not issued until date petitioner provided no evidence that he paid this invoice in accordingly the expenses reflected on that invoice would be deductible if at all in a subsequent tax_year


department of the treasury int ernal revenue service washington d c of f i c e of c h i e f c ou n s e l date number release date cc pa apjp b02 tl-n-3344-00 uilc internal_revenue_service national_office field_service_advice memorandum for delaware-maryland assistant district_counsel cc ser dem was attn from assistant chief_counsel administrative provisions judicial practice cc pa apjp subject joint_return after filing separate_return this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent disclosure statement field_service_advice is chief_counsel_advice and is open to public inspection pursuant to the provisions of sec_6110 the provisions of sec_6110 require the service to remove taxpayer identifying information and provide the taxpayer with notice of intention to disclose before it is made available for public inspection sec_6110 and i sec_6110 also authorizes the service to delete information from field_service_advice that is protected from disclosure under u s c sec_552 b and c before the document is provided to the taxpayer with notice of intention to disclose only the national_office function issuing the field_service_advice is authorized to make such deletions and to make the redacted document available for public inspection accordingly the examination appeals or counsel recipient of this document may not provide a copy of this unredacted document to the taxpayer or their representative the recipient of this document may share this unredacted document only with those persons whose official tax_administration duties with respect to the case and the issues discussed in the document require inspection or disclosure of the field_service_advice legend taxpayer year issues whether taxpayer who previously filed a year return claiming head_of_household filing_status may file a year return with his spouse electing joint filing_status after the taxpayer has filed a timely petition with the tax_court with respect to a notice_of_deficiency issued for year whether the commissioner is bound by erroneous advice given by a revenue_agent regarding taxpayer’s ability to elect to joint filing_status conclusions sec_6013 prevents taxpayer and his spouse from electing a joint filing_status if the revenue_agent gave taxpayer erroneous advice regarding entitlement to joint filing_status the commissioner is not bound by the erroneous advice facts for year the tax_year in issue taxpayer filed his federal_income_tax return claiming head_of_household filing_status later the commissioner issued a notice_of_deficiency to taxpayer for year determining among other things that taxpayer’s was not entitled to head_of_household status and that taxpayer’s proper filing_status was married_filing_separately taxpayer filed a timely petition with the tax_court claiming among other things that the commissioner’s adjustment to his filing_status was improper during the course of settlement negotiations taxpayer admitted that he is not entitled to head_of_household filing_status however taxpayer now contends that he and his wife should be allowed to file a joint federal_income_tax return because his proper filing_status for year is married_filing_jointly taxpayer further contends that he should be allowed to file a joint federal_income_tax return because the commissioner’s revenue_agent advised him that this would be permissible and he relied on the advice law and analysis issue sec_6013 of the internal_revenue_code provides generally that a husband and wife may make a single return jointly of income taxes however where a prior separate_return has been filed the election of joint filing_status is subject_to the requirements of sec_6013 sec_6013 provides that if an individual has filed a separate_return for a taxable_year for which a joint_return could have been made the individual and his spouse may file a joint_return even if the time prescribed for filing for such taxable_year has expired sec_6013 provides four limitations to this joint_return election one limitation under sec_6013 is that the election may not be made after there has been mailed to either spouse as to the tax_year involved a notice_of_deficiency if the spouse as to such notice files a petition with the tax_court within the time prescribed in sec_6213 another limitation under sec_6013 is that joint filing_status cannot be elected after the expiration of years from the last date prescribed by law for filing the return for the taxable_year determined without regard to any extension of time granted to either spouse the tax_court has strictly applied the limitation in sec_6013 which was explained in currie v commissioner tcmemo_1986_71 as follows under the clear language of the statute the right of each petitioner to elect to file a joint_return after having first filed separate returns was terminated after respondent mailed a notice_of_deficiency to a spouse and that spouse timely filed a petition with the tax_court with respect to the taxable_year in issue sec_6013 77_tc_867 affd on this issue 697_f2d_46 2d cir the statutory language is clear and unambiguous this court has no authority to expand the explicit terminology of the statue 68_tc_632 we must apply the law as written in 641_f2d_339 5th cir the executor of one spouse’s estate and the surviving_spouse claimed a refund based on an amended joint_return after a state court determined the parties had met the requirements for a sec_6013 is the predecessor to sec_6013 valid common-law marriage the joint_return was filed within years of the filing of the return for which tax was paid but more than years after the due_date contrary to sec_6013 however the court reasoned that because sec_6013 referred to an individual who had filed a separate_return the restrictive rule in sec_6013 applied only to taxpayers who filed as married_filing_separately under sec_1 and not to taxpayers who had filed as unmarried thus the taxpayers who had both shown an unmarried filing_status on their original returns were not barred under the predecessor of sec_6013 from electing to file a joint_return more than years after the original due_date for filing the joint_return the service announced in revrul_83_183 1983_2_cb_220 that it would not follow glaze in revrul_83_183 the service concluded that the reference to prior separate returns in sec_6013 should be viewed as a reference to the filing of any non-joint return under sec_1 head_of_household c unmarried or d married_filing_separately this view is supported by saniewiski v commissioner tcmemo_1979_337 which holds that an individual who had originally filed as unmarried is barred from filing a joint_return after that individual filed a petition with the tax_court similarly blumenthal v commissioner tcmemo_1983_737 holds that an individual who filed as a head_of_household could not later file a joint_return after filing a petition with the tax_court see also 86_tc_433 aff’d in part and rev’d in part on another issue 851_f2d_1492 d c cir in which the tax_court stated that in glaze the fifth circuit’s reading of separate_return in sec_6013 was too narrow in this case taxpayer filed a return claiming head_of_household status taxpayer cannot later obtain joint filing_status with his spouse after receiving with respect to the earlier return a notice_of_deficiency as to which taxpayer filed a timely petition with the tax_court sec_6013 specifically bars the filing of a joint_return in this situation the prohibition against filing the joint_return is applicable whether the filing_status for the earlier return was married filing separate head_of_household or unmarried revrul_83_183 1983_2_cb_220 supra issue it is well settled that the commissioner is not bound by the erroneous advice of his agents especially when the advice is contrary to statute 381_us_68 furthermore with respect the filing of a joint_return the tax_court has held that under no circumstances may a revenue_agent waive the statutory conditions under which an effective joint_return can be filed 35_tc_306 see also mazanek v commissioner tcmemo_1984_633 internal_revenue_service not bound by erroneous instructions concerning the filing of a joint_return in the instant case even if the revenue_agent gave taxpayer erroneous advice regarding entitlement to joint filing_status the commissioner is not bound by the erroneous advice therefore taxpayer and his spouse are not entitled to joint filing_status for the tax_year in issue case development hazards and other considerations there are no significant litigating hazards with respect to the issues addressed if the case is not appealable to the fifth circuit however if the case were appealable to the fifth circuit glaze would present a litigating hazard in light of the fifth circuit’s opinion in glaze that the restrictive rule_of sec_6013 applies only to taxpayers who filed as married_filing_separately under sec_1 please call willie e armstrong jr at if you have any further questions curtis g wilson by michael l gompertz assistant to branch chief branch


t c memo united_states tax_court glen godby petitioner v commissioner of internal revenue respondent docket no filed date glen godby pro_se denise a diloreto for respondent memorandum opinion goeke judge respondent determined a deficiency for based upon the disallowance of head_of_household filing_status and the earned_income_credit because petitioner’s two children lived with him for less than one-half the year we sustain respondent’s determination background the parties submitted this case fully stipulated pursuant to rule the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time the petition was filed petitioner resided in west virginia on his form_1040 u s individual_income_tax_return filed for petitioner claimed head_of_household as his filing_status and also claimed an earned_income_credit based upon two qualifying children--his two sons petitioner and his former spouse were married in they had two sons one born in and one in a decree of divorce was entered ending the marriage in date pursuant to an order of the west virginia family court family court petitioner was allowed to claim both of his sons as dependents on his tax_return the decree of divorce provides that petitioner’s ex- spouse was the primary custodian of the two children and that the children were to live with her dollar_figure percent of the time and to live with petitioner dollar_figure percent of the time this decree 1all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code as amended and as in effect for the year in issue unless otherwise indicated remained in effect until date when the family court ordered petitioner to have the children every other weekend and from december until the end of the year on date respondent issued a statutory_notice_of_deficiency to petitioner for determining an income_tax deficiency of dollar_figure on date petitioner filed a petition in order to be timely the petition was due to be filed on or before date the wrapper in which the petition was mailed to the court shows a u s postmark of date therefore the court deems the petition timely discussion sec_2 provides as pertinent to this case that an individual is entitled to filing_status as head_of_household if the individual is not married at the close of the taxable_year and maintains as his or her home a household which is for more than one-half of the taxable_year the principal_place_of_abode of his or her child a taxpayer does not qualify for filing as head_of_household when he or she fails to produce proof that the child lived with the taxpayer for more than one-half of the year in question castleton v commissioner tcmemo_2005_58 affd 188_fedappx_561 9th cir sec_32 allows an eligible_individual to claim an earned_income_credit against his or her income for the taxable_year and the amount of the credit is calculated as a percentage of the taxpayer’s earned_income the issue is whether petitioner is entitled to the credit based upon having qualifying children as defined in sec_32 sec_32 includes in the definition of a qualifying_child the requirement that the child have the same principal_place_of_abode as the taxpayer for more than one-half of such taxable_year rule a provides that the burden_of_proof shall be upon the petitioner however under sec_7491 if the taxpayer introduces credible_evidence with respect to a factual issue the burden_of_proof is placed upon the commissioner sec_7491 does not apply here petitioner has failed to meet the requirements of sec_7491 because he failed to substantiate or for that matter provide any evidence as to where his children resided during the taxable_year the only evidence in the record supports respondent’s conclusion that petitioner is not entitled to the credit associated with two qualifying children as we have found in our findings_of_fact the family court provided that petitioner’s ex-spouse would be the custodial_parent and that she would have custody for approximately two- thirds of the taxable_year petitioner has failed to provide any evidence that either of the children had as his principal_place_of_abode petitioner’s home for more than one-half of the taxable_year in accordingly we hold that petitioner is liable for the dollar_figure income_tax deficiency for the tax_year to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court humes houston hart petitioner v commissioner of internal revenue respondent docket no filed date humes houston hart pro_se judith cohen for respondent memorandum opinion panuthos chief special_trial_judge this case was heard pursuant to sec_7443a and rule sec_180 sec_181 and sec_182 unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency in petitioner's federal_income_tax in the amount of dollar_figure and an addition_to_tax pursuant to sec_6651 in the amount of dollar_figure respondent concedes the deficiency and addition_to_tax in full thus the only issue in dispute is whether petitioner is entitled to an overpayment in the amount of dollar_figure at the time of filing the petition herein petitioner resided at spring city pennsylvania during the taxable_year petitioner received taxable_income the taxable_income was reported by various third-party payors from stock bond sales pension annuities dividends and interest with respect to two of petitioner's bank accounts there were withholding credits totaling dollar_figure petitioner did not file a federal_income_tax return for the taxable_year respondent mailed a notice_of_deficiency to petitioner on date determining the deficiency and addition_to_tax the notice_of_deficiency determined that petitioner failed to file a return and failed to report various items of taxable_income referred to above after petitioner provided certain information to representatives of the internal_revenue_service irs and after a review of this matter by the irs appeals_office respondent concluded that petitioner was not required to file a federal_income_tax return and was not liable for a deficiency or an addition_to_tax petitioner claims that he is entitled to a determination of an overpayment of his federal_income_tax and that the overpayment should be refunded to him respondent contends that petitioner is not entitled to a refund of an overpayment because of the limitations of sec_6511 and sec_6512 pursuant to sec_6512 we have jurisdiction to determine the existence and amount of any overpayment_of_tax to be credited or refunded for years that are properly before us however if a taxpayer did not file a return before the notice_of_deficiency was mailed the amount of the credit or refund is limited to the taxes paid during the 2-year period prior to the date the deficiency_notice was mailed see sec_6511 ’ sec_6511 generally provides that a claim for credit or refund of an overpayment_of_tax must be filed by the taxpayer within years from the time the return was filed or within years from the time the tax was paid whichever period expires later sec_6511 also expressly provides that if no return is filed the claim must be filed within years from the time the tax was paid sec_6511 provides limitations on the amount of any credit or refund as follows limit on amount of credit or refund -- a limit where claim filed within 3-year period --if the claim was filed by the taxpayer during the 3-year period prescribed in subsection a the amount of the credit or refund shall not exceed the portion of the tax paid within the period immediately preceding the filing of the claim equal to years plus the period of any extension of time for filing the return if the tax was required to be paid_by means of a stamp the amount of the credit or refund shall not exceed the portion of the tax paid within the years continued b b 516_us_235 stevens v commissioner tcmemo_1996_250 the only tax_payments petitioner made for were withholding credits such payments are deemed to have been paid as of date see sec_6513 since the withholding taxes were paid more than years before the notice_of_deficiency was mailed petitioner is not entitled to a refund of any part of an overpayment for we therefore hold that the statutorily imposed time limitations of sec_6511 and sec_6512 bar us from determining that petitioner is entitled to a refund with respect to his tax see commissioner v lundy continued immediately preceding the filing of the claim b limit where claim not filed within 3-year period --if the claim was not filed within such 3-year period the amount of the credit or refund shall not exceed the portion of the tax paid during the years immediately preceding the filing of the claim c limit if no claim filed --if no claim was filed the credit or refund shall not exceed the amount which would be allowable under subparagraph a or b as the case may be if claim was filed on the date the credit or refund is allowed sec_6513 provides in pertinent part any_tax actually deducted and withheld at the source during any calendar_year shall be deemed to have been paid_by him on the 15th day of the fourth month following the close of his taxable_year with respect to which such tax is allowable as a credit under sec_31 supra badger v commissioner tcmemo_1996_314 stevens v commissioner supra to reflect the foregoing decision will be entered for petitioner as to the deficiency and addition_to_tax and for respondent as to the overpayment


t c summary opinion united_states tax_court dwayne perry petitioner v commissioner of internal revenue respondent docket no 182-17s filed date john q rodgers and tyler m bodi for petitioner christine a fukushima for respondent summary opinion carluzzo chief special_trial_judge this case was heard pursuant to the provisions of section of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not 1unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended and in effect for the relevant period rule references are to the tax_court rules_of_practice and procedure reviewable by any other court and this opinion shall not be treated as precedent for any other case in a notice_of_deficiency dated date notice respondent determined a deficiency in petitioner’ sec_2013 federal_income_tax and imposed sec_6651 and additions to tax petitioner’s liability for the additions to tax remains in dispute otherwise the adjustments made in the notice have been resolved by the parties along with petitioner’s liability for the additions to tax we consider whether petitioner is entitled to various deductions claimed on his untimely federal_income_tax return return submitted to respondent after this case was commenced background some of the facts have been stipulated and are so found at the time the petition was filed petitioner resided in california petitioner was married at all times relevant here but the return was not jointly filed with his spouse neither were any of the other federal_income_tax returns mentioned below on date petitioner purchased a three-unit apartment building in bellflower california bellflower property for dollar_figure he originally took title to the property in his name but on date he transferred title to himself and his wife as joint_tenants on date petitioner and his wife purchased as joint_tenants a six-unit apartment building in gardena california gardena property for dollar_figure the bellflower and gardena properties were each encumbered by deeds of trust securing loans that apparently were used to finance the acquisitions in petitioner and his wife defaulted on the loans the gardena property was placed in receivership during while operated by the court-appointed receiver the property generated a dollar_figure net profit it was sold by the receiver for dollar_figure on date a few months later on date foreclosure proceedings forced the sale of the bellflower property for dollar_figure the filing due_date for the return was extended to date because petitioner failed to submit the return when due on date respondent prepared a substitute for return pursuant to sec_6020 for petitioner’ sec_2013 tax_year the sec_6020 return includes form_4549 income_tax examination changes form 886-a explanation of items and form sec_6020 certification the return that is the source of the deductions here in dispute was prepared by a paid income_tax_return_preparer and submitted to respondent after this case was commenced as relevant here the return includes schedule a itemized_deductions on which deductions for mortgage interest unreimbursed employee business_expenses and margin interest are claimed schedule d capital_gains_and_losses on which a net_short-term_capital_loss deduction is claimed and a dollar_figure net_operating_loss nol_carryover deduction from the nol is not shown on a copy of petitioner’ sec_2011 federal_income_tax return dated date it is shown on a copy of petitioner’ sec_2011 form 1040x amended u s individual_income_tax_return amended_return dated date we cannot tell from what has been submitted why the nol was omitted from one version of petitioner’ sec_2011 return but included on the other the nol is attributable to the operation and disposition of the bellflower and gardena properties according to petitioner the nol consists of a dollar_figure rental real_estate loss reported on schedule e supplemental income and loss included with the amended_return and a dollar_figure loss shown on form_4797 sales of business property also included with the amended_return i deductions discussion as we have observed in countless opinions deductions are a matter of legislative grace and the taxpayer bears the burden_of_proof to establish entitlement to any claimed deduction rule a 503_us_79 292_us_435 this burden requires the taxpayer to establish that the expense to which the deduction relates is allowable as a deduction under some provision of the internal_revenue_code and further to maintain adequate_records in order to substantiate that the expense has been paid_or_incurred sec_6001 65_tc_87 aff’d per curiam 540_f2d_821 5th cir 43_tc_824 sec_1_6001-1 income_tax regs at trial petitioner maintained his entitlement to the disputed deductions according to respondent petitioner is not entitled to any of them for the following reasons we agree with respondent a nol_carryover deduction in general an nol is the excess of the sum of certain allowable deductions over gross_income for a given tax_year see sec_172 the nol must be consumed in the earliest year for which there is income available to be offset by the loss see sec_172 any excess nol that is not consumed in one year i sec_2petitioner does not claim and the record does not show that the provisions of sec_7491 are applicable and we proceed as though they are not carried to the next earliest year id an nol generally must first be carried back years and then carried forward years see sec_172 a taxpayer who makes an election can waive the carryback requirement and carry forward the nol directly see sec_172 an election to waive the carryback must be made on a timely filed tax_return for the year of the nol for which the election is to be in effect id a taxpayer claiming an nol must file with his return a concise statement setting forth the amount of the net_operating_loss_deduction claimed and all material and pertinent facts relative thereto including a detailed schedule showing the computation of the net_operating_loss_deduction sec_1_172-1 income_tax regs the evidence petitioner submitted in support of his claim to the nol_carryover deduction does not include any such detailed schedule schedule e loss shown on amended_return petitioner testified in general terms that he paid_or_incurred expenses in the operation and maintenance of the bellflower and gardena properties during but he did not provide any substantiating records either originally maintained or reconstructed with regard to any such expenses furthermore his claim to an overall operating loss is somewhat undermined by records showing that the gardena property generated a net profit while operating under receivership accordingly petitioner is not entitled to the portion of the nol that he attributes to a rental real_estate loss form_4797 loss shown on amended_return respondent agrees that petitioner suffered a loss upon the disposition of the bellflower and gardena properties according to respondent however the loss amounted to dollar_figure which is substantially less than the dollar_figure loss petitioner claims to have suffered the disagreement between the parties centers around the proper computation of petitioner’s tax basis or more precisely adjusted_basis in each property see sec_165 sec_1011 respondent’s calculation of the loss takes into account the acquisition_cost of each property the depreciation allowed_or_allowable over the years that each property was in service and the amount received in the disposition of each property petitioner takes the position that the adjusted_basis in each property is higher than recognized by respondent because of improvements made to the properties over the years again no records corroborating petitioner’s claim have been submitted after reviewing what has been submitted on the point we find that petitioner has failed to establish that he is entitled to a basis in either property in excess of what respondent determined it to be proceeding as though the nol suffered in the dispositions of the properties is as respondent computes it to be we further find that the nol was fully absorbed before petitioner claims that he properly elected to waive the carryback period but the record shows that hi sec_2011 amended_return was not timely filed and does not include a statement electing to waive the carryback period see sec_172 consequently we find that petitioner did not make a valid election to waive the carryback period see 77_f3d_637 2d cir finding the taxpayer’s failure to timely file a tax_return precluded subsequently claiming an nol carryforward without the nol’s being absorbed to the extent required by the carryback_year taking into account the foregoing we find that the nol was fully absorbed before and therefore petitioner is not entitled to an nol_carryover deduction from the sales of the bellflower and gardena properties b schedule a deductions and net_short-term_capital_loss deduction as noted petitioner claimed various deductions on the schedule a included with the return and a net_short-term_capital_loss deduction shown on schedule d also included with that return at trial petitioner offered neither testimony nor documents in support of any of the deductions the return itself provides insufficient substantiation see 71_tc_633 because petitioner failed to adequately substantiate the claimed deductions we find that he is not entitled to them ii additions to tax according to respondent petitioner is liable for the addition_to_tax under sec_6651 for failure_to_file a timely return and the addition_to_tax under sec_6651 for failure to timely pay the tax shown on his return sec_6651 provides for an addition_to_tax in the event a taxpayer fails to file a timely return determined with regard to any extension of time for filing unless it is shown that such failure is due to reasonable_cause and not due to willful neglect the amount of the addition is equal to of the amount_required_to_be_shown_as_tax on the delinquent_return for each month or fraction thereof during which the return remains delinquent up to a maximum addition of for returns more than four months delinquent id sec_6651 provides for an addition_to_tax for failure to timely pay the amount shown as tax on any return specified in paragraph unless the taxpayer establishes that the failure was due to reasonable_cause and not willful neglect the addition is calculated as of the amount shown as tax on the return but not paid with an additional for each month or fraction thereof during which the failure to pay continues up to a maximum of id the amount of the addition_to_tax under sec_6651 reduces the addition_to_tax under sec_6651 for any month for which both additions to tax apply sec_6651 under sec_7491 the commissioner bears the burden of production as to whether a taxpayer is liable for an addition_to_tax and must provide sufficient evidence showing that imposing the addition_to_tax is appropriate in the particular case see 116_tc_438 as to the addition_to_tax under sec_6651 for failure to timely file respondent has met this burden of production by showing that petitioner’ sec_2013 return was due to be filed on or before date and that it was not submitted to respondent until on or about date see sec_6072 sec_7503 as to the addition_to_tax under sec_6651 for failure to timely pay the amount shown as tax on the return there must first be an amount of tax shown on a return 120_tc_163 aff’d without published opinion a f t r 2d ria 3d cir for this purpose a return made by the commissioner under sec_6020 that meets certain requirements is treated as the return filed by the taxpayer see sec_6651 ulloa v commissioner tcmemo_2010_68 respondent introduced a substitute for return consisting of form sec_6020 certification signed by respondent’s examination operations manager form_4549 income_tax examination changes including an explanation of the delinquency penalty and a tax_year interest computation and form 886-a explanation of items the return is subscribed it contains sufficient information to calculate petitioner’s tax_liability and it purports to be a return thus it constitutes a valid substitute for return under sec_6020 see gleason v commissioner tcmemo_2011_154 see also hennard v commissioner tcmemo_2005_275 accordingly respondent has satisfied the burden of production under sec_7491 for the sec_6651 addition_to_tax by producing evidence sufficient to establish that a return showing petitioner’s tax_liability was filed by petitioner or prepared by respondent as a substitute for return under sec_6020 for the year in issue petitioner does not argue nor does the record show that he had reasonable_cause for failing to timely file hi sec_2013 tax_return or timely pay the tax shown on his return respondent’s imposition of the additions to tax is sustained to reflect the foregoing decision will be entered for respondent


internal_revenue_service department of the treasury number release date index no washington dc person to contact telephone number refer reply to cc ita - plr-112107-02 date date in re legend a b c d e f g h family company company company company partnership plr-112107-02 trust year dear this is in response to your private_letter_ruling request on behalf of a b c d e f g and h the taxpayers dated date the taxpayers request a ruling on whether the proposed contributions of shares of company adss defined below to one or more private_foundations or charitable_remainder trusts of which private_foundations are or may be remaindermen constitute contributions of qualified_appreciated_stock within the meaning of sec_170 of the internal_revenue_code the taxpayers request the following ruling ruling requested do the company adss that the taxpayers plan to contribute to the donees constitute qualified_appreciated_stock within the meaning of sec_170 of the internal_revenue_code conclusion yes the company adss that the taxpayers plan to contribute to the donees constitute qualified_appreciated_stock within the meaning of sec_170 facts immediately prior to the merger transactions described below partnership a general_partnership the sole partners of which are the taxpayers and trustees of trusts for the benefit of the taxpayers under the trust owned common shares of company for a period exceeding one year in year company company and company completed a series of merger transactions which resulted in the formation of company the merger pursuant to the merger partnership received company american depository shares adss in exchange for its company common shares an ads is issued by as u s depository bank and represents an interest in the underlying ordinary shares of a non- u s company an ads is evidenced by an american depository receipt an adr an adr is a negotiable receipt issued in certificate form representing an ads the plr-112107-02 holder of an adr is entitled to demand delivery of the underlying shares each company ads represents one ordinary share of company the number of company adss received was determined pursuant to a specific exchange ratio for each company common share owned the company adss are traded on the new york stock exchange the company adss are the equivalent of an adr pursuant to the merger agreement which states that direct holders of company adss whose ownership is registered on the books of the depository are company adr holders partnership is prepared to distribute a portion of its company adss to the trustees of trust and the trustees of trust in turn are prepared to distribute those company adss to the taxpayers the taxpayers presently intend to contribute some company adss to one or more private_foundations or charitable_remainder trusts of which private_foundations may be the remaindermen the donees at the time of the contributions the foundations will be private_foundations within the meaning of sec_509 and not foundations described in sec_170 each charitable_remainder_trust will be for the benefit of a taxpayer or a taxpayer and one or more family members of the taxpayer or just for one or more family members of a taxpayer for a specified period and at the end of such period will terminate and the assets will pass to one or more charitable organizations which may be private_foundations it is anticipated that the basis of the company ads to be contributed by each taxpayer will be less than the fair_market_value on the dates of the contributions the total value of the company ads to be contributed to the donees by all of the taxpayers will be less than in value of the outstanding company stock including adss the company adss that the taxpayers propose to contribute are subject_to certain contractual and statutory limitations on their transferability in connection with the merger partnership certain taxpayers and other members of the family and other entities related to the family the family shareholders entered into the governance agreement with company under the governance agreement the family shareholders may contribute company adss to the donees without restriction such contributed company adss may be sold by the donees without restriction the company adss acquired by donees pursuant to the proposed transaction will be subject_to rule of the general rules and regulations promulgated under the securities act of as amended the securities act because such securities were originally acquired in the merger the merger constituted a rule a transaction under that rule rule of the securities act imposes certain limitations on the offer or sale of securities acquired in a rule a transaction in general_rule of the securities act c f_r provides that securities acquired in a rule plr-112107-02 a transaction such as the merger may be resold without the selling party being deemed an underwriter of registered securities under the securities act if certain provisions of rule are followed in particular the following conditions must be met adequate current information is available about the issuer of the securities prior to resale the amount of restricted securities sold in any three-month period is limited to the greater of i one percent of the shares outstanding as shown by the then most recent report or statement published by the issuer and ii the average weekly reported trading volume of the shares during the four calendar weeks preceding the sale and the securities may only be sold in brokers transactions within the meaning of sec_4 of the act the taxpayers have taken steps to ensure that the donees will be able to sell the contributed adss in compliance with rule the taxpayers represent that the aggregate contributions to the donees will be limited such that the total number of company adss contributed by the taxpayers to the donees including any adss already held by donees will be substantially less than of the shares outstanding of company as shown by the most recent report or statement published by company the taxpayers also represent that contributions will be made by the donees only at such times when to the best of their knowledge there will not be any proposed recapitalization tender or exchange_offer stock repurchase program or similar plan that would have the effect of substantially reducing the number of outstanding shares of company within the 3-month period following the contribution the taxpayers will prior to the proposed contribution provide a statement to the donees that the requirements of rule are met for all transfers of the company adss by the taxpayers and that the taxpayers will not take any steps that will prevent the donees from making transfers of company adss free of any rule resale restrictions the taxpayers represent that at the time of the contributions the contributed company adss i in the hands of each of partnership and the taxpayers will be deemed under sec_1223 to have been held by each of partnership and the taxpayers for more than one year from the date such adss were acquired by each of them and ii will not come within any of the exceptions set forth in subsections through of sec_1221 in addition the taxpayers anticipate that the fair_market_value of the company adss on the contribution date will be more than the adjusted_basis of the adss law sec_170 of the code allows a deduction for any charitable_contribution as defined in sec_170 payment of which is made within the taxable_year plr-112107-02 sec_1_170a-1 of the income_tax regulations states that if a charitable_contribution is made in property other than money the amount of the contribution is the fair_market_value of the property at the time of the contribution reduced as provided in sec_170 and paragraph a of sec_1_170a-4 sec_170 of the code provides that in the case of charitable_contributions to or for_the_use_of a private_foundation as defined in sec_509 other than a private_foundation described in sec_170 the amount of the charitable_contribution of property otherwise taken into account under sec_170 is reduced by the amount of gain that would have been long-term_capital_gain if the property contributed had been sold by the taxpayer at its fair_market_value determined at the time of the contribution sec_170 of the code states that sec_170 does not apply to any contributions of qualified_appreciated_stock sec_170 of the code defines qualified_appreciated_stock except as provided in sec_170 to mean any stock of a corporation i for which as of the date of the contribution market quotations are readily available on an established_securities_market and ii which is capital_gain_property as defined in sec_170 sec_170 of the code provides that in the case of any donor the term qualified_appreciated_stock shall not include any stock of a corporation contributed by the donor in a contribution to which sec_170 applies determined without regard to sec_170 to the extent that the amount of the stock so contributed when increased by the aggregate amount of all prior such contributions by the donor of stock in such corporation exceeds percent in value of all of the outstanding_stock of such corporation for purposes of sec_170 an individual shall be treated as making all contributions made by any member of his family as defined in sec_267 sec_170 sec_170 of the code defines the term capital_gain_property to mean with respect to any contribution any capital_asset the sale of which at its fair_market_value at the time of the contribution would have resulted in gain which would have been long-term_capital_gain sec_1222 of the code defines long-term_capital_gain to mean gain from the sale_or_exchange of a capital_asset held for more than one year if and to the extent the gain is taken into account in computing gross_income sec_1221 of the code defines the term capital_asset to mean property held by the taxpayer whether or not connected with his trade_or_business but does not include stock_in_trade certain property used in a trade_or_business certain property that is the product of the taxpayer's personal efforts accounts or notes receivable plr-112107-02 certain publications of the united_states government certain commodities derivative financial instruments certain hedging_transactions and certain supplies analysis for stock to be qualified_appreciated_stock it must meet the requirements of sec_170 of the code sec_170 requires that market quotations for the stock be readily available on an established_securities_market as of the date of the contribution the market quotations requirement has the same meaning for the purpose of defining qualified_appreciated_stock and in determining when securities are publicly traded so as to exempt a donor from the substantiation requirements of sec_1_170a-13 todd v commissioner 118_tc_354 date the definition of an established_securities_market for purposes of determining when securities are publicly traded so as to exempt a donor from the substantiation requirements is in sec_1_170a-13 of the regulations sec_1_170a-13 provides that for purposes of sec_1_170a-13 market quotations are readily available on an established_securities_market with respect to a security if the security is listed on the new york stock exchange the american stock exchange or any city or regional exchange in which quotations are published on a daily basis including foreign securities listed on a recognized foreign national or regional exchange in which quotations are published on a daily basis company adss are traded on the new york stock exchange accordingly market quotations for company adss are readily available on an established_securities_market we further conclude that company adss are stock for purposes of sec_170 an ads is issued by a u s depository bank and represents an interest in the underlying ordinary shares of a non-u s company an ads is evidenced by an american depository receipt an adr an adr is a negotiable receipt issued in certificate form representing an ads the holder of an adr is entitled to demand delivery of the underlying shares each company ads represents one ordinary share of company the company adss are the equivalent of an adr pursuant to the merger agreement which states that direct holders of company adss whose ownership is registered on the books of the depository are company adr holders the service has interpreted adrs to be treated as shares of stock for various tax purposes such as the foreign_tax_credit revrul_65_218 1965_2_cb_566 and the interest equalization tax revrul_72_271 1972_1_cb_369 therefore for purposes of sec_170 company adss are stock for which market quotations are readily available on an established_securities_market the taxpayers represent that the taxpayers have taken steps to ensure that the donees will be able to sell the contributed adss in compliance with rule the plr-112107-02 taxpayers also represent that the aggregate contributions of the donees will be limited such that the total number of company adss contributed by the taxpayers to the donees including any adss already held by the donees will be substantially less than of the shares outstanding of company as shown by the most recent report or statement published by company the taxpayers also represent that contributions will be made to the donees only at such times when to the best of their knowledge there will not be any proposed recapitalization tender or exchange_offer stock repurchase program or similar plan that would have the effect of substantially reducing the number of outstanding shares of company within the 3-month period following the contribution the taxpayers represent that the taxpayers will prior to the proposed contribution provide a statement to the donees that the requirements of rule are met for all transfers of the company adss by the taxpayers and that the taxpayers will not take any steps that will prevent the donees from making transfers of company adss free of any rule resale restrictions the taxpayers also represent that under the governance agreement the family shareholders may contribute company adss to the donees without restriction and that such contributed company adss may be sold by the donees without restriction based on the taxpayers’ representations we conclude that the adss that the taxpayers plan to contribute to the donees constitute stock for which for purposes of sec_170 market quotations are readily available on an established_securities_market to meet the requirements of sec_170 of the code the shares must be capital_gain_property within the meaning of sec_170 which means that the shares would have to result in long-term_capital_gain if sold at their fair_market_value under sec_1222 long-term_capital_gain results from the sale of a capital_asset held for more than one year the taxpayers represent that at the time of the contribution the contributed company adss i in the hands of each of partnership and the taxpayers will be deemed under sec_1223 to have been held by each of partnership and the taxpayers for more than one year from the date such adss were acquired by each of them and ii will not come within any of the exceptions set forth in subsections through of sec_1221 in addition the taxpayers anticipate that the fair_market_value of the company adss on the contribution date will be more than the adjusted_basis of the adss based upon the taxpayers’ representations we conclude that the company adss that will be contributed to the donees represent long-term_capital_gain property within the meaning of sec_170 and taxpayers’ contribution of the shares will meet the requirements of sec_170 since clauses i and ii of sec_170 are met and taxpayers will not contribute more than percent within the meaning of sec_170 of all outstanding_stock of company to the donees we conclude that the company adss that the taxpayers plan to contribute to the donees are qualified_appreciated_stock as defined in sec_170 plr-112107-02 caveats a copy of this letter must be attached to any income_tax return to which it is relevant we enclose an extra copy of the letter for this purpose also enclosed is another copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 of the internal_revenue_code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any item discussed or referenced in this letter this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely karin g gross senior technician reviewer branch office of associate chief_counsel income_tax accounting enclosures


internal_revenue_service number release date index number ------------------------ ----------------------------------------------- -------------------------------------- --------------------------- -------------------------------------- --------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------- telephone number -------------------- refer reply to cc psi b01 plr-152027-05 date date ------------------ --------------------- ------------------------ legend legend x -------------------------------------------------- country d dear -------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-152027-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-152027-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely enclosures heather c maloy associate chief_counsel passthroughs and special industries copy of this letter copy for ' purposes cc


id office uilc cca-127138-09 ------------- number release date ------------------------------ tuesday date pm -------------------- from sent to cc ---------------------- subject re indirect method of proof of income in tefra context i agree if there are any doubts as to whether your case involves an indirect method of ------ proof of income or if you have any questions regarding that concept i recommend that you contact ------------ or ------------------------------------------- partnership taxable_year ending with or within any taxable_year of the partner for whom a deficiency_notice based upon an indirect method of proof of income is mailed to the partner are treated as nonpartnership_items as of the date on which that deficiency_notice is mailed to the partner the adjustments from the tefra partnership s should be included in the notice_of_deficiency i agree see irm partnership items of a partner arising in any yes also see irm if the tmp’s individual return is examined and unreported income is identified by using an indirect method of proof and a notice_of_deficiency is mailed to the tmp as of the date the notice is mailed the tmp’s designation is terminated thus whenever an examiner is performing an examination on an investor return that is linked to a tefra key case and the above situation arises the examiner should contact the key case examiner to coordinate the closing of the case sec_301_6231_c_-6 also see irm under sec_301_6231_c_-6 a partner’s partnership items with respect to a partner whose taxable_income is determined by use of an indirect method of proof of income convert to nonpartnership_items on the date a deficiency_notice based upon an indirect method of proof of income is mailed to the partner the notice must include any adjustments from the partnership s a the period for assessment of tax under irc f applies b the one-year assessment_period starts but is immediately suspended by the notice_of_deficiency since the partnership items converted to nonpartnership_items ----------------------- -----------------