t c memo united_states tax_court bernard a kansky petitioner v commissioner of internal revenue respondent docket nos 24528-04l filed date bernard a kansky pro_se michael r fiore for respondent memorandum findings_of_fact and opinion thornton judge in these consolidated cases petitioner seeks review pursuant to sec_6320 and sec_6330 of respondent’s determination sustaining the filing of tax_liens with respect to petitioner’s federal income taxes for years and petitioner also seeks review pursuant to sec_6404 of respondent’s denial of petitioner’s request to abate interest for tax years and findings_of_fact the parties have stipulated some facts which we incorporate herein by this reference when he filed his petition petitioner resided in needham massachusetts petitioner’s tax years through petitioner has been a practicing attorney for over years for tax years through petitioner failed to file federal_income_tax returns in respondent issued a summons directing petitioner to appear at the stoneham massachusetts irs office and produce his records relating to his through income in response to the summons on date petitioner produced seven or eight boxes of documents relating to personal expenses but not to his income by letter dated date respondent’s revenue_agent notified petitioner that the documents he had provided failed to satisfy the summons and requested petitioner to provide bank deposit records and all books_and_records relating to petitioner’s income subsequently at some unspecified date petitioner produced what he characterizes as one small shoe box size of records receipts unless otherwise indicated all section references are to the internal_revenue_code all rule references are to the tax_court rules_of_practice and procedure in date after various meetings with respondent’s agents petitioner submitted his delinquent returns for through petitioner’s cover letter dated date and addressed to respondent’s revenue_agent alluded to personal problems in petitioner’s family as the reason for the untimely filings and concluded again thank you for your professionalism and patience in the above matter during and as a result of the difficulties we have faced on date respondent issued a 30-day_letter proposing adjustments to petitioner’s taxes for through by letter dated date petitioner protested the proposed adjustments on date after consideration of petitioner’s case by the appeals_office respondent issued to petitioner a notice_of_deficiency for through on date petitioner filed a petition in this court seeking redetermination of the proposed deficiencies and additions to tax on date pursuant to the parties’ stipulation this court entered its decision in the deficiency case deciding that petitioner had deficiencies of dollar_figure dollar_figure and dollar_figure for and respectively and had no deficiencies or overpayments for and petitioner did not appeal this decision petitioner’s returns for through petitioner filed federal tax returns for through for every year except petitioner failed to fully pay the liabilities shown on those returns installment agreements petitioner entered into one or more installment agreements that eventually covered all years at issue except more particularly according to respondent’s transcripts of petitioner’s account petitioner’s liabilities for various years were made subject_to one or more installment agreements on the following dates date tax years date date date date date and and according to respondent’s transcripts of petitioner’s account between date and date petitioner made installment payments of about dollar_figure each respondent credited these payments variously to petitioner’s and the record does not contain copies of any installment agreements or any detailed information about them it is unclear from the record whether respondent and petitioner entered into new installment agreements on these various dates or whether existing installment agreements were modified to include additional liabilities on these various dates years after date petitioner stopped making installment payments collection activity on date respondent sent petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 with respect to petitioner’s federal_income_tax liabilities for and the notice indicated that the total_tax petitioner owed for these years was about dollar_figure exclusive of interest with about dollar_figure of this amount attributable to and on date petitioner sent respondent a form request for a collection_due_process_hearing on the form petitioner disputed his underlying tax_liabilities for and on the ground that his liabilities for those years should have been eliminated by net_operating_loss carrybacks and carryforwards from and petitioner complained that the time for claiming these carrybacks and carryforwards had expired while respondent’s revenue agents had control of hi sec_3 with respect to petitioner’s year respondent’s transcripts of petitioner’s account show installment payments of dollar_figure each on july and date feb mar and date and date with respect to petitioner’s year respondent’s transcripts of petitioner’s account show installment payments of dollar_figure each except for one of dollar_figure between date and date with respect to petitioner’s year respondent’s transcripts of petitioner’s account show seven installment payments of dollar_figure each except for one of dollar_figure between date and date files petitioner alleged that he had attempted to satisfy his tax debt by making installment payments of dollar_figure per month until he became ill with cancer petitioner also alleged that the collection activity was premature because his request for equitable relief was still under review by letter dated date respondent’s settlement officer scheduled a hearing on date in the letter the settlement officer stated that if petitioner wished her to consider collection alternatives such as an offer-in-compromise he had to provide within days certain documentation including completed collection information statements and a copy of his filed federal_income_tax return at petitioner’s request the meeting was rescheduled and by agreement the hearing was held by telephone on date petitioner expressed a desire to submit an offer-in-compromise the settlement officer set a deadline of date for petitioner to submit a completed offer-in-compromise as well as a completed form 433-a collection information statement for individuals and form 433-b collection information statement for businesses at petitioner’s request the settlement officer extended this deadline to date it appears that petitioner’s reference to his request for equitable relief refers to his form_843 claim_for_refund and request for abatement filed on date as discussed below on date respondent received from petitioner form_656 offer_in_compromise and form 433-a but no form 433-b on the form_656 petitioner checked boxes indicating that he was submitting his offer-in-compromise on the grounds of doubt as to liability doubt as to collectibility and effective tax_administration he offered dollar_figure to be applied first to pay’ts to my social_security account in compromise of tax_liabilities totaling approximately dollar_figure including accrued interest petitioner altered the standard terms of the form_656 so as to eliminate the statement that he was signing under penalties of perjury as the basis for his offer-in-compromise petitioner alleged that respondent’s revenue agents had engaged in ministerial and managerial misconduct by failing to review more promptly the boxes of documents he had submitted on date in response to the summons he challenged his underlying tax_liabilities for through petitioner also altered the standard terms of the form 433-a so as to eliminate the statement that he was signing under penalties of perjury on the form 433-a petitioner failed to disclose his ownership_interest in certain real_estate after evaluating petitioner’s offer-in-compromise and form 433-a by letter dated date the settlement officer requested additional information from petitioner including a form 433-b for petitioner’s business a copy of petitioner’s return and information about three specified real properties in addition the settlement officer stated that she had determined the fair_market_value of petitioner’s residence to be dollar_figure and offered petitioner an opportunity to submit an appraisal if he disputed this value the settlement officer requested all information by date and informed petitioner that she would be making her determination at that time petitioner provided none of the additional documentation requested by the settlement officer in an date letter to the settlement officer petitioner stated that his personal_residence was in a tired condition and that his property assessment had been reduced from dollar_figure to dollar_figure plus he stated that two of the real properties for which the settlement officer had requested information were owned by trusts and that the other real_property was owned by his wife he stated that he and his family had experienced health problems by letter dated date the settlement officer confirmed a telephone conversation with petitioner in which it was agreed that petitioner would submit by date all of the information requested in her letter dated date the settlement officer also requested this additional information documents verifying a reduced assessment on petitioner’s residence verification of petitioner’s and his family’s health problems and the trust documents and beneficiary schedules for the trusts referenced in petitioner’s letter the settlement officer requested this additional information by date and informed petitioner that she would be making her determination at that time petitioner failed to provide any of the requested documentation on date respondent sent petitioner a notice_of_determination concerning collection action s under sec_6320 and or for and the determination the determination concluded that petitioner was not entitled to challenge his tax_liabilities for and as those liabilities had been litigated in the tax_court in her determination the settlement officer also concluded that petitioner did not qualify for an offer-in-compromise on grounds of doubt as to liability because as just noted petitioner was precluded from challenging his and liabilities the settlement officer concluded that petitioner did not qualify for an offer-in-compromise on the basis of doubt as to collectibility because after taking into consideration petitioner’s equity in his residence petitioner had the means to fully pay the liabilities finally she concluded that because the settlement officer determined that petitioner had dollar_figure of equity in his residence on the basis of a forced continued petitioner had failed to comply with her requests to verify his health claims he did not qualify for an offer-in-compromise on the basis of effective tax_administration accordingly no viable collection alternative having been proposed the settlement officer sustained respondent’s collection action in his petition in docket no 24528-04l petitioner challenges respondent’s collection action the petition states that the only years which should be in question are the tax years and and adds the only reason that the tax years and remain unpaid is that despite the taxpayer’s earmarking funds for the years due the irs nevertheless applied those payments instead in such a haphazard manner so as to leave the oldest years ongoing and outstanding thereby increasing the amount of compounding interest for even greater and extended periods of time in his petition petitioner alleges that he sustained an overall net_loss for through and that loss_carrybacks and carryforwards should eliminate any federal_income_tax for these years he claims to have already paid the irs dollar_figure representing installment payments of dollar_figure each continued sale value of dollar_figure reduced by a dollar_figure encumbrance on the real_estate and further reduced by percent to reflect petitioner’s joint_ownership with his wife request for interest abatement in his form_843 claim_for_refund and request for abatement dated date petitioner requested abatement of interest and penalties for on the following grounds irs failed to work on tax_return for years after compelling production of records in and not getting to those records until early interest caused by irs delays irs failed to allow dollar_figure for health ins and related health benefits offered by office on 1040c schedule and limited deduction to modified schedule a irs by its undue delays ie years - willfully and deliberately deprived taxpayer of carryfoward loss which would have totally eliminated all taxes interest and penalties and would have resulted in a zero balance for ie no taxes penalties or interest also in furtherance of willful misconduct irs has not applied payments made on account to oldest principal balance but applies payments erratically and sporatically to more recent balance claimed also irs has ignored payments made in designated as payment in full of all prior alleged outstanding claims irs failed to advise that its results reported to ma by letter dated date respondent’s technical support manager advised petitioner that his claim for interest abatement would be denied because there was no error or delay relating to the performance of a ministerial_act in processing the examination of your return and because the irs could not consider petitioner’s claims for income_tax abatements as part of a claim_for_abatement of interest under sec_6404 by letter dated date petitioner requested reconsideration by respondent’s office of appeals on date respondent sent petitioner a final_determination disallowing petitioner’s request for abatement of interest for in his petition in docket no petitioner assigns error as follows to respondent’s refusal of his request for abatement of interest the irs stoneham ma office wrongfully witheld my records after subpoena for nearly years before returning them to amend file said returns if timely returned the and losses could have be used to eliminate all taxes for and penalties were assessed unfairly given the extraordinary family circumstances during the period which included death of father death of mother daughter becoming total disabled for life associate attempting suicide april ‘91 year old son - major kidney surgery emergency and tp being in poor health and under medical_care of mgh for multiple medical problems 1987-‘91 also not given full credit for dollar_figure per month poa between although petitioner’s form_843 requested interest abatement for only it appears that respondent treated petitioner’s form_843 as a request for interest abatement for and advised for tax_court by irs agent that penalties nominal and not to be concerned about interest which was incorrect a burden_of_proof opinion the burden_of_proof is generally upon petitioner except as may be otherwise provided by statute or determined by the court see rule a for the first time on reply brief petitioner contends with little elaboration that respondent has the burden_of_proof pursuant to sec_7491 because petitioner did not raise this argument or position in his pretrial memorandum at trial or on opening brief respondent has had no opportunity to address petitioner’s position petitioner’s attempt to raise this argument on reply brief is untimely and prejudicial to respondent see estate of deputy v commissioner tcmemo_2003_176 more fundamentally sec_7491 has no applicability to these consolidated cases sec_7491 operates to shift the burden_of_proof to the commissioner in certain circumstances with moreover petitioner failed to establish that sec_7491 was in effect at any time relevant to these cases sec_7491 is effective with respect to court proceedings arising from examinations commenced after date see internal_revenue_service restructuring and reform act of publaw_105_206 sec c 112_stat_727 we question whether the examination in this case commenced after date as required for sec_7491 to apply it appears obvious that at least with respect to and the examination commenced well before date respect to any factual issue relevant to ascertaining the taxpayer’s liability for tax imposed by subtitle a or b see sec_7491 rule a in one of these consolidated cases petitioner seeks review of respondent’s failure to abate interest because interest is not imposed by subtitle a or b but instead is imposed by sec_6601 which is part of subtitle f sec_7491 does not apply to petitioner’s interest-abatement claim see hawksley v commissioner tcmemo_2000_354 n in the other consolidated case petitioner seeks review of respondent’s collection action but as discussed infra is precluded from challenging his underlying tax_liability accordingly there is before us no legitimate factual issue relevant to ascertaining petitioner’s liability for tax imposed by subtitle a or b within the meaning of sec_7491 petitioner also appears to seek abatement of taxes and penalties under sec_6404 as discussed more fully infra we lack jurisdiction over those claims even if we were to assume for purposes of argument that sec_7491 was in effect for some relevant time and that petitioner had legitimately raised some factual issue as to which sec_7491 might be relevant petitioner has failed to establish that he has met the prerequisites for shifting the burden_of_proof under sec_7491 see 116_tc_438 taxpayers bear the burden of proving that the requirements of sec_7491 are met for instance for the burden to shift to the commissioner the taxpayer must among other things cooperate with reasonable requests by the commissioner for witnesses information documents meetings and interviews sec_7491 petitioner has introduced no evidence to show that he satisfies this requirement to the contrary the evidence in the record indicates that petitioner continued consequently the burden_of_proof remains upon petitioner see rule a b review of collection action sec_6321 imposes a lien in favor of the united_states on all property and property rights of a person who is liable for and fails to pay taxes after demand for payment has been made the lien arises when assessment is made and continues until the assessed liability is paid sec_6322 for the lien to be valid against certain third parties the secretary must file a notice_of_federal_tax_lien within business days thereafter the secretary must provide written notice to the taxpayer sec_6320 sec_6323 the taxpayer may request an administrative hearing before an appeals officer sec_6320 once the appeals officer issues a determination the taxpayer may seek judicial review in the tax_court or a district_court as appropriate sec_6320 sec_6330 sec_6330 prescribes the matters that a person may raise at an appeals_office hearing including spousal defenses challenges to the appropriateness of the commissioner’s intended collection action and possible alternative means of collection the existence or amount of the underlying tax_liability may be contested at an appeals_office hearing only if the taxpayer did continued failed to comply fully with respondent’s requests for information in a timely fashion even after respondent issued a summons not receive a notice_of_deficiency or did not otherwise have an opportunity to dispute that tax_liability sec_6330 see 114_tc_604 114_tc_176 if the validity of the underlying tax_liability is properly at issue we review that issue de novo see sego v commissioner supra pincite other issues we review for abuse_of_discretion id underlying tax_liability petitioner challenges his underlying liabilities for and on the ground that alleged net_operating_loss carrybacks and carryforwards from and should eliminate any liabilities for these years because petitioner received a notice_of_deficiency for his tax years through he is not entitled to challenge the existence or amount of his tax_liabilities for these years in this collection proceeding see sec_6320 sec_6330 sego v commissioner supra pincite goza v commissioner supra pincite moreover because this court adjudicated petitioner’s liabilities for these years pursuant to a stipulated decision in the prior deficiency proceeding the doctrine_of res_judicata prevents petitioner from relitigating in this proceeding his liabilities for and see newstat v commissioner tcmemo_2004_208 application of installment payments petitioner alleges that for some months he made monthly installment payments of dollar_figure each he has been vague and inconsistent in describing the total amount of installment payments he claims to have madedollar_figure nevertheless petitioner argues on brief that if his installment payments to the irs had been correctly credited to his account he would have no outstanding balance due for any year relevant to these cases he contends that respondent erred in failing to follow standard accounting practices so as to apply his payments to the oldest principal balance first petitioner has failed to establish that respondent committed error in this regard the record indicates that at least some of petitioner’s installment payments were made before date when petitioner’s and liabilities became subject_to an installment_agreement clearly respondent did not err by applying these pre-date installment payments to years other than and respondent’s records indicate that ultimately petitioner received credit for payments of approximately dollar_figure each some of which were in fact in his petition filed in docket no 24528-04l petitioner alleges that his installment payments totaled dollar_figure in his pretrial memorandum petitioner states that he made installment payments totaling more than dollar_figure on opening brief petitioner asserts that his installment payments totaled dollar_figure on reply brief petitioner asserts that his installment payments were dollar_figure plus credited against petitioner’s liability the record contains no credible_evidence to suggest that these installment payments were improperly credited or that petitioner made additional payments that were not credited collection alternatives petitioner has not expressly assigned error to the settlement officer’s rejection of his offer-in-compromise to the extent that the petition might be construed to raise such a claim by implication we hold that the settlement officer did not abuse her discretion in rejecting petitioner’s offer-in- compromise inasmuch as petitioner was not entitled to challenge his underlying tax_liabilities for and see sec_301_7122-1 proced admin regs failed to timely comply with the settlement officer’s requests for complete current financial information to establish doubt as to collectibility or economic hardship see sec_301_7122-1 and proced admin regs failed to submit a copy of his tax_return to show the settlement officer that he was in current compliance with filing_requirements see rodriguez v commissioner tcmemo_2003_153 and altered the standard terms of form_656 so as to delete the statement that he was signing the form under penalties of perjury see revproc_2003_71 sec_4 2003_2_cb_517 form must be signed under penalty of perjury and none of its standard terms may be stricken or altered conclusion petitioner has failed to make a valid challenge to the appropriateness of respondent’s collection action c request for abatement of interest in his petition petitioner requests us to abate all interest and penalties for and dollar_figure sec_6404 provides that the commissioner may abate interest on any deficiency or payment of income gift estate and certain excise_taxes to the extent that the deficiency or any error or delay in payment is attributable to erroneous or dilatory performance of a ministerial_act by an officer_or_employee of the commissionerdollar_figure such an error or delay in on brief petitioner seems to suggest that he is also requesting abatement of income_tax for and and may be requesting abatement of interest taxes and penalties for other years as well we decline to consider these issues raised for the first time on brief for to do so would result in surprise and prejudice to respondent see 96_tc_226 84_tc_191 affd 796_f2d_116 5th cir in any event in the administrative_proceeding petitioner did not seek interest abatement for years other than and in this proceeding petitioner has alleged no facts or legal basis to support any claim_for_abatement of interest for years other than and as discussed infra review of petitioner’s challenge to taxes and penalties is precluded in these cases in sec_6404 was amended to permit abatement of interest for unreasonable error or delay resulting from the performance of ministerial or managerial acts taxpayer bill of right sec_2 publaw_104_168 and 110_stat_1457 the amended provision applies to tax years beginning after date id sec_301 as previously continued performing a ministerial_act is taken into account only if it is in no significant aspect attributable to the taxpayer and only if it occurs after the irs has contacted the taxpayer in writing regarding the deficiency or payment sec_6404 is not intended to be used routinely to avoid payment of interest but rather is to be utilized in instances where failure to abate interest would be widely perceived as grossly unfair h rept pincite 1986_3_cb_1 s rept pincite 1986_3_cb_1 jurisdiction we have jurisdiction to decide whether respondent’s failure to abate interest under sec_6404 was an abuse_of_discretion see sec_6404 review of petitioner’s challenge to his underlying liability for taxes and penalties is precluded in these cases if not by the limitations of sec_6404 which gives the tax_court jurisdiction only with respect to claims for abatement of interest see 112_tc_230 then as previously discussed by continued discussed in neither the administrative_proceeding nor this proceeding has petitioner properly challenged respondent’s failure to abate interest for years other than and therefore the amendment is inapplicable to the instant cases we intend no inference that we would reach a different result in these cases if the amendment were applicable virtue of the doctrine_of res_judicata and the operation of sec_6330 ministerial error petitioner has failed to show error or delay by respondent’s officers or employees in performing a ministerial_act within the meaning of sec_6404 a ministerial_act means a procedural or mechanical act that does not involve the exercise of judgment or discretion and occurs during the processing of a taxpayer’s case after all the prerequisites to the act such as conferences and review by supervisors have taken place see 123_tc_202 sec_301 2t temporary proced admin regs fed reg date the exercise of judgment or discretion such as the commissioner’s deliberation concerning the proper application of federal tax law or other law is not a ministerial_act corson v commissioner supra petitioner alleges that respondent’s stoneham massachusetts office wrongfully withheld his records for nearly years after obtaining them by summons the mere passage of time in such circumstances however does not establish erroneous or dilatory ministerial acts by respondent see hanks v commissioner tcmemo_2001_319 it was not until that petitioner finally submitted his delinquent returns for through relatively soon thereafter respondent issued petitioner a 30-day_letter proposing adjustments petitioner filed an administrative appeal and after the notice_of_deficiency was issued in petitioner litigated the deficiency in the tax_court that litigation concluded in petitioner then entered into an installment_agreement with the irs in petitioner stopped making installment payments in these circumstances we discern no error or delay by respondent’s officers or employees in performing a ministerial_act petitioner alleges that respondent failed to give him proper credit for installment payments made as previously discussed we find petitioner’s contentions in this regard to be unfounded in any event respondent’s decision in this case to apply payments to a particular year’s tax_liability does not constitute a ministerial_act within the meaning of sec_6404 see boyd v commissioner tcmemo_2000_16 significant aspects of delay attributable to petitioner moreover even if we were to assume for the sake of argument that respondent’s officers or employees improperly delayed performing or failed to perform one or more prescribed ministerial acts we would nevertheless conclude that significant aspects of any such failure were attributable to petitioner so as to preclude relief under sec_6404 it was petitioner’s own fault that he failed to file returns for through forcing respondent to take action to secure the filing of the returns because of petitioner’s lack of cooperation respondent eventually resorted to summoning petitioner’s records as previously noted it was not until that petitioner finally submitted his delinquent returns for through notably petitioner’s accompanying cover letter attributed the late submission to his health problems rather than to any error or delay by respondent’s employees petitioner’s letter thanked the irs agents for their professionalism and patience in sum petitioner has not shown that respondent abused his discretion in failing to comply with petitioner’s request for interest abatement we have considered all arguments made by petitioner and have found those arguments not discussed herein to be moot or without meritdollar_figure to reflect the foregoing decisions will be entered for respondent although petitioner alleges in his petition that an irs agent advised him not to be concerned about interest which was incorrect petitioner has not expressly raised this issue at trial or on brief we deem petitioner to have abandoned any such issue in any event the record contains no evidence corroborating this claim


department of the treasury internal_revenue_service washington d c sep tax_exempt_and_government_entities_division uniform issue list legend taxpayer a irab bank c amount amount dear this is in response to your request for a ruling dated date as supplemented by correspondence dated date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he received a distribution from ira b totaling amount taxpayer a asserts that his failure to accomplish a rollover of amount within the 60-day period prescribed by code sec_408 was due to stress caused by legal proceedings being pursued by his ex-wife taxpayer a maintained ira bat bank c believing his ex-wife was about to initiate legal proceedings to attach his ira taxpayer a on date requested a distribution of amount from ira b taxpayer a received a check -------------- ---- page2 for amount less termination fees of amount which were withheld by bank c taxpayer a set the check aside continues to hold the check uncashed taxpayer a represents that a friend suggested he withdraw amount from ira b taxpayer a further represents that the stress caused by his divorce proceedings as well as some medical issues prevented him from completing a rollover however taxpayer a indicated he did not remember he had taken the distribution until his tax-preparer in early questioned the form_1099 he received concerning the distribution based on the facts and representations you request a ruling that the internal_revenue_service the service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers page sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the service has the authority to waive the 60-day rollover requirement for a distribution from an ira where the individual failed to complete a rollover to another ira within the 60-day rollover period but was prevented from doing so because of one of the factors enumerated above in revproc_2003_16 in this instance however the service finds that the documentation and materials provided by taxpayer a do not demonstrate how any of these factors resulted in his failure to accomplish a timely rollover of amount taxpayer a represented that he took the distribution because of anticipated legal proceedings by his ex wife and subsequently forgot he had taken the distribution until after the 60-day period had expired therefore pursuant to sec_408 of the code taxpayer a's request that the service waive the 60-day rollover requirement with respect to the distribution of amount is declined and amount is therefore includible in taxpayer a's gross_income for the taxable_year no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_611 o k of the code provides that it may not be used or cited as precedent page4 2'01548026 a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office if you wish to inquire about this ruling please contact at id or sincerely yours udji ro v manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice cc


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa jblack postf-114942-15 uilc date august to r scott shieldes associate area_counsel large business international from elizabeth girafalco chirich branch chief procedure administration branch subject sec_1359 application this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent issues sec_1359 states that a qualifying vessel-operator’s application_for non- recognition of gain must be made at such time and manner as the secretary may by regulations prescribe the secretary has not prescribed regulations must the service nonetheless consider a qualifying_vessel operator’s application conclusions the service must consider a qualifying_vessel operator’s application because the regulations contemplated under sec_1359 specify how not whether the statute shall apply background sec_1359 was enacted by section of the american_jobs_creation_act_of_2004 pub_l_no 118_stat_1418 the legislative_history accompanying the american jobs creation act states as follows with regard to sec_1359 generally if an sic qualifying_vessel_operator sells or disposes of a qualifying_vessel in an otherwise taxable transaction at the election of the postf-114942-15 operator no gain is recognized if a replacement qualifying_vessel is acquired during a limited replacement_period except to the extent that the amount_realized upon such sale or disposition exceeds the cost of the replacement qualifying vessels sic generally in the case of the replacement of a qualifying_vessel that results in the nonrecognition of any part of the gain under the rule above the basis of the replacement vessel is the cost of such replacement_property decreased in the amount of gain not recognized h_r conf_rep no at __ reprinted in u s c c a n the legislative_history further states that the purpose of section of the american_jobs_creation_act_of_2004 is to provide american shippers the opportunity to be competitive with their otherwise tax-advantaged foreign competitors h_r rep no i pincite sec_1359 a provides that a qualifying_vessel_operator may elect not to recognize certain gain on an otherwise taxable disposition of a qualifying_vessel if the qualifying_vessel_operator acquires a replacement qualifying_vessel during the period specified in subsection b that time period begins one year before the qualifying_vessel is disposed of and ends years after the close of the first taxable_year in which the gain is realized or subject_to such terms and conditions as may be specified by the secretary on such later date as the secretary may designate on application by the taxpayer sec_1359 subsection b also states that the application shall be made at such time and in such manner as the secretary may by regulations prescribe id to date the secretary has issued no regulations nor any other form of guidance prescribing the time and manner in which a taxpayer shall make the election and has specified no terms and conditions for an application made under sec_1359 you have asked whether when a taxpayer acquires a replacement qualifying_vessel after the period specified in sec_1359 has expired the service must consider the taxpayer’s application made under sec_1359 law and analysi sec_1 the text of sec_1359 is as follows in general -if any qualifying_vessel_operator sells or disposes of any qualifying_vessel in an otherwise taxable transaction at the election of such operator no gain shall be recognized if any replacement qualifying_vessel is acquired during the period specified in subsection b except to the extent that the amount_realized upon such sale or disposition exceeds the cost of the replacement qualifying_vessel in practice when taxpayers acquire replacement qualifying vessels within the period specified in sec_1359 they simply file tax returns on which they do not recognize the gain on the vessels disposed of postf-114942-15 a tax statute is self-executing if the regulations referred to in the statute deal only with how not whether the tax is to be applied 104_fedclaims_1 citing 82_tc_819 see also 108_tc_579 106_tc_216 the absence of regulations is not an acceptable basis for refusing to apply the substantive provisions of a section of the internal_revenue_code int’l multifoods corp t c pincite citing estate of neumann t c pincite 105_tc_71 88_tc_663 aff’d 842_f2d_180 7th cir occidental petroleum corp t c pincite to determine whether a statute is self-executing the tax_court has looked for explicit language supporting such a conclusion has considered legislative_history and has considered whether the statute can be applied without further explication in a regulation 409_fedappx_64 9th cir citing 119_tc_317 aff'd on other grounds 370_f3d_1228 n d c cir although not always explicitly analyzing these factors courts have found statutes to be self-executing where the statutes provided as follows ‘the secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this chapter including regulations providing for the application of this chapter in the case of transferors who are non-resident aliens ’ see estate of neumann t c pincite quoting sec_2663 applying the statute in the case of a non-resident alien and holding that the regulations contemplated reflected a ‘how’ characterization ‘the secretary shall prescribe such regulations as may be necessary or appropriate to prevent the avoidance of those provisions of this title dealing with certain tax elements through the use of related_persons ’ see h enters t c pincite quoting sec_7701 applying the provisions to related corporations because nothing in the language of the statute or the legislative_history foreclosed application to related_persons in absence of regulations i f the transportation tax is not collected from the purchaser ‘under regulations prescribed by the secretary ’ the carrier shall pay the tax to the government see temsco helicopters f app’x pincite quoting sec_4263 determining that the language of the statute set a straightforward requirement that was not contradicted by the legislative_history and that there was already a procedure for computing the tax and paying it to the government postf-114942-15 ‘the secretary shall prescribe regulations under which items of tax preference shall be properly adjusted where the tax treatment giving rise to such items will not result in the reduction of the taxpayer's tax under this subtitle for any taxable years ’ see occidental petroleum corp t c pincite quoting sec_58 holding that the failure to promulgate the required regulations can hardly render the new provisions of sec_58 inoperative a tax statute is not self-executing if the language of the statute provides that it shall apply only to the extent provided in regulations prescribed by the secretary see 95_tc_467 discussing the application of sec_465 to activities described in c a in alexander the court noted that the legislative_history which stated that sec_465 shall apply only to the extent provided in regulations prescribed by the treasury supported its interpretation see id pincite n here unlike the statute in alexander sec_1359 does not specify that it will apply only to the extent provided in regulations cf id pincite the contemplated regulations are therefore more accurately characterized as indicating how rather than whether the section applies see estate of neumann t c pincite moreover the legislative_history does not indicate that regulations are intended to be a prerequisite to application of sec_1359 see h_r conf_rep no at __ reprinted in u s c c a n see also h enters t c pincite supporting application of a statute where legislative_history indicated congress did not intend otherwise additionally the language of sec_1359 sets a straightforward requirement a taxpayer may elect not to recognize gain on a qualifying_vessel replaced during the period specified in sec_1359 see temsco helicopters f app’x pincite applying statute absent regulations where statute set straightforward requirement sec_1359 also sets a straightforward requirement the period during which the replacement qualifying_vessel must be acquired shall end years after the close of the first taxable_year in which the gain is realized or under sec_1359 subject_to terms and conditions as the secretary may specify on such later date as the secretary may designate on application by the taxpayer the legislative_history does not differentiate between paragraphs b and b it states only that no gain is recognized if a replacement qualifying_vessel is acquired during a limited replacement_period the language of paragraph b creates a minimum period and the language of paragraph b creates an extended period as the secretary may designate neither the legislative_history nor the language of sec_1359 provides that paragraph b will apply only to the extent provided in regulations cf alexander t c pincite postf-114942-15 by not allowing a taxpayer to apply for an extended time under sec_1359 because the service has not prescribed the time and manner for the application the service would thwart the clear congressional intent-to allow taxpayers to make an election see occidental petroleum corp t c pincite t he failure to promulgate the required regulations can hardly render the new provisions inoperative thus the service should consider a qualifying vessel-operator’s application under sec_1359 even though the service has not prescribed the time and manner for the application this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions


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 ps b02 plr-145299-10 date date legend x ---------------------------------------- --------------------------------- y ----------------------------------- z --------------------- -------------------------------- m -------------------------------------- n --------------------------------------- o ---------------------------------------------------------------- p ------------------------------------------- q ---------------------------------------------------------- r ------------------------------------------------------- s ------------------------------------------------ t ---------------------------------------------------- u ---------------------------- v -------------------------------------- plr-145299-10 state ------------- a --- b --- c --- d --- e --- f -- dear ------------------- this responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling concerning the qualifying_income exception to the publicly_traded_partnership rules of sec_7704 of the internal_revenue_code facts x is a limited_partnership organized under the laws of state x represents that it is a publicly_traded_partnership within the meaning of sec_7704 y a limited_liability_company organized under the laws of state is the general_partner and the tax_matters_partner of x y is wholly owned by z x through affiliated operating entities is principally engaged in the activity of natural_gas gathering natural_gas processing natural_gas marketing and the storage fractionation distribution and marketing of natural_gas liquids ngls and ngl products x has requested a ruling that the gross_income it derives from operating natural_gas processing and natural resource storage facilities as described below constitute qualifying_income under sec_7704 natural_gas processing activities x owns gas processing plants located in several states among these facilities are m n and o x has an ownership_interest in the entities that own m and n m and n consist of cryogenic gas processing trains that chill natural_gas streams in order to recover significant amounts of ngls from such streams m is connected to major common carrier pipelines that deliver natural_gas to the plants and deliver mixed ngls from the plants to the next point in the supply chain n owns a gas gathering system that gathers plr-145299-10 natural_gas from producers at the wellhead delivers the gas to the processing plant and delivers ngls from the plant to the next point in the supply chain x also owns an interest in o o is a refrigeration plant that chills a natural_gas stream in order to separate condensed ngls from the natural_gas stream o is connected to several major common carrier pipelines that deliver natural_gas to the plant and deliver mixed ngls from the plant to the next point in the supply chain x’s assets dedicated to the processing of mixed ngls through fractionated are in several locations x owns an interest in p which owns q q is comprised of several fractionation trains consisting of deethanizers depropanizers debutanizers q is connected to the major common carrier pipelines that deliver mixed ngls from the gas processing plants to q and deliver ngl products from q to the next point in the supply chain x serves as the operator of m n and o and has entered into an operating_agreement for each facility pursuant to each of the operating agreements x performs all functions associated with processing natural_gas at the plant including i contracting with customers for_the_use_of the plant ii taking delivery of the natural_gas from various gathering systems or common carrier pipelines iii performing the tasks necessary to process the natural_gas iv metering the quantities of natural_gas v monitoring the specifications of natural_gas and vi performing the tasks necessary to off-load the natural_gas for receipt by the customer in addition x is responsible for all the functions associated with the ownership of each plant including staffing each plant employing either directly or through an affiliate all personnel who physically control the processing facility handling all commercial transactions and conducting routine maintenance as well as identifying and purchasing all supplies necessary to operate each plant finally x is responsible for billing accounting financial reporting and treasury functions for the plants pursuant to the operating agreements x is entitled to a fee and reimbursement for all costs incurred to operate and maintain the plant x also serves as the operator of q pursuant to an operating_agreement with p x is responsible for all processing of mixed ngls through q pursuant to the operating_agreement x performs all functions associated with processing the product including i contracting with customers for_the_use_of q ii taking delivery of the mixed ngl stream from various common carrier pipelines iii performing the tasks necessary to process the ngls iv metering the quantities of ngls v monitoring the specifications of ngls and vi performing the tasks necessary to off-load the product for receipt by the customer in addition x is responsible for all the functions associated with the ownership of q including staffing the facility operations employing either directly or through an affiliate all personnel who physically control the facility handling all commercial transactions conducting routine maintenance identifying and purchasing all supplies necessary to operate the facility and overseeing and coordinating any expansion or modification of the facility finally x is responsible for billing accounting plr-145299-10 financial reporting and treasury functions of the facility pursuant to the operating agreements x is entitled to a fee and reimbursement for all costs incurred to operate maintain and expand the facility including shared expenses natural resource storage activities x serves as the operator of r the primary storage area for mixed ngls and ngl products fractionated by q and is connected by common carrier and private pipelines for mixed ngl supply r distributes ngls through several logistics methods with pipelines to customers being the predominant method of delivery r consists of a underground storage wells b of which are owned by x the remaining wells are owned by s pursuant to a cost-sharing agreement x operates the wells owned by s in exchange for a fee and s’s share of the costs x’s duties as operator of r include i taking delivery of the product from various common carier pipelines ii injecting the product into the underground storage wells iii metering the quantities of products stored in the wells owned by s iv monitoring the specifications of products and v performing the tasks necessary to off-load the product for receipt by customers in addition x is responsible for staffing r employing all personnel who physically operate the facility and maintain it in accordance with industry standards and state local and federal regulations any costs incurred by x for the sole benefit of s’s underground storage wells are billed directly to s in addition costs incurred that benefit both x and s are allocated c to x and d to s x is the sole owner of t that is an underground storage_facility which consists of e underground storage wells and is connected by pipeline to u x utilizes f of these underground wells to provide long-term and short-term storage services and throughput services to internal and third-party customers x has leased the remaining wells to v pursuant to a long-term_lease under the lease agreement with v x serves as the operator of the leased wells at t in its capacity as operator x is responsible for i injecting and withdrawing product into the leased underground storage wells ii transporting product from the underground storage wells to u and iii metering the quantities of products stored in the leased wells in addition x is responsible for staffing t employing all personnel who physically control the facility and maintaining the facility in accordance with industry standards and local state and federal regulations in exchange for its services as the contract operator of t x is paid a fixed fee as well as a reimbursement for certain expenses and other_amounts law and analysis plr-145299-10 sec_7704 provides that a publicly_traded_partnership shall be treated as a corporation sec_7704 provides that the term publicly_traded_partnership means any partnership if interests in that partnership are traded on an established_securities_market or interests in that partnership are readily_tradable on a secondary market or substantial equivalent thereof sec_7704 provides that sec_7701 shall not apply to any publicly_traded_partnership for any taxable_year if such partnership met the gross_income requirements of sec_7704 for such taxable_year and each preceding_taxable_year beginning after date during which the partnership or any predecessor was in existence sec_7704 explains that a partnership meets the gross_income requirements of sec_7704 for any taxable_year if percent or more of the gross_income of such partnership for such taxable_year is qualifying_income sec_7704 provides that the term qualifying_income means income or gains derived from the exploration development mining or production processing refining transportation including pipelines transporting gas oil or products thereof or the marketing of any mineral_or_natural_resource including fertilizer geothermal_energy or timber conclusion based solely on the facts submitted and representations made we conclude that to the extent x derives gross_income from the operations of m n o q r and t which may include fees and cost reimbursements depending on the facts and circumstances such gross_income will be qualifying_income within the meaning of sec_7704 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter including whether x meets the percent gross_income requirement of sec_7704 in any taxable_year for which this ruling may apply in addition no opinion is expressed or implied concerning whether any of the ownership structures discussed or referenced in this letter constitute partnerships for federal tax purposes 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 temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in the letter_ruling see dollar_figure of revproc_2011_1 2011_1_irb_1 however when the criteria in dollar_figure of revproc_2011_1 plr-145299-10 i r b are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely charlotte chyr senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ---------------------------------- ---------------------------------------------------- ----------------------------------------- ---------------------------------------------- ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-103236-10 date date legend x ---------------------------------------------------- -------------------------------- y ------------------------------------------------------------- z --------------------------------------------- country ------------------------------------ date1 ----------------------- date2 ------------------------- date3 ----------------------- dear --------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an entity classification election the information submitted states that x was organized under the laws of country and was approved for organization by the government of country on date1 x was legally formed by the issuance of a business license in country on date2 x is owned by y which in turn is owned by z x represents that it is a foreign_entity that was eligible to elect to be treated as a disregarded_entity for federal tax purposes effective on date2 an election was filed on behalf of x on date3 but the election erroneously plr-103236-10 provided for an effective date of date1 x represents that it has been consistently treated by y and z as a disregarded_entity for federal tax purposes sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an 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 sec_301 b by filing form_8832 with the appropriate service_center under sec_301_7701-3 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 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a plr-103236-10 disregarded_entity for federal tax purposes effective date2 a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code and the regulations thereunder 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 copies of this letter are being sent to x’s authorized representatives sincerely associate chief_counsel passthroughs special industries by _____________________________ bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury washington dc person to contact --------------------------- id no ------------- telephone number --------------------- refer reply to cc psi 04-plr-121766-03 date march internal_revenue_service number release date index number - ------------------------------------------------------------ ------------ ------------------------ ------------------------------- --------------------------------- re ------------------------------------------------------ -------------------------------- ------------------------------------ -------------------- - legend grantor -------------------------------------------------- spouse ------------------------------------------------ trust ------------------------------------------------------- disinterested trustee ------------------- date --------------------- date --------------------------- year ------- dollar_figurew ------------ dollar_figurex ----------- dollar_figurey --------- child a -------------------------------------------- child b ----------------------------------------- child c ------------------------------------------- court ---------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------ state -------------------- dear ----------------------------------- this is in response to your date letter and prior correspondence in which you requested rulings concerning the federal estate generation-skipping_transfer and income_tax consequences of the proposed division of three trusts plr-121766-03 facts the facts and representations submitted are summarized as follows on date prior to date grantor established an inter_vivos irrevocable_trust trust and transferred to trust cash in the amount of dollar_figurew bonds valued at dollar_figurex and non-voting common_stock valued at dollar_figurey in year the total value of the transfer was reported by grantor on a timely filed gift_tax_return on which grantor and spouse elected to split the gift_for federal gift_tax purposes no additions or contributions have been made to trust after date at the time trust was established grantor had three living children child a child b and child c and no other issue article ii of trust provides that the trustees are to allocate all property of trust by right of representation among grantor s issue living at the time such property is received by the trustees pursuant to article ii the trustees held the trust property in three separate trusts child a_trust child b_trust and child c trust one for each of the grantor’s children each child’s trust so allocated is to be held and disposed of by the trustees upon the terms set forth in article iii article iiia provides that net_income and principal of each child’s trust is to be paid to grantor s child or child s issue as the disinterested trustee deems desirable for the health education maintenance and support of any one or more of such persons the disinterested trustee may also pay net_income and principal to any other descendant of grantor for health education maintenance or support although the needs of grantor s child and child s issue should be given primary consideration article iiib provides that during grantor s lifetime whenever a gift is made to a child’s trust the child of grantor and each of the child s then living issue shall have the right to make a withdrawal from the principal of that child’s trust the amount which may be withdrawn by the child shall be the lesser_of the amount_of_the_gift and twice the maximum amount then permitted as an annual exclusion from taxable_gifts to a single donee under sec_2503 of the internal_revenue_code the amount which may be withdrawn by each of the issue of such child shall be the lesser_of a the amount_of_the_gift reduced by the amount which may be withdrawn by the child and b twice the maximum amount then permitted as an annual exclusion from taxable_gifts to a single donee under sec_2503 such right shall be exercisable in writing by the holder of the right to withdraw within days after the date of the gift but not later than the end of the calendar_year in which such gift is made article iiic provides that upon the death of a child of grantor the trustees are to pay the remaining principal of the child s trust together with any then undistributed_income in accordance with the exercise by such child of a special_power_of_appointment to the extent such child shall fail to exercise this power_of_appointment the principal and income is to be paid to the child s then living issue by right of plr-121766-03 representation or in default of such issue to grantor s then living issue by right of representation article va provides that a special_power_of_appointment is one exercisable to or for the benefit of grantor s issue living at the death of the holder of the power or thereafter born in such proportions as the holder of the power shall appoint by will article vb provides that each trust shall terminate in all event sec_21 years after the death of the survivor of all of grantor s issue living on the date of trust article xii defines the term athe disinterested trustee to mean all trustees who are not eligible and who are not legally obligated to support any person who is eligible to receive current distributions of income or principal from any trust created under trust each child allowed his her power_of_withdrawal granted under article iiib to lapse in year the trustees petitioned court seeking its approval to divide child a_trust child b_trust and child c trust into separate trusts pursuant to the proposed severance child a1 trust child b1 trust and child c1 trust will hold the assets from child a_trust child b_trust and child c trust attributable to the first dollar_figure of the original contribution to each such trust over which child a child b and child c allowed his her respective withdrawal power to lapse further pursuant to the proposed severance child a2 trust child b2 trust and child c2 trust will hold the assets from child a_trust child b_trust and child c trust attributable to that portion of the original contribution to each such trust in excess of dollar_figure over which child a child b and child c allowed his her respective withdrawal power to lapse the division will be on a fractional basis with each trust receiving an appropriate fraction of each asset held by the trust on date court ordered that the trustees of trust upon receipt of favorable rulings from the internal_revenue_service are authorized to sever each of the three child s trusts allocating each asset on a fractional share basis into two separate trusts the trustees request the following rulings after the severance of child a_trust child b_trust and child c trust i none of the post-severance trusts will be includable in the gross_estate of the grantor or spouse for federal estate_tax purposes ii the assets of child a1 trust child b1 trust and child c1 trust will not be includable in the particular child’s gross_estate for federal estate_tax purposes and iii the assets of child a2 trust child b2 trust and child c2 trust will be includable in the particular child’s gross_estate for federal estate_tax purposes under sec_2041 and b plr-121766-03 the proposed severance of each child s trust will not affect the gst exempt status of child a_trust child b_trust child c trust child a1 trust child b1 trust child c1 trust child a2 trust child b2 trust or child c2 trust the proposed severance of each child s trust will not be treated as a taxable_event for federal_income_tax purposes ruling_request 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 shall include the value of all property to the extent of the interest therein of the decedent at the time of the 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 case of a bona_fide sale for an adequate_consideration in money_or_money's_worth by trust or otherwise under which he or she has retained for life or for any period not ascertainable without reference to his her death or for any period which does not in fact end before his or her death b the 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 therefrom sec_2037 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 if the possession or enjoyment thereof can through ownership of such interest be obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property sec_2038 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 where the enjoyment thereof was subject at his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the 3-year period ending on the date of the decedent's death plr-121766-03 sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition which is of such a nature that if it were a transfer of property owned by the decedent such property would be includable in the decedent’s gross_estate under sec_2035 through inclusive sec_2041 defines the term general_power_of_appointment as a power that is exercisable in favor of the decedent the decedent's_estate the decedent's creditors or the creditors of the decedent's_estate sec_2041 provides that the lapse of a power_of_appointment created after date during the life of the individual possessing the power shall be considered a release of the power to the extent that the property that could have been appointed by exercise of the lapsed power during the calendar_year exceeds the greater of dollar_figure or percent of the aggregate value at the time of such lapse of the assets out of which the exercise of the lapsed powers could be satisfied in the present case neither grantor nor spouse retained any interests in child a_trust child b_trust or child c trust for purposes of sec_2036 sec_2037 sec_2038 or sec_2041 accordingly the assets of the post-severance trusts will not be includible in grantor’s or spouse’s gross_estate for federal estate_tax purposes each child allowed his her power_of_withdrawal granted under article iiib of trust to lapse in year pursuant to the proposed severance of each child’s trust child a1 trust child b1 trust and child c1 trust will hold the assets from child a_trust child b_trust and child c trust attributable to the first dollar_figure of the original contribution to each such trust over which child a child b and child c allowed his her respective withdrawal power to lapse the lapse of this withdrawal power was not a release of a general_power_of_appointment under sec_2041 in addition each child has a special_power_of_appointment to appoint the principal of his her respective trust upon his her death under article va of trust to or for the benefit of grantor’s issue living at the death of the powerholder or thereafter born each child’s special_power_of_appointment is not a general_power_of_appointment as defined in sec_2041 accordingly the assets of child a1 trust child b1 trust and child c1 trust will not be includible in the particular child’s gross_estate for federal estate_tax purposes pursuant to the proposed severance of each child’s trust child a2 trust child b2 trust and child c2 trust will hold the assets from child a_trust child b_trust and child c trust attributable to that portion of the original contribution to each such trust in excess of dollar_figure over which child a child b and child c allowed his her respective withdrawal power to lapse under sec_2041 such lapse is treated as a release of a general_power_of_appointment for purposes of sec_2041 and accordingly plr-121766-03 the assets of child a2 trust child b2 trust and child c2 trust will be includible in the particular child’s gross_estate for federal estate_tax purposes ruling_request sec_2601 imposes a tax on every generation-skipping_transfer gst within the meaning of subchapter_b under section a of the tax_reform_act_of_1986 act and ' a of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax is generally applicable to generation-skipping transfers made after date however under section b a of the act and ' b i the tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax will not cause the trust to lose its exempt status the regulation provides that the rules contained in the paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 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 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 but only 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 than the person or persons 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 it is represented that no additions actual or constructive have been made to trust child a_trust child b_trust or child c trust after date the proposed severance of child a_trust child b_trust and child c trust will not result in a shift of any beneficial_interest in such trusts to any beneficiary who occupies a generation lower than the persons holding the beneficial interests further the proposed severance will not extend the time for vesting of any beneficial_interest in plr-121766-03 the new trusts beyond the period provided for in the trusts accordingly the proposed severance of child a_trust child b_trust and child c trust will not affect the gst exempt status of those trusts or the resulting trusts child a1 trust child b1 trust child c1 trust child a2 trust child b2 trust or child c2 trust for purposes of chapter ruling_request sec_61 provides that gross_income means all income from whatever source derived sec_61 provides that gross_income includes gains derived from dealings in property sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in such section for determining loss over the amount_realized sec_1001 provides that the amount_realized from the sale_or_other_disposition of property shall be the sum of any money received plus the fair_market_value of the property received sec_1001 provides that except as otherwise provided in subtitle a the entire amount of the gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides that the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or as loss sustained an exchange of property results in the realization of gain_or_loss under sec_1001 if the properties exchanged are materially different 499_us_554 properties exchanged are materially different if the properties embody legal entitlements different in_kind or extent or if the properties confer different rights and powers id pincite in cottage savings the court held that mortgage loans made to different obligors and secured_by different homes embodied distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans id pincite in defining what constitutes a material difference for purposes of sectioni1001 a the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent id pincite plr-121766-03 in analyzing the instant trust division for sec_1001 to apply there must be a sale or disposition of an interest in property and the property interests exchanged must be materially different a_trust division unless prescribed by the original trust or local law is a deemed sale or disposition of an interest in property in this context a deemed sale or disposition of an interest of property is an exchange of materially different interests in property subject_to sectioni1001 if either the original trust assets are allocated to the post-severance trusts in a non-pro rata manner or the post-severance trusts contain new or additional terms and conditions in revrul_69_486 1969_2_cb_159 distinguished by revrul_83_61 1983_1_cb_78 a non-pro rata distribution of trust property was made in_kind by the trustee although the trust instrument and local law did not convey authority to the trustee to make a non-pro rata distribution_of_property in_kind the distribution was effected as a result of a mutual agreement between the trustee and the beneficiaries because neither the trust instrument nor local law conveyed authority to the trustee to make a non-pro rata distribution revrul_69_486 held that the transaction was equivalent to a pro_rata distribution followed by an exchange between the beneficiaries and was subject_to the provisions of sec_1001 the present case is distinguishable from revrul_69_486 because all of the assets from child a_trust child b_trust and child c trust will be divided and allocated pro_rata between the post-severance trusts accordingly the proposed transaction will not be treated as a pro_rata distribution followed by an exchange of assets among the beneficiaries of the child s trusts a_trust division may also result in the exchange of materially different interests in property if a post-severance trust contains new or additional terms and conditions revrul_56_437 1956_2_cb_507 provides that a partition of jointly owned property is not a sale_or_other_disposition of property where the co-owners of the joint property sever the joint_interests but do not acquire a new or additional interest as a result thereof the transaction here is similar to the kinds of transactions discussed in revrul_56_437 since the trusts here are to be divided but all other provisions of the trusts will remain unchanged thus the proposed transaction will not result in a material difference in the kind or extent of the legal entitlements enjoyed by the beneficiaries accordingly it is also consistent with the supreme court's opinion in cottage savings to find that the interests of the beneficiaries in the post-severance trusts will not differ materially from their interests in the original trusts the proposed division will not change the interests of the beneficiaries instead the beneficiaries will be entitled to the same benefits after the proposed transaction as before therefore the proposed severance of each child s trust will not constitute a taxable disposition under sec_1001 plr-121766-03 a copy of this letter should be attached to any income estate or generation- skipping transfer_tax returns that you may file relating to these matters in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for the ruling it is subject_to verification on examination 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 the ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely lorraine e gardner senior counsel branch office_of_chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes cc


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc psi b06 conex-148284-09 number info release date uil 25d the honorable bob goodlatte member u s house of representative sec_2 south main street first floor suite a harrisonburg va attention ---------------- dear congressman goodlatte this letter responds to your correspondence dated date on behalf of ---- ------------------------ a representative of ------------- she wrote about the incentive for qualified solar electric property under sec_25d of the internal_revenue_code and asked if taxpayers that purchase ------------- generators qualify for the residential energy efficiency property credit she described ------------- generators as producing industrial- strength power output to provide supplemental or standby power for residential or commercial applications sec_25d provides a credit to homeowners in the amount of percent of their expenditures to install qualified solar electric property an expenditure qualifies for this credit if the taxpayer makes the expenditure for property located in the united_states that uses solar_energy to generate electricity for use in a dwelling_unit used by the taxpayer as a residence in the united_states on date the service published notice_2009_41 to provide procedures that manufacturers such as ------------- may follow to certify property as qualified residential energy efficient property under sec_25d for taxable years beginning after date notice_2009_41 also provides guidance on the conditions under which taxpayers seeking to claim the sec_25d credit can rely on a manufacturer's certification for taxable years beginning after date i have enclosed a copy of notice_2009_41 conex-148284-09 i hope this information is helpful please contact me or --------------------------------at ------ --------------------- if we can assist you further with this matter sincerely charles b ramsey chief branch passthroughs special industries