internal_revenue_service number release date index number ------------------------------------------------------------ ------------------------------------------------------------ ----------------------------------------------- --------------------------- ---------------------- re ------------------------------------------ --------------------- - department of the treasury washington dc person to contact --------------- id no ------------- telephone number --------------------- refer reply to cc psi - plr-159547-04 date march legend ------------------------------------------------------------------ trust ---------------------------------------------------------- decedent bank niece brother a b c date date date date court state state statute agreement dear ------------------------------------ -------------------------- ------------------------------------------------ -------------------------------------------------------------- ------------------------ ----------------------------------------------------- -------------------------------------------------- ----------------------------------------------------- ------------------- ---------------------- ------------------ -------------------------- --------------------------------------------------- --------- ---------------------------- ------------------------------------ this is in response to the date letter and subsequent correspondence concerning the generation-skipping_transfer gst tax and income_tax consequences of the proposed partition of trust plr-159547-04 the facts and representations submitted are summarized as follows decedent died on date which is prior to date pursuant to decedent’s will dated date and codicil dated date a testamentary_trust trust was created for the primary benefit of decedent’s niece niece niece’s children and decedent’s brother brother brother predeceased decedent decedent was survived by niece and niece’s children a b and c the current trustees of trust are bank and niece paragraph of the will provides in part that all income from trust shall be paid_by the trustees at such time but not less than annually as shall seem most convenient to them as follows a one half to brother so long as he shall live and upon his death to the children now living or to be born hereafter of niece share and share alike b one half to niece so long as she shall live and upon her death to her children share and share alike trust shall continue throughout the lifetime of brother and niece and thereafter until the youngest child of niece shall reach the age of twenty-five years but after the death of brother and niece there shall be paid and distributed out of trust corpus to each child of niece when he or she reaches the age of twenty-five years an equal share of the corpus of trust thereby terminating his or her benefit under trust the current income beneficiaries of trust are niece a b and c the trustees propose to partition trust into four separate fractional interest subtrusts one for each current beneficiary individually successor trust and collectively successor trusts the partition will be pro_rata in accordance with each beneficiary’s respective interest in trust one half of the assets of trust will be allocated to niece’s successor trust and one-sixth of the assets of trust will be allocated to a successor trust for the benefit of each of a b and c trustees will continue to make current income distributions to niece a b and c pursuant to the terms of trust and state statute upon the death of niece each successor trust will terminate and be distributed according to the terms of decedent’s will state statute provides that the court may sever any trust on a fractional basis into two or more separate trusts for any reason and to segregate by allocation to a separate_account or trust a specific amount from a portion of or a specific asset included in the trust property of any trust to reflect a disclaimer to reflect or result in differences in federal tax_attributes to satisfy any federal tax requirement to make federal tax elections to reduce potential generation-skipping_transfer_tax liability or for any other tax planning purposes or other reasons the beneficiaries and trustees of trust have entered into agreement requesting and approving the judicial modification of trust the trustees have filed a complaint in court to partition the trust as described above and such partition is authorized under state law on date court issued an order approving and directing severance of trust and declaratory relief as described above however the order is effective only upon the issuance of a private_letter_ruling by the irs plr-159547-04 trust was irrevocable on date it is represented that no actual or the proposed partition of trust into four successor trusts will not result in the proposed partition of trust into four successor trusts will not subject you have requested the following rulings constructive additions have been made to trust after that date trust successor trusts or the distributions from any of these trusts to the gst tax under sec_2601 a transfer by any beneficiary that is subject_to the gift_tax under sec_2501 the recognition of gain_or_loss from the sale_or_other_disposition of property by trust successor trusts or the beneficiaries of such trusts identical to the holding_period of trust for such assets the trust’s basis in such asset ruling the holding_period for assets allocated to each successor trust will be the basis of each asset allocated to a successor trust will be identical to the proposed partition of trust into four successor trusts will not result in sec_2601 imposes a tax on each generation-skipping_transfer made by a transferor to a skip_person under section a of the tax_reform_act_of_1986 the gst tax is generally applicable to generation-skipping transfers made after date however under section b a of the tax reform act and sec_26_2601-1 of the regulations the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that 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 exempt from the gst tax will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification 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 than the person or persons who held the beneficial_interest sec_26_2601-1 example involves a_trust that is irrevocable on or plr-159547-04 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 a modification that does not result in an increase in the amount of a gst transfer or the creation of a new gst transfer will not cause the trust to lose its exempt status before date the trustee has the discretion to distribute income and principal to a b and their issue in such amounts as the trustee deems appropriate on the death of the last to die of a and b the trust principal is to be distributed to the living issue of a and b per stirpes in the appropriate local court approved the division of the trust into two equal trusts one for the benefit of a and a's issue and one for the benefit of b and b's issue the trust for a and a’s issue provides that the trustee has the discretion to distribute trust income and corpus to a and a’s issue in such amounts as the trustee deems appropriate on a’s death the trust is to terminate and the corpus distributed to a’s issue per stirpes the terms of the trust for b and b’s issue are identical except for the beneficiaries the example concludes that the division of the trust into two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the division in addition the division does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the two partitioned trusts resulting from the division will not be subject_to the provisions of chapter no additions have been made to trust after that date the proposed partition of trust will result in four successor trusts one for each current beneficiary the proposed partition of trust and pro_rata allocation of assets among the four successor trusts will not shift a beneficial_interest to any beneficiary who occupies a generation lower than the persons holding the beneficial interests prior to the division further the partition will not extend the time for vesting of any beneficial_interest beyond the period provided for in the original trust accordingly based on the facts submitted and the representations made we conclude that the proposed partition of trust into four successor trusts will not subject trust successor trusts or the distributions from any of these trusts to the gst tax under sec_2601 ruling resident or nonresident sec_2511 provides that the tax imposed by sec_2501 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 in this case trust was irrevocable on date it is represented that sec_2501 imposes a tax on the transfer of property by gift by an individual in this case upon the partition of trust into four successor trusts each sec_1001 provides that the gain from the sale_or_other_disposition of sec_61 provides that gross_income includes gains derived from dealings sec_2512 provides that if a gift is made in property the value thereof at plr-159547-04 the date of the gift shall be considered the amount_of_the_gift beneficiary of a successor trust will have the same beneficial_interest as he or she had under trust because the beneficial interests of the beneficiaries are substantially the same both before and after the proposed transaction no transfer of property will be deemed to occur as a result of the partition accordingly we conclude that the proposed partition of trust into four successor trusts will not result in a transfer by any beneficiary that is subject_to the gift_tax under sec_2501 rulings in property 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 sec_1011 for determining loss over the amount_realized of property shall be the sum of any money received plus the fair_market_value of the property other than money received under sec_1001 except as otherwise provided in subtitle a the entire amount of 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 loss sustained a partition of jointly owned property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result of the transaction thus neither gain nor loss is realized on a partition see revrul_56_437 1956_2_cb_507 issue of when a sale_or_exchange has taken place that results in realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender's interests in a 499_us_554 concerns the sec_1001 states that the amount_realized from the sale_or_other_disposition sec_1_1015-2 provides that in the case of property acquired after the supreme court of the united_states in cottage savings concluded that sec_1015 provides that if property is acquired by a transfer in trust other plr-159547-04 different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution sec_1_1001-1 reasonably interprets sec_1001 and stated that an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 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 cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans cottage savings u s pincite than a transfer in trust by gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer date by transfer in trust other than by transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased by the amount of gain or decreased by the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer was made in addition the principles in sec_1_1015-1 concerning the uniform basis are applicable in determining the basis_of_property where more than one person acquires an interest in property by transfer in trust sec_1_1015-1 provides that property acquired by gift has a single uniform basis although more than one person may acquire an interest in the property the uniform basis of the property remains fixed subject_to proper adjustment for items under sec_1016 and sec_1017 has held property however acquired there shall be included in the period for which such property was held by any other person if the property has the same basis in the taxpayer's hands as it would have in the hands of that other person savings to find that the interests of the beneficiaries of the successor trusts will not differ materially from their interests in the trust pursuant to the court’s order trust will be divided on a pro_rata basis all of the provisions of trust will remain unchanged accordingly the proposed transaction will not result in a material difference in_kind or extent of the legal entitlements enjoyed by the beneficiaries and no gain_or_loss is the proposed partition is consistent with the supreme court's opinion in cottage sec_1223 provides that in determining the period for which the taxpayer plr-159547-04 recognized by the beneficiaries or the trusts on the partition for purposes of sec_1001 the basis of the assets will be the same after the partition as the basis of those assets before the partition furthermore pursuant to sec_1223 the holding periods of the assets in the hands of successor trusts will include the holding periods of the assets in the hands of the trust because sec_1001 does not apply to the partition of trust under sec_1015 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent 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 letter is being sent to your authorized representatives in accordance with the power_of_attorney on file with this office a copy of this sincerely lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc


t c memo united_states tax_court dennis o fultz and linda g fultz petitioners v commissioner of internal revenue respondent docket no filed date jon j jensen for petitioners blaine holiday for respondent memorandum findings_of_fact and opinion goeke judge petitioners petitioned the court to redetermine deficiencies respondent determined in their federal income taxes for and of dollar_figure dollar_figure and dollar_figure respectively some of the adjustments in respondent’s original determinations are no longer disputed the issue remaining for decision is whether petitioners are liable for self-employment_tax under section on value-added payments that they received from an agricultural_cooperative we hold the value-added payments are subject_to the self-employment_tax findings_of_fact some of the facts have been stipulated the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioners husband and wife resided in tracy minnesota at the time their petition was filed during all relevant years dennis fultz mr fultz was a farmer and ran a farm operation involving grain and livestock linda fultz mrs fultz was also engaged in the farm operations in addition to running their household fultz farms inc fultz farms inc fultz farms was incorporated in date by bernard fultz mr fultz’s father during the 1respondent has conceded an adjustment in a ag rent-se income for and along with the corollary and computational adjustments associated with that adjustment in addition petitioners presented no argument nor provided any evidence with regard to adjustments b dividends or f patronage_dividends for any year and therefore have conceded those adjustments 2unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure all dollar amounts are rounded years at issue petitioners owned approximately acres of farm_land which they leased to fultz farms fultz farms was involved in growing crops such as corn and soybeans and hog farming the corn and grain grown on the farm also provided feed for livestock during the years in issue mr fultz was president of fultz farms and eric fultz mr fultz’s brother was vice president secretary and treasurer of fultz farms mr fultz and eric fultz were also directors during and mr fultz owned percent of fultz farms minnesota corn processors in approximately minnesota corn processors mcp an agricultural_cooperative was formed under the laws of the state of minnesota by a group of minnesota farmers mcp’s goal was to collectively provide a corn processing capability to its members and to realize profits for the members based upon the increased values of that processed corn had mcp not been created petitioners and other farmers would have been limited to selling their corn as raw corn and the processing profits would have been realized by others mcp’s articles of incorporation authorized it to issue big_number shares of common_stock at dollar_figure per share and big_number shares of nonvoting preferred_stock at dollar_figure per share the shares of 3bernard fultz resigned as vice president of fultz farms in date and as a director of fultz farms sometime between date and date such stock could be held only by producers of agricultural products who reside in the territory served producers referred to persons actually engaged in the production of one or more of the agricultural products handled by mcp producers of agricultural products eligible for membership and having acquired a minimum of shares of common_stock of mcp were recognized as members a units of equity participation mr and mrs fultz collectively purchased big_number shares of stock in mcp in approximately date when mcp was first organized both petitioners held enough shares of mcp stock to qualify as members of mcp as members they were able to purchase additional units of equity participation units in mcp petitioners collectively purchased an additional big_number units in date from date to date mr fultz individually purchased a total of big_number units mrs fultz individually purchased big_number units in date each unit represented one potential bushel of corn that the member might agree to supply to mcp in order to supply corn to mcp a producer was required to hold at least big_number units corn producers who wished to supply corn to mcp were also required annually to execute a uniform marketing agreement uma the producer was obligated to deliver to mcp the number of bushels provided in the uma both mr fultz and mrs fultz executed umas for and b umas between mcp and petitioners mr fultz executed umas dated date and date mrs fultz executed a uma dated date petitioners jointly executed umas dated date and date collectively their units and the umas defined the scope of petitioners’ obligation to mcp pursuant to the umas between petitioners and mcp petitioners were obligated to deliver to mcp a certain amount of corn during each processing year the umas outlined the terms with respect to production processing and marketing of the corn specifically the umas executed by petitioners obligated mcp to process the grain each year in a manner it deemed to be in the best interests of the cooperative and its members and to market the processed corn products at the best price that could be obtained on the open market petitioners were obligated to acquire and deliver the corn to mcp in the umas petitioners appointed mcp as their agent in both the selling and marketing of the corn committed to mcp in addition mcp had sole and 4mcp’s processing year started on the first day of october of each year and ended on the last day of september of the following year complete discretion in all phases of the marketing activity the umas did not obligate fultz farms only petitioners and mcp were parties to the agreements the umas specified that mcp was obligated to pay petitioners as follows an initial payment of percent of the value per bushel of corn delivered within days of mcp’s acceptance of the corn storage and interest payments for corn delivered after october of each processing year an additional payment value-added payment for the value added to the corn during its processing by mcp which was to be based on a yearend determination of mcp’s net_proceeds from all of its operations which would further compensate petitioners for their corn and still allow mcp to retain its financial integrity and patronage_dividends under the umas petitioners were required to produce and deliver corn to mcp for processing three times a year october through january february through may and june through september giving approximately a third of the total required annual quantity at each delivery time petitioners were free to satisfy their delivery obligations through several means they could meet these obligations to mcp with corn that was grown on the farm or acquired on the open market by hiring an outside grower or from pool corn pool corn was corn maintained by mcp and made available for members to use in order to meet their production and delivery obligations under the umas a member using pool corn completed a pool corn certificate which required that member to check a box on the certificate requesting that the obligation be fulfilled through the pool and to charge the member’s account with an acquisition fee of cents per bushel or the going charge at that time for this service any check that was sent to petitioners would have been offset by whatever charge they had incurred for the pool corn the pool corn certificates were sent directly to petitioners not fultz farms if fultz farms fell short of corn to satisfy petitioners’ obligation to mcp on some occasions corn was purchased by fultz farms from a local elevator in lieu of using pool corn for there were no production shortfalls experienced by fultz farms in the required bushels to be produced by petitioners and no pool corn was purchased by petitioners for both and there were shortfalls in the required bushels petitioners were to produce and as a result petitioners had to purchase big_number bushels of pool corn in to supplement the big_number bushels actually delivered and big_number bushels of pool corn to supplement the big_number bushels actually delivered in for all years processed corn had a higher fair_market_value than raw corn petitioners’ and tax years a leases between petitioners and fultz farms for and petitioners both executed separate lease agreements with fultz farms these leases reflected mr fultz and mrs fultz in their individual capacities as lessors and fultz farms as lessee the leases collectively provided that petitioners would receive rent from fultz farms for a house farm_land and mcp shares because of the parties’ partial settlement only the mcp shares are relevant to this opinion the lease rate on mcp shares rented from petitioners wa sec_50 cents per bushel of corn delivered to mcp mcp was not a party to the lease arrangement and fultz farms was neither a shareholder nor a member of mcp fultz farms had no contractual relationship with mcp with respect to the value-added payments in and petitioners received value-added payments from mcp by check mcp issued the checks to petitioners either jointly or individually when petitioners received the checks for value-added payments from mcp in one or both of their names they deposited the checks within a day or two and mr fultz then wrote out personal checks to fultz farms for the same amounts b petitioners’ member activity with mcp in petitioners jointly received value-added payments from mcp of dollar_figure for petitioners received total value-added payments of dollar_figure for mr fultz received value-added payments of dollar_figure the record for mrs fultz for is incomplete but the amount she received is not disputed by the parties the amounts of the value-added payments had no impact on the amounts petitioners were to receive under the leases c petitioners’ income_tax returns and respondent’s determinations petitioners timely filed their and federal_income_tax returns with respect to self-employment_tax petitioners completed and attached to their and federal_income_tax returns section b-long schedules se computation of self-employment_tax petitioners reported self- employment_tax of dollar_figure dollar_figure and zero for and respectively in the notice_of_deficiency respondent determined that petitioners’ self-employment_income from mcp was dollar_figure dollar_figure and dollar_figure for and respectively these amounts do not match the actual value-added payments to petitioners because respondent made adjustments based on the amount and timing of the net payments from fultz farms to petitioners per the lease related to the value-added payments from mcp the fultz farms payments were made after the issuance of the mcp value-added checks to petitioners netted across the years respondent’s adjustments appear to be lower than the amounts petitioners received from mcp petitioners do not contest respondent’s adjustment calculations we accept these adjustments as a partial concession by respondent however our holding is based upon the original payments from mcp to petitioners not petitioners’ relationship with fultz farms respondent also made an adjustment increasing petitioners’ income_tax deduction equal to one-half of the amount of petitioners’ self-employment_tax for each of and opinion this case presents the question whether value-added payments petitioners received from mcp a minnesota agricultural_cooperative are subject_to self-employment_tax under sec_1401 payments from mcp have previously been the subject of decisions of this court and the court_of_appeals for the eighth circuit where an appeal of this case would lie in 118_tc_138 affd 353_f3d_595 8th cir this court held and the court_of_appeals affirmed that value-added payments received by members of mcp were subject_to self-employment_tax and that the self-employment_income of a member of mcp includes income that the member derives from the business conducted by mcp as an agent of the member it has been stipulated that before the period in dispute petitioners purchased shares of stock in mcp and units of equity participation petitioners entered into umas with mcp in which they represented they were producers or owners of the corn they would deliver under the mcp program corn was delivered to mcp to meet petitioners’ obligations to mcp and they received value- added payments from mcp all these factors were present in bot nevertheless petitioners maintain the present case should be distinguished from bot because they entered into a lease agreement with fultz farms under which they purportedly assigned to fultz farms all their responsibilities and duties as holders of the units and all the value-added payments due from mcp petitioners also assert that although they received the checks representing the value-added payments from mcp they immediately wrote a check to fultz farms for the full amount of each check issued to them by mcp petitioners maintain that once fultz farms was incorporated they no longer had the assets and ability needed to grow the corn required by their equity participation in mcp petitioners represent that fultz farms assumed the obligation to produce the corn for mcp pursuant to the lease and the payments they personally received from fultz farms were akin to the rent on the farm real_estate paid to them by fultz farms accordingly petitioners argue they were not subject_to self- employment_tax see 236_f3d_410 8th cir revg tcmemo_1999_333 this dispute is simply stated as whether the lease arrangement with fultz farms precludes the inclusion of the mcp value-added payments in petitioners’ self-employment_income there are several aspects of the umas with mcp and the facts regarding the mcp payments that present impediments to petitioners’ position to purchase units in mcp the purchaser was required to own stock in mcp petitioners owned the mcp stock fultz farms did not petitioners entered into umas with mcp that appointed mcp as their agent and they agreed to deliver the requisite quantities of corn to mcp each year fultz farms was not a party to any agreement with mcp in their agreements with mcp petitioners represented themselves as the growers or owners of corn petitioners were personally obligated to mcp and personally benefited from their agreements with mcp through the receipt of payments from mcp petitioners’ position presents an argument analogous to the taxpayers’ argument in bot v commissioner supra the bots argued that their intent in purchasing the mcp equity units was to make an investment they reasoned that this subjective intent prevented the application of the self-employment_tax to the proceeds received from mcp this court and the court_of_appeals for the eighth circuit rejected this argument the court_of_appeals explained why the bots’ argument failed despite their assertions that they bought the units of participation as an investment the program operated on the basis that they were producers or owners of the corn delivered under the program and that mcp acted as their agent in further processing and marketing the corn the bots should be held to their representations if they want the benefits of the coop program they must bear the burdens as well cf estate of 268_f3d_553 8th cir once chosen the taxpayers are bound by the consequences of the transaction as structured even if hindsight reveals a more favorable tax treatment bot v commissioner f 3d pincite this reasoning applies to petitioners’ assertion that they assigned their rights under the mcp agreements to fultz farms because petitioners’ purported assignment did not bind mcp fultz farms did not own any stock in mcp was not a member of mcp and would not have been able to contract with mcp for the delivery of the corn mcp paid petitioners not fultz farms as the growers or owners of the corn and mcp acted as petitioners’ agent in marketing the corn accordingly we find this case is controlled by 118_tc_138 and thus hold the value-added payments from mcp must be included in petitioners’ income from self-employment in light of the foregoing and to reflect concessions by the parties decision will be entered under rule


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date date date contact person uniform issue list contact’s identification_number telephone number se t-eo ra‘t employer_identification_number legend f xx y dear this is in reply to your request dated date and supplemented on date for rulings on your proposed awards program for past achievements by individuals facts you are exempt from federal_income_tax under sec_501 of the internal_revenue_code and are classified as a private_operating_foundation under sec_4942 you desire to establish an award program intended to recognize individuals for their past charitable scientific educational or literary achievements the awards will be for recognition of past achievements of individuals who have contributed to the betterment of their community country or world more specifically the award will recognize the promotion of mutual understanding friendship cooperation and lasting peace among peoples contributing to the alleviation of human suffering protection of life or the promotion of health education of the people on the meaning and importance of humanity and human dignity and or promotion of the respect for human beings the recipients of the awards will be chosen by your award selection committee and governing body on the basis of the recipient’s past achievement s related to your type of exempt purposes such as wide positive impact on the promotion of mutual understanding friendship cooperation and lasting peace among all peoples contributing to the alleviation of human suffering the protection of life the promotion of health the education of the public the meaning and importance of humanity human dignity love and forgiveness and respect for human beings you submitted your proposed guidelines for the selection process the selection process includes objective and nondiscriminatory criteria for selection of a recipient the recipient of an award will be determined by the majority vote of a selection committee comprised of your board_of directors an independent review committee of approximately six to twelve individuals who meet certain criteria with regard to their leadership expertise and authority will review and score the nominations a select number up to fifteen of the top scoring nominations will then be sent on to a panel of judges for final selection you represent that you will have a policy in place your goal is to generate at least submissions and qualified candidates in your early years with increasing numbers each subsequent year additionally the availability of the awards and the awardees will be made known to the public strict conflict of interest the choice of recipients of the award will be based solely on the selection committee’s judgment that is consistent with your stated purposes the award recipients may include u s residents as well as residents of other countries you have represented that awards will not be made to persons who are relatives of your governing body to the members of your selection committees to your employees or to any other disqualified persons with respect to you under chapter of the code you state that the award will be paid in a lump sum and or yearly installments you represent that each year you plan to make from one to three larger awards totaling x amount also you state that you may make about seven smaller similar awards totaling about y amount per year you have represented that any awards under the program will not be related to study travel or similar purposes the awards will be made by you to pursue your charitable scientific educational or literary purposes you will not impose conditions on the manner in which the recipient may expend the award and the award will not be intended to finance any future activity of the recipient additionally there is no action to be taken on the part of any recipient to obtain this award there is no service or commitment made by any recipient as a result of this award the recipient need not account for his or her uses of the personal award money the recipient will be selected from the united_states and or the international general_public rulings requested you requested rulings that the awards to be made to individuals under your proposed awards program are not made for travel study or similar purposes under sec_4945 of the code such awards are not subject_to approval by the service under sec_4945 of the code because they are not for travel study or other similar purposes such awards are not taxable_expenditures within the meaning of sec_4945 of the code such awards will constitute qualifying distributions under sec_4942 of the code law sec_501 of the code provides for the exemption from federal_income_tax of nonprofit_organizations organized and operated exclusively for charitable and or educational_purposes sec_509 of the code provides that certain organizations exempt from federal_income_tax under sec_501 are private_foundations subject_to the provisions of chapter including sec_4942 and sec_4945 sec_4942 of the code provides that private_foundations must make qualifying distributions for exempt purposes and defines a qualifying_distribution as including amounts paid_by a private_foundation to accomplish one or more of its exempt purposes under sec_501 of the code sec_4942 of the code concerns the requirements of private operating_foundations under sec_4942 under sec_4942 and sec_53_4942_b_-1 of the foundation and similar excise_taxes regulations regulations qualifying distributions under sec_4942 as payments to individual beneficiaries must be for the direct active_conduct of the operating foundation’s exempt purposes with significant involvement in the exempt activity sec_4945 of the code imposes excise_tax on a private foundation's making of any taxable_expenditure as defined in pertinent part by sec_4945 and sec_4945 sec_4945 of the code provides that a taxable_expenditure includes an amount_paid by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual’ unless the foundation grant procedure meets the requirements under sec_4945 for pre-approval by the internal_revenue_service in advance of making the grants sec_4945 of the code provides that the term taxable_expenditure includes any amount_paid or incurred by a private_foundation for any purpose other than one specified in sec_170 that is other than for exclusively religious charitable scientific literary or educational purpose or to foster national or international amateur sports competition not involving the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals sec_4945 of the code and sec_53_4945-4 of the regulations concern the pre-approval by the internal_revenue_service of grant procedures for grants to be made by private_foundations to individuals for travel study or other similar purposes’ sec_4945 of the code provides that sec_4945 shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if it is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which would be subject_to the provisions of sec_117 of the code as in effect on the day before the date of the enactment of the tax reform act of date and is to be used for study at an educational_organization described in sec_170 or the grant constitutes a prize or award which is subject_to the provisions of sec_74 of the code without regard to sec_74 thereof if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or other similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that in general the term taxable_expenditure includes any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless the grant satisfied the requirements of sec_4945 sec_53_4945-4 of the regulations provides that a grant to an individual for purpose other than those described in sec_4945 of the code is not a taxable_expenditure within the meaning of sec_4945 revrul_77_380 c b situation holds that an award for journalism past achievement does not require the additional pre-approval procedure by the internal_revenue_service under sec_4945 of the code where the award is granted in recognition of past achievement in this particular field of journalism and is not intended to finance any specific activities of the recipient the awards are not intended to finance any future activity of the recipient there are no conditions or requirements to be met subsequent to receiving the grants analysis in your case as in revrul_77_380 situation cited above you have represented that these recognition of past achievement awards by you will not require any_action or future action by the recipient will not be made for travel study or similar purposes and that they are awarded on an objective and nondiscriminatory basis thus the awards will not be treated as grants for travel study or other similar purposes under sec_4945 of the code also your awards do not require the pre-approval by the internal_revenue_service under sec_4945 because such pre-approval is directed to foundation grant procedures for grants to be used by the recipient for travel study or similar purposes and your awards will not be paid for any of those purposes but instead will be paid only for the past achievement s of the grantee in the matters valued by your exempt purposes and without any required action by the grantees and are not intended to finance any future activities of the recipient your awards further one of your exempt humanity purposes and as such the awards will be qualifying distributions for exempt purposes under sec_4942 a grant is a taxable_expenditure under sec_4945 of the code if the grant is made for any purpose other than one specified in sec_170 since your awards are for purposes described in sec_170 amounts paid_by you are amounts paid to accomplish a purpose described in sec_170 and therefore the awards are not taxable_expenditures conclusion accordingly provided that your awards will be made as described for exempt purposes under sec_501 of the code we rule that the awards will not be treated as grants for travel study or other similar purposes under sec_4945 of the code the awards do not need pre-approval by the internal_revenue_service under sec_4945 of the code the awards will not be taxable_expenditures by you under sec_4945 of the code the awards will be qualifying distributions for your exempt purposes under sec_4942 of the code this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolved questions concerning your federal_income_tax status this ruling should be kept in your permanent records this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling letter is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely robert c harper jr manager exempt_organizations technical group


id office uilc cca-461459-10 ----------------------------- number release date from --------------- sent tuesday april pm to ------------------------------------------------------------------------------------- cc ---------------------- subject re fica protective claims - severance_pay - just heard back from my contact modified your statement as follows recently the district_court for the western district of michigan issued an opinion in quality stores inc et al v united_states - wl w d mich feb that certain severance payments were excluded from fica tax the district court's opinion runs counter to the federal_circuit court of appeal's decision in csx corp v united_states that held that severance payments are subject_to fica tax unless they meet the narrow administrative exclusion for sub-pay in revrul_90_72 ---------------------------------------------------------------- ----------------------------- the decision is not binding precedent


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 plr-130412-15 date date legend decedent --------------------------------------------------- ---------------------------- spouse date date ---------------------- ------------------- --------------------- dear ----------------- this letter responds to your personal representative’s letter of date and subsequent correspondence requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date the estate discovered its failure to elect portability after the due_date for making the election plr-130412-15 decedent’s estate represents that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of the decedent’s death and that during his lifetime decedent made no taxable_gifts decedent’s estate requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis 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_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-130412-15 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 plr-130412-15 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date decedent’s estate represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed 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 if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void 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 plr-130412-15 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 associate chief_counsel passthroughs special industries by leslie h finlow leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date conex-113514-10 uil the honorable orrin g hatch united_states senate washington dc attention --------------- dear senator hatch i am responding to your letter dated date on behalf of your constituents -- ----------------------------------------- ------------------------- wrote about the differences in the tax treatment between the losses direct and indirect investors sustained from the fraud mr bernard l madoff perpetrated -------------------------said they lost funds in their personal savings a charitable_remainder_trust and their individual_retirement_accounts iras revrul_2009_9 explains the income_tax law that applies to investors who lost money in a fraudulent investment arrangement and are entitled to a theft_loss deduction revproc_2009_20 provides an optional safe_harbor treatment for qualified investors who lost money in certain fraudulent investment arrangements qualified investors under the revenue_procedure include only investors that transferred cash or property to the perpetrators of the fraudulent scheme these direct investors include individuals partnerships limited_liability corporations and other persons as defined in sec_7701 of the internal_revenue_code the code the primary reason for the restriction to direct investors in revproc_2009_20 is because they are the party from which the perpetrator of the fraudulent arrangement stole money or property and thus the proper party to compute and claim a theft-loss deduction under sec_165 of the code however this restriction does not prevent indirect investors from benefitting from the safe_harbor treatment for example partners in a feeder fund can deduct their share of a theft-loss deduction the fund claimed a charitable_remainder_trust crt is exempt from federal_income_tax although it may be subject_to excise_taxes crts differ from conex-113514-10 iras and sec_401 retirement plans in that a crt is an entity separate from its grantor for income_tax purposes with its own separate_return filing_requirements because under current law only a direct investor may claim theft losses arising from a ponzi scheme only a trustee on behalf of a crt may claim losses arising from the ponzi scheme however the crt must be a qualified investor under revproc_2009_20 which would affect the amount and character of the distributions made to its beneficiaries for investments held in tax-deferred vehicles such as iras the code limits a loss or other deduction to the taxpayer's cost or other basis to prevent multiple deductions or exclusions for the same amount if taxpayers have basis in a tax-favored retirement_plan or ira for example because they made after-tax contributions to an ira they can take a miscellaneous itemized_deduction to the extent they have unrecovered_basis after their entire_interest in the plan or ira is distributed if taxpayers have no basis in the retirement_plan or ira for example because they claimed a deduction for ira contributions or because we have not taxed the growth in value in the ira they cannot take a deduction for the economic loss in the plan or ira in this situation the tax effect of the economic loss is that economic_income that we never taxed or we taxed but then an ira deduction offset it will not be taxed now or in the future allowing taxpayers with no basis in a retirement_plan or ira to take a loss deduction for amounts that they deducted or excluded from gross_income would provide those taxpayers two deductions or both a deduction and an exclusion for the same dollars two deductions also would put those taxpayers in a more favorable tax position than other taxpayers who contributed to a retirement_plan or ira on an after-tax basis and sustained a ponzi scheme economic loss of the same or a similar amount and thus received only one tax deduction i hope this information is helpful if you have additional questions please contact me -- ------------------ or ------------------------ at -------------------- sincerely john p moriarty chief branch i income_tax accounting


internal_revenue_service number release date index number 860d --------------------------------------------- ------------------------------------------------------ ------------------------------------------- ------------------------------------------------ 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 fip b01 plr-112142-16 date date legend trustee 1a --------------------------------------------------------------- --------------------------------------------------------- trustee 1b --------------------------------------------------------------- --------------------------------------------------------------- trustee trustee trustee state year year company exchange date ---------------------------------------------------------- ------------------------------- ------------------------------------------- -------------- ------- ------- -------------------- ------------------------------------- ------------------- plr-112142-16 date a b c d e f g month year ------------------------ -- -- ---- ---- ---- -- ---- --------------- ------- dear ------------------- this letter is in reply to a letter dated date in which trustee sec_1a and sec_1b together referred to as trustees solely in their capacity as trustee and separate trustee respectively of real_estate mortgage investment conduits remics identified in appendix a each a taxpayer and collectively the taxpayers requests certain rulings in connection with each taxpayer’s qualification as a remic under sec_860a-860g of the internal_revenue_code specifically you have asked for the following rulings in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement as defined below none of i the execution of the settlement agreement as defined below ii the methodology for determining and the right to receive an allocable share as defined below of the settlement payment as defined below or iii the receipt of an allocable share of the settlement payment will cause such taxpayer to fail to meet the requirements of sec_860d in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share of the settlement payment will be treated as a payment received on qualified mortgages within the meaning of sec_1 860g- g ii of the income_tax regulations plr-112142-16 in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the distribution of an allocable share amount in accordance with the applicable governing agreement and the settlement agreement will not cause any regular_interest in such taxpayer to fail to qualify as a regular_interest as defined in sec_860g or the sole class of residual_interest in such taxpayer to fail to qualify as a residual_interest as defined in sec_860g in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share amount will not be treated as a prohibited_transaction within the meaning of sec_860f or as a contribution that is subject_to the tax imposed under sec_860g facts background trustee 1b acts as a separate trustee for a residential mortgage-backed securitization rmbs trusts each an ld trust and together the ld trusts both of which comprise a or more taxpayers each of which has elected to be treated as a remic within the meaning of sec_860d trustee 1a is the trustee of the ld trusts trustee 1b was appointed as a separate trustee of the ld trusts on date for the purpose of pursuing mortgage loan repurchase claims for the ld trusts each of the ld trusts is evidenced by a separate pooling and servicing agreement psa in addition to the psas each taxpayer also entered into the related mortgage loan purchase agreements and assignment and assumption agreements and the agreements and orders appointing trustee 1b as the separate trustee for the ld trusts each a governing agreement and collectively the governing agreements the laws of state govern the rights and obligations of the parties to the governing agreements that are applicable to the ld trusts the annual_accounting_period for each taxpayer is the calendar_year and each taxpayer utilizes the accrual_method of accounting for maintaining its accounting books and filing its u s federal_income_tax return company is a bank_holding_company whose shares of common_stock are traded on exchange company and its subsidiaries collectively bank constitute a banking and financial services organization taxpayers function as residential mortgage loan securitization vehicles the taxpayers were established during the period of year through year for the primary purpose of raising financing in the securitization market with respect to pools of residential real_estate mortgage loans originated or acquired by bank the sponsor of the mortgage securitizations plr-112142-16 the securitization process for each taxpayer generally occurred as follows one or more bank entities the seller sold portfolios of residential mortgage loans the mortgage loans to another bank entity the depositor the depositor conveyed the mortgage loans to the related trustee to be held in trust several classes of rmbs certificates or notes representing various entitlements to the underlying mortgage pool’s cash flows then were issued and sold through an underwriter or underwriters to investors investors in certain instances all or part of a class of issued certificates or notes may have been retained by bank for each rmbs trust a master servicer servicer or both master servicer was charged with responsibility for among other things collecting debt service payments on the mortgage loans taking any necessary enforcement action against borrowers and remitting payments on a monthly basis for distribution to the investors in each securitization an election was made to treat the mortgage loans and certain related assets held by the applicable trust as one or more remics under the code the governing agreements for the securitizations contain a series of representations and warranties made for the benefit of each rmbs trust in general these include representations that the mortgage loans were underwritten in all material respects in accordance with certain underwriting guidelines that the mortgage loans conform in all material respects to their descriptions in the investor disclosure documents and that the origination underwriting and collection practices of the seller have been lawful and customary in the mortgage lending and servicing business the dispute in a letter dated date to bank a group of institutional investors institutional investors alleged that a significant number of the mortgage loans with respect to which the institutional investors held investment certificates or notes had been sold or deposited into the trusts based on false and or fraudulent representations and warranties by the mortgage originators the seller and or the depositor these assertions were based in part on the alleged excessive early default and foreclosure rates on and in respect to the mortgage loans bank and the institutional investors engaged in extensive negotiations over a period of more than b years in an effort to reach a settlement relating to the alleged plr-112142-16 breaches of the governing agreements the negotiations resulted in a settlement the settlement memorialized in a settlement agreement the settlement agreement between the institutional investors and bank under the terms of the settlement agreement the institutional investors then submitted a letter to trustee 1a as a party to the underlying governing agreements expressing their support for the settlement and requesting that trustee1a accept it the settlement agreement involves a total of c rmbs trusts trustees act as trustee for a of the rmbs trusts trustee trustee and trustee collectively with trustee the settlement trustees act as trustee indenture trustee or separate trustee for a total of d rmbs trusts e of which are structured as one or more remics the settlement agreement defines accepting trustee as a trustee that has accepted the settlement agreement on behalf of an rmbs trust or on behalf of only one or more separate mortgage loan groups contained within an rmbs trust each trustee constitutes an accepting trustee under the settlement agreement the settlement agreement defines settlement_trust as each rmbs trust including each taxpayer for which the applicable settlement trustee accepted and signed the settlement agreement with respect to all mortgage loans held by the trust and in the case where the applicable settlement trustee accepted and signed the settlement agreement on behalf of one or more but not all of the mortgage loan groups contained within an rmbs trust each such separate mortgage loan group for which the applicable settlement trustee accepted and signed the settlement agreement under the settlement agreement any rmbs trust or specific mortgage loan group contained within an rmbs trust for which the settlement agreement was not accepted is referred to as a non-settling trust none of the rmbs trusts in their entirety constitute a non-settling trust f separate mortgage loan groups contained within certain rmbs trusts are non-settling trusts each rmbs trust and each non- settling trust is treated as a separate trust for purposes of determining payment under the settlement agreement in month year trustee accepted and signed the settlement agreement on behalf of the taxpayers the settlement agreement the settlement agreement has two principal terms one a settlement payment to be allocated among all of the settlement trusts the settlement payment and two a release of claims against bank that arise under or are based upon the governing agreements or that relate to the origination sale delivery servicing and or administration of mortgage loans to or in the taxpayers the settlement agreement does not contain releases regarding the servicing of mortgage loans within any of the settlement trusts except as it pertains to alleged failures by any bank entity to provide plr-112142-16 notice of representation and warranty violations or to otherwise enforce claims for breaches of representations and warranties the settlement payment will be allocated among the settlement trusts in accordance with an agreed allocation formula that is based on the past and expected future losses associated with the mortgage loans held in all of the rmbs trusts an independent financial advisor the expert retained by the accepting trustees will perform any calculations required in connection with the allocation formula and those allocation calculations will be treated as final and accepted by the parties absent bad faith or manifest error the settlement payment allocations are determined by reference to the amount of net losses_incurred by each settlement_trust and each non-settling trust the expert will calculate the amount of net losses for each settlement_trust and for each non-settling trust that have been incurred and are estimated to be incurred from each trust’s inception to its expected termination the amount will be expressed as a percentage of the sum of the net losses that are estimated to be borne by the settlement trusts and non-settling trusts the net_loss percentage the expert will calculate the allocable share of the settlement payment for each settlement_trust and for each non-settling trust by multiplying the amount of the settlement payment by the net_loss percentage for each settlement_trust and non- settling trust the allocable share within g days of the completion of the expert’s calculation of each settlement trust’s allocable share and at the direction of the settlement trustees bank will wire each settlement trust’s allocable share into the related trust’s collection or distribution account for further distribution to investors taxpayers represent that the distribution provisions of the settlement agreement do not alter the rights or obligations of any of remic trust or remic interests therein and that the distribution of allocable shares to investors is consistent with the distribution provisions contained in the governing agreements that provide for the distribution of subsequent recoveries or unscheduled principal amounts received the settlement agreement requires that the distribution of a remic trust’s allocable share to its investors be consistent with the applicable provisions contained in the settlement trust’s governing agreement that provide for the distribution of subsequent recoveries or unscheduled principal amounts received as the case may be the settlement agreement provides that each settlement trust’s distribution of allocable share amounts to investors be characterized as distributions of principal in respect of remic regular_interest classes entitled to receive such distributions distributions to the investors who hold regular_interest classes entitled to receive principal will be made either in the order of seniority of such classes or on a pro-rata basis in accordance with applicable senior-subordinate principal distribution priority rules plr-112142-16 in the event a remic’s distribution waterfall provisions and its current allocable share amount available for distribution would combine to result in a distribution of any amount on or in respect of any trust’s residual_interest class whether on the date of the distribution of an allocable share or on any subsequent distribution date that is not the final distribution date under the governing agreement such amount shall not be paid on or distributed to such residual class instead the affected settlement trustee would retain this amount in the applicable trust’s distribution account and on the next distribution date the settlement trustee would distribute the retained amount to the applicable regular_interest investors entitled to receive a principal distribution of subsequent recoveries or unscheduled payments of principal consistent with the governing agreements the settlement agreement provides for the allocation of a notional amount to each remic’s issued certificates or notes equal to the remic’s distributed allocable share in order to restore the outstanding principal balance of such certificates or notes attributable to the prior write down of previously incurred realized losses on mortgage loans specifically a notional amount equal to a remic’s allocable share will be applied in the reverse order of previously allocated realized losses to increase on a pro_rata basis within each class the class certificate balance component balance component principal balance or note principal balance of each class of certificates or notes other than any class of remic residual interests to which realized losses have been previously allocated an increase to the principal balance of any class of certificates or notes shall not exceed the aggregate amount of realized losses previously allocated to such class under the governing agreements in addition holders of certificates or notes whose class principal balances are restored will not be entitled to any payment in respect of interest on the restored amount for any interest_accrual_period relating to the distribution date on which such increase occurs or on any prior distribution date law and analysis issue and qualified mortgages permitted_investments and payments received on qualified mortgages sec_860d provides that the terms real_estate_mortgage_investment_conduit and remic mean any entity that meets several requirements including that as of the close of the third month beginning after the startup_day and at all times thereafter substantially_all of the assets of the entity consist of qualified mortgages and permitted_investments sec_860g defines qualified_mortgage to include any obligation including any participation or certificate of beneficial_ownership therein which is principally secured_by an interest_in_real_property and which i is transferred to the remic on the startup_day in exchange for regular or residual interests in the remic ii is purchased by the remic within the 3-month period beginning on the startup_day if except as provided in regulations such purchase is pursuant to a fixed-price contract in plr-112142-16 effect on the startup_day or iii represents an increase in the principal_amount under the original terms of an obligation described in clause i or ii if such increase- i is attributable to an advance made to the obligor pursuant to the original terms of a reverse_mortgage_loan or other obligation ii occurs after the startup_day and iii is purchased by the remic pursuant to a fixed price contract in effect on the startup_day sec_860g defines permitted_investments to mean any cash_flow_investment qualified_reserve_asset or foreclosure_property sec_860g defines cash_flow_investment to mean any investment of amounts received under qualified mortgages for a temporary period before distribution to holders of interests in the remic sec_1_860d-1 provides that for purposes of the asset test of sec_860d substantially_all of a qualified entity’s assets are qualified mortgages and permitted_investments if the qualified_entity owns no more than a de_minimis amount of other assets sec_1_860d-1 provides that the amount of assets other than qualified mortgages and permitted_investments is de_minimis if the aggregate of the adjusted bases of those assets is less than one percent of the aggregate of the adjusted bases of all of the remic’s assets sec_1_860g-2 states that in determining what is a cash_flow_investment the term payments received on qualified mortgages includes among other_payments payments by a sponsor or prior owner in lieu of the sponsor's or prior owner's repurchase of a defective obligation as defined in sec_1_860g-2 that was transferred to the remic in breach of a customary warranty sec_1_860g-2 defines a defective obligation as a mortgage subject_to certain defects including that the mortgage does not conform to a customary representation or warranty given by the sponsor or prior owner of the mortgage regarding the characteristics of the mortgage or the characteristics of the pool of mortgages of which the mortgage is a part each taxpayer’s right to receive its allocable share under the settlement agreement arises from the mortgage loans the allocable share for each taxpayer is a contract claim that stems directly from the rights held by the trustee on behalf of each taxpayer and its status as a remic therefore a taxpayer’s right to receive an allocable share does not constitute an asset that is newly acquired by a remic after its startup date the execution of the settlement agreement the methodology used to determine a taxpayer’s allocable share and the receipt of the allocable share by a taxpayer arise from each taxpayer’s interest in the mortgage loans and its status as a remic and therefore will not cause any taxpayer to fail to meet the requirements under sec_860d the allocable share under the settlement agreement is the result of a dispute between the institutional investors and bank regarding whether the mortgage loans plr-112142-16 conveyed to each taxpayer violated customary representations and warranties under the respective governing agreements for purposes of the remic rules a defective obligation includes mortgages that do not conform to a customary representation or warranty given by the sponsor or prior owner of the mortgage regarding the characteristics of the mortgage or the characteristics of the pool of mortgages of which the mortgage is a part each taxpayer’s right to the allocable share under the settlement agreement is akin to a payment received by such taxpayer from a sponsor or prior owner in lieu of the sponsor or prior owner’s repurchase of such a defective obligation therefore pursuant to sec_1_860g-2 the allocable share will be considered a payment received on a qualified_mortgage pursuant to sec_1 860g- g ii issue regular and residual interests sec_860g defines a regular_interest in a remic to mean any interest in a remic which is issued on the startup_day with fixed terms and which is designated as a regular_interest if a such interest unconditionally entitles the holder to receive a specified principal_amount or other similar amount and b interest payments or other similar amount if any with respect to such interest at or before maturity i are payable based on a fixed rate or to the extent provided in regulations at a variable rate or ii consist of a specified portion of the interest payments on qualified mortgages and such portion does not vary during the period such interest is outstanding sec_860g defines a residual_interest in a remic to mean an interest in a remic which is issued on the startup_day which is not a regular_interest and which is designated as a residual_interest sec_860g defines the term startup_day to mean the day on which the remic issues all of its regular and residual interests sec_1_860g-1 provides that for purposes of sec_860g a remic designates an interest as a regular_interest by providing to the internal_revenue_service the information specified in sec_1_860d-1 in the time and manner specified in sec_1_860d-1 sec_1_860g-1 provides that a residual_interest is an interest in a remic that is issued on the startup_day and that is designated as a residual_interest by providing the information specified in sec_1_860d-1 at the time and in the manner provided in sec_1_860d-1 a residual_interest need not entitle the holder to any distributions from the remic sec_1_860g-1 provides that for purposes of sec_860g a regular_interest in a remic has fixed terms on the startup_day if on the startup_day the remic's organizational documents irrevocably specify i the principal_amount or other similar amount of the regular_interest ii the interest rate or rates used to compute any interest payments or other similar amounts on the regular_interest and iii the latest possible maturity_date of the interest plr-112142-16 a remic regular_interest must be issued on the startup date with fixed terms a remic residual_interest is an interest in the remic issued on the startup date that is not a regular_interest taxpayers represent that the distribution provisions of the settlement agreement do not alter the rights or obligations of any of the taxpayers or the investors’ interests therein and that the distribution of allocable shares to investors is consistent with the distribution provisions contained in the governing agreements that provide for the distribution of subsequent recoveries or unscheduled principal amounts received distributions that are made pursuant to these provisions are treated as and constitute distributions of underlying mortgage loan principal collections the settlement agreement also provides that should a principal payment become payable to a class of remic residual interests such payment will be maintained in the distribution account and the trustee shall distribute the retained amount to the applicable regular_interest investors entitled to receive a principal distribution of subsequent recoveries or unscheduled payments of principal accordingly the distribution of an allocable share to investors will not cause any regular_interest in a taxpayer to fail to qualify as a regular_interest or the sole class of residual_interest in the taxpayer to fail to qualify as a residual_interest issue tax on contributions after startup date and prohibited_transaction except as provided in sec_860g sec_860g imposes on any amount that is contributed to a remic after the startup_day a tax equal to percent of the amount contributed sec_860g provides that the tax on contributions after the startup date shall not apply to any contribution which is made in cash and is a a contribution to facilitate a cleanup call as defined in regulations or a qualified_liquidation b a payment in the nature of a guarantee c a contribution during the month period beginning on the startup_day d a contribution to a qualified_reserve_fund by any holder of a residual_interest in the remic or e any other contribution permitted in regulations sec_860f imposes a tax equal to percent of the net_income_derived_from_prohibited_transactions sec_860f defines prohibited_transaction to mean one of the following a disposition of any qualified_mortgage transferred to the remic other than a disposition pursuant to i the substitution of a qualified_replacement_mortgage for a qualified_mortgage or the repurchase in lieu of substitution of a defective obligation ii a disposition incident to the foreclosure default or imminent default of the mortgage iii the bankruptcy or insolvency of the remic or iv a qualified_liquidation b the receipt of any income attributable to any asset which is neither a qualified_mortgage nor a permitted_investment c the receipt by the remic of any amount representing a fee or other compensation_for services or d gain from the disposition of any cash_flow_investment other than pursuant to any qualified_liquidation plr-112142-16 as discussed above the receipt of the allocable share by a taxpayer arises from the mortgage loans and each taxpayer’s status as a remic the allocable share arises in connection with each taxpayer’s interest in the mortgage loans and is neither a contribution of cash to the remic nor is it listed as a prohibited_transaction in sec_860f as a result the receipt of the allocable share by a taxpayer will not be treated as a prohibited_transaction within the meaning of sec_860f or as a contribution subject_to tax under sec_860g conclusion we hereby rule as follows in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement none of i the execution of the settlement agreement ii the methodology for determining and the right to receive an allocable share of the settlement payment or iii the receipt of an allocable share of the settlement payment will cause the taxpayer to fail to meet the requirements of sec_860d in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share of the settlement payment will be treated as a payment received on qualified mortgages within the meaning of sec_1 860g- g ii in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the distribution of an allocable share amount in accordance with the applicable governing agreement and the settlement agreement will not cause any regular_interest in such taxpayer to fail to qualify as a regular_interest as defined in sec_860g or the sole class of residual_interest in such taxpayer to fail to qualify as a residual_interest as defined in sec_860g in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share amount will not be treated as a prohibited_transaction within the meaning of sec_860f or as a contribution that is subject_to the tax imposed under sec_860g this ruling's application is limited to the facts representations code sections and regulations cited herein except as specifically ruled upon above no opinion is expressed concerning any federal_income_tax consequences related to the facts herein under any other provisions of the code specifically we do not rule whether any plr-112142-16 taxpayer qualifies as a remic under sec_860a-860g or whether any mortgage loan qualifies as a qualified_mortgage as defined in sec_860g this ruling is directed only to the taxpayers that requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the provisions of a power_of_attorney on file we are sending a copy of this ruling letter to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely ________________________________________ jason kurth assistant to the branch chief branch office of associate chief_counsel financial institutions products


t c memo united_states tax_court robert and vienna leshin petitioners v commissioner of internal revenue respondent docket no 17709-06l filed date jeffrey d moffatt for petitioners michael w tan for respondent memorandum findings_of_fact and opinion vasquez judge pursuant to sec_6330 petitioners seek review of respondent’s determination to proceed with collection of their unpaid income_tax_liability the issue unless otherwise indicated all section references are to the internal_revenue_code for decision is whether respondent may proceed with collection of the above-mentioned unpaid income_tax_liability findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts the supplemental stipulation of facts and the attached exhibits are incorporated herein by this reference at the time they filed the petition petitioners resided in california on date respondent filed a notice_of_federal_tax_lien nftl regarding petitioners’ tax_year on date respondent mailed to petitioners a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 regarding petitioners timely submitted a form request for a collection_due_process_hearing regarding to respondent on or about date respondent received form_656 offer_in_compromise oic from petitioners petitioners offered to pay dollar_figure to satisfy their total outstanding tax_liabilities of approximately dollar_figure for through as of the date of the notice_of_determination petitioners’ income_tax_liability for was approximately dollar_figure on the form_656 petitioners listed the tax years as to however petitioners had a zero balance for through and for attached to the oic was form 433-a collection information statement for wage earners and self-employed individuals the information provided on the form 433-a was incomplete for example petitioners did not list the current value of a chevrolet petitioners listed no monthly income even though they indicated they were self-employed and petitioners indicated that they received income from stocks but did not submit any documentation related to such income ie listing the amount of dividends received respondent’s settlement officer wrote petitioners’ counsel requesting additional information additionally on date respondent’s settlement officer requested a form 433-b collection information statement for businesses regarding petitioners’ hay sales business petitioners failed to provide any information on their business during the sec_6330 hearing during through petitioners sold stocks and bonds with a value of over dollar_figure however they did not use these proceeds to pay their outstanding tax_liabilities for those years based on the incomplete information provided by petitioners respondent determined their monthly future income potential wa sec_3 form 433-a states on the face of the form that attachments are required as proof of self-employment_income and other income dollar_figure dollar_figure in monthly income less dollar_figure for reasonable expenses petitioners’ present_value of future income was dollar_figure dollar_figure per month x months this amount alone resulted in a reasonable collection potential rcp well in excess of the amount owed for 2001--dollar_figure until date respondent’s settlement officer provided petitioners with several opportunities to dispute any and all aspects of her rcp calculations petitioners’ counsel did not contest respondent’s rcp calculation until two weeks after the date deadline on date respondent issued the notice_of_determination to petitioners and sustained the filing of the nftl respondent concluded that petitioners’ rcp exceeded the dollar_figure offered in the oic accordingly the settlement officer rejected petitioners’ oic opinion sec_6320 provides that the secretary shall furnish the person described in sec_6321 with written notice ie the hearing notice of the filing of a notice of lien under sec_6323 sec_6320 further provides that the taxpayer may request administrative review of the matter in the form of a hearing within a 30-day period the hearing generally shall be furthermore this amount alone is close to petitioners’ total outstanding tax_liabilities of approximately dollar_figure for through conducted consistent with the procedures set forth in sec_6330 d and e sec_6320 pursuant to sec_6330 a taxpayer may raise at the sec_6330 hearing any relevant issue with regard to the commissioner’s collection activities including spousal defenses challenges to the appropriateness of the commissioner’s intended collection action and alternative means of collection 114_tc_604 114_tc_176 the only issue raised by petitioners at the sec_6330 hearing was an oic as a collection alternative accordingly because the validity of the underlying tax_liability is not at issue we review the commissioner’s determination for abuse_of_discretion sego v commissioner supra pincite the information petitioners provided on the form 433-a was incomplete petitioners failed to submit a form 433-b as requested by the settlement officer petitioners’ rcp substantially exceeded the amount of their tax_liability for additionally during through petitioners sold stocks and bonds with a value of dollar_figure but did not use the proceeds to pay their outstanding tax_liabilities for these years we conclude that respondent did not abuse his discretion when he sustained the filing of the nftl in reaching all of our holdings herein we have considered all arguments made by the parties and to the extent not mentioned above we find them to be irrelevant or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service cc psi 1-cor-132471-01 number info release date date uilc we are responding to your correspondence requesting relief in order to establish date as the effective date for your s_corporation_election in revproc_98_55 copy attached the internal_revenue_service provides special procedures that permit taxpayers in certain situations to obtain automatic late s_corporation relief instead of applying for a private_letter_ruling the facts presented in your situation are covered by this revenue_procedure and you have been granted relief you should have recently received a letter confirming this fact if not please contact mrs rose at the telephone number provided above if you have computer web access you may wish to visit www irs gov smallbiz for specialized tax information products and forms relating to small businesses please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosure revproc_98_55


significant index no department of the treasury internal_revenue_service washington d c tax exempt and government entities jul in re company owners this letter is in response to your request of date for a waiver of the excise_tax on the accumulated_funding_deficiency for the plan_year ended december funding deficiencies for the plan years ended december and for waivers of the excise_tax on the accumulated and with respect to the waivers of the excise_taxes on the accumulated funding deficiencies for the plan years ended december letter constitutes notice that with respect to the above named pension_plan waivers of the excise_tax under sec_4971 of the internal_revenue_code code have been granted for the excise_taxes that would otherwise apply for the plan years ended december and and _ this the waivers of the excise_tax have been granted in accordance with section b of the employee_retirement_income_security_act_of_1974 erisa the amount for which these excise_tax waivers have been granted is equal to of the contribution which would otherwise be required to reduce the balance of the funding_standard_account to zero as of the end of each of the applicable_plan years for which a waiver is granted to the extent such deficiency has not been corrected of course because we have waived the excise_tax for these three years the penalties and interest associated with the excise_taxes under sec_4971 of the code will be zero with respect to the request to waive the excise_tax on the accumulated_funding_deficiency for the plan_year ended december has paid the excise_taxes due under sec_4971 for the plan years ended december section b of erisa that permits us to waive the excise_tax under - sec_4971 of the code accordingly your request for a waiver of the excise_tax on the accumulated_funding_deficiency for the plan_year ended december _ there is no statutory provision similar to has been denied the company and according to the information received the plan was terminated on july at all times since the inception of the plan the only plan participants have been the owners at all times prior to the end of officers and employees of the company were the owners on the sole shareholders directors the owners were divorced the plan remains the subject of litigation i in divorce court it should be noted that the accumulated_funding_deficiency is not required to be eliminated as a condition of plan qualification this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this letter is being sent to the authorized representatives listed on the power_of_attorney form on file with this office a copy of this letter is also being sent to the employee_plans classification manager in if you have any questions concerning this matter please contact sincerely donna m prestia acting manager employee_plans actuarial group