internal_revenue_service number release date index number --------------------------- ------------------------------------------ ------------------------------------ ------------------------- --------------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc corp b04 plr-128365-06 date date -------------------------------------- legend legend distributor ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------- sub1 ---------------------------------------------------------------------------------------- ------------------------------------------------------------------------------- sub2 ----------------------------- ------------------------------------ ---------------------------------------- ----------------------------------------- sub3 ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------- newco purchaser ------------------------------------------------------------------------------------- country y state a business a ---------------------------- --------------------- ---------------- ---------------------------------------------- -------------------------------------------------- plr-128365-06 --------------------------------------------------------------------- business b ------------------------------------ --------------------------------------------------------------- discontinued business --------------------------------------------------------------- -------------------------------------------- ------------------------- -------------------------------------------------------------- --------------------------- date date d assets ------------------------------------------------------------------------------------------------------------------ e assets m n p dear ------------ --------------------------------------------- ----------------- --------------- --------------- this letter responds to your date request for rulings on certain federal_income_tax consequences of a proposed transaction the information provided in that letter and in later correspondence is summarized below summary of facts distributor is the common parent of an affiliated_group that files consolidated federal_income_tax returns distributor directly and indirectly conducts several businesses including business a and through sub3 business b distributor has outstanding two classes of common_stock class a and class b both classes of stock are publicly traded and possess the same rights in the event of a liquidation of distributor the majority of the outstanding class a stock and a significant portion of the class b stock are closely held the remaining shares of both classes are widely held prior to date distributor owned all of the stock of sub1 a state a corporation sub1 conducted the discontinued business directly and through its wholly owned subsidiary sub2 a country y company on date distributor sold all of the stock of sub1 to purchaser an unrelated plr-128365-06 third party for approximately m dollars in cash the sub1 sale distributor and purchaser have agreed to make a joint sec_338 election to treat the purchase of the sub1 stock as an asset sale distributor deposited the proceeds of this sale in an account segregated from all other funds of distributor the segregated account distributor will invest funds from the segregated account in a separate portfolio apart from other distributor investments the temporary investments prior to the sale of the sub1 stock sub1 distributed to distributor the d assets the e assets and the stock of sub2 at that time distributor had outstanding an intercompany receivable due from sub1 totaling approximately p dollars the intercompany debt will be satisfied from amounts realized on the sale of the distributed e assets and to the extent necessary from the proceeds as defined below the e assets are non-business assets and amounts realized from their sale will not be included in the proceeds on date distributor sold the d assets for approximately n dollars the proceeds were deposited to the segregated account distributor has not sold the stock or the assets of sub2 the sub1 sale the future sale of sub2 and the sale of the d assets are collectively referred to as the asset sales proposed distribution distributor has decided it is in the best interest of distributor and its shareholders to distribute the net_proceeds as defined below to the distributor shareholders distributor proposes to take the following steps to effect such distribution collectively the proposed distribution i distributor will sell or otherwise dispose_of the assets of sub2 and liquidate sub2 in a transaction qualifying under sec_332 all liabilities connected with the assets of sub2 will be settled out of the proceeds from the sale or disposition of such assets distributor will deposit the proceeds from this sale in the segregated account ii distributor will adopt a plan of partial_liquidation the plan as soon as is practical after receipt of this private_letter_ruling iii pursuant to the plan distributor will within the taxable_year in which the plan is adopted or within the succeeding taxable_year distribute the net_proceeds pro_rata to its shareholders in redemption of the outstanding shares of distributor stock to facilitate the distribution of the net_proceeds distributor will merge into newco with distributor surviving in a reorganization that is intended to qualify under sec_368 the merger as consideration in the merger the distributor shareholders will receive in exchange for and in proportion to their outstanding pre-merger shares a smaller number of post- plr-128365-06 merger shares and cash the total cash received by all of the distributor shareholders will equal the amount of the net_proceeds representations the taxpayer has made the following representations concerning the proposed distribution a distributor and purchaser will make a joint sec_338 election with respect to the purchase and sale of sub1 b the proceeds to be distributed are proceeds from the sale of business_assets that were actively used in the discontinued business and are not attributable to an expansion reserve a mere business decline a mere decrease in working_capital the sale of a business that is nominal in relation to the entire business of distributor or a business operated at a loss that acquired assets from another business of distributor none of the proceeds are from the sale of assets that directly or indirectly are or were idle passive or investment_assets none of the net_proceeds are substitute assets c the distribution in partial_liquidation will equal the net_proceeds net_proceeds are the amounts realized on the sale of the discontinued business including proceeds from the asset sales the proceeds reduced by i assets received by distributor in settlement of the intercompany debt totaling approximately p dollars satisfied in the liquidation of sub1 to the extent such debt was not satisfied from the sale of the e assets ii debt repayments associated with the d assets and with the assets of sub2 settled out of proceeds from the sale or disposition of the d assets and the assets of sub2 iii taxes and expenses of distributor attributable to the asset sales iv taxes and expenses of distributor incident to the proposed distribution including any expenses with regard to any investment of the proceeds such as the temporary investment of the proceeds in the temporary investments and v any loss of proceeds as a result of being temporarily invested in the temporary investments d the proposed distribution will be made pro_rata to all shareholders of distributor in accordance with the plan and in redemption of the outstanding shares of distributor stock e to the extent the assets in the asset sales constitute inventory such assets were substantially_similar to and substantially the same in quantity as those held during the prior five-year period and were sold in bulk to purchaser plr-128365-06 f the proceeds will not include any gain realized from the temporary investment of the proceeds in the temporary investments g distributor will adopt the plan as soon as practical after the receipt of this private_letter_ruling all distributions pursuant to the plan including distributions of proceeds from the sale of sub2 will be made within the taxable_year in which the plan is adopted or within the succeeding taxable_year h other than dividends declared and paid in the ordinary course there will be no declared but unpaid dividends on the distributor stock at the time of the proposed distribution i there is no plan or intention to completely liquidate distributor j distributor has no plan or intention to re-enter the discontinued business or to expand its continuing business other than through normal internal growth and acquisition or expansion in the usual course of business k there will be no unreasonable delay in effectuating the proposed distribution the time between the receipt of the proceeds and the proposed distribution represents the period reasonably necessary for distributor to make informed decisions to obtain legal guidance and governmental rulings to make appraisals and or cost and liability determinations and to take other actions such that the transaction proceeds in an orderly and businesslike manner l following the proposed distribution distributor will not retain any portion of the net_proceeds m the proposed distribution will be made with cash from the segregated account that can be traced to the proceeds received from the asset sales the proceeds will not include any gain or income earned on the net_proceeds since the asset sales and will be reduced by any loss on the net_proceeds since the asset sales n the amount distributed in the proposed distribution will be no greater than the amount of the net_proceeds o distributor will not use any of the proceeds in any manner except that distributor has invested or will invest the proceeds in the temporary investments and distributor may use the proceeds for the payment of expenses associated with the sale of the assets of the discontinued business the payment of federal and state income taxes assessed as a result of such sales and to satisfy the intercompany debt totaling plr-128365-06 approximately p dollars distributor has not used and will not use any of the proceeds in any of its remaining business activities distributor will not distribute any substituted assets in lieu of the proceeds p management of distributor knows of no plan or intention on the part of any of distributor’s shareholders to reinvest in distributor any of the net_proceeds to be distributed in the proposed distribution q management of distributor is not aware of any plan or intention on the part of its shareholders to transfer the cash received in the proposed distribution to another corporation if persons holding more than percent in value of the stock of distributor also hold more than percent in value of the stock of the recipient corporation for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 as modified by sec_304 r none of the amounts distributed by distributor in the proposed distribution will be received by a shareholder of distributor as a debtor creditor or employee or in some capacity other than that of a shareholder of distributor s the net_proceeds in the proposed distribution will not include any portion attributable to indebtedness of any liquidating subsidiary to distributor that was or will be satisfied upon liquidation t for tax purposes the shareholders are receiving nothing except cash in the proposed distribution u the amount of cash distributed by distributor to each of its shareholders in the proposed distribution will in each instance be equal to the difference between the fair_market_value of the shares of stock held by such shareholder prior to the merger and the fair_market_value of the shares of stock held by such shareholder after the merger rulings based solely on the information submitted and on the representations set forth above we rule as follows the proposed distribution will be treated as a distribution in partial_liquidation under sec_302 and sec_302 of the internal_revenue_code provided i distributor and purchaser have made a valid sec_338 election for the sale of the assets of the discontinued business and ii the proposed distribution of the net_proceeds is made within the taxable_year in which the plr-128365-06 plan is adopted or within the succeeding taxable_year sec_1_346-1 of the income_tax regulations the maximum amount of cash considered to be distributed in the proposed distribution will equal the net_proceeds this amount will not include any earned or accrued investment earnings on the proceeds see revrul_60_232 1960_2_cb_115 revrul_71_250 1971_1_cb_112 revrul_76_279 1976_2_cb_99 revrul_76_289 c b distributions made pursuant to the plan to a shareholder who is not a corporation will be treated as in-full payment in exchange for the stock redeemed under sec_302 of the code gain_or_loss will be recognized to such noncorporate shareholders to the extent of the difference between the amount distributed in partial_liquidation and the adjusted_basis of the shares surrendered as provided in ruling below in exchange therefore provided that distributor's stock is a capital_asset in the hands of such noncorporate shareholders gain_or_loss if any will be considered capital_gain or loss subject_to the provisions and limitations of subchapter_p of chapter of the code if the amount distributed to shareholders of distributor in the proposed distribution exceeds the net_proceeds distributed pursuant to ruling above each shareholder of distributor or each person considered to hold distributor stock under sec_302 will be treated as receiving the same ratio of the net_proceeds and any excess any amount distributed to the shareholders of distributor that is not distributed in partial_liquidation under sec_302 may constitute a distribution in redemption under sec_302 or that will be treated as in full payment for the stock redeemed under sec_302 or may be treated as a distribution_of_property under sec_301 and sec_316 distributor will not recognize any gain_or_loss in connection with the proposed distribution sec_311 for purposes of the rulings above the number of shares that will be considered to be redeemed regardless of the number of shares actually surrendered for the purpose of determining gain_or_loss will be determined in accordance with the principles set forth in revrul_77_245 1977_2_cb_105 no opinion is expressed about the tax treatment of the proposed distribution under other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed distribution that are not caveats plr-128365-06 specifically covered by the above rulings in particular no opinion is expressed regarding whether the sec_338 election will be a valid election procedural statements this ruling letter is directed only to the taxpayer requesting it sec_6110 a copy of this ruling letter should be attached to the federal_income_tax return of provides that it may not be used or cited as precedent each taxpayer involved for the taxable_year in which the transaction covered by this ruling letter is consummated alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the ruling letter 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 _________________________ lewis k brickates chief branch associate chief_counsel corporate cc


internal_revenue_service number release date index number ---------------------------------- ----------------------------- ---------------------------------- ----------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc corp plr-126840-10 date august legend distributing --------------------------------------------------------------------------------------------------------------- ----------------------------------------------------- ----------------------------------------- controlled --------------- state x shareholder shareholder beneficiary beneficiary beneficiary beneficiary busine sec_1 ----------------------------------------------------- --------------------------------------------- ------------- -------------- ------------------------------------------------------ ----------------------------------------------------------------------- -------------------- ------------------------------------------------------ ---------------------------------------------------------------------- -------------------- -------------------------------------------- -------------------------------------------- ---------------------------------------------- ----------------------------------------- ---------------------------------- plr-126840-10 busine sec_2 aa bb date a dear -------------- -------------------------------- ----- ----- ------------------ this letter is in response to your date request for rulings regarding certain transaction the proposed federal transaction the request and later correspondences is summarized below tax consequences of a proposed that information submitted in your income in the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process in particular this office has reviewed no information pertaining to and has made no determination regarding whether the proposed transaction i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 summary of facts distributing a state x corporation is treated as an s_corporation for federal_income_tax purposes and is engaged directly in busine sec_1 shareholder and shareholder each own aa shares of distributing common_stock no other classes of distributing stock have been authorized shareholder is a revocable_trust whose beneficiaries are beneficiary and beneficiary shareholder is a revocable_trust whose beneficiaries are beneficiary and beneficiary together the beneficiaries on date a distributing contributed busine sec_2 to controlled a newly formed state x limited_liability_company that authorized and issued bb membership interests to plr-126840-10 distributing controlled is a qualified_subchapter_s_subsidiary qsub for federal_income_tax purposes the financial information submitted by distributing and controlled indicates that busine sec_1 and busine sec_2 each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the last five years proposed transaction for what are represented to be valid business purposes distributing proposes to distribute all interests in controlled to shareholder in exchange for all of shareholder 1’s stock in distributing the distribution representations the taxpayers have made the following representations in connection with the proposed transaction a b c d e f the fair_market_value of controlled interests and other consideration if any to be received by shareholder will be approximately equal to the fair_market_value of distributing stock surrendered by shareholder in the exchange no part of the consideration to be distributed by distributing in the distribution will be received by shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing the five years of financial information submitted with regard to busine sec_1 and busine sec_2 is representative of each business's present operations and with regard to each business there have been no substantial operational changes since the date of the last financial statement submitted following the distribution distributing and controlled will each continue the active_conduct of its business independently and with its separate employees neither busine sec_1 nor busine sec_2 nor control of an entity conducting either business will have been acquired during the five-year period ending on the date of the distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part the distribution is carried out for the corporate business_purpose of resolving a disagreement between and among the beneficiaries regarding the extent to which future operations should emphasize busine sec_1 or busine sec_2 the plr-126840-10 g h i j k l distribution is motivated in whole or substantial part by this corporate business_purpose the proposed transaction will not be used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled interests entitled to vote or percent or more of the total value of all classes of controlled interests that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock_or_securities that were acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing each equals or exceeds the sum of i the total liabilities assumed within the meaning of sec_357 by controlled plus any liabilities to which the transferred assets were subject and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by distributing and transferred to its creditors in connection with the reorganization the liabilities assumed as determined under sec_357 by controlled in the transaction and the liabilities to which the transferred assets were subject were incurred in the ordinary course of business and were associated with the assets being transferred plr-126840-10 m the fair_market_value of the assets of controlled exceeded the amount of its liabilities immediately_after_the_exchange n o p q r s t u v w the aggregate fair_market_value of the assets transferred to controlled in the transaction equaled or exceeded the aggregate adjusted_basis of these assets distributing has neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the proposed transaction no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length no two parties to the proposed transaction are investment companies as defined in sec_368 and iv immediately after the distribution neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 distributing is an s_corporation and controlled is a qsub within the meaning of sec_1361 immediately after the distribution controlled will elect to be an s_corporation pursuant to sec_1362 effective immediately after the distribution there is no plan or intent to revoke or otherwise terminate the s_corporation_election of either distributing or controlled none of the persons holding stock membership interests or any equity_interest in either distributing or controlled is a non-resident alien individual a foreign_corporation or a_trust except for trusts meeting the requirements of sec_1361 rulings based solely on the information submitted and the representations made we rule as follows the distribution will cause a termination of controlled's election to be a qsub because controlled will cease to be a wholly-owned subsidiary of an s_corporation for federal_income_tax purposes the distribution will be treated as if controlled is a new plr-126840-10 corporation acquiring all of its assets and assuming all of its liabilities in a deemed contribution the contribution from distributing occurring immediately before the distribution and distributing will be deemed to receive the membership interests in controlled in exchange for the contribution sec_1_1361-5 the contribution followed by the distribution will be a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing on the contribution sec_361 and sec_357 no gain_or_loss will be recognized by controlled on the contribution sec_1032 the basis of each asset deemed received by controlled will be equal to the basis of such asset in the hands of distributing immediately before its transfer sec_362 the holding_period for each asset deemed received by controlled will include the period during which such asset was held by distributing sec_1223 no gain_or_loss will be recognized by distributing on the distribution sec_361 no gain_or_loss will be recognized by and no amount will be included in the income of shareholder upon receipt of controlled interests sec_355 the basis of the controlled interests in the hands of shareholder after the distribution will equal the basis of the distributing stock surrendered in exchange therefor sec_358 the holding_period of the controlled interests received by shareholder in the distribution will include the holding_period of the distributing stock with respect to which it is received provided that the distributing stock is held as a capital_asset in the hands of shareholder on the date of the exchange sec_1223 as provided in sec_312 of the code proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 caveats except as expressly provided herein no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction not specifically covered by the above rulings in particular no plr-126840-10 opinion is expressed regarding i whether the distribution satisfies the business_purpose requirement of sec_1_355-2 ii whether the distribution is used principally as a device for the distribution of earnings_and_profits of distributing and controlled or both see sec_355 and sec_1_355-2 or iii whether the distribution is part of a plan or series of related transactions under sec_355 additionally no opinion is expressed regarding issues relating to controlled's subchapter_s_election procedural statements this ruling is directed only to the taxpayers who requested it sec_6110 provides that this private_letter_ruling may not be used or cited as precedent a copy of this letter must be attached to the federal_income_tax returns to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching to the return a statement that provides the date and control number plr-126840-10 of this ruling letter pursuant to the power_of_attorney on file in this matter a copy of this letter is being sent to your authorized representative sincerely mark j weiss assistant to the branch chief branch office of associate chief_counsel corporate


department of the treasury employer_identification_number contact person - id number contact telephone number vil internal_revenue_service p o box cincinnati oh number release date date date legend w o o m m m x x x n individual scholarship school city state dollar amount number dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request your letter indicates you will operate a scholarship program called c c provides financial assistance in the form of a scholarship grant to an outstanding is to honor the science student graduating each year from d in e the purpose of c letter catalog number 58263t legacy of b by making scholarship grants for attendance at a college university or other degree-granting institution of higher learning you do not have any plans to make educational loans you will award one x dollars scholarship grant to an outstanding graduating science student per year distributed equally in four annual installments each installment of the grant after the first year will be conditioned upon the student's full time attendance and maintenance of a minimum gpa of z additionally for grants to be renewed a scholarship recipient must remain in good standing with his or her educational_institution the selection committee will be composed of three members of the science faculty at d they will be positioned to assess a given student's eligibility for c and select an annual scholarship grant recipient applying the criteria of c each member of the committee will complete a student nomination application_for eligible nominees and the committee as a group will select the annual scholarship grant recipient the committee will record the reasons for its selection of the scholarship grant recipient over the other nominees in the student nomination application eligible nominees are those top tier science students graduating from d who will attend college full time in pursuit of a four year degree which need not be a science degree the top five percent of the seniors attending d will be eligible for a scholarship grant under c children or relatives of the your officers directors substantial contributors and selection committee members are not eligible for scholarship grants the following are specific criteria used to select recipients in order of importance e e e cumulative gpa and science gpa number of science courses including honors and advanced placement applied courses outside of science including computer science and engineering concepts participation in science clubs and activities other_relevant_factors as determined by the selection committee in awarding c there will be no discrimination based on race national origin religion sexual orientation or gender you invite all students nominated for c to your annual award night ceremony where you will announce the recipient of c after the ceremony you will send a formally confirming that person was awarded a scholarship grant under c letter to the recipient you will only disburse funds to educational institutions and will require such institutions to return those funds if a scholarship recipient drops out of their program after the first installment you will condition each subsequent installment of the scholarship grant upon your receipt of a transcript which will constitute the scholarship grant recipient's annual report letter catalog number 58263t in the event of a misuse of funds you will determine if the situation is a mistake and can be corrected and then take appropriate action under certain circumstances you will revoke the scholarship and cease making further installments you will maintain case histories which will be composed of the student nomination application and the annual transcripts obtained by you in respect of each grant recipient the student nomination application will record the name and address of each nominee being considered for a scholarship grant the information relied upon by the selection committee to determine eligibility and the criteria upon by the committee to select scholarship recipients the student nomination application also will require confirmation that the nominee bears no relationship to the officers directors substantial contributors to you or member of the selection committee you expect to maintain these records for a period of at least four years after the time the scholarship recipient has graduated from or failed to remain enrolled in the school he or she attended you will periodically review its case histories to evaluate the effectiveness of c basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination e e e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the office of exempt_organizations at letter catalog number 58263t e you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives e e all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely holly o paz director exempt_organizations rulings and agreements letter catalog number 58263t


department of the treasury internal_revenue_service washington d c date number release date cc pa cbs br2 gl-118271-01 uilc memorandum for area_counsel area small_business self- employed denver group from lawrence schattner chief branch collection bankruptcy summonses subject waiver of notice of termination of installment_agreement this responds to your request for advice dated date this document is not to be cited as precedent issue whether the service can obtain a waiver of a taxpayer’s right to receive the notice of termination of an installment_agreement required by sec_6159 conclusion sec_6159 does not authorize a waiver of the taxpayer’s right to receive notice of termination of an installment_agreement background you have brought to our attention two cases where as part of collection appeals proceedings before appeals settlement officers installment agreements were entered into with the taxpayer in which the taxpayer waived the right to notice of termination if any term or condition in the installment agreements were not met thus permitting the service to commence immediate collection action upon default one of those cases involved a prior default in an installment_agreement you have been asked by the revenue_officer to whom the accounts are assigned whether the waivers are valid thus permitting the service to levy on the taxpayers’ assets without notice of termination should the taxpayers default on the agreements you conclude that a waiver of the right to notice of termination is legally valid but that as a matter of policy such waivers should only be solicited in egregious cases such as where the taxpayer has had prior defaulted installment agreements law and analysis for the following reasons we conclude that waivers of the right to receive notice of termination of installment agreements are invalid a notice of proposed termination should be sent after default even if such a waiver was executed sec_6159 authorizes the service to enter into agreements for the payment of taxes in installments sec_6159 sec_6159 provides except as otherwise provided in this subsection any agreement entered into by the secretary under subsection a shall remain in effect for the term of the agreement sec_6159 gl-118271-01 - further enumerates the grounds for which the service may alter modify and terminate installment agreements providing inaccurate or incomplete information before the agreement was executed collection of the tax is in jeopardy the financial condition of the taxpayer has significantly changed the taxpayer fails to pay an installment or any other tax_liability when due and the taxpayer fails to provide financial information requested by the secretary sec_6159 specifies that unless collection of the tax is in jeopardy the secretary may not alter modify or terminate an installment_agreement for the enumerated reasons unless the taxpayer is given days notice of such termination with an explanation of why the secretary intends to take the action sec_301_6159-1 further provides that upon receiving the notice of termination the taxpayer may provide information showing that the reason for the intended alteration modification or termination is incorrect levies with respect to the tax which is the subject of an installment_agreement are prohibited during the period that an installment_agreement is in effect and in the case of a default during the day period plus the period of any appeals after notice of termination is sent sec_6331 d the taxpayer can however waive the restriction on levy sec_6331 k we conclude that a waiver of the right to receive a notice of termination is not permitted under the current statutory scheme the purpose of the notice of termination is to give the taxpayer the right and opportunity to contest a proposed termination and there is no statutory basis for forcing the taxpayer to relinquish that right as a condition of entering an installment_agreement the receipt of the notice of termination is a fundamental right which cannot be withdrawn absent specific statutory authorization the secretary has the discretion to require terms that protect the interests of the government as a condition to entering into an installment_agreement such as a requirement that the taxpayer authorize direct debit bank transfers sec_301_6159-1 however the secretary cannot impose conditions inconsistent with sec_6159 because the statute and regulations contain restrictions on the ability of the service to terminate agreements the service can only insert additional terms in installment agreements which are consistent with these restrictions a waiver of the notice of termination entered into as a condition of acceptance of the installment_agreement is invalid because it is inconsistent with sec_6159 one of the installment agreements at issue requires the taxpayer to timely file returns and make federal tax deposits we note in this regard that an installment_agreement can only be terminated for the reasons stated in sec_6159 failure to make federal tax deposits failure_to_file returns and failure to do any other act not specified in sec_6159 are not valid grounds for terminating an installment_agreement see irm gl-118271-01 - we finally note that it would be legally permissible under the statute to require the taxpayer to waive the restriction on levy for the day period and during any appeal period after the notice of termination as a condition for entering into the installment_agreement however the published procedures involving installment agreements do not contemplate such waivers see irm while it might be appropriate to require such waivers in cases involving past defaults this is a matter of policy which should be approved within the national_office of the sb_se division please contact the attorney assigned to the case at if you have any questions or comments concerning this memorandum


internal_revenue_service number release date index number ------------------------- --------------------------- --- -------------------------------------- ------------------------ ------------------------- department of the treasury washington dc person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc intl - plr-137162-03 date date taxpayer legend ---------------------------------------------------------------------------------------------- ------------------------ ------------------------- individual a dear -------------- this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file the annual certification described in sec_1_1503-2 in accordance with schedule a which is attached to and made a part of this ruling letter additional information was submitted in a letter dated date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process individual a was taxpayer’s tax director during the tax years at issue individual a reviewed and timely filed taxpayer’s tax returns for those years subsequent to the filing of the tax returns individual a held discussions with outside tax professionals regarding taxpayer’s business and operations in the course of these discussions the outside tax professionals suggested to individual a that taxpayer’s records should be plr-137162-03 reviewed to determine if annual certifications were filed as required by sec_1 g vi b for the tax years at issue after a review of the records individual a determined that he had not filed the annual certifications listed on schedule a sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith within the meaning of sec_301_9100-3 subject_to the conditions set forth in sec_301_9100-3 and the grant of relief will not prejudice the interests of the government within the meaning of sec_301_9100-3 in the present situation the annual certification described in sec_1_1503-2 is a regulatory election as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards for relief as set forth in sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the annual certification described in sec_1 g vi b in accordance with schedule a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the annual certifications sec_301_9100-1 a copy of this ruling letter should be associated with the annual certifications this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented specifically no opinion is expressed as to whether the amount of the dual consolidated losses reported on schedule a are correct plr-137162-03 pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representatives sincerely associate chief_counsel international by s allen goldstein allen goldstein reviewer enclosures schedule a copy for purposes plr-137162-03 schedule a an extension of time as provided under sec_301_9100-3 has been requested to file the annual certification described in sec_1_1503-2 with respect to the dual consolidated losses of the following entities for the tax years ended on ------------------------------------------------------------------ ------------------------------------------------------------- dual_consolidated_loss year --------- --------- --------- dual_consolidated_loss ----------------------------- ----------------------------- ----------------------------- year annual certification to be filed ------------------------------------- -- ----------------------------- ------------------- ---------------------------------------------- dual_consolidated_loss dual_consolidated_loss year annual certification to year --------- --------- --------- ----------------------------- ----------------------------- ----------------------------- be filed ------------------------------------- ------------ ------------------------------------- -- -----------------------------


t c memo united_states tax_court betty w thompson petitioner v commissioner of internal revenue respondent docket no filed october david d aughtry and donald p lancaster for petitioner julie m t foster for respondent memorandum opinion dawson judge this case was assigned to special_trial_judge john f dean pursuant to sec_7443a and rule sec_180 sec_181 and sec_183 the court agrees with and adopts the special trial judge's opinion which is set forth below 1unless otherwise specified all section references are to the internal_revenue_code as amended all rule references are to the tax_court rules_of_practice and procedure opinion of the special_trial_judge dean special_trial_judge this matter is before the court on petitioner's motion for litigation and administrative costs pursuant to sec_7430 and rule in separate notices of deficiency addressed to betty w thompson hereinafter petitioner and her husband lawrence n thompson hereinafter mr thompson respondent determined a deficiency in and an addition to the federal gift_tax liability of each of them as follows calendar_year ended deficiency dollar_figure addition_to_tax sec_6660 dollar_figure the adjustment in the respective notices of deficiency was primarily attributable to respondent's determination that the value of gifts of common_stock made in the year was dollar_figure instead of dollar_figure as reported on the gift_tax_return signed by petitioner and mr thompson the petition in this case was filed on date on date the court issued its notice setting petitioner's case and mr thompson's case for trial at the date trial calendar in atlanta georgia within the period allowed by rule f petitioner and mr thompson submitted an expert witness report on the valuation of the 2the notices also determined that there were taxable_gifts from prior periods in the amount of dollar_figure and not dollar_figure as reported on the return closely held stock which was the subject of respondent's deficiency notices shortly before trial respondent accepted the valuation contained in the expert witness report a stipulation of settled issues and a revised stipulation of settled issues were filed with the court in may and august of respectively concurrently with the filing of the stipulation of settled issues petitioner filed her motion for litigation and administrative costs respondent filed a response to petitioner's motion and petitioner filed a reply to respondent's response to petitioner's motion also since the filing of the motion and responses the parties have stipulated additional facts and petitioner has filed an additional affidavit4 neither party initially requested a hearing in this matter respondent eventually requested a hearing on the element of petitioner's payment of legal fees but the court concludes that a hearing is not necessary for the proper consideration and disposition of this motion rule a 3the parties have agreed that there is a deficiency in gift_tax due from petitioner for the taxable_year in the amount of dollar_figure and that there is no addition_to_tax due from petitioner for the taxable_year under the provisions of sec_6660 4petitioner supplied an additional affidavit attesting to the attorney's_fees that she allegedly paid_or_incurred the court decides the motion for litigation and administrative costs based upon the pleadings petitioner's motion with attached exhibits respondent's response with attached exhibits petitioner's reply to respondent's response with attached exhibits the parties' stipulations and petitioner's additional affidavit the relevant facts as drawn from the record are set out below background petitioner and mr thompson resided at milledgeville georgia at the time the petition in this case was filed mr thompson is the chief executive of and principal_shareholder in t s hardwoods inc the company the company is a closely held family_corporation located in milledgeville georgia the company is engaged in the operation of hardwood sawmills on date mr thompson made gifts of stock in the company to his son and two daughters on date the internal_revenue_service received a form_709 united_states gift and generation-skipping_transfer_tax return signed by l n thompson jr as donor petitioner also signed the return indicating her consent to split-gift treatment under sec_5petitioner and mr thompson had given split_gifts of stock in the company to their children in the years and that reduced the amount of unified_credit available for application to the tax on the gifts made in see sec_2505 this issue has been settled by agreement of the parties on a schedule attached to the return gifts of big_number shares of the company to lawrence n thompson iii big_number shares to barbara e thompson and big_number shares to ann w jefferson were reported all of the shares were valued at dollar_figure per share and the valuation was supported by the computations of james m grant c p a hereinafter mr grant the return preparer mr grant valued the company stock by capitalizing the yearly average net profit per share pincite percent and comparing the resulting figure of dollar_figure to the book_value per share as of date which was dollar_figure after finding the average of the two figures dollar_figure mr grant then deducted a discount of percent for lack of marketability and the transfer of a minority interest the deduction for the discount of dollar_figure from the average of dollar_figure resulted in the reported valuation of dollar_figure per share both gift_tax returns were selected for examination by respondent on date mr thompson and his accountant mr grant met with respondent's examining agent at the company's facilities in milledgeville georgia respondent's examining agent an estate and gift_tax attorney was primarily interested in discussing with mr thompson and mr grant the level of the 6part i line of mr thompson's form_709 was marked with an x in the yes column indicating that his spouse petitioner intended to file a separate gift_tax_return for the calendar_year the parties have stipulated that petitioner in fact filed a form_709 reporting the subject gifts discount taken in determining the value of the company's shares when the and gifts were made to the thompson children respondent's examining agent made his own computation of the value of the company stock the agent using what he considered to be a comparable publicly traded corporation determined in his report that the hypothetical market_value of the company on the valuation_date was dollar_figure per share he then discounted that value by percent or dollar_figure per share to reflect the lack of marketability of closely held stock to the discounted value of dollar_figure he applied a control premium of percent or dollar_figure which he added to the marketability discounted value of dollar_figure to arrive at a figure of dollar_figure per share finally he rounded to the amount of dollar_figure as his proposed per-share value of the company stock to a hypothetical buyer in august of mr thompson engaged attorney j rené hawkins hereinafter mr hawkins in connection with representing mr thompson in the examination of the gift_tax_return mr hawkins suggested that mr thompson hire an independent_appraiser to value the shares that mr thompson had given to the children based upon this advice mr thompson hired john o batson hereinafter mr batson to perform an appraisal of the company stock control here represents ownership of more than percent of the stock of a corporation by a single family mr batson prepared an appraisal report and submitted it to the company mr batson's fee was paid_by the company and charged as compensation to mr thompson it was mr thompson's understanding that both mr batson and mr hawkins although formally engaged by him were also representing his wife here petitioner with respect to her potential gift_tax liability in due course petitioner and mr thompson received the revenue_agent's_report and filed a protest in may of mr hawkins by letter submitted the appraisal prepared by mr batson to the appeals_office on or about date statutory notices were issued to petitioner and mr thompson determining gift_tax deficiencies and additions to tax under sec_6660 based on respondent's valuation of the company stock the petition was filed on date upon the filing of respondent's answer on date the case was at issue a notice setting case for trial dated date set the case for trial on date and the standing pre-trial order directed the parties to file expert witness reports no later than days prior to the first day of the trial session on or about date mr thompson hired attorney david aughtry hereinafter mr aughtry to represent mr thompson and petitioner at trial a valuation expert z christopher mercer hereinafter mr mercer of mercer capital management inc was in turn engaged by mr aughtry to prepare an appraisal of the shares of the company for use in the gift_tax valuation cases of mr thompson and petitioner mr mercer prepared an appraisal report and submitted it to mr thompson mr mercer's fee was paid_by the company and charged as compensation to mr thompson although mr aughtry and mr mercer were formally engaged by mr thompson it was understood that they would also represent petitioner's interests in her separate gift_tax case mr aughtry entered his appearance in petitioner's case on date petitioner provided a copy of the valuation report prepared by mr mercer to respondent within the time required under rule f respondent on the record at a hearing in atlanta georgia on date accepted the per-share value of the company stock as determined by mr mercer dollar_figure for the year and lesser values for gifts in the previous years respondent also conceded on the record that the addition_to_tax under sec_6660 would not apply it was agreed that the settlement would apply to both petitioner's and mr thompson's case since mr thompson had a net_worth in excess of dollar_figure million he did not file a motion for fees and costs in his case 8the company advanced other litigation costs and charged them as compensation to mr thompson the court ordered the parties to meet and attempt to prepare a stipulation of agreed facts relevant to the issue of petitioner paying' or incurring' the costs claimed in petitioner's motion in response thereto petitioner filed an affidavit with the court the affidavit sworn to the best of her knowledge and belief on date states in paragraph that petitioner has incurred and paid fees and costs in the amount of dollar_figure on date the court once again ordered the parties to file a stipulation of facts regarding whether petitioner paid' or incurred' the litigation and administrative costs at issue on date the parties filed a stipulation of facts attached to the stipulation as joint exhibit 7-g is a copy of a check drawn by petitioner to her husband in the amount of dollar_figure dated date petitioner is not employed and although she receives occasional dividend income most of her income and assets have come from mr thompson directly or indirectly discussion sec_7430 provides that in the case of any administrative or court proceedings brought by or against the united_states in connection with the determination collection_or_refund_of_any_tax interest or penalty the prevailing_party may be awarded a judgment for reasonable_administrative_costs incurred in connection with any administrative proceedings within the irs and reasonable_litigation_costs incurred in connection with any court_proceeding to qualify as a prevailing_party under the statute petitioner must establish that the position_of_the_united_states in the proceeding was not substantially justified she substantially prevailed with respect to the amount in controversy or with respect to the most significant issue presented and she met the net_worth requirements of u s c sec d b on the date the petition was filed sec_7430 to recover litigation costs petitioner must also establish that she exhausted the administrative remedies available to her within the internal_revenue_service and that she did not unreasonably protract the proceedings sec_7430 petitioner bears the burden_of_proof with respect to each of the preceding requirements rule e petitioner's motion in this case seeks litigation and administrative costs paid_or_incurred beginning with the examination of the returns of petitioner and of mr thompson on which the split_gifts were reported through the filing of petitioner's reply to respondent's response to petitioner's motion for litigation and administrative costs respondent agrees in her response to petitioner's motion for litigation and administrative costs that petitioner has substantially prevailed with regard to the amount in controversy and that petitioner meets the net_worth requirement for the reasons stated below we find it unnecessary to address the issues of whether the position of respondent was substantially justified in this matter whether petitioner exhausted administrative remedies and whether petitioner unreasonably protracted the court and administrative proceedings petitioner must pay or incur fees and costs upon examination of the record in this case we conclude that petitioner has not carried her burden of proving that she has paid_or_incurred any costs in connection with these administrative or judicial proceedings as required by statute and the rules of this court sec_7430 and reasonable litigation and administrative costs incurred rule d reasonable litigation and administrative costs paid_or_incurred in 100_tc_88 a husband and wife filed a joint federal_income_tax return were issued a joint statutory notice filed a joint petition and had a combined net_worth greater than dollar_figure million but less than dollar_figure million each this court held that each petitioner met the net_worth requirements of u s c sec d b incorporated into sec_7430 the latter section we said speaks in terms of an individual however an individual must demonstrate that he or she has incurred or paid the costs and fees for which an award is sought see prager v commissioner tcmemo_1994_420 cf hong v commissioner supra pincite n as an initial matter we note that like sec_7430 the equal_access_to_justice_act eaja codified pincite u s c sec_504 and sec_28 u s c section allows courts to award attorney's_fees and other expenses to a prevailing_party in actions against the government at times we will draw on the more extensive case law under the eaja in order to interpret an analogous provision in sec_7430 942_f2d_459 8th cir where wording is consistent courts read the eaja and sec_7430 in harmony 769_f2d_1440 ndollar_figure 10th cir 91_tc_673 revd on another issue 891_f2d_1167 5th cir meaning of paid_or_incurred by virtue of its requirement that attorney's_fees have been incurred by the party sec_7430 differs from some other fee-shifting statutes for example unlike the civil rights attorneys fees awards act of which provides for allowance of a reasonable attorney's fee as part of the costs sec_7430 is more narrowly drawn and requires that to receive an award attorney's_fees must have been paid_or_incurred 87_tc_838 this is an important distinction to be eligible for an award of fees under sec_7430 petitioner must be able to show that she has paid those fees or incurred an obligation to pay them id pincite plain language of sec_7430 indicates that recovery is limited to actual expenditures the court has observed that the meaning of incurred in the context of sec_7430 is 'to become liable or subject_to bring down upon oneself ' id pincite in analogous circumstances it has been held that fees are incurred when there is a legal_obligation to pay them 856_f2d_56 8th cir applying sec_304 of the uniform relocation assistance and real_property acquisition policies act of u s c sec a fees must be actually incurred accord 908_f2d_1407 8th cir construing the eaja to a similar effect the fact that petitioner here may have retained and was represented by attorneys and other professionals in the administrative and judicial proceedings is not sufficient to meet the requirements of sec_7430 see eg 762_f2d_1077 d c cir 9there is a well-recognized exception not pertinent here to this requirement in proceedings under the eaja in light of the legislative_history of the act and for reasons of public policy parties who are represented by a legal services organization or by an attorney pro bono are not precluded from an award of fees and costs under the eaja awards are routinely made in those circumstances even though the claiming party did not pay or incur fees see eg 924_f2d_1577 fed cir 908_f2d_1407 8th cir 873_f2d_402 d c cir 765_f2d_1562 n 11th cir individual plaintiffs retained attorney and received representation but payment was made by another the unification church payment of fees and costs the issues involved in the gift_tax deficiency cases of petitioner and her husband were identical the primary question to be answered was on the valuation_date what was the value of stock in the company given as split_gifts by mr thompson and petitioner to their children both petitioner and her husband were represented by the same legal counsel under these circumstances close scrutiny of the record before us is warranted to determine what fee arrangement in fact existed see 873_f2d_402 d c cir concern about evasion of party eligibility requirements is highest where one counsel represents more than one party especially where the wealth of one or more of those parties would likely cause disqualification from recovering fees mr thompson engaged mr hawkins and hired mr batson the company of which mr thompson is chairman and principal_shareholder paid mr batson's fee and the payment was charged as compensation to mr thompson the evidence further shows that mr thompson hired mr aughtry who in turn hired mr mercer the valuation expert who represented petitioner and mr thompson after the filing of the petition in this case mr mercer's fee was paid_by the company and the payment charged as compensation to mr thompson moreover the company advanced other litigation costs in an unspecified amount and charged them as compensation to mr thompson the only evidence in this record that petitioner paid any of the fees and costs in this case is her date check to mr thompson in the amount of dollar_figure that bears the notation reimburse legal exp as demonstrated by the date date the check was written after the court's order requesting stipulated facts concerning whether petitioner had paid_or_incurred fees and costs we also note that the check is dated days after the sworn affidavit dated date in which petitioner stated that to the best of her knowledge and belief she had incurred and paid attorney's_fees and costs of dollar_figure the date of petitioner's check is not its only questionable characteristic petitioner submitted a summary of assets as of the end of the year attached to her affidavit of date an examination of the summary of assets fails to reveal any apparent source of liquid funds10 from which petitioner could write a check for dollar_figure to mr thompson since petitioner is not employed and most of her assets have come from mr thompson we are reluctant to place much weight on her check to him as 10petitioner has not stated that she converted any of her other assets into cash evidence that she has paid the subject fees and costs on the contrary the reimbursement check written by petitioner to mr thompson is additional evidence that he is the person who paid the fees and costs in this case the conduct of petitioner and mr thompson strongly suggests that it was never intended that petitioner would incur or pay any fees in this matter in our judgment the timing of the reimbursement check and petitioner's lack of liquid funds strongly suggest an attempt by petitioner and her husband to circumvent the net_worth requirement for a sec_7430 award rather than her bona_fide payment of an obligation we must look to the substance of what occurred allowance of a fee award to petitioner would effectively allow her to recover costs incurred by mr thompson an ineligible litigant who actually absorbed the financial burden of the litigation in addition we need not address petitioner's arguments sounding in contract including quantum meruit at any length suffice it to say that payment to a creditor discharges a debtor's obligation see ga code ann sec michie unlike 931_fsupp_1564 s d ga payments of all the litigation costs here at issue were made by the company and charged as compensation to mr thompson based on the record before us we hold that petitioner has failed to carry her burden of showing that she paid_or_incurred within the meaning of sec_7430 any fee or cost11 identified in her motion to reflect the foregoing an appropriate order and decision will be entered 11we have considered whether petitioner has paid any miscellaneous administrative or litigation cost in an attempt to determine whether petitioner is entitled to recover the fee for filing her petition we discovered that petitioner's petition and that of her husband mr thompson were sent to the court by federal express in a single envelope the receipt attached to the envelope indicates the sender to be mr hawkins the internal billing reference is listed as l n thompson jr also the parties have stipulated that in addition to the fees of mr batson and mr mercer t s hardwoods inc advanced other unspecified litigation costs and charged them as income to mr thompson


id office uilc cca_2010062515142635 ------------------ number release date from -------------------- sent friday date pm to ---------------------------------------------------- cc subject refund statute for foreign tax credit-related claims confirming my telephone advice sec_6511 provides a special extended statute_of_limitations for refund claims attributable to foreign tax_credits such a refund claim is generally made by filing an amended_return and is timely if filed within years from the original due_date without extensions of the return for the year in which the foreign taxes were actually paid_or_accrued and not the earlier or later year to which the taxes are carried and claimed as a credit contested taxes once finally determined are considered to relate back and to accrue in the tax_year to which the taxes relate that is the u s taxable_year with or within which ends the foreign taxable_year for which the creditable_foreign_tax is imposed revrul_84_125 1984_2_cb_125 revrul_61_93 1961_1_cb_390 the taxpayer must substantiate its entitlement to the foreign_tax_credit with appropriate proof that the foreign taxes were actually owed and paid including that the taxpayer reasonably applied the foreign tax law rules and took all effective and practical steps to minimize its foreign tax_liability over time sec_905 sec_1_901-2 please call if you have further questions -------------------- ----------------------- -------------------


internal_revenue_service number release date index number ----------------------- ------------------------------------------ --------------------- ----------------------------- in re ------------------------------------------ legend department of the treasury washington dc person to contact --------------------- ---------------------- telephone number --------------------- refer reply to cc intl - plr-135210-03 date date ---------------------- ----------------------- ------------------------ ------------------------ ------------------------------ ------------------------------------------ taxpayer ------------------------------------------------------------------- entity a entity b individual a individual b cpa firm date a date b date c dear ----------------- this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file the election agreement described in sec_1_1503-2 the g i agreement for the tax_year ended on date a with respect to entity a’s and entity b’s dual consolidated losses and the annual certification statement described in sec_1_1503-2 g vi b certification for tax years ended on date b and date c with respect to entity a’s and entity b’s dual consolidated losses_incurred in the tax_year ended on date a the information submitted for consideration is substantially as set forth below ---------------------- --------------------- ------------------ in re plr-135210-03 the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process individual a is the tax director for taxpayer with respect to international matters in this capacity individual a engaged cpa firm to prepare taxpayer’s international tax filings for the tax years ended on date a and date b for tax_year ended on date c taxpayer relied on individual a to prepare its international tax filings the affidavits of individual a and individual b and the facts submitted show that individual a failed to file or advise taxpayer to file the g vi b certifications for the tax_year ending on date c individual b is a tax partner in cpa firm and has been a certified_public_accountant for over thirteen years individual b was in charge of review of the international operations portions of taxpayer’s federal_income_tax returns for tax years ending on date a and date b the affidavits of individuals b and a and the facts submitted show that individual b failed to make or timely advise taxpayer to make the elections for the tax_year ending on date a and to file the certifications for the tax_year ending on date b sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation the agreements described in sec_1_1503-2 are regulatory elections as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the rules set forth in sec_301_9100-3 in re plr-135210-03 based on the facts and information submitted we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the election agreement described in sec_1_1503-2 for the tax_year ended on date a with respect to entity a’s and entity b’s dual consolidated losses and an extension of time of days from the date of this ruling letter to file the annual certification required under sec_1_1503-2 for tax years ended on date b and date c with respect to entity a’s and entity b’s dual consolidated losses_incurred in the tax_year ended on date a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the g i election agreements and the g vi b certifications sec_301_9100-1 a copy of this ruling letter should be associated with the g i agreements and the g vi b certifications this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to taxpayer sincerely associate chief_counsel international by s allen goldstein allen goldstein reviewer enclosure copy for purposes


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc psi plr-125272-01 date date number release date index number legend x a state d1 dear this letter responds to a letter dated date by your authorized representative on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts x was incorporated on d1 by a under the laws of state and it was decided that x would be an s_corporation a relied upon his tax advisers to file x's form_2553 election by a small_business_corporation however the form_2553 was not timely filed x requests a ruling under sec_1362 that its sec_1362 election will be treated as timely made for its taxable_year that begins on d1 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation plr-125272-01 until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year conclusion based solely on the facts submitted and representations made we conclude that x has established reasonable_cause for failing to make a timely s election and that x is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 containing an effective date of d1 for the election within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether x is an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely mary beth collins senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court lars e fredrickson jr donna j fredrickson petitioners v commissioner of internal revenue respondent docket no filed date lars e fredrickson jr and donna j fredrickson pro sese allan d hill for respondent memorandum opinion foley judge by notice dated date respondent determined a deficiency in petitioners' federal_income_tax of dollar_figure the issues for decision are as follows whether petitioners pursuant to sec_104 are entitled to exclude amounts received in settlement of a class action suit we hold they are not whether petitioners pursuant to sec_162 are entitled to an above-the-line deduction for legal fees we hold they are not unless otherwise indicated all section references are to the internal_revenue_code as in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure background the facts have been fully stipulated under rule and are so found at the time the petition was filed petitioners resided in eureka california on date a class action suit against state farm general insurance co state farm mutual automobile insurance co state farm life_insurance co and state farm fire and casualty co state farm was filed in the u s district_court for the northern district of california kraszewski et al v state farm gen ins co the plaintiffs alleged that state farm in violation of title vii of the civil rights act of title vii had discriminated against women in the hiring of its insurance agents on date the district_court bifurcated the litigation into a liability and a remedy phase on date the district_court ruled in the liability phase that state farm was liable under title vii for classwide discrimination on the basis of sex specifically it ruled that women who attempted to become trainee agents were lied to misinformed and discouraged in their efforts to obtain the entry level sales position the court found state farm liable with respect to all female applicants and deterred applicants who at any time since date have been are or will be denied recruitment selection and or hire as trainee agents by defendant companies within the state of california on date donna fredrickson petitioner applied to become a state farm trainee agent state farm rejected her application and appointed a male applicant petitioner subsequently joined the class action suit against state farm the parties to the class action subsequently reached an agreement in a consent decree as to the remedy phase of the litigation the consent decree provided for individual hearings to determine each claimant's entitlement to damages and the amount of such damages petitioner ultimately prevailed in her claim against state farm in february of petitioner and state farm entered into a settlement agreement entitled settlement agreement and general release that agreement provided in relevant part the approximate full value of petitioner's claim under the consent decree damage formula as of date is dollar_figure which represents back pay as a state farm agent accrued from the year of the challenged appointment to date plus six months of front pay from that date forward b settlement cash pincite acceptance rate state farm offers petitioner settlement cash of dollar_figure which is approximately of the estimated full consent decree value of her claim to release her claims against state farm c incentive cash for acceptance rate above the incentive cash will be dollar_figure per claimant for each full percentage_point by which the acceptance rate exceed sec_90 e attorney's_fees the payments state farm is offering to petitioner include her attorneys' fees and costs that is petitioner will have to pay her attorneys' fees out of the payment state farm makes to her petitioner accepted the terms of the settlement agreement as a result in state farm issued petitioner and her attorney a dollar_figure check dollar_figure plus a dollar_figure acceptance rate bonus amount petitioner's attorney retained legal fees of dollar_figure and the dollar_figure balance was paid to petitioner petitioners reported on their joint federal_income_tax return dollar_figure of the dollar_figure amount respondent determined that the entire dollar_figure should have been included in petitioners' gross_income the petition in this case was filed on date discussion i excludability of settlement proceeds under sec_104 except as otherwise provided gross_income includes income from all sources sec_61 348_us_426 while sec_61 is to be broadly construed statutory exclusions from income must be narrowly construed commissioner v schleier u s ___ 115_sct_2159 under sec_104 gross_income does not include the amount of any damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal injuries or sickness sec_1_104-1 income_tax regs provides that the term 'damages received whether by suit or agreement ' means an amount received through prosecution of a legal suit or action based upon tort or tort type rights or through a settlement agreement entered into in lieu of such prosecution thus an amount may be excluded from gross_income only when it was received both through prosecution or settlement of an action based upon tort or tort type rights and on account of personal injuries or sickness commissioner v schleier u s at ___ s ct pincite7 where amounts are received pursuant to a settlement agreement the nature of the claim that was the actual basis for settlement controls whether such amounts are excludable under sec_104 504_us_229 102_tc_116 affd in part revd in part and remanded 70_f3d_34 5th cir the critical question is in lieu of what was the settlement amount_paid 105_tc_396 determination of the nature of the claim is a factual inquiry robinson v commissioner supra pincite the amounts petitioner received under the settlement agreement were intended to settle petitioner's claim under title vii although the settlement agreement does not contain a specific statement to that effect the surrounding circumstances establish that title vii is the underlying claim petitioner was a member of a class action suit asserting a claim of discrimination under title vii the district_court ruled that state farm was liable under title vii to all members of the class who had been discriminated against and ordered individual hearings state farm and the plaintiffs to the class action suit agreed on a procedure and a formula to ascertain the amount owed if any to each individual claimant petitioner's damages under the consent decree were ascertained and petitioner was paid an amount equal to percent of her full claim under the consent decree plus a bonus amount thus the consent decree implemented the district court's ruling that state farm was liable under title vii and the settlement agreement represented a compromise and settlement of petitioner's rights under the consent decree as a result we conclude that petitioner's settlement proceeds were intended to settle her title vii claim and that the u s supreme court's decision in united_states v burke supra controls in burke the court considered whether amounts received in settlement of a claim under title vii were excludable under sec_104 the court analyzed title vii and concluded that it did not provide for remedies to recompense claimants for tort type personal injuries instead the court noted that the statute offered only injunctions back and front pay and other equitable relief id pincite as a result the court concluded that title vii did not redress tort type personal injuries and consequently that settlement proceeds based on such a claim are not excludable under sec_104 petitioner contends that remedies available to her under other laws redressed tort type personal injuries and that the settlement was partially intended to settle these claims petitioner emphasizes that the consent decree indicated that state farm was concerned about its liability under other laws and that the settlement agreement provided that petitioner released all claims she had against state farm under title vii and other laws petitioner has failed however to establish the amount if any attributable to claims under other laws as a result petitioner has failed to prove that any part of the settlement proceeds is excludable see 91_tc_160 affd on this issue revd on other issues 913_f2d_1486 9th cir accordingly we conclude that petitioners are not entitled to exclude any part of the dollar_figure settlement proceeds under sec_104 ii deductibility of legal fees petitioner contends that her legal fees are ordinary and necessary business_expenses deductible under sec_162 respondent contends that the legal fees are deductible under sec_212 as an expense for the production_of_income and treated as a miscellaneous itemized_deduction under sec_67 we agree with respondent such legal fees are deductible to the extent they exceed percent of petitioners' adjusted_gross_income see also sec_1_67-1t temporary income_tax regs fed reg date we have considered all other arguments made by the parties and found them to be either irrelevant or without merit to reflect the foregoing decision will be entered under rule