internal_revenue_service department of the treasury number release date index number 468a washington dc person to contact telephone number refer reply to cc psi br 6-plr-152893-01 date date re revised schedule of ruling amounts legend taxpayer plant location former parent parent commission dear this letter responds to the taxpayer’s request dated date for a revised schedule of ruling amounts in accordance with sec_1_468a-3 of the income_tax regulations relating to the plant's nuclear decommissioning fund fund taxpayer previously received a schedule of ruling amounts on a revised schedule of ruling amounts was requested on for the period beginning in a letter dated this office granted a revised schedule of ruling amounts for the taxpayer’s fiscal_year beginning but determined that the portion of the request pertaining to the period from through had not been filed within the period prescribed by sec_1_468a-3 of the regulations on taxpayer submitted a new request for a schedule of ruling amounts for the period begiunning and ending along with a request for permission under sec_301_9100-3 of the regulations for the request for revised schedule of ruling amounts to be treated as timely filed the relief requested under sec_301_9100-3 was granted in a letter dated plr-152893-01 - taxpayer as a part of its restructuring and withdrawal from the power generation industry sold all of its interest in plant on and is requesting a schedule of ruling amounts for part of the period between the expiration of the previous schedule and the sale date information was submitted pursuant to sec_1_468a-3 prior to the date of sale taxpayer directly owned a percent undivided tenancy_in_common in the plant which is situated in location taxpayer filed a consolidated_return with former parent through on that date former parent was acquired by parent and taxpayer as a result of the acquisition became a wholly-owned subsidiary of parent consequently after taxpayer will file a consolidated_return with parent in addition as a result of a merger taxpayer has acquired an additional percent undivided ownership_interest in the plant this private_letter_ruling pertains only to taxpayer’s percent interest in the plant and not to the additional percent interest the commission has exclusive regulatory jurisdiction over the rates of taxpayer and taxpayer is under the audit jurisdiction of the industry director natural_resources lm nr included in the sale of taxpayer’s interest in the plant were the facilities licenses records nuclear fuel and assets comprising both the qualified and nonqualified nuclear decommissioning trust funds relating to plant in addition the entity purchasing plant assumed taxpayer’s liability for decommissioning plant taxpayer will make no further payments to the qualified nuclear decommissioning trust fund following the sale of plant the estimated cost of decommissioning the plant is dollar_figure of which taxpayer's share is dollar_figure the commission in provided for decommissioning costs for the plant of dollar_figure to be included in taxpayer's cost of service for ratemaking purposes commission has not subsequently redetermined this amount and taxpayer continued to receive the same amount of decommissioning charge as a component of its cost-based rates through the closing date of the sale of plant any additional expenses for decommissioning plant that are bourne by taxpayer through the date of sale of the plant will be recouped through a non-bypassable contract termination charge paid with respect to taxpayer’s transmission and distribution activities and collected by taxpayer’s retail distribution company affiliates from their customers the funding_period and level_funding limitation period begins on and ends on the assumed after-tax rate of return to be earned by the assets of the fund is percent the rate of escalation to determine the future cost of the plant is percent compounded annually prior to the sale of the plant the estimated date on which the plant would no longer be included in taxpayer's rate base for ratemaking purposes was the proposed method for decommissioning the plant is the prompt removal dismantling method plr-152893-01 - taxpayer has determined the estimated period for which the fund is to be in effect is and the estimated_useful_life of the plant is therefore the qualifying percentage is percent sec_468a of the code provides that a taxpayer may elect to deduct the amount of payments made to a qualified decommissioning fund however sec_468a limits the amount_paid into such fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to this fund which is included in the taxpayer’s cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the total nuclear power plant as the period for which the nuclear decommissioning fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year and is made within ½ months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in among other things a direct ownership_interest including an interest as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such tax_year if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b the excess is not deductible by the electing taxpayer in addition under sec_1_468a-5 there are rules which provide that the internal_revenue_service may disqualify a nuclear decommissioning fund if the amount plr-152893-01 - of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes under sec_1_468a-3 the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer’s proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3 of the regulations provides that in general the amount for any_tax year in the level_funding limitation period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day on which the nuclear power plant will no longer be included in the taxpayer’s rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer’s share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer’s share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer’s qualifying interest in the plant under sec_1_468a-3 the qualifying percentage for any nuclear decommissioning fund is equal to a fraction the numerator of which is the number of tax years in the estimated period for which the nuclear decommissioning plr-152893-01 - fund is to be in effect and the denominator of which is the number of tax years in the estimated_useful_life of the applicable plant sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount we have examined the representations and the data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely upon these representations of the facts we reach the following conclusions for the period covered by this schedule of ruling amounts taxpayer had a qualifying interest in the plant and was therefore an eligible_taxpayer under sec_1_468a-1 of the regulations the commission has determined the decommissioning costs to be included in taxpayer’s cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations taxpayer as one of several owners of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by the commission and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts in regard to the commission satisfies the requirements of sec_468a of the code accordingly the schedule of ruling amounts requested by the taxpayer under sec_468a is approved as follows approved schedule of ruling amounts allocable to the taxpayer year plr-152893-01 - approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above in particular no opinion is expressed or implied concerning whether the contract termination charge is includible in the gross_income of and deductible by any entity other than taxpayer the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code payments made to such fund can qualify only to the extent they are made while taxpayer is the owner of the plant and only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the powers of attorney we are sending a copy of this ruling to your authorized representative we are also sending a copy of this letter_ruling to the industry director natural_resources lm nr pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer’s federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries


internal_revenue_service number release date date cc el gl br2 gl-503988-00 uil memorandum for new jersey district_counsel attention wendy gardner from acting chief branch collection bankruptcy summonses joseph w clark subject request for technical_advice taxpayers this constitutes our response to your date request for an opinion on whether the service can argue that the running of the three-year look-back period for determining priority status of a claim in bankruptcy is tolled during the period of an earlier bankruptcy when the debtor was making payments pursuant to a confirmed chapter plan as an extension of the holding in 81_f3d_20 3d cir we believe that taylor provides authority for arguing that the look-back period is tolled in this context but we advocate advancing this position only in circuits where controlling precedent such as taylor exists legend taxpayer x taxpayer y date a date b date c date d date e date f issue whether the running of the three-year look-back period for determining that a claim is entitled to priority status as set forth at b c sec_507 is suspended for the time the debtor was making payments pursuant to the terms of a confirmed chapter plan conclusion yes based on the reasoning of 81_f3d_20 3d cir the running of the period for determining priority status can be viewed as tolled during any time the service is precluded from engaging in collection action during bankruptcy including while the debtor is making payments under a confirmed chapter plan however since the service no longer advances the gl-503988-00 reasoning which is the basis of taylor in circuits which have not addressed the issue this view is limited to those circuits which have addressed the specific tolling issue addressed in taylor and which have reached the same conclusion on the same rationale background your memorandum requesting advice assumes a situation as follows a married couple owes federal income taxes for various unspecified years which include date a on date b taxpayer x files a petition under chapter of the bankruptcy code the chapter plan which fully provides for the couple’s income taxes for date a a post-petition year is confirmed on date c taxpayer x makes some payments under the plan in date d but then stops making payments until date e when taxpayer x makes several additional payments on date f taxpayer y files a petition under chapter at this point part of the claim for taxes filed in the second bankruptcy cannot be classified as priority unless the running of the three-year look-back period set forth at b c sec_507 is viewed as suspended during the period between confirmation of the chapter plan and the time of substantial default law and analysis in taylor supra the specific issue presented was whether the period for determining priority status set forth in what is now b c sec_507 should be viewed as having stopped running during the pendency of the debtor’s earlier bankruptcy in that case the two bankruptcies involved were both chapter cases since the service’s claim was based on taxes for which a return was filed within three years of the filing of the first bankruptcy petition but more than three years before the filing of the second bankruptcy petition its claim would have had to have been classified as unsecured general rather than unsecured priority in the second bankruptcy if tolling were not applied the third circuit_court of appeals upholding the determinations of both the bankruptcy and district courts viewed tolling as warranted in this context the court essentially reasoned as follows sec_6502 a provision of sec_507 of the bankruptcy code affords unsecured claims of governmental units an eighth-level priority in order of payment where the claims are for prepetition taxable years and are for taxes i for which a return if required is last due including extensions after three years before the date of the filing of the petition or ii assessed within days before the date of the filing of the petition b c sec_507 prior to this provision was numbered b c sec_507 gl-503988-00 nonbankruptcy law sets a ten-year period for collection_of_taxes following assessment the running of the sec_6502 period is suspended during bankruptcy by another nonbankruptcy provision sec_6503 therefore under b c sec_108 the running of the period for collection is suspended as is the running of the period for determining whether a claim is entitled to priority status during the pendency of any bankruptcy the third circuit held that these provisions of the bankruptcy code and internal_revenue_code taken together reflect intent on the part of congress that the service be afforded additional time to effect tax collection where collection previously could not be pursued due to the pendency of a bankruptcy relying in part on the fact that the service cannot collect taxes during the imposition of the automatic_stay see f 3d pincite in rendering its decision in taylor the third circuit did not explicitly address the issue you raise whether tolling should apply not only when the automatic_stay is in effect but during periods in bankruptcy when the service is precluded for other reasons from effecting collection however the court did make certain comments indicating that its application of tolling might not be limited to periods during which the automatic_stay was in effect for example the court stated the time limitations within sec_507 merely reflect the existing limitation periods in income_tax cases under sec_6501 and sec_6502 which are suspended during bankruptcy proceedings by sec_6503 we deem it obvious that the relevant internal_revenue_code and bankruptcy code sections read together evidence a congressional concern to preserve the collectability of tax claims sec_108 of the bankruptcy code states in pertinent part that if applicable nonbankruptcy law fixes a period for commencing or continuing a civil_action in a court other than a bankruptcy court on a claim against the debtor and such period has not expired before the date of the filing of the bankruptcy petition then such period does not expire until the later of - the end of such period including any suspension of such period occurring on or after the commencement of the case or days after notice of the termination or expiration of the stay under sec_362 with respect to such claim b c sec_108 gl-503988-00 sec_507 simply provides priority as to those taxes which fall within the three-year limitation period the extension of time provided within sec_108 of the bankruptcy code and sec_6503 of the internal_revenue_code would be meaningless if debtors could discharge their tax_liability by filing successive bankruptcies f 3d pincite given the third circuit’s general reasoning in taylor and the above-cited specific language we believe that this decision provides authority for arguing that tolling may be warranted for all periods in bankruptcy when the service is precluded for any reason from taking collection action including during the type of scenario you present this makes sense because the service normally is precluded from collecting taxes while a debtor is adhering to the terms of a confirmed chapter plan even though the automatic_stay generally is not in effect at this point see eg b c sec_362 indicating that automatic_stay terminates upon confirmation of plan 57_f3d_561 7th cir in dictum court summarily agrees that service was precluded from collecting taxes while payments were being made under reorganization plan moreover this argument while not squarely addressed by any court has been at least implicitly approved in several instances see eg in re 965_f2d_554 7th cir finding it unnecessary to address lower court’s determination that tolling applies for all periods post-confirmation but ruling that tolling applies for period service’s claims were initially disallowed mouradian v united_states u s dist lexis m d fla suggesting that tolling should apply whenever assets are within bankruptcy court’s protection 203_br_930 n d tex in general discussion of tolling notes existence of wright supra and montoya supra as supporting application of tolling even while automatic_stay is not in effect despite our agreement that this argument is viable we do not recommend that the argument be advanced in all circuits we recognize that three circuits in addition to the third have issued decisions in which tolling was applied based on reasoning similar to that contained in taylor see 109_f3d_489 8th cir cert_denied 118_sct_80 in re 5_f3d_423 9th cir cert_denied 511_us_1081 in re montoya supra however three others have explicitly rejected this reasoning see in re palmer u s app lexis 6th cir date 182_f3d_775 11th cir in re 19_f3d_163 5th cir as a result the office_of_chief_counsel now recognizes the of the three decisions in which the analysis based on sec_108 and sec_6503 was rejected all except palmer left the door open for tolling to potentially apply on a different basis another decision in re richards 994_f2d_763 10th cir applied tolling based on the bankruptcy court’s equitable authority afforded by b c sec_105 without addressing the analysis based on sections gl-503988-00 infirmities of the argument that the look-back periods contained in the bankruptcy code should be deemed tolled pursuant to b c sec_108 and sec_6503 and the office no longer advances this argument in circuits where no controlling precedent based on these provisions already exists in summary we believe that taylor provides authority for arguing at least in cases arising within the third circuit that the running of the three-year look- back period for determining priority status contained in b c sec_507 should be viewed as tolled during not just periods of prior bankruptcies when the automatic_stay was in place but periods when the service was precluded from effecting collection because the debtor was making payments pursuant to the provisions of a confirmed chapter plan because the office_of_chief_counsel no longer advances the reasoning adopted in taylor except in circuits where this reasoning has already been adopted however we do not urge that the extension of the taylor holding discussed herein be advocated in all circuits if you have further questions please call c and h instead the office now argues that tolling applies based on the legislative intent underlying the look-back periods themselves in addition we argue that the bankruptcy court is authorized to apply tolling if the court believes equitable factors so warrant pursuant to b c sec_105


t c summary opinion united_states tax_court ronald w ramey and joni j ramey petitioners v commissioner of internal revenue respondent docket no 1776-00s filed date douglas s chiapuzio for petitioners robert v boeshaar for respondent gerber judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority ' unless otherwise indicated all subsequent sections refer to the internal_revenue_code in effect for the year in issue _9- respondent determined a dollar_figure deficiency in income_tax for petitioners’ taxable_year the sole issue for our consideration is whether proceeds received by joni j ramey petitioner in settlement of an action under the fair labor standards act of flsa ch sec_1 b 52_stat_1060 current version pincite u s c secs b are for personal_injury_or_sickness and excludable from her gross_income under sec_104 background’ in employees the class of payless drugstores inc payless filed a class action lawsuit under the flsa in the u s district_court for the district of idaho the lawsuit one of these employees was petitioner the class alleged that despite managerial-sounding titles and job descriptions they were in fact hourly employees who were required to work overtime without compensation as relief the class sought to be paid time-and-a-half for all the hours worked in excess of the statutory limit of hours liquidated_damages in an amount equal to the unpaid overtime compensation and attorneys’ fees and costs in date the class action was settled for dollar_figure million and the plaintiffs sought judicial approval of the settlement in a memorandum in support of their motion the facts were fully stipulated -3- plaintiffs explained that the cash settlement was to be distributed as follows all plaintiffs receive a dollar_figure allocation appropriate individuals receive dollar_figure deposition scheduling allocation dollar_figure deposition attending allocation and named plaintiffs receive a dollar_figure representation allocation hach individual’s claim is valued based on the fluctuating average workweek calculation the hours claimed are taken from the interviews of plaintiffs by plaintiff’s counsel the hourly rate is determined from payless payroll records all overtime hours and individual claims between two years prior to the consent date and date are given of calculated value to discount for a potential finding of no liability all overtime hours and individual claims for the time period between two and three years of their consent date are given of calculated value to discount for a finding of no liability all overtime hours claimed for the time period between date and three years prior to an individual’s consent date are given of calculated value to recognize the limited although existing possibility that plaintiffs could have recovered for this time period the individual’s claim is then totaled the remaining portion of the settlement that is the total settlement minus the amount allocated for participation and back wage sec_1s apportioned the same ratio as that of each individual’s calculated back wages to -4-- the total of the calculated back wages for the class the sum of the participation allocation the back wages allocation and the liquidated_damages allocation equals each individual’s total recovery from the individual’s total recovery the contractual attorney fee is then subtracted each individual is then allocated a share of the costs of the litigation based on the same ratio as that person’s total recovery to the total settlement proceeds that share of the costs is then subtracted the settlement allocation was approved by the court on date on date the plaintiffs entered into a settlement agreement and release the agreement contains the statement that all settlement proceeds are paid to the plaintiffs on account of personal injuries emphasis added moreover the release contains the following paragraph release of payless by the plaintiffs in exchange for the payment of the amount set forth in paragraph below plaintiffs hereby release and discharge payless from all actions claims or demands for damages liabilities costs or expenses which the plaintiffs individually or collectively have against payless on account of or in any way arising out of the claims that were asserted or that could have been asserted in the lawsuit by the plaintiffs which lawsuit is hereby acknowledged as not fully plead sic further including but not limited to claims for personal injuries intentional infliction of emotional distress negligent infliction of emotional distress and from all known claims whether based in tort statute or contract which are based in whole or in part or arise out of or in any way relate to the lawsuit and anything done or allegedly done by payless arising out of or in conjunction with or relating to the employment of any and or all plaintiffs prior to date by payless on date pursuant to the above settlement petitioner received a payment of dollar_figure dollar_figure back wages dollar_figure designated as liquidated_damages from which attorney’s fees of dollar_figure were deducted for a net payment of dollar_figure petitioner did not report any portion of the dollar_figure on her income_tax return respondent determined that petitioner must include the dollar_figure in her gross_income respondent also allowed petitioner dollar_figure as a miscellaneous itemized_deduction for attorney’s fees incurred to collect back wages petitioner contends that the dollar_figure settlement is not includable in her gross_income she argues that at least percent of her award is attributable to a recovery for the intentional and or negligent infliction of emotional distress and is excludable under sec_104 a respondent counters that the dollar_figure in damages was not paid on account of personal injuries instead respondent contends that the settlement proceeds resulted from the claim set forth in the complaint---the flsa claim which does not provide for personal injury compensation respondent also contends that any on brief respondent argues that attorney’s fees should not be excluded from petitioner’s gross_income however the guestion of whether attorney’s fees are excludable was not raised by petitioners as an issue in this case accordingly there is no need to address respondent’s argument - settlement language to the contrary was a naked attempt to gualify under sec_104 and therefore should be disregarded discussion sec_61 provides that all income from whatever source derived is included in gross_income except as otherwise provided this definition of gross_income is broadly construed see 515_us_323 accordingly any statutory exclusions from income must be narrowly construed id one such exclusion provided for in sec_104 is that damages received whether by suit or agreement and whether as lump sums or periodic_payments are excluded from gross_income if those damages were received on account of personal injuries or sickness however two requirements must be met commissioner v schleier supra pincite sec_1_104-1 income_tax regs first the claims from which the lawsuit arose and upon which it settled must be based upon tort or tort type rights commissioner v schleier supra pincite second the damages must have been received on account of personal injuries or sickness id for the exclusion to apply both requirements must be satisfied id jacobs v commissioner t c memo it must be noted here that a personal injury is different from an economic injury a personal injury includes nonphysical injuries such as those affecting emotions reputation or character 504_us_229 the nature of the claim first we consider whether the claim settled was based upon a tort or tort type cause of action from the record before us we consider the evidence the stipulated facts the complaint and the intent of the payor 87_tc_1294 affd 848_f2d_81 6th cir 87_tc_236 affd 835_f2d_67 3d cir 80_tc_1104 there is no dispute that the complaint arose under the flsa to recover unpaid overtime compensation liquidated_damages attorney’s fees and costs it is well settled that an action under the flsa in and of itself is not based upon a tort or tort type right see jacobs v commissioner supra the flsa was enacted to establish minimum wages and maximum hours for employees and it does not provide for personal injury compensation see 324_us_697 jacobs v commissioner supra the only relief available under the flsa is the payment of back wages and liguidated damages for excessive hours worked see u s c n but see small_business job protection act of publaw_104_188 sec a 110_stat_1838 which amended sec_104 to provide that for amounts received after date a personal injury is limited to a physical injury on the other hand an economic injury includes injuries such as those arising out of the unlawful deprivation of either full wages earned or the opportunity to earn them id - sec_216 these liquidated_damages are intended to compensate employees not for personal injury but for damages that may be too obscure or difficult to estimate because of the delay of wage payment see 316_us_572 accordingly if a claim arose solely under the flsa petitioner would most likely fail to meet the test of commissioner v schleier supra however petitioner argues that along with the flsa claim another claim existed--the intentional and or negligent infliction of emotional distress petitioner contends that this and not the flsa claim was the claim upon which the lawsuit was settled indisputably no claims for personal injury were alleged in the class action pleadings nevertheless petitioner points out that under 180_f3d_859 7th cir the absence of an allegation does not bar the existence of a tort claim or the ability of the parties to settle upon it we agree that claims need not be specifically enumerated to be the basis of a settlement nonetheless the payor must be aware of that claim id practically speaking the complaint is petitioner claims that she experienced dry heaves and had to take prescription tagamet to prevent an ulcer she also claims that her marriage suffered because of job-related stress -9- the easiest way to prove a payor’s awareness however if a payor’s awareness can be shown by other means then the lack of a formal complaint does not bar either the existence of that claim or its ability to be the basis of a settlement id petitioner argues that payless and its attorneys did know about her claim for the intentional and or negligent infliction of emotional distress petitioner claims that she told the class action attorneys about her physical injury and sickness and that this information was conveyed to payless’ attorneys during the settlement negotiations petitioner argues that language in the settlement documents such as the release reflects the attorneys’ knowledge of her injuries in that regard the release a acknowledges that the lawsuit was not fully plead and b discharges payless of any other claims including but not limited to claims for personal injuries intentional infliction of emotional distress and negligent infliction of emotional distress petitioner argues that because the discharge of the tort claims follows the acknowledgment that the lawsuit was not fully pleaded it proves that payless and its attorneys knew and were admitting that the tort claims existed and could still be pleaded we acknowledge that this statement may indicate a generalized knowledge of payless’ attorneys that injuries existed within a broad class of claimants however from looking at the --10- language there is no way to tell for certain that payless and its attorneys knew of petitioner’s particular situation in fact this could merely be a concession made by payless’ attorneys to settle the claim quickly while this statement benefited petitioner and other plaintiffs for tax purposes it made no difference to payless moreover when analyzing similar release language in a previous case we held that generic blanket type statements would not suffice jacobs v commissioner supra accordingly petitioner has failed to meet the first requirement under 515_us_323 an action under the flsa is not based upon a tort or tort type right additionally petitioner has not shown that her claim for the intentional and or negligent infliction of emotional distress existed so as to qualify for exclusion of damages under sec_104 a the nature of the damages even if petitioner had shown that her claim of intentional and or negligent infliction of emotional distress existed we would still need to consider whether the damages were received on account of that specific claim under sec_104 it is irrelevant that a tort claim existed if payless paid damages only for the flsa claim for this reason there must be an actual link between the claim of intentional and or negligent infliction of emotional distress and the amount_paid pipitone v united --11- states supra pincite in making this determination we must examine the terms of the agreement id pincite in particular we examine the agreement language that all settlement proceeds were paid on account of personal injuries petitioner contends that this sentence irrefutably proves that part of the liquidated_damages were received on account of her personal injuries petitioner further contends that under 105_tc_396 affd 121_f3d_393 8th cir we must accept the terms of the parties’ agreement unless facts and circumstances deem otherwise respondent counters that liquidated_damages in a flsa lawsuit by their very nature are not and cannot be on account of personal injuries see overnight motor transp co v missel supra pincite rather liquidated_damages compensate plaintiffs for back wages and incidental costs id in light of this respondent contends that the inclusion of this language was a naked attempt by the plaintiffs to bring the proceeds under sec_104 despite petitioner’s contention that we must accept the agreement’s terms we cannot blindly accept labels which parties attach to transactions see 102_tc_116 affd in part revd in part 70_f3d_34 5th cir peaco v commissioner tcmemo_2000_122 more --12 - importantly the facts and circumstances in the record in this case do not support petitioner’s claim first the language is not supported by the evidence in our record we know that all proceeds were not paid on account of personal injury plaintiffs in their memorandum in support of the motion for judicial approval allocated all settlement proceeds according to back wages attorney’s fees and lawsuit involvement we find it significant that there was no allocation for personal injury when the parties to the class action meticulously provided for all of the items involved in the flsa claim petitioner dismisses this as a mere technicality we cannot so easily ignore this aspect----especially in light of the fact that petitioner admits on brief that up to percent of the proceeds could have been received on account of the flsa claim second this language does not show a direct link between the tort claim and a specific amount of money it is well settled that failure to show the specific amount of the payment allocable to the claims of tort or tortlike damages for personal injuries results in the entire amount’s being presumed not to be excludable wise v commissioner tcmemo_1998_4 see also jacobs v commissioner tcmemo_2000_59 considering that exclusions from income including those in sec_104 are narrowly construed we cannot accept petitioner’s contentions on this record that the uncorroborated and equivocal statements in the agreement and release are sufficient to show petitioner’s personal injury or gualification for exclusion pipitone v united_states f 3d pincite citing 917_f2d_1033 7th cir affg t c memo we hold that the damages received were on account of the flsa for back wages liquidated_damages attorney’s fees and costs and not for personal injury to the extent not herein discussed we have considered all other arguments made by the parties and conclude they are moot or without merit to reflect the foregoing decision will be entered for respondent


id office uilc cca_2011033111570837 ---------- number release date from ------------------- sent thursday date am to ---------------------- cc --------------------------------------------------------------------------- subject re statute extension question the statute extension would be in the name of the withholding_agent the llc person authorized under state law to sign documents on behalf of the state law llc this typically would be a manager identified in the operating_agreement if no manager exists because it was an entity that dissolved then we should issue the notice before the statute expires - unless the manager remains in existence for winding up purposes under state law and can continue to sign documents as the manager under state law state law likely determines who can act for the company for assets that are set_aside for contingent liabilities i have no expertise on delaware state law on these issues the two year rule i referenced was for c corporations not llc's it would be signed by a there is no statute_of_limitations if no form_1042 was filed


number release date id office uilc cca_2011042012330242 -------------- from ------------------------- sent wednesday date pm to ------------------------ cc subject hot_interest the applicable_date for computing sec_6621 interest on a large_corporate_underpayment of tax hot_interest is established thirty days after the issuance of a first 30-day_letter or a notice_of_deficiency whichever is earlier once triggered the applicable_date is effective for all subsequent underpayments determined for that year sec_6601 provides that if any amount of tax is not paid on or before the last date prescribed for payment interest at the rate established under sec_6621 will accrue from the last date to the date paid sec_6621 establishes the rates for interest on tax overpayments and tax underpayments under sec_6621 the underpayment rate is the sum of the federal_short-term_rate plu sec_3 percentage points sec_6621 provides that for purposes of interest payable under sec_6601 on any large_corporate_underpayment for any period after the applicable_date the underpayment rate under sec_6621 is determined by substituting percentage points for percentage points this interest rate is also known as hot_interest a large_corporate_underpayment is an underpayment_of_tax that exceeds dollar_figure for any single taxable_period the applicable_date is the thirtieth day after the earlier of the mailing of the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review 30-day_letter or the mailing of the notice_of_deficiency see sec_6621 and ii and sec_301 c i and ii which are generally effective for periods after date hot_interest begins to run per sec_6601 when a tax becomes both due and unpaid 588_f2d_342 2d cir pursuant to sec_301_6621-3 the existence of a threshold_underpayment of tax should be determined as of the due_date of the return thus we would argue that an nol_carryback that arises after the due_date of the return does not affect the existence of a threshold_underpayment we continue to believe that once the threshold is met hot_interest applies to all underpayments of tax after the applicable_date regardless of any payments made the satisfaction of a deficiency by the carryback of an nol is considered a payment sec_6601 provides generally that if an amount of tax is reduced by reason of a carryback of an nol the reduction shall not affect the computation of interest for the period ending with the filing_date for the year in which the nol arises we do not agree with the decision in 121_tc_147 please call if you have any questions


internal_revenue_service number release date index number -------------------------------------------- ------------ ------------------ ------------------------ - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number -------------------- refer reply to cc ita b04 plr-141362-05 date date x ------------- x ------------- date ------------------- date ------------------ date -------------------------- dear ----------------- this letter_ruling is in reference to x’s request that its form_1128 application to adopt change or retain a tax_year be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administrative regulations x is requesting permission to change its accounting_period for federal_income_tax purposes from a taxable_year ending on date to one ending date effective date the information submitted indicates that x filed a timely form_2553 election by a small_business_corporation however based on advice given x by its tax professional x did not attach form_1128 with the form_2553 due to an error or misunderstanding on the part of the tax professional the form_1128 was not timely filed sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government based on the facts and information submitted and the representations made we have concluded that x has acted reasonably and in good_faith in respect to this matter furthermore we have determined that the granting of relief in this case will not prejudice the interests of the government within the intendment of sec_301_9100-3 accordingly the requirements of sec_301_9100-3 for the granting of relief have been satisfied and x’s late filed form_1128 requesting permission to change from a tax_year ending on date to one ending on date effective date is considered timely filed plr-141362-05 the ruling contained in this letter is based upon facts and representations submitted by x 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 part of an examination process this ruling addresses the granting of sec_301_9100-3 relief only no opinion is expressed or implied regarding the tax treatment of the instant transaction under the provisions of any other section of the internal_revenue_code or income_tax regulations that may be applicable thereto or regarding the tax treatment of any conditions existing at the time of or effects resulting from the instant transaction specifically no opinion is expressed or implied as to whether x is permitted under the code and the applicable regulations to change to the tax_year requested in the subject form_1128 this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 in accordance with the provisions of a power_of_attorney currently on file we are sending a copy of this letter to the taxpayer’s authorized representative enclosure michael j montemurro branch chief office of associate chief_counsel income_tax accounting sincerely


department of the treasury internal_revenue_service washington d c dec - gph ats tax_exempt_and_government_entities_division uics legend taxpayer a taxpayer b trustee c taxpayer d trust t subtrust u subtrust v trustee w date date date date date date date date page date tra x company m company n state o value dear ms this is in response to the request for letter rulings under sec_401 of the internal_revenue_code submitted on your behalf by your authorized representative as supplemented by correspondence dated for letter rulings is based on the following facts and representations the request taxpayer a whose date of birth was date died on date at age without having attained his required_beginning_date as that term is defined in code sec_401 as of his date of death taxpayer a was the owner of an individual_retirement_account ira x maintained with company m a subsidiary of company n ira x had an approximate value of value as of taxpayer a’s date of death at his death taxpayer a was a resident of state o taxpayer a was survived by his wife taxpayer b whose date of birth was date taxpayer b died on date taxpayer a was also survived by a son taxpayer c and a daughter taxpayer d taxpayers c and d were born on date taxpayers c and d were alive as of the date of this ruling_request on date taxpayer a signed and adopted trust t which was subsequently restated for the last time on date trustee w t trust t is the beneficiary of taxpayer a’s ira x as indicated on a beneficiary designation dated date is the trustee of trust page your authorized representative asserts on your behalf that trust t became irrevocable as of the death of taxpayer a your authorized representative also asserts that trust t is valid under the laws of state o item xiii of trust t provides in relevant part that upon the death of taxpayer a_trust t is to be divided into two sub-trusts subtrust u and subtrust v subtrust v was to be funded through a fractional formula_clause with the exemption equivalent in the year of taxpayer a’s death item xii sec_4 of trust t mandates that all income of subtrust v was to be distributed not less frequently than quarterly to taxpayer b item xiii sec_4 of trust t also provides that trustee w had the discretion to pay principal of subtrust v to taxpayer b as the trustee deemed necessary or desirable for her health maintenance and support the provisions of trust t provide in relevant part that all income of subtrust u was to be distributed not less frequently that annually to taxpayer b the provisions of trust t also provide in relevant part that trustee w had the discretion to pay principal of subtrust u to taxpayer b as the trustee deemed necessary or desirable for her health maintenance and support or because of an emergency sickness or other need the provisions of trust t further provide that upon the death of taxpayer b the trustee of subtrust u is authorized to pay to the personal representative of taxpayer b’s estate that amount which equals the sum of all additional death taxes payable by such personal representative by reason of the inclusion of such trust in taxpayer b’s estate your authorized representative asserts that no taxes were due upon the death of taxpayer b and no portion of the assets of subtrust u has been or will be used for the payment of taxes or expenses the provisions of trust t further provide in relevant part that upon the death of taxpayer b whatever remains of subtrust u will be merged with subtrust v under the terms of item xiii of trust t upon the death of taxpayer b subtrust v is to be distributed in equal shares to taxpayer a’s children free of trust as long as said children are over the age of taxpayers c and d were over the age of at the death of taxpayer b the provisions of trust t also provide that the trustee thereof shall not distribute any ira to or for the benefit of taxpayer a’s estate any charity or any other non- individual beneficiary in addition any ira shall not be used or applied for payment of taxpayer a’s debts funeral_expenses estate administration_expenses or other claims page against taxpayer a’s estate nor for the payment of estate inheritance or similar transfer_taxes due on account of his death with respect to calendar_year required minimum distributions from ira x were taken based on the life expectancy of taxpayer b the divisor of which was based on taxpayer b’s age during of was used with respect to on date ira x was divided and segregated into two equal separate_accounts one was set up as follows trustee w trustee for taxpayer c beneficiary of trust t decedent ira the other was set up as follows trustee w trustee for taxpayer d beneficiary of trust t decedent ira your authorized representative asserts that the documentation required under sec_1 a of the income_tax regulations question and answer-6 was provided to the ira x trustee no later than date based on the above facts and representations you through your authorized representative request the following letter rulings that trust t is a qualified_beneficiary a valid see-through trust within the meaning of sec_1_401_a_9_-4 of the regulations question and answer-5 that the creation of equal iras and the in-kind distribution of a share of ira x to the ira set up for the benefit of taxpayer d as beneficiary of trust t did not affect the tax deferred status of said portion of ira x and did not constitute a taxable_distribution to taxpayer d and that required distributions from the ira maintained in the name of taxpayer a decedent for the benefit of taxpayer d may be paid over the remaining life expectancy of taxpayer b said life expectancy is computed by using as the divisor for calendar_year and reducing by one for each subsequent calendar_year with respect to your ruling requests code sec_408 of the code provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the ira trust is maintained code sec_401 provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee- page ii will be distributed to such employee not later than the required_beginning_date or will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary code sec_401 provides in general that if a plan participant ira holder dies before the distribution of his interest has begun in accordance with subparagraph a ii prior to his required_beginning_date then his entire_interest must be distributed within years of his death code sec_401 iii provides in general that if any portion of the interest of a deceased plan participant ira holder is payable to or for the benefit of a designated_beneficiary such portion will be distributed beginning not later than year after the date of the deceased’s death or a later date as prescribed by the secretary under regulations in accordance with regulations over the life of the designated_beneficiary or a period not extending beyond the life expectancy of the beneficiary sec_401 of the code provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the employee ira holder attains age with respect to your ruling requests final income_tax regulations under code sec_401 and sec_408 were published in the federal_register pincite federal_register date and in the internal_revenue_bulletin pincite lr b date the preamble to the final regulations in relevant part provide that the regulations apply for determining required minimum distributions for calendar years beginning after date sec_1_401_a_9_-3 of the final regulations q a-1 describes in relevant part the life expectancy exception to the 5-year rule sec_1_401_a_9_-3 of the final regulations q a-3 a provides in general that with respect to the life expectancy exception to the 5-year rule described in code sec_401 and in a-1 distributions are required to begin to a non-spouse beneficiary on or before the end of the calendar_year immediately following the calendar_year in which the employee died q a-3 a adds that this rule also applies to the distribution of the entire remaining benefit if another individual is a designated_beneficiary in addition to the employee’s ira holder’s surviving_spouse page sec_1_401_a_9_-5 of the final regulations q a-5 b provides in general that if an employee dies before his required_beginning_date in order to satisfy the requirements of code sec_401 or iv and the life_expectancy_rule described in a-1 of sec_1_401_a_9_-3 the applicable distribution period for distribution calendar years after the distribution calendar_year containing the employee’s date of death is determined in accordance with paragraph c of this a-5 sec_1_401_a_9_-5 of the final regulations q a-5 c provides in general that with respect to a non-spouse beneficiary the applicable distribution period measured by the beneficiary’s remaining life expectancy is determined using the beneficiary’s age as of the beneficiary’s birthday in the calendar_year immediately following the calendar_year of the employee’s death in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after the calendar_year immediately following the calendar_year of the employee’s death sec_1_401_a_9_-5 of the final regulations q a-5 c provides in general that with respect to a spouse who is the employee’s sole beneficiary the applicable distribution period is measured by the beneficiary’s remaining life expectancy using the surviving spouse’s birthday for each distribution calendar_year after the calendar_year of the employee’s death up to the calendar_year of the spouse’s death in subsequent calendar years the applicable distribution period is the life expectancy of the spouse using the age of the spouse as of the spouse’s birthday in the calendar_year of the spouse ‘s death reduced by one for each calendar_year that has elapsed after the calendar_year of the employee’s death sec_1_401_a_9_-4 of the final regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee’s or ira holder’s death generally an employee’s designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of death sec_1_401_a_9_-4 of the final regulations q a-3 provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate may not be a designated_beneficiary however q a-5 of sec_1_401_a_9_-4 provides that beneficiaries of a_trust with respect to the trust's interest in an employee's benefit may be treated as designated beneficiaries if the following requirements are met the trust is valid under state law or would be but for the fact that there is no corpus page the trust is irrevocable or the trust contains language to the effect it becomes irrevocable upon the death of the employee the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee's benefit are identifiable within the meaning of a-1 of this section from the trust instrument the documentation described in a-6 of this section has been provided to the plan_administrator sec_1_401_a_9_-4 of the final regulations q a-6 b provides generally with respect to required minimum distributions after the death of the employee that documentation described therein must be provided by the trustee of the trust_beneficiary to the plan_administrator by october of the calendar_year following the calendar_year in which the employee died sec_1_401_a_9_-4 of the final regulations q a-5 c provides in relevant part that the separate_account rules under a-2 of sec_1_401_a_9_-8 are not available to beneficiaries of a_trust with respect to the trust’s interest in the employee’s benefit sec_1_401_a_9_-9 of the final regulations provides the life expectancy and distribution period tables used to determine minimum required distributions the uniform lifetime table is the table to be used to determine the life expectancy of an individual pursuant to the uniform lifetime table the life expectancy of a individual age i sec_15 years as noted above if distributions are made to a_trust even if the trust is a see- through trust within the meaning of q a-5 of sec_1_401_a_9_-4 of the final regulations the separate_account rules of a-2 of sec_1_401_a_9_-8 of the final regulations are not available to the beneficiaries of the trust thus in general each beneficiary of a_trust must receive minimum required distributions over the life expectancy of the eldest beneficiary we note in this case that after the death of taxpayer a ira x was subdivided into two equal iras including one set up for the benefit of taxpayer d as the beneficiary of taxpayer a’s trust t the ira set up to benefit taxpayer d is designed to pay distributions directly to taxpayer d free of trust t said design was accomplished pursuant to the terms of trust t although neither the code nor the final regulations promulgated under code sec_401 preclude the posthumous division of ira x into two iras the final page regulations do preclude ‘separate account treatment for code sec_401 purposes where amounts pass through a_trust t thus even though ira x has been divided into two iras which were set up and designed to pay beneficiaries free of trust t the life expectancy of the eldest beneficiary of all of the iras including the trust t beneficiaries of ira x is the life expectancy to be used to determine the code sec_401 payout period for distributions from the ira set up and maintained to benefit taxpayer d taxpayer b is the said eldest beneficiary in this case the ira x amounts pass through trust thus based on the specific facts and representations surrounding this ruling_request we conclude as follows that trust t is a qualified_beneficiary a valid see-through trust within the meaning of sec_1_401_a_9_-4 of the regulations question and answer-5 that the creation of equal iras and the in-kind distribution of a share of ira x to the ira set up for the benefit of taxpayer d as a beneficiary of trust t did not affect the tax deferred status of said portion of ira x and did not constitute a taxable_distribution to taxpayer d and that required distributions from the ira maintained in the name of taxpayer a decedent for the benefit of taxpayer d may be paid over the remaining life expectancy of taxpayer b said life expectancy is computed by using as the divisor for calendar_year and reducing by one for each subsequent calendar_year this ruling letter is based on the assumption that ira x and the ira created after the death of taxpayer a for the benefit of taxpayer d as beneficiary thereof either have met are meeting or will meet the requirements of code sec_408 at all times relevant thereto it also assumes that trust t and the subtrusts created thereunder are valid under the laws of state o as represented pursuant to a power_of_attorney on file with this office the original of this letter_ruling is being sent to your authorized representative page this letter is directed only to the taxpayer that requested it and is based solely on the representations made with respect thereto sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours lance us dm rances v sloan manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


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 b05 plr-108203-12 date june legend parent date date date x -------------------------------- ---------------------- ------------------- ---------------------- ------------------ -- company official ------------------------------------------------------- -------------------------------- tax professional ------------------------------ ----------------------- dear ------------- this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election in particular parent is requesting an extension of time for the consolidated_group of which parent is the common parent to elect an extended carryback period the election for a consolidated_net_operating_loss plr-108203-12 cnol additional information was submitted in a letter dated date the material information submitted for consideration is summarized below parent is the common parent of a consolidated_group the parent group parent group incurred a cnol in the taxable_year ending date the year cnol parent seeks to carry back the year cnol x years to its taxable_year ending on date under sec_172 of the internal_revenue_code parent was required to file the election in order to carry back the year cnol to its taxable_year ending on date and to obtain the benefit of sec_56 the election was due on date parent intended to file the election but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for the parent group’s consolidated_income_tax_return for the taxable_year in which the year cnol was incurred or any subsequent taxable_year parent has represented that it is not seeking to alter a return position for which an accuracy related penalty has been or could be imposed under sec_6662 at the time the taxpayer requested relief sec_172 generally permits a taxpayer to carry back a net_operating_loss nol to each of the taxable years preceding the taxable_year of the nol sec_172 permits a taxpayer to elect to carry back an applicable net_operating_loss applicable nol to each of the or taxable years preceding the taxable_year of the applicable nol in lieu of the 2-year period provided by sec_172 sec_172 provides that the term applicable nol means the taxpayer’s nol for a taxable_year ending after date and beginning before date sec_172 provides that the election under sec_172 shall be made by the due_date including extension of time for filing the return for the taxpayer’s last taxable_year beginning in the election is irrevocable and in general may be made only with respect to one taxable_year sec_1502 provides that the secretary shall prescribe such regulations as he may deem necessary in order that the tax_liability of any affiliated_group_of_corporations making a consolidated_return and of each corporation in the group both during and after the period of affiliation may be returned determined computed assessed collected and adjusted in such manner as clearly to reflect the income_tax_liability and the various factors necessary for the determination of such liability and in order to prevent avoidance of such tax_liability in carrying out the preceding sentence the secretary may prescribe rules that are different from the provisions of chapter that would apply if such corporations filed separate returns plr-108203-12 sec_1_1502-21 of the income_tax regulations provides that losses taken into account in determining a cnol may be carried to other taxable years whether consolidated or separate only under paragraph b of sec_1_1502-21 sec_1_1502-21 provides that nol carryovers and carrybacks to a taxable_year are determined under the principles of sec_172 and sec_1_1502-21 sec_1_1502-21t provides that a consolidated_group can elect an extended carryback period pursuant to sec_172 with regard to a cnol arising in a taxable_year ending after date and beginning before date revproc_2009_52 2009_49_irb_744 provides when and how a taxpayer may make an election under sec_172 sec_4 of revproc_2009_52 provides that the common parent of a consolidated_group makes the election for the group sec_4 and of revproc_2009_52 permit the election to be made for consolidated taxpayers by attaching a statement to the original or amended consolidated_return for the taxable_year of the applicable cnol by attaching a statement to the taxpayer’s amended consolidated_return applying the applicable cnol to the carryback_year or by attaching a statement to a claim for a tentative_carryback_adjustment on form_1139 corporation application_for tentative refund sec_4 b and b of revproc_2009_52 require the election regardless of the manner in which made to be filed no later than the due_date including extensions for filing the return for the taxpayer’s last taxable_year beginning in under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 requests 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 the election by a consolidated_group to extend the carryback period under sec_172 for a cnol is a regulatory election therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent to file the election provided parent establishes to the satisfaction of the commissioner that it acted reasonably and in good_faith the requirements of sec_301_9100-1 and plr-108203-12 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make a valid election see sec_301_9100-3 based on the facts and information submitted including the affidavits submitted and the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly provided the parent group qualifies substantively to file the election we grant an extension of time under sec_301_9100-3 until sixty days from the date on this letter for parent to file the election the time in which parent may file a form_1139 for the year cnol has expired however parent may file the election under sec_172 to carry back the year cnol to its taxable_year ending on date on form 1120x amended u s_corporation income_tax return for the tax_year ending either date or date according to the procedures set forth in revproc_2009_52 a copy of this letter must be attached to the form 1120x if parent files form 1120x electronically parent may satisfy the requirement of attaching a copy of this letter by attaching a statement to the parent group’s amended_return that provides the date and control number plr-108203-12 of this letter_ruling the above extension of time is conditioned on the parent group’s tax_liability if any not being lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money we express no opinion as to the parent group’s tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the income_tax returns involved except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any item discussed or referenced in this letter in particular we express no opinion with respect to whether parent qualifies substantively to make the election in addition we express no opinion as to the tax effects or consequences of filing the election late under the provisions of any other section of the internal_revenue_code or regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in this letter plr-108203-12 for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made under penalty of perjury by parent company official and tax professional the director however should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable continue to apply this letter_ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives sincerely _ken cohen________________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 3-plr-146804-01 date date legend corporation shareholders date date date dear this letter responds to a letter dated date and subsequent correspondence requesting rulings on behalf of corporation under sec_1362 and f of the internal_revenue_code corporation was incorporated on date shareholders represent that they intended to elect s_corporation status for corporation effective date corporation failed to file timely the election to be treated as an s_corporation on date shareholders entered into an agreement concerning the purchase financing and operation of corporation that inadvertently may have created two classes of stock of corporation however shareholders represent that the date agreement was never followed on date shareholders revoked the date agreement corporation and its shareholders agree to make any adjustments consistent with the treatment of corporation as an s_corporation as may be required by the secretary with respect to the period specified by sec_1362 corporation requests inadvertent termination relief under sec_1362 and a ruling that its sec_1362 election will be treated as timely made for its taxable_year that began on date plr- sec_1362 generally provides that a small_business_corporation may elect to be an s_corporation for federal tax purposes sec_1362 provides the rule for when an s election will be effective generally if an election to be treated as an s_corporation 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 beginning in the year in which the election is made if the 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 having made an effective election to be treated as an s_corporation for federal tax purposes until the following taxable_year sec_1362 provides that if an election to be treated as an s_corporation for federal tax purposes is either made untimely pursuant to sec_1362 or not made at all and the secretary determines that there was reasonable_cause for the failure to make a timely election then the secretary may treat the corporation as having made a timely election and sec_1362 will not apply sec_1361 defines the term small_business_corporation to mean a domestic_corporation that is not an ineligible_corporation and that does not a have more than shareholders b have as a shareholder a person other than an estate and other than a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that such termination is effective on and after the date the s_corporation ceases to be a small_business_corporation sec_1362 provides that if an election under sec_1362 by any corporation is not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or was terminated under sec_1362 or the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation is a small_business_corporation or to acquire the required shareholder consents and the corporation and each person who was a shareholder in the corporation at any time during the period specified pursuant to this subsection agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination such corporation shall be treated as an s_corporation during the period specified by the secretary plr- sec_1_1362-4 provides that for purposes of sec_1_1362-4 the determination of whether a termination was inadvertent is made by the commissioner the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should determine that the termination was inadvertent the fact that the terminating event was not reasonably within the control of the corporation and was not part of a plan to terminate the election or the fact that the event took place without the knowledge of the corporation notwithstanding its due diligence to safeguard itself against such an event tends to establish that the termination was inadvertent based on the facts submitted and representations made we conclude that corporation has established reasonable_cause for failing to make a timely election pursuant to sec_1362 and that corporation is eligible for relief under sec_1362 furthermore we conclude that the execution of the date agreement would have terminated corporation’s s election had corporation timely filed the election we also conclude that the termination would have been inadvertent within the meaning of sec_1362 accordingly if corporation makes an election to be treated as an s_corporation by filing a completed form_2553 election by a small_business_corporation with an effective date of date with the appropriate service_center within days following the date of this letter corporation’s election will be treated as timely made for taxable_year that begins on date a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose pursuant to the provisions of sec_1362 corporation will be treated as continuing to be an s_corporation from date and thereafter provided that corporation’s s election is not otherwise terminated under sec_1362 except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any provision of the internal_revenue_code specifically we express or imply no opinion concerning whether corporation 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 sincerely yours christine ellison chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------- ----------------------------------------------- ----------------- ---------------------- --------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc corp plr-100866-07 date may ------------ ------------ legend foreign parent foreign sub us parent foreign bank year year year year x state foreign shareholder dear ---------------- -------------------- ------------------------- ----------------------------------------------- ------------------------- ---------------------------- --------------------------------- --------------------------------------------------- -------------------------- ------- ------- ------- ------- --------------- ------------- --------------- -------------------------------- in year foreign parent formed foreign sub a foreign private limited_company foreign parent is a privately owned foreign public limited_company that is this letter responds to a letter dated date on behalf of foreign in year foreign sub formed us parent a state single member limited_liability plr-100866-07 sub requesting certain rulings including under sec_368 of the internal_revenue_code with respect to a completed transaction additional information was submitted in letters dated february february and date summary of facts treated as a corporation for us tax purposes shareholder owns the majority of the outstanding shares of foreign parent stock that is treated as a corporation for us tax purposes foreign sub was formed with minimal capital and remained a dormant shell company until the transactions described below company and a disregarded_entity for us tax purposes at times referred to below as us parent d e foreign sub is a holding_company its sole asset is and always has been its interest in us parent shortly after its formation us parent acquired five shelf companies also single member limited_liability companies organized in state us parent and the five shelf companies comprise the us entities foreign parent formed us parent and acquired the other us entities in order to purchase the assets of a us business the us assets and operate a us business with those assets unrelated party the fs loan foreign parent guaranteed the fs loan foreign sub contributed dollar_figurex of the fs loan proceeds to us parent and retained dollar_figurex to cover its transaction expenses us parent then used dollar_figurex to purchase the us assets and retained dollar_figurex for working_capital us parent retained some of the us assets and contributed some to each of the five smllcs accordingly foreign sub reported the us taxable_income of the us entities each year that it owned and operated the us assets initially the interest on the fs loan was deductible for purposes of both foreign and us tax however in year foreign law changed and as a result the interest on the fs loan was no longer deductible for foreign purposes if it was claimed on a us return foreign parent determined that the deduction would be more valuable to the group for foreign tax purposes and thus to ensure the deduction would be allowable for foreign tax purposes foreign parent caused the following the ctb transaction to occur all of the assets of the us entities generated income exclusively in the us to fund the acquisition foreign sub borrowed dollar_figurex from foreign bank an plr-100866-07 first pursuant to sec_301_7701-3 foreign sub elected to change its classification from that of an association_taxable_as_a_corporation to that of an entity disregarded as separate from its owner a disregarded_entity for us tax purposes second within a week following foreign sub’s election but effective on the same day and also pursuant to sec_301_7701-3 us parent d e elected to change its classification from disregarded_entity to an association_taxable_as_a_corporation for us tax purposes at times referred to below as us parent inc at the time of the ctb transaction the balance of the fs loan was approximately dollar_figurex and us parent d e’s basis in its assets exceeded the fair_market_value of those assets us parent inc did not assume the fs loan subject_to us tax or otherwise required to file a us income_tax return as a result the interest on the fs loan was no longer deducted on any return other than a foreign return representations following the ctb transaction neither foreign parent nor foreign sub were in connection with the ctb transaction the taxpayer has made the following representations the fair_market_value of the stock of us parent deemed received by foreign parent was approximately equal to the fair_market_value of the foreign sub stock deemed surrendered in the exchange reduced by the fs loan and any other foreign sub liabilities deemed assumed by foreign parent immediately after the ctb transaction foreign parent through foreign sub then a disregarded_entity owned all the outstanding shares of stock of us parent and owned stock solely by reason of its ownership of foreign sub stock immediately prior to the ctb transaction at the time of the ctb transaction us parent did not have nor does it currently have any plan or intention to issue additional shares of its stock following the ctb transaction immediately following the ctb transaction us parent held the same assets and liabilities other than the fs loan that foreign sub held immediately prior to the ctb transaction plr-100866-07 at the time of the ctb transaction foreign sub had no outstanding warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in us parent at the time of the ctb transaction us parent did not have and it does not currently have any plan or intention to reacquire any of its stock issued in the ctb transaction the liabilities of foreign sub assumed within the meaning of sec_357 by us parent plus the liabilities if any to which the transferred assets were subject were incurred by foreign sub in the ordinary course of its business and were associated with the assets transferred foreign parent paid its own expenses if any incurred in connection with the ctb transaction foreign sub was not at the time of the ctb transaction under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 neither foreign sub nor us parent filed an election to change its initial or default classification for us federal tax purposes within the 60-month period ending on december year all of foreign sub’s earnings_and_profits were effectively_connected_earnings_and_profits as defined in sec_884 or accumulated_effectively_connected_earnings_and_profits as defined in sec_884 prior to the ctb transaction rulings based solely on the information submitted and the representations set forth above we rule as follows the ctb transaction is an f reorganization of foreign sub into us parent foreign sub and us parent are each a_party_to_a_reorganization under sec_368 no gain_or_loss was recognized by foreign parent upon its deemed exchange of the shares of foreign sub stock for shares of us parent sec_354 no gain_or_loss was recognized by foreign sub upon the deemed transfer of assets to us parent in the ctb transaction sec_361 plr-100866-07 no gain_or_loss was recognized by us parent upon its deemed receipt of foreign sub’s assets and liabilities other than the fs loan in the ctb transaction sec_1032 the basis of each asset held by us parent immediately after the ctb transaction was the same as the basis of that asset in the hands of foreign sub immediately before the ctb transaction sec_362 immediately after the ctb transaction the basis of the us parent common_stock deemed received by foreign parent was the same as its basis immediately before the ctb transaction in the foreign sub stock for which they will be deemed exchanged sec_358 provided the foreign sub shares were held as a capital_asset at the time of the ctb transaction the holding_period of the us parent common_stock received in exchange therefor includes the holding_period of the foreign sub’s shares sec_1223 the taxable_year of foreign sub closed on the effective date of the ctb transaction and the taxable_year of us parent ended with the close of the date on which foreign sub’s taxable_year would have ended but for the ctb transaction sec_1_367_b_-2 us parent succeeded to and takes into account the tax_attributes of foreign sub described in sec_381 sec_381 sec_1_381_a_-1 these items are taken into account by us parent subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 of the code and the regulations hereunder caveats we express no opinion about the tax treatment of the ctb transaction under any other provision of the code or regulations or the tax treatment of any condition existing at the time of or effect resulting from the ctb transaction that is not specifically covered by the above rulings specifically no opinion is expressed as to the federal_income_tax treatment of the ctb transaction under sec_897 or sec_884 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 this office has not verified any of the material submitted in support of the request for rulings and such material is subject_to verification on examination plr-100866-07 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer’s representatives sincerely theresa a abell special counsel office of associate chief_counsel corporate