internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b03-plr-105352-03 date date legend parent foreign company subsidiary foreign grandparent foreign sub foreign sub state a year year plr-105352-03 date date date tax professional company official dear we respond 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 the extension is being requested for parent and subsidiary to make an election to file a consolidated federal_income_tax return with parent as the common parent under sec_1_1502-75 of the income_tax regulations election effective for their taxable_year ending on date additional information was received in and with letters dated march and date the material information submitted for consideration is summarized below in order to assist in the financing of a u s acquisition by foreign grandparent parent was formed in year by two wholly-owned subsidiaries foreign sub and foreign sub of foreign grandparent as a state a general_partnership with the filing on date of form_8832 entity classification election parent elected under the check- the-box ctb regulations of sec_301_7701-3 to be treated as a corporation for u s tax purposes effective on date parent formed foreign company a unlimited liability company disregarded as an entity separate from its single owner parent for federal tax purposes foreign company formed subsidiary a state a corporation becoming its owner parent is a calendar_year taxpayer for various reasons the election was never filed for year or year subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the statute_of_limitations on assessment under sec_6501 of the internal_revenue_code has not expired for parent’s or subsidiary’s taxable_year for which they want to make the election or for any taxable_year that would be affected by the election sec_1_1502-75 provides that a group which did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation which has been plr-105352-03 a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents in the manner provided in sec_1_1502-75 to the regulations under sec_1502 if a group wishes to exercise its privilege of filing a consolidated_return it must be filed not later than the last day prescribed by law including extensions of time for filing the common parent’s return 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 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations sec_1 a therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent and subsidiary to file the election provided parent shows 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 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 the election the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the government will not be prejudiced if relief is granted see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent has shown that 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 an extension of time is granted under sec_301_9100-3 until days from the date on this letter for parent to file the election by filing a consolidated_return for the year ending on date including form_1122 authorization and consent of subsidiary_corporation to be included in a consolidated_income_tax_return a copy of this letter should be attached to the return if the parent group elects to file a consolidated_return for year then pursuant to sec_1_1502-75 the parent group will be required to file a consolidated_return for all subsequent taxable years in which the group continues to exist unless it has an election to discontinue filing consolidated_returns under sec_1_1502-75 plr-105352-03 the above extension of time is conditioned on the taxpayers’ parent’s and subsidiary’s tax_liability if any being not 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 no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ liability is lower sec_301_9100-3 we express no opinion with respect to whether parent and subsidiary qualify substantively to file a consolidated_return or whether foreign company may properly be disregarded as an entity separate from its single owner for federal tax purposes in addition we express no opinion as to the tax effects or consequences of filing the return or the election late under the provisions of any other section of the code or regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the return or the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by parent company official and tax professional however the director should verify all essential facts moreover notwithstanding that the extension to file the election is granted under sec_301_9100-3 penalties and interest that would otherwise be applicable still apply this ruling is directed only to the taxpayer s requesting it sec_6110 of the code 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 representative sincerely ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc


internal_revenue_service department of the treasury index number number release date washington dc person to contact telephone number refer reply to cc dom p si br 7-plr-110707-98 date may legend taxpayer a taxpayer’s spouse date date state x in a letter dated your authorized representative requested several rulings on your behalf concerning the proposed testamentary exercise of a limited_power_of_appointment granted to you as the beneficiary of trust that is currently exempt from the generation-skipping_transfer_tax this letter is in response to that request and several subsequent submissions from your authorized representative the facts and representations submitted are summarized as follows on date a a parent of taxpayer executed an irrevocable_trust agreement establishing the a_trust under article ii of the a_trust agreement the trust corpus was divided into equal separate trust shares to provide one share for each of a’s children living on date plr-110707-98 paragraph e of article ii of the a_trust agreement provides that upon the death of each child of a the assets remaining in the separate share trust held for his or her benefit are to be distributed to or held for the benefit of one or more persons of the group consisting of the issue and or surviving_spouse of such child of a and or a’s then living lineal_descendants and in such amounts and proportions and upon such terms trusts and conditions as such child of a appoints by a will that specifically refers to the powers in the a_trust agreement given to such child of a in default of a valid appointment by will the a_trust agreement provides for the disposition of each separate share trust to the then living issue as a group of such child of a or in default of such issue such trust share shall be divided and apportioned per stirpes among a’s then living lineal_descendants taxpayer a beneficiary of a separate share trust established under article ii of the a_trust agreement proposes to create an irrevocable_trust called the taxpayer trust taxpayer proposes to appoint by will the balance of the separate share trust held for his benefit under article ii of the a_trust agreement to the taxpayer trust article ii sec_2_1 paragraph a of the taxpayer trust agreement provides that the trustee may pay to or apply for the benefit of taxpayer’s spouse during her lifetime such amounts of the net_income and or principal of the trust as the trustee in trustee’s discretion may determine to be necessary to provide for the support and maintenance of taxpayer’s spouse if in the judgment of the trustee spouse’s income and means of support from trust and from other sources is not sufficient for such purposes further paragraph b of that section of the taxpayer trust agreement provides that during the lifetime of taxpayer’s spouse taxpayer’s spouse has the unrestricted right during january of each calendar_year to demand cash and or property from the trust estate equal to the greater of dollar_figure or five percent of the value of the trust estate article ii sec_2_1 paragraph c of the taxpayer trust agreement provides that subject_to article vii of the taxpayer trust agreement upon the death of taxpayer’s spouse the then remaining trust assets shall be distributed to or held for the benefit of such of the then living issue of a in such amounts and proportions and for such estates and interests and upon such terms trusts conditions and limitations as taxpayer’s spouse shall appoint by a will that specifically refers to the power given in the taxpayer trust agreement to spouse any such appointment however shall not postpone the vesting absolute ownership or power of alienation of an interest in the taxpayer trust beyond date the trust termination_date defined in article iv of the taxpayer trust agreement paragraph c of sec_2_1 of article ii of taxpayer trust agreement also provides that to the extent that there are any assets not subject_to the limited_power_of_appointment or taxpayer’s spouse fails to exercise the limited_power_of_appointment by will the then remaining trust assets shall be divided into as many shares as plr-110707-98 taxpayer has children then living treating as a then living child the living issue of any child who is then deceased one share is to be held for each such living child and one share shall be divided and held per stirpes for the issue of each such deceased child subject_to article vii of the taxpayer trust agreement after each child attains the age of fifty or upon the death of each such child the child’s share of the then remaining trust assets shall be distributed to or held for the benefit of such of the then living issue of a other than taxpayer each such child the estate of each such child or the creditors of the estate of each such child in such amounts and proportions for such estates and interests and upon such terms and conditions as the child designates by a writing to the trustee or by a will that specifically refers to the power given in the taxpayer trust agreement to such child any such appointment however shall not postpone the vesting absolute ownership or power of alienation of an interest in the taxpayer trust beyond date the trust termination_date article ii sec_2 paragraph c of the taxpayer trust agreement provides that upon the death of a child of taxpayer or the death of taxpayer’s spouse if a child of taxpayer is not then living any trust share or portion thereof not appointed pursuant to the exercise of the limited_power_of_appointment shall be divided into as many equal subshares as he or she has children then living treating as a then living child the living issue of any child who is then deceased one subshare shall be held for the benefit of each such living child and one subshare shall be divided and held per stirpes for the issue of each such deceased child subject_to the terms in article ii sec_2 paragraph c paragraph c of sec_2 of article ii of taxpayer trust agreement also provides for the distribution and disposition of any assets held in taxpayer trust for the benefit of taxpayer’s grandchildren upon the death of each such grandchild of taxpayer subject_to article vii of the taxpayer trust agreement the share of each grandchild of taxpayer shall be distributed to or held for the benefit of such of taxpayer’s living issue other than such grandchild the estate of such grandchild or the creditors of the estate of such grandchild in such amounts and proportions and upon such terms and conditions as such deceased grandchild may designate by his or her will to receive the share provided that in no event shall any such appointment postpone the vesting absolute ownership or power of alienation of an interest in the taxpayer trust beyond date the trust termination_date to the extent that there are any assets not subject_to the limited_power_of_appointment article ii sec_2 paragraph c of the taxpayer trust agreement provides that the remaining trust estates shall be divided into as many equal subshares as grandchild has children then living treating as a then living child the living issue per stirpes of any child who is then deceased one subshare is to be held for each such living child and one subshare is to be divided and held per stirpes for the issue of each such deceased child plr-110707-98 taxpayer trust agreement also provides for the distribution and disposition of any assets held in taxpayer trust for the benefit of taxpayer’s great grandchildren the provision for distribution and disposition of taxpayer trust assets is consistent with the requirements of the a_trust agreement article vii of the taxpayer trust agreement provides that nothing in the taxpayer trust is to be construed to postpone the vesting of the trust estate beyond date the trust termination_date date is a date that does not exceed years from the date of creation of the a_trust further section of article ii of the taxpayer trust agreement provides that no power_of_appointment set forth in the taxpayer trust agreement shall be exercised in any manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property in the taxpayer trust estate for a period beyond date article vii of the taxpayer trust agreement also provides that taxpayer has elected out of the section x of the state revised code it is represented that the only assets that will be held in the taxpayer trust will be assets transferred to taxpayer trust pursuant to taxpayer’s proposed exercise of the power_of_appointment granted to taxpayer under the terms of the a_trust you have requested the following rulings taxpayer’s proposed testamentary exercise of the limited_power_of_appointment granted to taxpayer under the terms of the a_trust will not cause any property subject_to the power_of_appointment to be included in taxpayer’s gross_estate taxpayer’s proposed testamentary exercise of the limited_power_of_appointment granted to taxpayer under the terms of the a_trust will not constitute a taxable transfer and therefore taxpayer will not be treated as the transferor of such portion of the a_trust under sec_2652 taxpayer’s proposed testamentary exercise of the limited_power_of_appointment granted to taxpayer under the terms of the a_trust the a_trust will continue to be exempt from the generation-skipping_transfer_tax under chapter of the code after the proposed testamentary exercise by taxpayer of the power_of_appointment granted to taxpayer under the terms of the a_trust taxpayer trust will be exempt from the generation-skipping_transfer_tax under chapter of the code sec_2033 provides that a decedent’s gross_estate shall include the value of all property to the extent of the decedent’s interest at the time of his death plr-110707-98 sec_2035 provides except as provided in sec_2035 the value of a decedent’s gross_estate shall include the value of all property to the extent of any interest therein that the decedent has at any time made a transfer by trust or otherwise during the 3-year period ending on the date of the decedent's death sec_2036 through provide for the inclusion in the gross_estate of property transferred by the decedent if the decedent has either retained an interest in or a power over the property transferred sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of his death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent by will exercises a power_of_appointment created after date by creating another power_of_appointment which under the applicable local law can be validly exercised so as to postpone the vesting of any estate or interest in such property or suspend the absolute ownership or power of alienation of such property for a period ascertainable without regard to the date of the creation of the first power sec_2041 defines the term general_power_of_appointment as a power that is exercisable in favor of the decedent the decedent's_estate the decedent's creditors or the creditors of the decedent's_estate a power to consume invade or appropriate property for the benefit of the decedent that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent is not a general_power_of_appointment sec_20_2041-1 of the estate_tax regulations provides that a power_of_appointment is not a general power if by its terms it is either a exercisable only in favor of one or more designated persons or classes other than the decedent or his creditors or the decedent's_estate or the creditors of his estate or b expressly not exercisable in favor of the decedent or his creditors or the decedent's_estate or the creditors of his estate under sec_20_2041-1 a power is limited by an ascertainable_standard if the extent of the holder's duty to exercise and not to exercise the power is reasonably measurable in terms of his needs for health education or support or any combination of them the words support and maintenance are synonymous and their meaning is not limited to the bare necessities of life plr-110707-98 sec_20_2041-3 provides in part that property subject_to a power_of_appointment created after date which is not a general power is includible in the holder’s gross_estate if the power is exercised by will and if the power is exercised by creating another power_of_appointment which under the terms of the instrument creating and exercising the first power and under applicable local law can be validly exercised so as to a postpone the vesting of any estate or interest in the property for a period ascertainable without regard to the date of creation of the first power or b if the applicable rule_against_perpetuities is stated in the terms of suspension of ownership or of the power of alienation rather than of vesting suspend the absolute ownership or the power of alienation of the property for a period ascertainable without regard to the date of the creation of the first power sec_2601 imposes a tax on every generation-skipping_transfer sec_2611 defines a generation-skipping_transfer as a taxable_termination a taxable_distribution or a direct_skip sec_2612 provides that the term taxable_termination means a termination by death lapse of time release of a power or otherwise of an interest_in_property_held_in_trust unless- a immediately after such termination a non-skip_person has an interest in such property or b at no time after such termination may a distribution be made from such trust to a skip_person sec_2612 provides that the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip under sec_2612 a direct_skip is a transfer subject_to federal estate or gift_tax made by a transferor to a skip_person under sec_2612 however for purposes of determining whether a transfer is a direct_skip if an individual is a grandchild of the transferor or the transferor’s spouse or former spouse and as of the time of the transfer the parent of such individual who is a lineal descendant of the transferor or the transferor’s spouse or former spouse is dead such individual shall be treated a if such individual were a child of the transferor and all of that grandchild’s children shall be treated as if they were grandchildren of the transferor sec_2613 defines a skip_person as a natural_person who is assigned to a generation which is two or more generations below that of the transferor a_trust in which all the interests are held by skip persons or a_trust where after that transfer no trust distributions may be made to a non-skip_person under a of the tax_reform_act_of_1986 1986_3_cb_1 the generation-skipping_transfer_tax is generally applicable to generation-skipping transfers made after date section b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations provide plr-110707-98 that the generation skipping transfer_tax does not apply to a transfer from a_trust if the trust was irrevocable on date but only to the extent that the transfer is not made out of principal added to the trust after date or out of income attributable to principal so added under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in the settlor's gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides that except as provided under sec_26_2601-1 where any portion of a_trust remains in the trust after the post- date release exercise or lapse of a power_of_appointment over that portion of the trust and the release exercise or lapse is treated to any extent as a taxable transfer under chapter or chapter the value of the entire portion of the trust subject_to the power that was released exercised or lapsed will be treated as if that portion had been withdrawn and immediately retransferred to the trust at the time of the release exercise or lapse an addition to the trust the creator of the power will be considered the transferor of the addition except to the extent that the release exercise or lapse of the power is treated as a taxable transfer under chapter or chapter in the latter case the transferor for purposes of chapter or chapter is the transferor for purposes of chapter sec_26_2601-1 provides a special rule for certain powers of appointment this section provides that the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment as defined in sec_2041 will not be treated as an addition to a_trust if such power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26_2601-1 and in the case of an exercise such power_of_appointment is not exercised in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of the trust extending beyond any life in being at the date of creation of the trust plus a period of years the perpetuities period for purposes of sec_26_2601-1 the exercise of a power_of_appointment that validly postpones or suspends the vesting absolute ownership or power of alienation of an interest in property for a term of years that will not exceed years measured from the date of creation of the trust will not be considered an exercise that postpones or suspends vesting absolute ownership or the power of alienation beyond the perpetuities period if a power is exercised by creating another power it is deemed to be exercised to whatever extent the second power may be exercised sec_26_2601-1 example describes a situation where prior to the effective date of chapter gp established an irrevocable_trust under which the trust income was to be paid to gp's child c for life c was given a testamentary power to plr-110707-98 appoint the remainder in further trust for the benefit of c’s issue in default of c’s exercise of the power the remainder was to pass to charity c died on date survived by a child who was alive when gp established the trust c exercised the power in a manner that validly extends the trust in favor of c’s issue until the later of may years from the date the trust was created or the death of c’s child plu sec_21 years c’s exercise of the power is a constructive_addition to the trust because the exercise may extend the trust for a period longer than the permissible periods of either the life of c’s child a life in being at the creation of the trust plu sec_21 years or a term not more than years measured from the creation of the trust on the other hand if c’s exercise of the power could extend the trust based only on the life of c’s child plu sec_21 years or only for a term of years from the creation of the trust but not the later of the two periods then the exercise of the power would not have been a constructive_addition to the trust in example of sec_26_2601-1 the facts are the same as in example except local law provides that the effect of c’s exercise is to extend the term of the trust until may whether or not c’s child predeceases that date by more than years c’s exercise is not a constructive_addition to the trust because c exercised the power in a manner that cannot postpone or suspend vesting absolute ownership or power of alienation for a term of years that will exceed years the result would be the same if the effect of c’s exercise is either to extend the term of the trust until years after the death of c’s child or to extend the term of the trust until the first to occur of may or years after the death of c’s child in this case taxpayer is a beneficiary of a separate share trust established under the a_trust agreement under the a_trust agreement taxpayer has a testamentary_power_of_appointment over his separate share of the a_trust corpus taxpayer’s testamentary_power_of_appointment over his separate share of the a_trust corpus can only be exercised in favor of one or more persons of the class consisting of the issue and or surviving_spouse of taxpayer and or a’s then living lineal_descendants because taxpayer's testamentary_power_of_appointment over his separate share of the a_trust corpus cannot be exercised in favor of himself his creditors his estate or the creditors of his estate taxpayer's testamentary_power_of_appointment created under the a_trust is not a testamentary general_power_of_appointment accordingly the exercise of the testamentary_power_of_appointment as proposed will not cause any property subject_to the power_of_appointment to be included in taxpayer’s gross_estate under sec_2041 taxpayer proposes to exercise his limited testamentary_power_of_appointment created under the a_trust in favor of the taxpayer trust article vii of the taxpayer trust provides that the trust is to be construed so that the taxpayer trust terminates and the taxpayer trust estate vests on date a date that does not exceed years from the date of creation of the a_trust further the exercise of any power_of_appointment set forth in the taxpayer trust agreement may not postpone the vesting plr-110707-98 absolute ownership or power of alienation of an interest in the taxpayer trust estate beyond date under the terms of the taxpayer trust the trust property will be distributed outright and free of trust in all events within a period measurable from the date of creation of the original powers thus the proposed testamentary exercise of the limited_power_of_appointment will not create other powers that may be exercised in a manner that postpones the vesting or absolute ownership of any property interest without regard to the date of the creation of the original powers in the a_trust consequently taxpayer’s proposed testamentary exercise of the limited_power_of_appointment will not result in the value of the taxpayer’s share of the a_trust being included in the taxpayer's gross_estate under sec_2041 taxpayer’s testamentary limited_power_of_appointment was created under the a_trust the a_trust was irrevocable on date and it is represented that no additions constructive or otherwise to the a_trust have been made after date taxpayer proposes to exercise his limited testamentary_power_of_appointment created under the a_trust in favor of the taxpayer trust under the taxpayer trust agreement the taxpayer trust will terminate no later than date hence the taxpayer's proposed testamentary exercise of the limited powers under the a_trust in favor of the taxpayer trust will not postpone or suspend the vesting absolute ownership or power of alienation of any interest in trust property for a period beyond a date which i sec_90 years measured from the date of creation of the a_trust under these facts the proposed testamentary exercise of the limited_power_of_appointment will not be treated as a constructive_addition to the a_trust therefore exercise of the limited_power_of_appointment will not cause the a_trust or the taxpayer’s trust to be subject_to the generation-skipping_transfer_tax under chapter of the code based on the information submitted and the representations made we conclude as follows taxpayer’s proposed testamentary exercise of the limited_power_of_appointment granted to taxpayer under the terms of the a_trust will not cause any property subject_to the power_of_appointment to be included in taxpayer’s gross_estate under sec_2041 taxpayer’s proposed testamentary exercise of the limited_power_of_appointment granted to taxpayer under the terms of the a_trust will not constitute a taxable transfer and therefore taxpayer will not be treated as the transferor of such portion of the a_trust plr-110707-98 after taxpayer’s proposed testamentary exercise of the limited_power_of_appointment granted to taxpayer under the terms of the a_trust the a_trust will continue to be exempt from the generation-skipping_transfer_tax under chapter of the code after taxpayer’s proposed testamentary exercise of the limited_power_of_appointment granted to taxpayer under the terms of the a_trust the taxpayer trust will be exempt from the generation-skipping_transfer_tax under chapter of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely christine e ellison chief branch assistant chief_counsel p si


internal_revenue_service director exempt_organizations rulings and agreements release number release date date legend b foundation c fellowship dear department of the treasury p o box - room cincinnati ohio employer_identification_number person to contact - id contact telephone numbers uil we have considered your request for advance approval of an additional grant-making program under sec_4945 g of the internal_revenue_code dated date our records indicate that the b was recognized as exempt from federal_income_tax under sec_501 of the code and that it is classified as a private_foundation as defined in sec_509 in addition our records indicate that the b received advance approval of grant-making procedures from the internal_revenue_service on previously approved scholarship programs which would not be taxable_expenditures within the meaning of sec_4945 your letter indicates that the b is requesting approval of an additional program called the c that will further entrepreneurship the grants will be fellowship awards for entrepreneurship education of promising postdoctoral researchers legally present in the united_states who are conducting scientific specifically translational research who seek to translate their research to the public for society’s benefit the foundation anticipates awarding these fellowships annually and for grants to be paid out over one year in the first year the foundation anticipates making such awards and expects to make between and awards in subsequent years the amount of the grant will be based on and consistent with the post-doctoral fellow salary guidelines of recipient’s institutions and as a result award amounts will vary slightly from institution to institution recipients will be able to use the funds to develop their educational program as well as for travel to conferences related to their research each year potential applicants will be notified of the program and deadlines through advertising on the foundation websites and email distribution announcements at conferences information distributed to professional organizations and press releases issued on the academic newswires among other means only postdoctoral candidates will be eligible for the award preference will be given to candidates who have made exemplary research discoveries in entrepreneurship education to be eligible applicants must have received their doctoral degree by the time the term of the scholarship would commence in addition scholarship applicants must be engaged in research at a u s institution the applicants also must commit to publishing and or revising their research and results as well as and making their research and results widely available consistent with academic standards o b each applicant must submit a statement describing their research any discoveries or inventions translational efforts to date a plan for translation and detailed description of entrepreneurship education activities planned for the award year and a curriculum vitae applicants’ department chairs and faculty advisor must submit a letter discussing their support of the applicant and specifically their commitment to the translational research goals and entrepreneurship education plan of the applicant the committee will rank applicants based on their assessment of the quality and quantity of the existing research and a review of their published research and ongoing projects the committee will also review and assess the quality of the applicant’s research and education plan for the year including as it relates to the field of entrepreneurship the foundation will select grant recipients based on recommendations from a selection committee comprised of three or more people who otherwise have no employment relationship with the foundation and have an established reputation for excellence in the field of scientific research as well as in other fields they will be highly respected and accomplished professors researchers scholars or business leaders all of whom have scientific backgrounds and expertise the b will take steps to ensure that committee members are not in a position to derive a private benefit either directly or indirectly if certain candidates are selected over others other than the fact that the recipient may come from the same university with which the member is affiliated if a potential fellow comes from the same university as one of the committee members that committee member will not vote on the recommendation each member of the committee will also sign a statement of neutrality and independence upon being named to the committee which states that the member is not in a position to derive a private benefit either directly or indirectly if certain candidates are selected over others employees and disqualified persons of the b and their family members will not be eligible to receive the award likewise committee members and their family members will not be eligible to receive an award finally fellows may not include anyone whose selection would result in a private benefit to any of the aforementioned individuals the foundation will make reasonable efforts to see that the award is spent solely for the purpose for which it is made and to obtain full and complete reports from the grantee on how the progress made in achieving the goals of the fellowship along with a statement of expenditures made in connection with the fellowship in addition to a detailed narrative of progress reports will contain copies of working papers and published research references for new technology disclosures patents filed through the recipient’s institution and summaries of research in progress upon the conclusion of the one-year grant the recipient will be required to submit a final narrative and budget report describing his or her accomplishments and accounting for all funds received with respect to the grant about their fellowship activities the progress of each recipient will be reviewed periodically by appropriate individuals at the foundation any significant changes to the recipient’s research and teaching plan would require foundation approval if a report or other information including failure to submit a report were to indicate that all or any part of a grant made by the foundation was not being used for the purposes for which the grant was made or that the recipient was not complying with the terms of the grant the foundation would investigate if the problem were to arise as a result of a failure to submit required reports the foundation would withhold further payment s to the extent possible until all such delinquent reports were submitted if it were determined that any part of a grant had been used for improper purposes the foundation would take all reasonable and appropriate steps either to recover the grant funds or to ensure the restoration of the diverted funds and the dedication of any remaining grant funds held by the recipient to the purposes of the grant the foundation would withhold any further payments to the recipient until it received his or her assurance that no future diversions would d e t occur and would require the recipient to take extraordinary precautions to prevent further diversions the foundation reserves the right to cancel the grant should the recipient not meet the performance expectation as outlined in the recipient’s plan the foundation agrees that it will maintain indefinitely records that include the information used to evaluate the qualifications of potential grantees specifications of the amount and purpose of each grant the reports from the grantees on their use of funds and any other information obtained in the course of supervising grants and any information obtained in connection with the investigation of jeopardized grants e sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that ii its grant procedure includes an objective and nondiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request we have not considered whether grants made under your procedures are excludable from the gross_income of recipients under sec_117 of the code any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours robert choi director exempt_organizations rulings and agreements enclosures sanitized copy of this letter notice


internal_revenue_service date cc ser geo atl ct f-601258-99 myanes number release date memorandum for district_counsel atlanta from subject barry j finkelstein s assistant chief_counsel criminal tax - proposed administrative forfeiture of computer equipment printers and typewriters we have reviewed your proposed law and fact memorandum from a policy perspective with respect to the proposed administrative forfeiture of the above referenced property while we concur with the proposed forfeiture from a policy standpoint we wonder whether i r s ’s limited resources are best served by instituting forfeiture proceedings for property valued at less than you indicate the computers and related equipment were seized under the authority of sec_7302 based on violations of sec_7602 generally sec_7302 authorizes the seizure and forfeiture of property used or intended to be used in violation of any of the internal revenue laws to be forfeitable under sec_7302 the government must prove by a preponderance_of_the_evidence that the property was used as an active aid in the violation of the internal revenue laws 777_f2d_1358 9th cir was charged with conspiracy to impede and impair the lawful function of the internal_revenue_service by aiding and assisting in the preparation of false and fraudulent_returns in violation of u s c sec_371 and sec_7206 to which he entered into a plea agreement and was subsequently sentenced to incarceration grant ’s conviction satisfies the required burden the computers printers and other office equipment seized were essential and instrumental in conducting ’s illegal tax_return preparation businesses we note the proposed forfeiture fails to comply with cid’s lem ix forfeiture_case selection criteria cid’s lem ix forfeiture_case selection criteria however the chief cid can make an exception to this rule if he determines that one of the exceptions apply the e-mail included with the law and fact cc ser geo atl ct f-601258-99 memorandum indicates the chief cid has made the required determination that although the proposed forfeiture does not comply with their guidelines as discussed in greater detail below he believes the items seized were critical instrumentalities of the crime and it would not be appropriate to return them further he believes the egregiousness of this preparer scheme warrants the forfeiture of these items as long as the chief cid makes this determination we authorize you to recommend and refer for forfeiture the above reference property pursuant to sec_7302 additionally we note the significant time lapse from the time of seizure to instituting forfeiture proceedings four year and ten months we agree that as has not raised any claims of right for the property seized during this time period and as the delay between the conclusion of the criminal case and instituting the forfeiture proceedings is not substantial five months no significant due process issues are apparent lastly if a claim and cost bond is filed and forfeiture must proceed judicially referral must be to the department of justice tax_division ccdm c should you have any questions or wish to discuss this matter further please feel free to contact marta yanes of my staff on


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc dom corp plr-109435-00 date date distributing sec_1 sec_3 nf1 nf2 nf3 ff1 ff2 year year year business a business b country f country i country n we respond to your date request for rulings on certain federal_income_tax consequences of several proposed transactions distributing’s predecessors received rulings on prior transactions during year year and year the prior ruling letters further this ruling letter two other ruling letters issued with this letter plr-109432-00 and plr-109430-00 and a ruling letter issued to distributing on date plr-105240-00 all address aspects of the same overall transaction the overall transaction the rulings in this letter are based on facts and representations submitted under penalties of perjury in support of the request this office has not verified any of the materials submitted in support of the request for a ruling verification of that information may be required as part of the audit process summary of facts publicly traded distributing is the common parent of a corporate group whose includible affiliates join in filing a consolidated federal_income_tax return distributing wholly owns sec_1 a domestic_corporation sec_1 wholly owns sec_3 also domestic sec_3 wholly owns nf1 a country n corporation nf1 wholly owns nf2 also country n and if1 country i nf2 wholly owns nf3 country n and ff1 country f and ff1 wholly owns ff2 country f distributing nf1 and nf2 are holding_companies sec_1 if1 nf3 and ff1 conduct business a sec_3 owns branches and subsidiaries engaged in business a and business b ff2 is engaged in business b we have received financial information indicating that each of these businesses has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years the operation of business a and business b within the same group creates managerial systemic and other problems and produces no significant synergies distributing’s management has therefore decided based on the advice of consultants and other information that the two businesses should be separated the separation proposed transactions to accomplish the separation distributing has proposed the following series of transactions to be carried out in conjunction with the other steps of the overall transaction i ff1 will sell the shares of ff2 to nf2 in exchange for a receivable the transitory debt and the transitory debt will immediately be satisfied through a reduction of ff1 share capital this step as recharacterized by ruling below will be referred to hereinafter as distribution ii nf2 will distribute the shares of ff2 to nf1 as a repayment of share premium under country n law distribution iii nf1 will undertake a transaction under country n law pursuant to which a new country n company newcon will be formed nf1 will transfer the ff2 stock to newcon the stock of newcon will be issued directly to sec_3 and sec_3 will continue to own the shares of nf1 this step as recharacterized by ruling below will be referred to hereinafter as the contribution and distribution iv sec_3 will distribute the shares of newcon to sec_1 distribution v sec_1 will distribute the shares of newcon to distributing distribution representations distribution distributing has made the following representations concerning distribution based on the recharacterization of step i above in ruling below which treats ff1 as distributing the ff2 stock to nf2 1a the fair_market_value of the ff2 stock to be received by nf2 will approximately equal the fair_market_value of the ff1 stock deemed surrendered by nf2 in the exchange 1b no part of the ff2 stock distributed by ff1 will be received by nf2 as a creditor employee or in any capacity other than that of a shareholder of ff1 1c the five years of financial information submitted for ff1 regarding its business a and ff2 regarding its business b represents the present business operations of ff1 and ff2 and regarding each business there have been no substantial operational changes since the date of the last financial statements submitted 1d following distribution ff1 and ff2 each will continue the active_conduct of its business independently and with its separate employees 1e distribution is being undertaken to resolve managerial systemic and other problems that have arisen from operating business a and business b within a single affiliated_group distribution is motivated in whole or substantial part by this corporate business_purpose and for other business reasons 1f except for distribution there is no plan or intention by nf2 to sell exchange transfer by gift or otherwise dispose_of any stock in ff1 or ff2 after distribution 1g there is no plan or intention by ff1 or ff2 directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution 1h there is no plan or intention to liquidate ff1 or ff2 to merge either corporation with any other corporation or to sell or otherwise dispose_of any of the assets of either corporation after distribution except in the ordinary course of business 1i any indebtedness owed by ff2 to ff1 following the separation will not be stock_or_securities under sec_355 of the internal_revenue_code 1j immediately before distribution any items of income gain loss deduction and credit will be taken into account as required by applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 of the income_tax regulations as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d 1k payments made in any continuing transactions between ff1 and ff2 will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length 1l distribution is not a part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of either ff1 or ff2 stock entitled to vote or stock possessing percent or more of the total value of all classes of stock of either ff1 or ff2 distribution distributing has made the following representations concerning distribution 1m the fair_market_value of the ff2 stock to be received by nf1 will approximately equal the fair_market_value of the nf1 stock deemed surrendered by nf1 in the exchange 1n no part of the stock of ff2 distributed by nf2 will be received by nf1 as a creditor employee or in any capacity other than that of a shareholder of nf2 1o the five years of financial information submitted for nf3 regarding its business a ff1 and ff2 represents the present business operations of nf3 ff1 and ff2 and regarding each business there have been no substantial operational changes since the date of the last financial statements submitted 1p immediately after distribution at least percent of the fair_market_value of the gross assets of nf2 will consist of the stock and securities of nf3 and ff1 controlled corporations that are engaged in the active control of a trade_or_business as defined in sec_355 following distribution nf3 ff1 and ff2 each will continue the active_conduct of its business independently and with its separate employees 1q distribution is being undertaken to resolve managerial systemic and other problems that have arisen from operating business a and business b within a single affiliated_group distribution is motivated in whole or substantial part by this corporate business_purpose and for other business reasons 1r except for the contribution and distribution there is no plan or intention by nf1 to sell exchange transfer by gift or otherwise dispose_of any stock in nf2 or ff2 after distribution 1s there is no plan or intention by nf2 or ff2 directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution 1t there is no plan or intention to liquidate nf2 or ff2 to merge either corporation with any other corporation or to sell or otherwise dispose_of any of the assets of either corporation after distribution except in the ordinary course of business 1u any indebtedness owed by ff2 to nf2 following the separation will not be stock_or_securities under sec_355 1v immediately before distribution any items of income gain loss deduction and credit will be taken into account as required by applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d and as currently in effect sec_1_1502-13 as published by t d 1w payments made in any continuing transactions between nf2 and ff2 will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length 1x distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of either nf2 or ff2 stock entitled to vote or stock possessing percent or more of the total value of all classes of stock of either nf2 or ff2 contribution and distribution distributing has made the following representations concerning the contribution and distribution based on the recharacterization of step iii above by ruling below which treats step iii as a contribution of the ff2 stock by nf1 to newcon the contribution followed by a distribution of newcon to sec_3 distribution 1y no part of the stock of newcon distributed by nf1 will be received by sec_3 as a creditor employee or in any capacity other than that of a nf1 shareholder 1z the five years of financial information submitted for if1 regarding its business a nf3 ff1 and ff2 represents the present business operations of if1 nf3 ff1 and ff2 and regarding each business there have been no substantial operational changes since the date of the last financial statements submitted 2a immediately after distribution at least percent of the fair_market_value of the gross assets of nf1 will consist of the stock and securities of nf2 and if1 at least percent of the fair_market_value of the gross assets of newcon will consist of the stock and securities of ff2 and at least percent of the fair_market_value of the gross assets of nf2 will consist of stock and securities of nf3 and ff1 if1 nf3 ff2 and ff1 are controlled corporations that are engaged in the active control of a trade_or_business as defined in sec_355 b following distribution if1 nf3 ff1 and ff2 each will continue the active_conduct of its business independently and with its separate employees 2b distribution is being undertaken to resolve managerial systemic and other problems that have arisen from operating business a and business b within a single affiliated_group distribution is motivated in whole or substantial part by this corporate business_purpose and for other business reasons 2c except for distribution there is no plan or intention by sec_3 to sell exchange transfer by gift or otherwise dispose_of any stock in nf1 or newcon after distribution 2d there is no plan or intention by nf1 or newcon directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution 2e there is no plan or intention to liquidate nf1 or newcon to merge either corporation with any other corporation or to sell or otherwise dispose_of any of the assets of either corporation after distribution except in the ordinary course of business 2f the total adjusted_basis and the fair_market_value of the assets transferred to newcon by nf1 in the contribution will in each instance equal or exceed the liabilities if any assumed as determined under sec_357 by newcon 2g the liabilities assumed as determined under sec_357 in the contribution were incurred in the ordinary course of business and are associated with the assets being transferred 2h any indebtedness owed by newcon to nf1 following the separation will not be stock_or_securities under sec_355 2i immediately before distribution any items of income gain loss deduction and credit will be taken into account as required by applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d and as currently in effect sec_1_1502-13 as published by t d 2j payments made in any continuing transactions between nf1 and newcon will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length 2k no two parties to the transaction are investment companies as defined in sec_368 and iv 2l distribution is not a part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of either nf1 or newcon stock entitled to vote or stock possessing percent or more of the total value of all classes of stock of either nf1 or newcon distribution distributing has made the following representations concerning distribution 2m no part of the stock of newcon distributed by sec_3 will be received by sec_1 as a creditor employee or in any capacity other than that of an sec_3 shareholder 2n the five years of financial information submitted for sec_3 regarding its business a and business b and ff2 represents the present business operations of sec_3 and ff2 and regarding each business there have been no substantial operational changes since the date of the last financial statements submitted 2o immediately after distribution at least percent of the fair_market_value of the gross assets of newcon will consist of the stock and securities of ff2 a controlled_corporation that is engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 following distribution sec_3 and ff2 each will continue the active_conduct of its business es independently and with its separate employees 2p distribution is being undertaken to resolve managerial systemic and other problems that have arisen from operating business a and business b within a single affiliated_group distribution is motivated in whole or substantial part by this corporate business_purpose and for other business reasons 2q except for distribution and except for the transfer of the sec_3 stock to a new corporation that will be distributed to the shareholders of distributing described in step vi of the ruling letter issued to distributing on date plr-105240-00 there is no plan or intention by sec_1 to sell exchange transfer by gift or otherwise dispose_of any stock in sec_3 or newcon after distribution 2r there is no plan or intention by sec_3 or newcon directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution 2s there is no plan or intention to liquidate sec_3 or newcon to merge either corporation with any other corporation or to sell or otherwise dispose_of any of the assets of either corporation after distribution except in the ordinary course of business 2t any indebtedness owed by newcon to sec_3 following the separation will not be stock_or_securities under sec_355 2u immediately before distribution any items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d and as currently in effect sec_1_1502-13 as published by t d 2v payments made in any continuing transactions between sec_3 and newcon will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length 2w distribution is not a part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of either sec_3 or newcon stock entitled to vote or stock possessing percent or more of the total value of all classes of stock of either sec_3 or newcon distribution distributing has made the following representations concerning distribution 2x no part of the stock of newcon distributed by sec_1 will be received by distributing as a creditor employee or in any capacity other than that of an sec_1 shareholder 2y the five years of financial information submitted for sec_1 regarding its business a and ff2 represents the present business operations of sec_1 and ff2 and regarding each business there have been no substantial operational changes since the date of the last financial statements submitted 2z immediately after distribution at least percent of the fair_market_value of the gross assets of newcon will consist of the stock and securities of ff2 a controlled_corporation that is engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 following distribution sec_1 and ff2 each will continue the active_conduct of its business independently and with its separate employees 3a distribution is being undertaken to resolve managerial systemic and other problems that have arisen from operating business a and business b within a single affiliated_group distribution is motivated in whole or substantial part by this corporate business_purpose and for other business reasons 3b except for the transfer of sec_1 to a new corporation that will be distributed to the shareholders of distributing described in step v of the ruling letter issued to distributing on date plr-105240-00 there is no plan or intention by distributing to sell exchange transfer by gift or otherwise dispose_of any stock in sec_1 or newcon after distribution 3c there is no plan or intention by sec_1 or newcon directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution 3d there is no plan or intention to liquidate sec_1 or newcon to merge either corporation with any other corporation or to sell or otherwise dispose_of any of the assets of either corporation after distribution except in the ordinary course of business 3e any indebtedness owed by newcon to sec_1 following the separation will not be stock_or_securities under sec_355 3f immediately before distribution any items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d and as currently in effect sec_1_1502-13 as published by t d 3g payments made in any continuing transactions between sec_1 and newcon will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length 3h distribution is not a part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of either sec_1 or newcon stock entitled to vote or stock possessing percent or more of the total value of all classes of stock of either sec_1 or newcon international 3i ff2 ff1 nf2 and nf1 are corporations for federal tax purposes and will be controlled_foreign_corporations within the meaning of sec_957 immediately before and immediately after the proposed transactions 3j newcon will be a corporation for federal tax purposed and a controlled_foreign_corporation within the meaning of sec_957 at the time of its formation and immediately after the proposed transactions rulings distribution based on the information submitted and the representations made we rule as follows on distribution for federal_income_tax purposes the transitory debt will be disregarded and step i of the proposed transactions will be treated as if ff1 had distributed the ff2 shares to nf2 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of nf2 on distribution sec_355 no gain_or_loss will be recognized by ff1 on distribution sec_355 the holding_period of ff2 stock received by nf2 in distribution will include the holding_period of the ff1 stock for which the ff2 stock is deemed exchanged provided the ff1 stock is held as a capital_asset on the date of distribution sec_1223 ff1's transfer of the ff2 stock in distribution is a distribution to which sec_1_367_b_-1 sec_1_367_b_-5 sec_1_367_b_-5 and sec_1_367_b_-5 apply if nf2’s postdistribution amount with respect to ff1 or ff2 is less than nf2’s predistribution amount with respect to ff1 or ff2 nf2's basis in such stock immediately after the distribution must be reduced by the amount of the difference however nf2’s basis in such stock must not be reduced below zero and to the extent the foregoing reduction would have reduced basis below zero nf2 must instead include such amount in income as a deemed_dividend from such corporation such income shall not be foreign_personal_holding_company_income under sec_954 distribution based on the information submitted and the representations made we rule as follows on distribution no gain_or_loss will be recognized by and no amount will otherwise be included in the income of nf1 on distribution sec_355 no gain_or_loss will be recognized by nf2 on distribution sec_355 the holding_period of ff2 stock received by nf1 in distribution will include the holding_period of the nf2 stock for which the ff2 stock is deemed exchanged provided the nf2 stock is held as a capital_asset on the date of distribution sec_1223 nf2's transfer of the ff2 stock in distribution is a distribution to which sec_1_367_b_-1 sec_1_367_b_-5 sec_1_367_b_-5 and sec_1_367_b_-5 apply if nf1’s postdistribution amount with respect to nf2 or ff2 is less than nf1’s predistribution amount with respect to nf2 or ff2 nf1's basis in such stock immediately after the distribution must be reduced by the amount of the difference however nf1’s basis in such stock must not be reduced below zero and to the extent the foregoing reduction would have reduced basis below zero nf1 must instead include such amount in income as a deemed_dividend from such corporation such income shall not be foreign_personal_holding_company_income under sec_954 contribution and distribution based on the information submitted and the representations made we rule as follows on the contribution and distribution for federal_income_tax purposes step iii of the proposed transactions will be treated as if nf1 had transferred all of the ff2 stock to newly formed newcon in exchange for the newcon stock and then had distributed the newcon stock to sec_3 cf revrul_77_191 c b the contribution followed by distribution will qualify as a reorganization under sec_368 nf1 and newcon each will be a party to the reorganization under sec_368 no gain_or_loss will be recognized by nf1 on the contribution sec_357 and sec_361 no gain_or_loss will be recognized by newcon on the contribution sec_1032 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of sec_3 on distribution sec_355 no gain_or_loss will be recognized by nf1 on distribution sec_361 the holding_period of newcon stock received by sec_3 in distribution will include the holding_period of the nf1 stock on which distribution is made provided the nf1 stock is held as a capital_asset on the date of distribution sec_1223 the contribution is an exchange to which sec_1_367_b_-1 and sec_1 b - a apply no gain_or_loss will be recognized under sec_367 on the contribution sec_1_367_b_-4 nf1's transfer of the newcon stock in distribution is a distribution to which sec_1_367_b_-1 sec_1_367_b_-5 sec_1_367_b_-5 and sec_1_367_b_-5 apply if sec_3’s postdistribution amount with respect to nf1 or newcon is less than sec_3’s predistribution amount with respect to nf1 or newcon sec_3's basis in such stock immediately after the distribution must be reduced by the amount of the difference however sec_3’s basis in such stock must not be reduced below zero and to the extent the foregoing reduction would have reduced basis below zero sec_3 must instead include such amount in income as a deemed_dividend from such corporation distribution based on the information submitted and the representations made we rule as follows on distribution no gain_or_loss will be recognized by and no amount will otherwise be included in the income of sec_1 on distribution sec_355 no gain_or_loss will be recognized by sec_3 on distribution sec_355 immediately following distribution the basis of the newcon stock in the hands of the sec_1 will be the lesser_of the adjusted_basis of the newcon stock in the hands of sec_3 or the substituted_basis allocated to the newcon stock in accordance with sec_1_358-2 sec_1248 notice_87_64 c b immediately following distribution sec_1’s holding_period in newcon stock received in the sec_355 distribution will be the greater of the holding_period of the newcon’s stock in the hands of sec_3 or the holding_period of the sec_3 stock in the hands of sec_1 sec_1248 notice distribution based on the information submitted and the representations made we rule as follows on distribution no gain_or_loss will be recognized by and no amount will otherwise be included in the income of distributing on distribution sec_355 no gain_or_loss will be recognized by sec_1 on distribution sec_355 immediately following distribution the basis of the stock of newcon in the hands of the distributing will be the lesser_of the adjusted_basis of the newcon stock in the hands of the sec_1 or the substituted_basis allocated to the newcon stock in accordance with sec_1_358-2 sec_1248 notice immediately following distribution distributing’s holding_period in the newcon’s stock received in the sec_355 distribution will be the greater of the holding_period of the newcon’s stock in the hands of sec_1 or the holding_period of the sec_1 stock in the hands of distributing sec_1248 notice miscellaneous the proposed transactions will not adversely affect the prior ruling letters which will retain full force and effect caveats we express no opinion on the tax effects of the transactions under any other provisions of the code or regulations or the tax effects of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the rulings in particular no opinion is expressed on whether any or all of the above- described foreign_corporations are passive foreign investment companies within the meaning of sec_1297 and the related regulations to be promulgated if it is determined that any of the above-described foreign_corporations are passive foreign investment companies no opinion is expressed related to the application of sec_1291 through to the proposed transactions in particular in a transaction in which gain is not recognized regulations under sec_1291 may require gain recognition notwithstanding any other provision of the code procedural statements this ruling is directly only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in these transactions should attach a copy of this letter to the taxpayer’s federal_income_tax return for the taxable_year in which the transactions covered by this ruling letter are consummated pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer sincerely yours assistant chief_counsel corporate by ________________________ wayne t murray senior technician reviewer branch


department of the treasury internal_revenue_service number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-111104-02 date date x sub a d1 dear this letter responds to a letter dated date and subsequent correspondence written on behalf of x that the service grant x an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to elect to treat sub as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code the information submitted states that x is a corporation that has elected to be an s_corporation sub is wholly-owned by x and was incorporated on d1 a as the president and sole shareholder of x represents that x intended to treat sub as a qsub effective d1 however x inadvertently failed to timely file the proper election sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines the term qualified_subchapter_s_subsidiary qsub as a domestic_corporation which is not an ineligible_corporation if percent of the stock of the corporation is owned by the s_corporation and the s_corporation plr-111104-02 elects to treat the corporation as a qsub the statutory provision does not however provide guidance on the manner in which the qsub election is made or on the effective date of the election a taxpayer makes a qsub election with respect to a subsidiary by filing a form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center the election may be effective on the date the form_8869 is filed or up to days prior to the filing of the form provided that date is not before the parent’s first taxable_year beginning after date and that the subsidiary otherwise qualifies as a qsub for the entire period for which the retroactive relief is in effect if a valid qsub election is made the subsidiary is not treated as a separate corporation and all assets liabilities and items of income deduction and credit of the qsub are treated as assets liabilities and items of income deduction and credit of the parent s_corporation under sec_301_9100-1 of the procedure and administration regulations the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of section based solely on the facts and the representations submitted we conclude that the requirements of have been satisfied as a result x is granted an extension of time for days from the date of this letter to file a form_8869 to elect to treat sub as a qsub effective d1 a copy of this letter should be attached to the election except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is a valid s_corporation or whether sub is otherwise a valid qsub for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 plr-111104-02 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes