internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 4-plr-125777-03 date august re legend taxpayer donor daughter date state dear this is in response to your date letter in which you requested a ruling on the federal gift_tax consequences of a proposed disclaimer of an interest in a_trust in donor executed an irrevocable_trust trust under the terms of trust the trustees are currently authorized to pay to or for the benefit of daughter or any of her descendants in the sole and absolute discretion of the trustees in the event of illness accident or other misfortune or in the event of any emergency or if in the judgment of the trustees it is necessary for the comfortable maintenance support or education of any such person such sum or sums from time to time out of the income or accumulated income or principal of the trust estate as the trustees in their sole judgment shall deem necessary plr-125777-03 trust further provides that it will terminate years after the death of the survivor of donor's children and all descendants of donor living at the time donor executed the trust on termination the trust corpus will be distributed among the then living descendants of donor per stirpes at the time donor created trust donor had three living children and eight grandchildren all of these individuals are still living taxpayer is the great grandchild of donor and a current beneficiary of trust to whom the trustees may in their discretion make distributions taxpayer has previously received discretionary distributions from trust taxpayer does not intend to disclaim her right to such discretionary distributions in addition taxpayer is a potential distributee of the trust corpus on termination of trust taxpayer who will reach the age of majority under state law on date proposes to disclaim her right to receive any distributions from trust on the termination of trust years after the death of the last surviving measuring life specified in trust the disclaimer will be executed by taxpayer within nine months after attaining her majority sec_469 of state revised statutes provides that any individual to whom property or an interest therein is donatively transferred by any means including a transfer resulting from another disclaimer may disclaim all or any portion of the transfer unless the terms of the transfer otherwise provide the disclaimer shall cause the terms of the transfer to be applied to the disclaimed transfer and to any future interests taking effect thereafter as if the disclaimant had died immediately before the transfer sec_469 of state revised statutes provides that a disclaimer is made by a writing showing an unconditional refusal to accept a transfer or a portion thereof signed by the disclaimant or representative and delivered on or before nine months after the transfer or by any later time provided in the particular case or pursuant to other provisions of chapter of state revised statutes and before any acceptance of the disclaimed interest delivery of a disclaimer may be accomplished by delivery to the transferor the transferor's personal representative or other legal_representative or the holder of legal_title to the property to which the interest is related sec_469 of state revised statutes provides that each separate interest in property is subject_to disclaimer or acceptance and each separate interest including any specific amount part fraction or asset thereof or formula amount based on present or future facts independent of the disclaimant's volition is subject_to disclaimer or acceptance sec_469 of state revised statutes provides that a contingent future_interest may be disclaimed in whole or in part at any time before or within nine months after beneficiaries of the interest have been fully ascertained and their interests vested sec_2501 of the internal_revenue_code imposes a tax on all transfers of property by gift sec_2511 provides that the federal gift_tax imposed under sec_2501 applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-1 of the gift_tax regulations provides that in the case of taxable transfers creating an interest in the beneficiary disclaiming made before date where the law governing the administration of the decedent's_estate gives the beneficiary a right completely and unqualifiedly to refuse to accept ownership of property transferred from a decedent a refusal to accept ownership does not constitute the making of a gift if the refusal is made within a reasonable_time after knowledge of the existence of the transfer is unequivocal plr-125777-03 is effective under local law and is made before the disclaimant has accepted the property compare sec_25_2518-1 through which apply to a qualified_disclaimer of an interest in property that is created in the beneficiary disclaiming by a transfer made after date as noted above under sec_25_2511-1 if the interest to be disclaimed was created before date the disclaimant must disclaim the interest in the property within a reasonable_time after knowledge of the existence of the transfer creating the interest to be disclaimed in the case of the disclaimer of an interest in trust in general the transfer occurs when the trust is established rather than when the interest actually vests in the disclaimant if the transferor has not reserved any power over the trust see 455_us_305 however the time limitation for making the disclaimer does not begin to run until the disclaimant has attained the age of majority and is no longer under a legal disability to disclaim see jewett v commissioner u s pincite in the present case taxpayer proposes to execute the disclaimer within nine months after reaching age under these circumstances the proposed disclaimer will be considered to be made within the time prescribed in sec_25_2511-1 under sec_25_2511-1 the disclaimer must be unequivocal revrul_76_156 1976_1_cb_292 which considers the application of sec_25_2511-1 concludes that a disclaimer is unequivocal if the disclaimant’s act of refusal is unambiguous in its consequences that is the disclaimant must unqualifiedly refuse to accept ownership of the property for example a disclaimer is unequivocal if the disclaimed property must pass as otherwise provided in the instrument and not pursuant to the direction of the disclaimant in this case the disclaimed interest will not pass pursuant to any direction on the part of taxpayer similarly the disclaimer is unequivocal if the disclaimant does not accept the benefits from the property interest disclaimed in this case taxpayer will not accept the benefits of the property interest disclaimed after the disclaimer cf sec_25_2518-3 and sec_25_2518-3 examples and regarding treatment of certain interests in the same property as separate interests eligible for qualified_disclaimer treatment under sec_2518 under sec_25_2511-1 the disclaimer must be effective under local law in this case state law specifically provides that an individual may make a valid disclaimer of any separate interest in property while retaining other separate interests in the same property further the disclaimer will be timely under sec_469 of the state revised statutes consequently if taxpayer satisfies the procedural requirements prescribed under state law the disclaimer will be valid under local law finally under sec_25_2511-1 the disclaimant must not have accepted the property taxpayer represents that she will not accept or receive any of the benefits of the interest in trust to be disclaimed cf sec_25_2518-2 example regarding treatment of discretionary distributions of income and corpus to minor children under sec_2518 accordingly we conclude that based on the representations made if the disclaimer is plr-125777-03 executed as proposed the disclaimer will not constitute a transfer subject_to the federal gift_tax the ruling contained in this letter is 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 except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code the ruling contained in this letter 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 with this office a copy of this letter is being sent to taxpayer sincerely yours associate chief_counsel passthroughs and special industries lorraine e gardner senior counsel branch enclosure copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to plr-115694-02 cc psi date date legend company esop trust state business a b c d dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of company requesting a ruling that company’s subchapter_s_election will not terminate under the circumstances described below facts company was incorporated under the laws of state on a and engages in business_company established an employee_stock_ownership_plan the esop effective as of b pursuant to the terms of the esop company established an employee_stock_ownership_trust the trust to hold company stock on c the trust purchased all of the outstanding_stock of company thus becoming the sole owner of plr-115694-02 company stock following this stock purchase company elected to be treated as a subchapter_s_corporation effective as of d under the terms of the esop distributions may be made to plan participants in the form of cash or company stock however as long as company has an s election in effect a participant who receives company stock must provide prior written notice of the participant’s intent to sell the stock to company immediately upon distribution the terms of the esop also provide that every participant who receives a distribution may direct that the distribution be paid directly to an individual_retirement_account ira or another qualified_retirement_plan as required under sec_401 of the internal_revenue_code a direct_rollover alternatively a participant who receives and sells company stock to company generally may within days roll the proceeds over to an ira or qualified_retirement_plan an indirect rollover in either a direct or indirect rollover in the case of a stock_distribution a participant in the participant’s capacity as the beneficiary of the ira account will complete an irrevocable stock transfer form the irrevocable stock transfer form is prepared specifically for each distributee and identifies the number of shares to be sold to company immediately following the distribution from the esop company prepares a check for each distributee and records the stock transfer to the distributee and redemption by company on its stock record books because the stock_distribution and the repurchase of the stock occur on the same day a stock certificate never leaves company’s premises company represents that by monitoring the timing of stock distributions from the esop company can ensure that it will never have more than shareholders company has requested a ruling that its status as an s_corporation will not terminate if the esop makes distributions of company stock and one or more participants elect to make a direct_rollover of the distribution to an ira provided that the stock is immediately repurchased by company using the procedure described above law and analysis sec_1361 provides that an s_corporation may not have as a shareholder a person that is not an estate a_trust described in sec_1361 an organization described in sec_1361 or an individual sec_1361 provides that for purposes of sec_1361 an organization that is described in sec_401 or sec_501 and is exempt from taxation under sec_501 may be a shareholder in an s_corporation under sec_1361 an employee_stock_ownership_plan is an eligible shareholder of an s_corporation provided that the employee_stock_ownership_plan is described in sec_401 and is exempt from tax under sec_501 according to revrul_92_73 1992_2_cb_224 an ira is not permitted to hold stock in an s_corporation plr-115694-02 sec_401 requires a sec_401 plan to permit participants to elect to have an eligible_rollover_distribution paid directly to an eligible_retirement_plan specified by the participant sec_402 provides that the term eligible_rollover_distribution is defined as any distribution to an employee of all or any portion of the balance credited to his or her account in a qualified_trust except for distributions made in the form of an annuity or in installments over a period of ten years or more sec_402 provides that the term eligible_retirement_plan is defined to include iras under sec_409 an employee_stock_ownership_plan generally is required to make distributions available in the form of employer_securities however sec_409 provides in pertinent part that an employee_stock_ownership_plan maintained by an s_corporation may provide that benefits will be distributed in the form of cash alternatively sec_409 provides in pertinent part that benefits from an s_corporation employee_stock_ownership_plan may be distributed in the form of employer_securities subject_to the requirement that the securities may be sold back to the sponsoring employer under a fair valuation formula employee_stock_ownership_plans iras and s_corporations are all subject_to significant qualification rules as described above the terms of the esop provide that distributions may be made to plan participants in the form of cash or company stock but that as long as company has a subchapter_s_election in effect company must immediately purchase any distributed stock distributions of cash and stock both may constitute eligible rollover distributions that qualify for direct and indirect rollovers whenever a distribution of stock subject_to immediate repurchase by company is rolled over to an ira the custodian of the ira receives the proceeds of the repurchase thus every direct or indirect rollover whether of stock or cash to an ira results in the custodian of the ira receiving cash for the benefit of the plan participant in the case of a direct_rollover of stock the momentary designation of the custodian of the ira as the owner of the stock under the particular facts described above will not cause company’s s election to terminate conclusion based solely on the facts submitted and the representations made we conclude that company's s_corporation_election will not terminate if the esop makes distributions of company stock and one or more participants elect to make a direct_rollover to an ira provided that the stock is immediately repurchased by company using the procedure described above except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding whether company is qualified to be an s_corporation or whether the esop constitutes a qualified_plan under sec_401 plr-115694-02 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to company’s authorized representatives this ruling is directed only to the taxpayer requesting it under sec_6110 it may not be used or cited as precedent sincerely yours s mary beth collins senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes plr-115694-02 cc


internal_revenue_service number release date index number ---------------------------------- --------------------------------------- ----------------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------- telephone number -------------------- refer reply to cc psi b02 plr-141717-09 date date legend x y a b state date date date ------------------------------------------ ---------------------- ------------------------------ ---------------------- ----------------- ----------------- ------------------- ------------------ -------------------------- -------------------------- dear -------------- this responds to a letter dated date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on date x made an election to be treated as an s_corporation effective date x’s election was inadvertently terminated effective date when y a partnership for federal_income_tax purposes owned by a and b became the owner of x stock on date a and b entered into an agreement to transfer the ownership of y to a which resulted in y’s federal tax classification changing from a partnership to an entity disregarded from its owner a plr-141717-09 x represents that the termination was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1362 provides that if an election under sec_1362 by any corporation a was 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 b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 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 the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x’s s_corporation_election on date was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter provided x’s s_corporation_election was valid and provided that the election was not otherwise terminated under sec_1361 this ruling is conditioned upon the shareholders of x including in income their pro_rata share of the separately_stated and nonseparately computed items of x as provided in sec_1366 making any adjustments to basis as provided in sec_1367 and taking into account any distributions made by x as provided in sec_1368 if x or its shareholders fail to treat themselves as described above this letter_ruling shall be null and void except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code specifically we express no opinion as to the consequences of the proposed transactions under the estate and gift_tax provisions of chapter sec_11 and sec_12 of subtitle b including the proper valuation of any property or interest in property for federal estate and gift_tax purposes this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent plr-141717-09 pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representatives sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------- in re ----------------------- ------------------------- ------------------------------------------------ legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ telephone number --------------------- refer reply to cc tege eb ec plr-113302-10 date september taxpayer ------------------- acquiring ---------------------------------------------------------------------------------- merger subsidiary ---------------- date a -------------------------- date b ----------------------- date c ----------------------- date d -------------------------- dear -------------- this letter is in response to a letter dated date submitted by your authorized representative requesting a ruling under sec_162 of the internal_revenue_code code specifically taxpayer requested a ruling that taxpayer’s officers are not covered employees for the short taxable_year ending on date b for purposes of sec_162 the facts as represented are as follows on date a taxpayer entered into a merger agreement with acquiring and merger subsidiary on date b merger subsidiary acquired more than of the vote and value of taxpayer’s shares resulting in taxpayer becoming a member of acquiring’s affiliated_group and having a short taxable_year ending on date b merger subsidiary is a direct wholly-owned subsidiary of acquiring pursuant to the merger agreement merger subsidiary merged with and into taxpayer which was the surviving corporation the acquisition was completed on date c on date c the taxpayer terminated its registration of securities by filing a form_15 with the securities_and_exchange_commission taxpayer represents that pursuant to the executive compensation disclosure rules under the securities exchange act of exchange act taxpayer is not required to disclose compensation of its officers for the fiscal_year ending on date d or for any plr-113302-10 portion of such year including any portion of taxpayer’s short taxable_year ending on date b sec_162 of the code allows a deduction for all of the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business including a reasonable allowance for salaries or other compensation_for_personal_services actually rendered sec_162 of the code provides that for any publicly_held_corporation no deduction shall be allowed for applicable_employee_remuneration with respect to any covered_employee to the extent that the amount of such remuneration for the taxable_year exceeds dollar_figure million sec_162 of the code defines publicly_held_corporation to mean any corporation issuing any class of common equity securities required to be registered under sec_12 of the exchange act sec_162 of the code defines covered_employee as any employee of the taxpayer if a as of the close of the taxable_year such employee is the chief_executive_officer of the taxpayer or is an individual acting in such capacity or b the total compensation of such employee for the taxable_year is required to be reported to shareholders under the exchange act by reason of such employee being among the four highest compensated officers for the taxable_year other than the chief_executive_officer sec_1_162-27 of the income_tax regulations provides that a covered_employee means any individual who on the last day of the taxable_year is a the chief_executive_officer of the corporation or is acting in such capacity or b among the four highest compensated officers other than the chief_executive_officer whether an individual is the chief_executive_officer or one of the four highest compensated officers is determined pursuant to the executive compensation disclosure rules under the exchange act the executive compensation disclosure rules are contained in item of regulation s-k cfr these rules require disclosure of compensation awarded to earned by or paid to certain executive officers pursuant to notice_2007_49 2007_1_cb_1429 effective for taxable years ending on or after date the irs interprets the term covered_employee for purposes of sec_162 to mean any employee of the taxpayer if as of the close of the taxable_year such employee is the principal executive officer within the meaning of the disclosure rules of the taxpayer or an individual acting in such a capacity or if the total compensation of such employee for that taxable_year is required to be reported to shareholders under the exchange act by reason of such employee being among the three highest compensated officers for the taxable_year other than the principal executive officer or the principal financial officer plr-113302-10 therefore based solely on the facts presented we rule as follows for purposes of sec_162 of the code taxpayer’s officers are not covered employees with respect to taxpayer for taxpayer’s taxable_year ending on date b 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 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely john b richards senior technician reviewer executive compensation branch office of division counsel associate chief_counsel tax exempt government entities


internal_revenue_service number release date index number ----------------------------------------------- ------------------------- ----------------------- ---------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------------- id no -------------- telephone number --------------------- refer reply to cc intl b04 plr-124620-08 date date taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer ----------------------------------------------- ------------------------------- ---------------------------- ----------------------------------------------------------------- ------------------------------- ---------------------------- ------------------------------------------------------------------ ------------------------------- ---------------------------- ----------------------------------------------- ------------------------------- ---------------------------- ---------------------------------- ------------------------------- ---------------------------- --------------------------------------- ------------------------------- ---------------------------- ------------------------------------------------ ------------------------------- ---------------------------- ---------------------------------------------- ------------------------------- ---------------------------- ---------------------------------------------------------- ------------------------------- ---------------------------- ------------------------------------------------ ------------------------------- ---------------------------- plr-124620-08 taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer ------------------------------------------ ------------------------------- ----------------------- ------------------------------------------------- ------------------------------- ----------------------- ---------------------------------------------------------- ------------------------------- ---------------------------- ---------------------------------------- ------------------------------- ---------------------------- -------------------------------------- ------------------------------- ---------------------------- ------------------------------------------------------------ ------------------------------- ---------------------------- ----------------------------------------- ------------------------------- ---------------------------- ------------------------------------------------- ------------------------------- ---------------------------- -------------------------------------------- ------------------------------- ---------------------------- --------------------------------- -------------------------------- ---------------------------- ------------------------------------------------------ ------------------------------- ---------------------------- ------------------------------------------------ ------------------------------- ---------------------------- -------------------------------------- ------------------------------- ---------------------------- -------------------------------------------------------- ------------------------------- ---------------------------- ------------------------------------------ ------------------------------- plr-124620-08 taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer fund ---------------------------- ------------------------------------------------------------ ------------------------------- ----------------------- ---------------------------------------------------- ------------------------------- ---------------------------- --------------------------------------------- ------------------------------- ---------------------------- ------------------------------------------------ -------------------------------- ---------------------------- ---------------------------------- ------------------------------- ---------------------------- --------------------------------------------------- ------------------------------- ---------------------------- ----------------------------------------------- ------------------------------- ---------------------------- -------------------------------------------------------- ------------------------------- ---------------------------- ----------------------------------------------------- ------------------------------- ---------------------------- ------------------------------------------- ------------------------------- ---------------------------- ----------------------------------------- ------------------------------- ---------------------------- ----------------------------------- ------------------------------- ---------------------------- ------------------------------------------------ ------------------------------- ---------------------------- -------------------------------------------------------- ------------------------------- ---------------------------- ---------------------------------------------------------------- plr-124620-08 fund fund fund fund fund fund fund date date --------------------------------- ----------------------- -------------------------------------------------------------------- --------------------------------- ----------------------- -------------------------------------------------------------------------------- --------------------------------- ----------------------------- ----------------------------------------------------------------------------------- --------------------------------- ----------------------- --------------------------------------------------------------------------------------- ---- --------------------------------- ----------------------- ------------------------------------------------------------------ --------------------------------- ----------------------- ----------------------------------------------------------------------- --------------------------------- ----------------------- --------------------------------------------------------------------------------- --------------------------------- ----------------------- -------------------------- --------------------------- dear ----------------- this replies to a letter dated date in which taxpayer through taxpayer collectively taxpayers request extensions of time under treas reg to satisfy the statement and notice requirements of sec_1_897-2 and sec_1 h note that the procedures of revproc_2008_27 apply with respect to relief for untimely statements and notices under sec_1_897-2 and sec_1_897-2 filed after date the information submitted for consideration is substantially as set forth below the rulings contained in this letter are based upon information and representations submitted by taxpayers 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_ruling verification of the factual information representations and other data may be required as a part of the audit process plr-124620-08 taxpayers are domestic corporations twenty-eight of the taxpayers are owned in varying percentages by fund fund fund and fund including taxpayer through taxpayer taxpayer through taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer and taxpayer through taxpayer four of the taxpayers are owned in varying percentages by fund fund fund and fund including taxpayer taxpayer taxpayer and taxpayer five of the taxpayers are owned in varying percentages by fund fund fund and fund including taxpayer taxpayer taxpayer taxpayer and taxpayer finally two of the taxpayers are owned in varying percentages by fund fund and fund including taxpayer and taxpayer taxpayers made distributions of property to funds between date and date neither taxpayers nor funds timely filed the statements and notices required under sec_1_897-2 and sec_1_897-2 to establish that taxpayers were not u s real_property holding corporations and that withholding under sec_1445 was not required sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government based on the facts and circumstances of this case we conclude that the standards of sec_301_9100-3 have been satisfied accordingly taxpayers are granted an extension of time until days from the date of this ruling letter to satisfy the statement and notice requirements of sec_1_897-2 and sec_1_897-2 with respect to the distributions that occurred between date and date the granting of an extension of time is not a determination that taxpayers are otherwise eligible to comply with the requirements of sec_1_897-2 and sec_1_897-2 sec_301_9100-1 no opinion is expressed as to the application of any other section of the code or regulations to the facts presented plr-124620-08 a copy of this ruling should be attached with the statements and the notices mailed to the irs this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely david b bailey assistant to the branch chief associate chief_counsel international branch


internal_revenue_service number release date index number ------------------------------------------- --------------------------------- --------------------------- ----------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no --------------- ----------------------------------------------------- telephone number -------------------- refer reply to cc psi plr-144393-14 date date legend x state date date trust a_trust b individual year year year --------------------------------------------------------------------------------------- ------------------------------------- ------------ --------------------- --------------------- --------------------------------------------------------------------------------------- ------------------------------------ --------------------------------------------------------------------------------------- ----------------------------------- --------------------------------------------------------------------------------------- ------------------------------------ ------ ------ ------ dear ------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representatives requesting a ruling relating to x’s status as an s_corporation under sec_1361 and sec_1362 of the internal_revenue_code facts the information submitted states that x was incorporated under the laws of state on date x elected to be treated as an s_corporation for federal tax purposes effective date at the time of the s election all of the shares of x stock were held by trust a_trust b and individual plr-144393-14 x made disproportionate distributions to its shareholders in taxable years year year and year which may have created a second class of stock in violation of the one class of stock requirement under sec_1361 after the discovery of the errors x took remedial action and made corrective distributions to the shareholders thus eliminating the cumulative amount of the disproportionate distributions x represents that under its governing provisions all of x’s shares of stock possess identical rights to distribution and liquidation proceeds and that no provision exists in the governing documents regulations or by-laws that vary these rights and x represents that no other binding agreement exists that varies these rights x further represents that neither x nor its shareholders knew that disproportionate distributions could terminate x’s s_corporation_election x represents that the possible termination was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any further adjustments the commissioner may require consistent with the treatment of x as an s_corporation law and analysis 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 provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not among other things have more than one class of stock sec_1_1361-1 of the income_tax regulations provides that a corporation is generally treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds differences in voting rights among shares of stock of a corporation are disregarded in determining whether a corporation has more than one class of stock sec_1_1361-1 provides that the determination of whether all outstanding shares of stock confer identical rights to distribution and liquidation proceeds is made based on the corporate charter articles of incorporation by-laws applicable state law and binding agreements relating to distribution and liquidation proceeds collectively the governing provisions a commercial contractual agreement such as a lease employment agreement or loan agreement is not a binding agreement relating to distribution and liquidation proceeds and thus is not a governing provision unless a principal purpose of the agreement is to circumvent the one class of stock requirement of sec_1361 and sec_1_1361-1 although a corporation is not treated as having more than one class of stock so long as the governing provisions provide for identical plr-144393-14 distribution and liquidation rights any distributions including actual constructive or deemed distributions that differ in timing or amount are to be given appropriate tax effect in accordance with the facts and circumstances sec_1_1361-1 provides that except as provided in sec_1_1361-1 and relating to restricted_stock deferred_compensation plans and straight_debt in determining whether all outstanding shares of stock confer identical rights to distribution and liquidation proceeds all outstanding shares of stock of a corporation are taken into account sec_1362 provides in part that a small_business_corporation may elect to be an s_corporation 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 in part that if an election under sec_1362 by any corporation a was 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 consent or b 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 the ineffectiveness or termination steps were taken - a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 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 sec_1_1362-4 provides that the commissioner may require any adjustments that are appropriate in general the adjustments required should be consistent with the treatment of the corporation as an s_corporation during the period specified by the commissioner conclusion based solely on the facts submitted and representations made we conclude that because x made disproportionate distributions to its shareholders x may have had more than one class of stock beginning in year we conclude however that if x’s s election was terminated such termination was inadvertent within the meaning of sec_1362 further we conclude that the corrective actions taken by x and its plr-144393-14 shareholders do not create a second class of stock under sec_1361 consequently we rule that x will be treated as an s_corporation for year and thereafter provided x’s s_corporation_election was valid and was not otherwise terminated under sec_1362 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 requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representatives sincerely joy c spies joy c spies senior technician reviewer branch passthroughs special industries enclosures copy of letter copy for purposes cc


t c memo united_states tax_court robert banat petitioner v commissioner of internal revenue respondent docket no filed date p filed a petition for a determination that r’s failure to abate interest under sec_6404 i r c with respect to petitioner’s and taxable years was an abuse_of_discretion and for an abatement order held p has not established any erroneous or dilatory ministerial acts by r giving rise to the assessment of interest after p was first contacted in writing about the deficiency and before interest was assessed hedy p forspan for petitioner thomas j kerrigan for respondent memorandum opinion halpern judge this case is before the court for review of respondent’s failure to abate interest ’ by notice dated date respondent made his final_determination not to abate interest with respect to petitioner’s and taxable calendar years unless otherwise indicated all section references are to the internal_revenue_code in effect at the time the petition was filed and all rule references are to the tax_court rules_of_practice and procedure at the time the petition was filed petitioner resided in brooklyn new york this case was submitted for decision without trial see rule the parties have agreed to a stipulation of facts the stipulation the stipulation with attached exhibits is incorporated herein by this reference certain other exhibits were received into evidence we shall not here repeat the stipulation or recite the contents of the other exhibits we shall however summarize certain facts as an aid to understanding our discussion ' a prior report in this case appears at 109_tc_92 background petitioner filed his federal_income_tax returns for and on date date and date respectively petitioner was contacted in writing with respect to a deficiency in his federal_income_tax liability no later than date he was contacted in writing with respect to a deficiency in his federal_income_tax liability no later than date he was contacted in writing with respect to a deficiency in his federal_income_tax liability no later than date on date with respect to petitioner’s taxable_year respondent assessed an additional tax of dollar_figure and interest of dollar_figure also on date with respect to petitioner’s taxable_year respondent assessed an additional tax of dollar_figure and interest of dollar_figure on date with respect to petitioner’s taxable_year respondent assessed an additional tax of dollar_figure and interest of dollar_figure on date petitioner submitted three form sec_843 claim_for_refund and regquest for abatement the form sec_843 to respondent one each for his taxable years and each claiming an abatement of interest none of the form sec_843 specifies the amount of interest to be abated or the period during which the interest to be abated accrued respondent treated the form sec_843 as claims for abatement of interest as follows claims for abatement of interest taxable_year of deficiency_interest accrual_period amount to dollar_figure to big_number to big_number on date respondent made his final_determination not to abate interest with respect to petitioner’s and taxable calendar years the petition was filed on date discussion in certain circumstances the secretary is authorized to abate interest sec_6404 prior to its amendment by the taxpayer bill of right sec_2 tbor publaw_104_168 110_stat_1452 read as follows sec e assessments of interest attributable to errors and delays by internal_revenue_service -- in general --in the case of any assessment of interest on-- a any deficiency attributable in whole or in part to any error or delay by an officer_or_employee of the internal_revenue_service acting in his official capacity in performing a ministerial_act or b any payment of any_tax described in sec_6212 to the extent that any error or delay in such payment is attributable to such officer_or_employee being erroneous or dilatory in performing a ministerial_act the secretary may abate the assessment of all or any part of such interest for any period for purposes of the preceding sentence an error or delay shall be taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved and after the internal_revenue_service has contacted the taxpayer in writing with respect to such deficiency or payment among the amendments made to sec_6404 by the tbor was the replacement in paragraph a and b of the expression in performing a ministerial_act with the expression in performing a ministerial or managerial act tbor sec_301 a emphasis added that amendment however applies only to interest accruing with respect to deficiencies or payments for tax years beginning after date see tbor sec_301 it is inapplicable to this case therefore the secretary’s authority to abate interest in this case is limited to interest on any deficiency attributable in whole or in part to any error or delay by any officer_or_employee of the internal_revenue_service the service in performing a ministerial_act see 112_tc_19 n sec_6404 authorizes this court to determine whether the secretary’s failure to abate interest under section sec_6404 now sec_6404 e was an abuse_of_discretion and if the court so determines to order an abatement under sec_6404 a the secretary has no authority to abate an assessment of interest on a deficiency unless that assessment is attributable in whole or in part to some error or delay by an officer_or_employee without distinction employee of the service in performing a ministerial_act unless the secretary has the authority under sec_6404 e a to abate an assessment of interest on a deficiency we have no authority under sec_6404 to review his failure to abate such interest the regulations interpreting sec_6404 define the term ministerial_act as a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer's case after all in pertinent part sec_6404 provides sec_6404 review of denial of request for abatement of interest -- in general the tax_court shall have jurisdiction over any_action brought by a taxpayer who meets the requirements referred to in sec_7430 c a to determine whether the secretary’s failure to abate interest under this section was an abuse_of_discretion and may order an abatement if such action is brought within days after the date of the mailing of the secretary’s final_determination not to abate such interest petitioner meets the requirements of sec_7430 a and the action was timely brought prereguisites to the act such as conferences and review by supervisors have taken place sec_301_6404-2t b temporary proced admin regs fed reg date therefore as a prerequisite to our reviewing the commissioner’s failure to abate an assessment of interest ona deficiency the taxpayer must show that such assessment is attributable to some error or delay by an employee of the service in performing a ministerial_act see sec_6401 moreover pursuant to the specific language of the last sentence of sec_6404 e any such error or delay must be disregarded unless it occurred after the taxpayer was first contacted in writing about the deficiency since with respect to the assessment of interest on a deficiency the secretary’s authority is to abate the portion of the interest assessment attributable to such error or delay the error or delay must of necessity occur before the assessment of the interest on the deficiency see sec_6404 therefore for each taxable_year for which the taxpayer claims the commissioner abused his discretion in failing to abate the assessment of interest on a deficiency the taxpayer must show not only the assessment of interest attributable to the final_regulation under sec_6404 as issued on date contains the same definition of ministerial_act the final_regulation generally applies to interest accruing on deficiencies or payments of tax for taxable years beginning after date see sec_301_6404-2 proced admin regs some error or delay of an employee in performing a ministerial_act but also that such error or delay occurred after the taxpayer was first contacted in writing about the deficiency and before the interest was assessed petitioner has not made that preliminary showing for any of the years here in guestion petitioner’s brief contains a statement of facts that reiterates the stipulation petitioner has failed to establish concrete incidences of error or delay in performing ministerial acts that gave rise to any assessment of interest petitioner argues that the length of time from the start of respondent’s examination of until the conclusion of respondent’s examination of and automatically establishes that there was an erroneous or dilatory ministerial_act or acts we disagree see 113_tc_145 the mere passage of time in the litigation phase of a tax dispute does not establish error or delay by the commissioner in performing a ministerial_act the length of time required by petitioner's case was largely a function of the expansion of for each of the taxable years in question the relevant periods during which petitioner must show error or delay in performing a ministerial_act 1ie the period from first written contact to assessment of the interest are as follows taxable_year period to to to respondent’s examination to other years third-party summonses made necessary by petitioner’s difficulties in supplying documentation respondent’s suspicion of civil_fraud and the reopening of the examination at petitioner’s request after it was settled in none of those actions which extended the time of the examination involve ministerial acts by respondent see eg 113_tc_206 the commissioner's decision not to proceed with civil case during criminal_fraud investigation and prosecution was not a ministerial_act petitioner points to a misaddressed letter from respondent to one of petitioner’s representatives as evidence of an error in performing a ministerial_act there was no error by respondent the letter was mailed to an incorrect address provided by petitioner’s representative to respondent the letter was remailed once respondent determined the correct address since petitioner has not established any erroneous or dilatory ministerial acts giving rise to the assessment of interest during the relevant timeframes we conclude that respondent’s failure to abate interest was not an abuse of his discretion decision will be entered for respondent


internal_revenue_service department of the treasury index number washington dc person tocomtect tovqqqy telephone number refer reply to cc dom p st 03-plr-107322-98 date november legend company original fund new fund i new fund ii state date date date dear this letter responds to a request dated date and additional submissions on behalf of company sec_721 of the internal_revenue_code and sec_721 for rulings under company is the sole general_partner of original fund a state limited_partnership original fund began operations on facts plr-107322-98 and always has been classified as date and is for federal_income_tax purposes make investments in all types of stocks and securities as well as a wide variety of rights related to stocks and securities original fund was organized to a partnership company subsequently formed new fund i also a state limited_company is the sole general_partner of new fund partnership the initial limited partners of new fund i were certain former limited partners of original fund date original fund distributed to these limited partners their shares of the original fund assets and cash in complete_liquidation of their original fund interests thereafter each of the initial limited partners transferred to new fund i all of these assets in exchange for limited_partnership interests in new fund i that the assets are considered diversified under sec_1_351-1 i of the income_tax regulations at the close of business on it has been represented immediately company intends to allow additional limited partners in original fund to also make such transfers in the future however it has been represented that such transfers will consist only of cash and or portfolio interests that would also be considered diversified within the meaning of the plan of contribution company intends to market limited_partnership interests in new fund i pursuant to this plan limited return for cash contributions partnership interests in new fund i were obtained by investors solely for cash on date to other investors solely in sec_1_351-1 i as part of company intends to replicate this transaction in forming new the initial limited in exchange for limited_partnership interests fund ii another state limited_partnership partners of new fund ii will again be existing limited partners of original fund who receive their shares of original fund assets and cash in liquidation of their partnership interests limited partners will then transfer the assets and or cash to new fund ii has been represented that these contributions will consist solely of cash and or portfolio interests that would be considered diversified within the meaning of formation of new fund ii will be substantially_similar to the formation of new fund i except that the limited partners in new fund ii will be tax-exempt investors will also market limited_partnership interests in new fund ii solely in return for cash contributions after formation company sec_1_351-1 i again it these the company has represented that to the best of its knowledge no plan or intention for any transferor to transfer there is assets other than cash and or a diversified portfolio of stocks and securities to new fund i representations a portfolio of stocks and securities is diversified under sec_1_351-1 it satisfies the and or new fund ii i if for these plr-107322-98 50-percent tests of provisions of sec_368 f iv government securities are included in determining total assets unless government securities are acquired to satisfy the requirements of sec_368 except that in applying sec_368 f ii applying the relevant sec_368 f ii rulings requested for the transaction described the following rulings have been requested sec_721 b will not apply to the transfers by the initial new fund i limited partners at the close of business on of their pro-rata shares of the assets of original fund date under sec_721i a the initial limited partners of new fund i the contribution by such partners as of the close of business on date of their respective pro-rata shares of each of the assets of original fund to new fund i partnership interests in new fund i in exchange for limited no gain_or_loss will be recognized by or by new fund i on for sec_721 contributions solely of cash by investors to in exchange for limited_partnership new fund i and or new fund ii interests in new fund i and or new fund ii will not cause former original fund limited partners who transfer to new fund i and or new fund ii within the meaning of pro-rata shares of each of the assets of original fund treated as transferring property to a partnership that would be treated as an investment_company within the meaning of the partnership were incorporated i representing their to be a diversified portfolio of stocks and securities sec_1_351-1 sec_351 if law and analysis sec_721 provides that no gain_or_loss shall be recognized by a partnership or by any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership sec_721 provides that sec_721 a shall not apply to gain realized on a transfer of property to a partnership which would be treated as an investment_company within the meaning of sec_351 if the partnership were incorporated sec_1_351-1 states that a transfer to an investment_company will occur when i directly or indirectly in diversification of the transferors' interests and company ric a real_estate_investment_trust reit or a the transfer results a regulated investment the transferee is ii plr-107322-98 corporation more than percent of the value of whose assets excluding cash and non-convertible debt obligations from consideration are held for investment and are readily marketable stocks or securities or interests in rics or reits l for sec_1002 of the taxpayer_relief_act_of_1997 pub no sec_1_351-1 the act amends sec_351 in taxable years ending after such 111_stat_788 transfers after june date subject_to certain transitional relief provisions of the act is intended to expand the types of assets considered in determining whether a transfer is to a transferee described in addition to readily marketable stocks or securities and interests in rics and reits alter the requirement of property will be considered to be a transfer to an investment_company under sec_351 indirectly in diversification of the transferors' interests see s 105th cong 105th cong only if the transfer results directly or ii to include certain assets in lst sess h_r rep i that a transfer of rep 105th cong ist sess however the act is not intended to sec_1_351-1 ist sess h_r section rep sec_1_351-1 provides that a transfer ordinarily it further provides that if results in diversification of the transferors' interests if two or more persons transfer nonidentical assets to a corporation in the exchange a transfer is part of a plan to achieve diversification without recognition of gain such as delayed of the corporate assets or of the stock_or_securities received in the earlier exchange to an investment_company in a transaction purporting to qualify for nonrecognition treatment the original transfer will be treated as resulting in diversification a plan which contemplates a subsequent transfer however sec_1_351-1 i provides that a transfer of stocks and securities will not be treated as resulting in a diversification of the transferors' interests if each transferor transfers a diversified portfolio of stocks and securities and a portfolio of stocks and securities is considered to be diversified if sec_368 sec_368 f except that government securities are included in total assets for purposes of the denominator of the and percent tests unless acquired to meet the and 50-percent tests but are not treated as securities of an issuer for purposes of the numerator of the and 50-percent tests f ii applying the relevant provisions of it satisfies the and 50-percent tests of an investment_company is diversified within the meaning of f ii if not more than percent of the value of sec_368 its total assets is invested in the stock and securities of any one issuer and not more than percent of the value of its total ay plr-107322-98 assets is invested in the stock and securities of five or fewer issuers conclusion after applying the relevant law to the representations submitted we hold as follows sec_721 will not be applicable to the date transfer by the initial new fund i limited partners to new fund i because new fund i would not have been treated as an investment_company within the meaning of incorporated it had been sec_351 if under sec_721 no gain_or_loss will be recognized by the initial limited partners of new fund i the date contribution or by new fund i on contributions solely of cash by investors in new fund i in exchange for limited_partnership interests as or new fund ii described above will not cause former original fund limited partners who transfer to new fund i portfolio of stocks or securities within the meaning of sec_1_351-1 the assets of original fund to be treated as transferring property to be treated as an investment_company within the meaning of if the partnership were incorporated a partnership new fund i or new fund ii or new fund ii i representing their pro_rata shares of each of that would sec_351 a diversified we express no opinion on the tax treatment of the in particular we the transaction not or effects resulting from the consequences of other transfers to transaction described above under any other provision of the code or regulations or the tax treatment of any conditions existing at the time of specifically covered by the above ruling express no opinion on new fund i or new fund ii either as transfers would be transfers to an investment_company or would except for transfers solely of cash when taken together-with the above referenced transfers by company the initial new fund i partners or future original fund partners that invest in new fund ii cause those above referenced transfers to be considered transfers to an investment_company whether the above referenced transfers are part of diversification without recognition of gain under sec_1_351-1 assets to new fund i or new fund ii that would be considered diversified under sec_1_351-1 i whether any transferor will transfer to whether such other a plan to achieve and in addition no opinion is expressed about any partnership_allocations under sec_704 or sec_704 the classification of any entity as a partnership for federal tax purposes or the proper tax treatment of any liquidating distributions made to original fund investors this ruling is directed only to the taxpayer who requested sec_6110 provides that it may not be used or cited it as precedent pursuant to a power_of_attorney on file in this office copies of this letter will be sent to partnership's authorized representatives sincerely yours jeffrey a erickson assistant branch chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi br 1-plr-111614-01 date date legend x d1 this letter responds to the ruling_request dated date which was submitted by your representative on behalf of x and which requests relief under sec_1362 of the internal_revenue_code facts x was incorporated on d1 x intended to be treated as an s_corporation for federal_income_tax purposes effective on d1 but the s election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if 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 an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the plr-111614-01 election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under sec_1362 effective on d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed as to the federal tax consequences of the transaction described above under any other provision of the internal_revenue_code 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 pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to your representative sincerely yours dianna k miosi chief branch associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury washington dc contact person telephone number in reference to cc dom it a 09-plr-113787-98 date cct ig9g d index no projects group project project project project project project project project project project project project project project project project project e e r e m s project project project project t t project project project project projects group project project project project project project project project projects group project project project project project project project project project project project project project project project project project project project project project project project project project project project project project project project project project project project project project u l project project project project project project project project project project dear this is in reference to a request filed on behalf of x the taxpayer for permission to change to the deferred expense method of deducting the research_and_experimental_expenditures relating to the development of the projects listed above pursuant to the provisions of revenue code beginning with the tax_year ended june year_of_change of the internal sec_174 it is represented that the taxpayer is currently expensing research_and_experimental_expenditures as incurred the change in accounting_method will apply only to the research_and_experimental_expenditures paid_or_incurred by the taxpayer on or after the first day of the year_of_change in accordance with sec_1_174-3 of the income_tax regulations the amortization period will be months permission is hereby granted the taxpayer pursuant to the facts presented to change to the deferred expense method of deducting research_and_experimental_expenditures relating to the development of the projects listed above paid_or_incurred on or after the first day of the year_of_change and to amortize the expenditures over a period of months beginning with the year_of_change provided the taxpayer keeps its books_and_records for the year_of_change provided they are not closed for that year on the date it receives this letter and for later taxable years on the method_of_accounting granted in this letter for purposes of this condition any reconciliation entries that are necessary to compute taxable_income must be maintained as part of the taxpayer's permanent books_and_records the taxpayer makes an accounting segregation on its books_and_records of the research or experimental expenditures to which the change in method applies the taxpayer uses the method granted in this letter for the year_of_change and all later tax years unless the taxpayer secures permission to change to another recognized method the amortization period elected begins with the month in which the taxpayer first realizes benefit from the expenditures incurred pursuant to sec_1_174-4 if the deferred expenditures result in the development of depreciable_property deductions for the unrecovered expenditures beginning with the time the asset becomes depreciable in character shall be determined under sec_167 pursuant to sec_1_174-4 the taxpayer attaches a copy of this letter to its tax_return for the year_of_change as evidence of its authority for making the change in connection with the permission granted herein it should be understood that the responsibility for making the determination as by the taxpayer in connection with the taxpayer's trade_or_business are research_and_experimental_expenditures within the meaning of director upon examination of the taxpayer's return to whether the expenditures paid_or_incurred a matter to be considered by the district sec_174 is in no event shall any absorption of a net_operating_loss_carryover from tax years ending before the beginning of the year_of_change be any greater in the year_of_change or later tax years under the proposed method_of_accounting than if the proposed change had not been effected this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel o utd ag ing _ qyaries strickland ona branch


department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------------ telephone number --------------------- refer reply to cc psi b01 plr-124498-13 date date internal_revenue_service number release date index number -------------------------------------------- -------------------------------------- ------------------------------- ----------------------------- legend x ------------------------------------------------------------ --------------------------------------------- a ------------------------------------------- --------------------------------------------- b -------------------------------------------------------------- ----------------------- trust trust -------------------------------------------------------- ---------------------------------------------------------------- -------------------------------------------------------------- ------------------------------------------- ------------------------------------------------------------ state date date date date ------ ------------------- ---------------------- ---------------------- ---------------------- plr-124498-13 dear -------------- this responds to a letter dated date submitted on behalf of x from x’s authorized representative requesting inadvertent termination relief pursuant to sec_1362 of the internal_revenue_code facts the information submitted states that x was incorporated under the laws of state on date and elected to be treated as an s_corporation effective date a established a revocable_trust trust trust was a shareholder of x on date a died pursuant to the terms of trust after a’s death the remainder of a’s estate passed to trust shares of x stock were transferred to trust on date under the terms of trust the sole beneficiary of trust was b x represents that trust qualifies as a qualified_subchapter_s_trust qsst under sec_1361 however b did not file timely a qsst election on behalf of trust therefore x's s_corporation_election terminated on date x represents that b reported b's allocable share of trust 2's income consistent with the treatment of trust as a qsst on all affected returns x represents that the circumstances resulting in the termination of x's s_corporation_election were inadvertent law and analysis 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 a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate 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 class of stock sec_1361 provides that a qsst whose beneficiary makes an election under sec_1362 will be treated as a_trust described in sec_1361 and the qsst's beneficiary will be treated as the owner for purposes of sec_678 of that portion of the qsst's s_corporation stock to which the election under sec_1361 applies under sec_1361 a beneficiary of a qsst may elect to have sec_1361 apply plr-124498-13 under sec_1361 this election will be effective up to days and two months before the date of the election sec_1361 provides that for purposes of sec_1361 the term qualified_subchapter_s_trust means a_trust a the terms of which require that - i during the life of the current income_beneficiary there shall be only income_beneficiary of the trust ii any corpus distributed during the life of the current beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of such beneficiary's death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to that beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to individual who is a citizen or resident_of_the_united_states sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder in the corporation at any time during the period specified pursuant to sec_1362 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 termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the representations made and the information submitted we conclude that x's s_corporation_election terminated under sec_1362 on date we also conclude that this termination was inadvertent within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter provided that x's s_corporation_election was valid and was not otherwise terminated under sec_1362 this ruling is contingent upon b filing a qsst election for trust with an effective date of date with the appropriate service_center within days of the date of this letter a copy of this letter should be attached to the qsst election except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code specifically we express no opinion on whether x is otherwise eligible to be treated as an s_corporation or whether trust is eligible to be a qsst under plr-124498-13 sec_1361 this ruling letter is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representatives sincerely david r haglund david r haglund chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes