internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b01-plr-103289-01 date date legend x state date date date date a this responds to a letter dated date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts the information submitted discloses that x is a corporation organized under the laws of state on date x transferred to a an ineligible shareholder shares of stock on date and shares of stock on date as compensation_for services as director x’s s_corporation_election terminated effective date when x discovered that a was an ineligible shareholder it took immediate steps to redeem a’s shares and submitted this request for a ruling plr-103289-01 x represents that the shares of stock held by a were redeemed on date x and all persons who are a shareholder of x during the termination period agree to make the adjustments consistent with x’s treatment as an s_corporation that are required by the secretary with respect to the termination period in addition x represents that a paid united_states income_tax due on his pro_rata share of the income of x during his period of ownership law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect sec_1361 defines small_business_corporation as a domestic_corporation that is not an ineligible_corporation and that does not a have more than shareholders b have as a shareholder a person other than an estate other than a_trust described in sec_1361 and other than an organization described in c who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1362 of the code provides that an election to be treated as an s_corporation terminates whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation the corporation ceases to be a small_business_corporation the termination is effective on and after the date the s_corporation ceases to meet the requirements of a small_business_corporation sec_1362 sec_1362 in relevant part provides that if an election to be treated as an s_corporation was terminated under sec_1362 the secretary determines that the termination was inadvertent no later than a reasonable period of time after discovery of the event resulting in the termination steps were taken so that the corporation is once more a small_business_corporation 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 any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the terminating event the corporation shall be treated as continuing to be an s_corporation during the period specified by the secretary s rep no 97th cong 2d sess 1982_2_cb_718 in discussing sec_1362 of the code provides in part as follows if the internal_revenue_service determines that a corporation’s subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period plr-103289-01 the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts conclusions based upon the information submitted and the representations set forth above we conclude that the termination of x’s s_corporation_election was inadvertent within the meaning of sec_1362 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 subchapter_s_election is not otherwise terminated under sec_1362 a will be treated as a shareholder from date to date except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the above-described facts under any other provision of the code in particular no opinion is expressed or implied concerning whether x’s election was valid under sec_1362 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 the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative s david r haglund sincerely david r haglund senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c o f f ic e o f c h ief c o u n sel number info release date uil date cc intl br3 cor-140740-01 this letter is in reply to your letter dated date inquiring about the procedures for requesting a ruling on whether you as a non-resident alien are subject_to u s tax on distributions received from a closed-end bond fund the fund specifically you have inquired whether the tax exemption of sec_871 of the internal_revenue_code the code with respect to dividends_paid by a domestic_corporation meeting the foreign business requirement of sec_861 is applicable to the fund distributions you received while it is the practice of the internal_revenue_service to issue letter rulings to individuals that interpret and apply the tax laws to a taxpayer’s specific set of facts the service generally does not rule on issues that are inherently factual in nature such as whether a corporation has met the foreign business requirement of sec_861 see section dollar_figure of revproc_2001_1 2001_1_irb_1 revproc_2001_1 can be obtained from the irs website at www irs ustreas gov ind_info bullet html although we cannot issue a letter_ruling we offer the following general information for your assistance but also suggest that you contact the fund’s investor relations department for information that may help you determine the appropriate tax treatment of their dividend distributions from the information provided in your letter the distributions you are receiving appear to be from a regulated_investment_company ric within the meaning of sec_851 of the code commonly known as a mutual_fund rics are domestic corporations created by pooling funds of investors to allow them to take advantage of a diversity of investments and professional management for tax purposes a ric generally is not subject_to corporate level tax to the extent it distributes its investment_company_taxable_income and net_capital_gain to its shareholders distributions received by ric shareholders may consist of ordinary dividends capital_gain distributions exempt- interest dividends and nontaxable return_of_capital distributions a ric reports its distributions to its shareholders on form 1099-div cor-140740-01 your letter indicates that you are a nonresident_alien not engaged in a trade_or_business in the united_states whether your distributions are subject_to u s tax will depend on the specific kinds of distributions reported to you on form 1099-div by the fund generally a non-resident alien is subject_to u s income_tax only with respect to u s source income dividends received from a domestic_corporation are generally treated as u s source income under sec_861 of the code accordingly in most cases ordinary dividend distributions paid to a nonresident_alien by a ric will be subject_to u s tax at a withholding rate under sec_1441 or a lower treaty rate if applicable a limited exception exists as referenced in your letter under sec_871 of the code with respect to dividends_paid by a domestic_corporation meeting the foreign_business_requirements of sec_861 in general a domestic_corporation meets the foreign_business_requirements if at least of its gross_income is derived outside the u s and is attributable to the active_conduct_of_a_trade_or_business in a foreign_country while it would be highly unusual for a u s mutual_fund to meet these requirements we suggest that you contact the fund’s investor relations department for information that may help you determine whether sec_871 is applicable with respect to the fund distributions you received see also publication mutual_fund distributions for further general information regarding the tax treatment of mutual_fund distributions publication is available on the irs website at www irs ustreas gov we hope that this general information will prove helpful to you this information_letter is advisory only and has no binding effect on the internal_revenue_service see sec_2 of revproc_2000_1 2000_1_irb_4 sincerely barbara a felker chief branch office of associate chief_counsel international 1a ric may elect under sec_853 of the code to pass through to its shareholders the right to take the foreign_tax_credit or deduction with respect to foreign taxes it paid in which case the shareholders treat as foreign_source_income the amount of such taxes plus the portion of any dividend paid which represents income derived from foreign sources however this special source rule applies only for purposes of the foreign_tax_credit and does not operate to change the u s source of the distribution under sec_861 or for purposes of the withholding provisions see sec_853 of the code


internal_revenue_service appeals release number release date date date uil code a taxpayer name b for-profit corporation c beginning year for filing forms d telephone number of local taxpayer_advocate office e address of local taxpayer_advocate office department of the treasury address any reply to employer_identification_number form number person to contact contact telephone number fax number last day to file a petition with the united_states tax_court - certified mail dear this is our final adverse determination with respect to your exempt status under sec_501 of the internal_revenue_code code recognition of your exemption under code sec_501 is revoked beginning july if yuu decide o contesithis determination under the-declaratory-judgme --provisions of code- --- sec_7428 a petition to the united_states tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia must be filed within days from the date this determination was mailed to you contact the clerk of the appropriate court for rules for filing petitions for declaratory_judgment to secure a petition from the united_states tax_court write to the united_states tax_court second street n w washington d c our adverse determination was made because a is not operated exclusively for exempt purposes under sec_1_501_c_3_-1 an organization is not operated exclusively for exempt purposes unless it serves a public rather than a private interest with b you ceded effective contro over your impermissibly serving private interests operations to a for-profit corporation in your lease agreement contributions to your organization are not deductible under code sec_170 you are required to file federal_income_tax returns on form_1120 for any years which are still open under the statute_of_limitations based on the information you furnished it appears that returns should be filed beginning with c you should file any returns due for these years or later years i ‘ ’ with the internal_revenue_service center ogden ut as applicable for processing of income_tax returns will not be delayed because you have filed a petition for a declaratory_judgment under code sec_7428 if you have questions about this letter you may write to or call the contact person whose name if you write please telephone number and irs address are shown on the first page of this letter include your telephone number the best time for us to call you if we need more information and a if you copy of this letter to help us identify your account keep the original letter for your records prefer to call and the telephone number is outside your local calling area there will be a long distance charge to you the contact person identified on the front of this letter can access your tax information and help you get answers you also have the right to contact the office_of_the_taxpayer_advocate you can call and ask for taxpayer_advocate assistance or you can contact the nearest taxpayer_advocate office by calling d or writing to local taxpayer_advocate e taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate is not able to reverse legally correct_tax determinations nor extend the time fixed by law that you have to file a petition in the u s tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements sincerely yours of ic-- dpaves i charles f fisher appeals team manager org tin legend org organization name city adm-1 president brp administrator co-2 g xyz state co-1 5th gth gth 67th companies xx date address address city form_886 attachment revised report esq esq-1 esq-2 esq-3 president president co-3 co-4 co-5 co-6 co-7 t 2nd esq president-2 co-8 facts background history early in 19xx a group of concerned city residents formed the co-1 for building a org with community raised funds and matching government grants on march 19xx groundbreaking ceremonies took place and on august 19xxk org org was officially dedicated the 19xx by march of 19xx the org opened the west wing expanding the bed capacity to wing in 19xx the bed capacity changed to its present day beds updated with the latest monitoring equipment of which beds were designated icu beds with the closing of the east six of these beds are icu -bed health_care_facility admitted its first patient on september organizational structure prior to the co-1 lease agreement org was first formed as an association under the name of co-1 the association terminated on august 19xx when it incorporated as a not for profit and changed to its current name org’s corporate powers vested with its board_of trustees the board’s responsibilities included but were not limited to a the employment of personnel b pay out of all necessary expenses c provide the necessary facilities for the conduct of health care d elect the officers of the corporation president two vice-presidents secretary treasurer and org administrator e make appointments to the medical staff f direct the manner in which routine and special activities are carried out and designed to further the objectives of the corporation exhibit there were two classes of membership honorary which was bestow on members that would add honor to the org and sustaining which were those who sustained the org’s objective contributed financial support and had the right to be elected to the board_of trustees sustaining category consisted of the following a governors - required to contribute dollar_figure and became a member for life b founders - who contributed dollar_figure retain membership for life and c regular members - persons that pay annual dues of dollar_figure org tin form_886 attachment revised report the board elected the corporate officers who ran the business of the org through various committees the following principal committees and its responsibilities were executive committee- represented the board_of trustees between meetings of the board joint conference committee - consist of an equal number of members of the corporation and the attending medical staff act as a liaison group between the board_of trustees the administration and the medical staff finance committee- responsible for the preparation of the budget the other committees were building and grounds gifts and endowments public relations legal special specific purpose exhibit the board_of trustees organized the physicians and dentists granted practice privileges in the org had sole power to set up and approved the bylaws which governed them dismissal or failure to renew their practice privileges could appeal to the board_of trustees exhibit the daily management of the org vested with the administrator subject_to the control and direction of the board_of trustees according to the revised and adopted by-laws dated march 19xx the duties of the administrator included but were not limited to carrying out all policies established by the board_of trustees perfect and submit for approval a plan of organization of the personnel prepare an annual budget showing the expected receipts and expenditures as required by the executive committee select employ control and discharge all employees see that all physical properties are kept in a good state of repair and operating condition supervise all business affairs and to ensure that all money is collected and expended to the best possible advantage work with the medical staff and will all those concerned with the rendering of professional service submit regularly to the board_of trustees or its authorized committees reports showing the professional service and financial activities of the org and attend all meetings of the board_of trustees and its committees perform any other duty that may be necessary serve as the liaison officer and channel of communications for all official communications between the board_of trustees or any of its committees and the medical staff exhibit the board_of trustees ‘duties remained constant until july 19xx when the board relinquished control of the org facilities and its operation to co-1 a subsidiary of co-2 a city xyz based for profit corporation that specializes in acute health care management c status org first applied and secured a tentative ruling on march 19xx as a charitable_organization under the name of co-1 the exempt_purpose listed was to raise funds in order to match the co-3 government grants used for the construction of the org on october 19xx org filed form_1023 exemption application listing their purpose as care for the sick to carry on scientific research related to the sick and training o b org tin form_886 attachment revised report institution for faculty the service issued them a private ruling on december 19xx stating that another tentative ruling was not required but that they should apply again after the org had been operative for a full year the service issue a definitive ruling on march 19xx granting exemption from federal income taxes under sec_501 of the code the service’s administrative file shows that org’s administrator adm-1 filed form_4553 notification concerning foundation status on july 19xx and again on december 19xx confirming they were a org under sec_170gii exhibit organizational structure after entering into a lease with co-1 co-1 on july 19xx org‘s board_of trustees entered into a 15-year lease agreement with co-1 to separate and differentiate the two corporations for the benefit of the public and when doing business org used the name of org’s org board association inc the agreement limited and changed the activities duties and role of the trustees when it deals with the operations of the org they can only advise co-1 when it deals with the org and medical office buildings their role is one of a property owner the 20xx bylaws lowered the annual membership dues to dollar_figure and life membership to a member who donates dollar_figure the annual meeting of the membership is held the first week of december and is use to elect members to serve as trustees the board_of trustees is responsible for the business of the org association any new member or existing member beginning a new term is disqualified from membership on this board if they are on co-1’s advisory board org’s web site provides a listing of their recent accomplishments activities which are emergency room renovation project- major contributor org’s org medical complex - entirely funded capital improvements new tvs for patient rooms - co- funded with auxiliary scholarship program - on going employee support and high school seniors patient transport van - co funded with auxiliary board member continuing education - participated co-1 the board_of trustees minutes verified the statements noted above the board members continuing education encompassed an annual tour of the org facilities annual board membership dinner that is open to medical doctors sec_501 status after the lease agreement with co-1 letter since entering into a lease with co-1 org has secured three legal opinions on a dated april 19xx org was told by esq esq of the firm of co-4 in city xyz that based on the terms of the lease agreement and the requirements of sec_501 it no longer qualified as a org the letter also tells them of the requirement to inform the ' board_of trustee bylaws 20xx article ii sec_1 5f org tin form_886 attachment revised report service of any material_change in its operation and that org could prepare and file a request for a ruling on their exempt status esq-2 esq of the firm co-5 in city xyz wrote on may 19xx to org and indicated that their tax-exempt status may be in jeopardy if they build a new surgical wing for co- 1’s use without an increase in the base rent it told org to consider requesting a private_letter_ruling before going further with such an arrangement the last legal opinion secured is from the legal firm of co-6 of city xyz dated august 20xx the firm stated that the acquisition of the medical office complex located at address further org’s tax exempt_purpose since it help provide health care in its geographic area org did not secured a legal opinion about its decision to purchase the address building also known as org’s org medical complex for dollar_figure from past board member president president of co-7 and giving the building to co-1 without remuneration for seven years org never requested a private_letter_ruling or notified the service of its change_of operations or sources of funding org’s filed form s return of organization exempt from income_tax for the years ending june 19xx through 20xx indicates to the service that the organization is not a private_foundation because it’s a org or a cooperative org service_organization under sec_170 of the internal_revenue_code on september 19xx epeo customer service reissued at org’s request a determination_letter indicating that they were exempt from federal_income_tax under sec_501 of the internal_revenue_code the letter from the service states this classification is based on the assumption that your organization’s operations would continue as stated in the application if your organization sources of support or its character method of operations or purposes have changed please let us know so we can consider the effect of the change on the exempt status and foundation status of your organization org‘s board_of trustees opted again to disregard the notification requirements as stated in the service’s letter lease agreements regarding org facilities and medical office buildings on august 19xx a month after the signing of the lease agreement org complied with the co-1’s lease terms article b and provided to co-1 a legal opinion from esq- that attest to the facts as follows board_of trustees of org’s org has the lawful authority to enter into the lease and further that said lease would be binding upon the lessor and its successors on the same date org signed a closing memorandum that described the actions taken prior to closing and actions taken at closing including a bill of sale which listed the assignment for all personal_property both tangible and intangible and all listed contracts and leases the bill of sale documents states that seller has sold conveyed transferred assigned to vested in and by these presents does sell convey transfer assign to and vest in buyer its successors and assigns forever all of seller’s rights title and interest legal or equitable in and to all of the assets described in schedule a schedule a list under section i all org tin form_886 attachment revised report cash accounts and bank accounts construction funds accounts_receivable inventory contracts leases both where seller is lessor and lessee fixtures and equipment iii all right title and interest in and to the name ‘ org’s org inc and variants thereof in co-1 xyz iv all prepaid taxes and expenses attributable to the business or operations of the org the documents were signed by the then org’s chairman - president of the board_of trustees president-2 the lease agreement called for the formation of org’s advisory board whose by-laws gave voting control_over any and all decisions to co-1 and co-1 co-1 inc doing business as org’s org the board was made up of the board members elected by org’s org association the medical chief of staff an co-1 officer and the org administrator an employee of co-1 under the terms of the lease agreement org agreed to relinquish control_over all the assets and activities of the org in return for an annual rental fee of dollar_figure and the assumption of all its outstanding liabilities including the retirement of its existing bond debt of dollar_figure org was also promised __ million in capital renovations and equipment for the first years of the lease pursuant to the terms of the lease agreement co-1 was to operate org’s org and its related activities with the exclusive right to use and control the entire org operations including but not limited to administration services finances and non-medical staffing equipment inventory furnishings supplies renovation and any additions or expansions of the org facilities made by co-1 co-1 was required to operate an emergency room staffed twenty-four hours per day seven days per week at all time during the term of the lease co-1 was also required to provide treatment for all emergency patients and accept all non-elective patients who were residents of its service area and who were determined to be indigent pursuant to the criteria established under xyz law any indigent patient admitted to the org was to be provided the full spectrum of org services without regard to the patient’s ability to pay at the expiration of the lease org was given an option to purchase any assets and equipment placed into service at the org by co-1 the original amount of bond debt was dollar_figure million evidenced by a_trust indenture for org’s org dated december 19xx according to the examination the in existing bond debt was paid off by co-1 prior to co-1 and org entering into the lease agreement article of the lease agreement provides current_assets and current liabilities as set out in article of this lease agreement as of the lease commencement_date lessee co-1 is assuming all current_assets excluding the co-8 and assuming all current liabilities and other long-term debt of lessor org the lessor’s independent auditor shall prepare a balance_sheet as of said date that shall be attached to this lease agreement as exhibit d upon the expiration of the lease_term lessee shall deliver to lessor current_assets at least equivalent in value to the net difference current ratio in current liabilities as shown on exhibit d upon the ‘org tin form_886 attachment revised report on december 19xx org and co-1 made the following amendments to the lease agreement both parties agreed to extend the lease_term for another years without any increase in the rental fees co-1 also agreed to spend million during the first ten years of the lease ending july 20xx and another dollar_figure million during the last ten year ending july 20xx for org improvements and equipment over the extended lease_term org received two legal opinions concerning its lease arrangement with co-1 co-4 legal opinion advises org that its tax-exempt status may be in jeopardy since it may no longer be operating for a charitable purpose but rather a commercial one by relinquishing complete control of the operations of the org to a for profit entity and receiving only rental income as its primary activity the part of co-5 legal opinion dealing with co-1’s lease agreement advises org that it does not adversely affect its tax-exempt status since org satisfies the community benefit standard set out in revrul_69_545 1969_2_cb_117 and the lease furthers org’s tax-exempt purpose org purchased a medical complex building located at address on april 19xx for dollar_figure co-1 had free usage of the medical complex located at address from aprill 19xx till september 19xx org then entered into a written lease for a term of five years at the base monthly rental of dollar_figure plus applicable sales_tax there on the annual rent was adjusted by the rate of inflation as determined by the consumer_price_index section sixteen of the lease gave co-1 the right to sublease the premises to licensed practitioners only for the purpose of the practice of healing arts all sublease had to be approved by org’s executive committee on august 20xx this lease was renewed for another five years ending on august 20xx for the agreed total rental of dollar_figure at the rate of first year second year dollar_figure third year and thereafter dollar_figure plus the applicable current sales_tax applicable org invested a substantial sum of the money it received under the lease agreement to expand the facilities of the org by constructing a new surgical wing the new surgical wing was constructed however primarily for co-1’s benefit and use in 20xx org purchased an adjacent medical office building from four doctors for dollar_figure million which it then immediately leased to co-1 for an annual rent of dollar_figure who in turn subleased it back to the same four doctors the purchase contract agreement expressly provided that in order for the purchase to be consummated all three parties were required to enter into the lease and sublease agreements simultaneously the sale lease and sublease transactions were expiration of the lease_term lessor shall have an option to purchase any assets in excess of those delivered above in compliance with this paragraph article of the lease agreement provides purchase of equipment upon expiration of the lease_term lessor shall have the option but shall not be obligated to purchase all equipment owned by lessee and place in service at the org at lessee’s current book_value or fair_market_value whichever is less further lessor may at its option lease lessee’ computer_software at its then market lease price org form_886 attachment revised report contingent on settlement of ongoing legal suits regarding medical practice restrictions between co-1 and the four doctors owners of the medical office building org board_of trustees minutes report that the purchase of the building was a prudent investment considering that it would have lost the money in the stock market if it had not purchased the building org also received a legal opinion dated august 20xx from the law office of co-6 p a regarding the purchase of the building the opinion advises org that although the purchase_price of the medical office building exceeds a fair market appraisal the acquisition would not jeopardize its tax-exempt status because the purpose of the acquisition is to further org’s tax-exempt purpose to provide healthcare in it geographic area the fact that the office building may not be able to be replaced due to a building moratorium and an income valuation methodology supports the acquisition of the building the lease agreement does not contain a termination clause allowing org’s the right to terminate the agreement if the terms of the agreement or co-1’s operation of the org would jeppardize its exemption under sec_501 org copies of exhibits and schedules identified in or associated with the master lease agreement dated july 19kx were requested from org and co-1 exhibit a which is a legal description of the org campus or the leased premises as referred to in the lease agreement exhibit b which is a list of capital expenditures and equipment co-1 agreed to provide with the dollar_figure million in capital for the first years of the lease exhibit c which is a form service_contract used by the org to contract services for radiologists pathologists and anesthesiologists exhibit d which is a balance_sheet of org’s current_assets and current liabilities that were to be assumed by co-1 which was prepared by an independent auditor exhibit e which is the governing by-laws for the advisory board_of trustees article transfer of liability schedule these documents with the exception of exhibits a and e however were not provided org and co-1 claims that the requested documents were either lost or that they were unable to locate them at the present time capital expenditures article of the lease agreement sets forth the rental obligations of the lessee co-1 to the lessor org’s under the original terms of the lease agreement which was entered on july 19xx co-1 was required to pay and perform the following duties as part of its rental obligation to org’s org tin annual basic rent of dollar_figure additional rent form_886 attachment revised report a b c d e f g h i assume and defease the org’s outstanding bond obligations pay all accounts_payable reflected on the books of the org pay all bank notes payable per balance_sheet assume all operating and capital leases of the org assume all other current and non-current liability spend a minimum of dollar_figure million for capital renovations and equipment during the first months of the lease and an additional dollar_figure million for capital renovations and equipment during the succeeding twenty-four months of the lease pay all accumulated personal leave time to the org employees as of the commencement_date of the lease pay back over a nine month period the estimated medicare overpayment liability not due to medicare pay the directors and officers of org’s annual insurance premiums other obligations any obligation of lessee which under the terms of this lease is construed as a rental obligation the lease was amended on december 19xx the amendments made were as follows lease_term ten year extension of the lease_term to july 20xx new_capital expenditures a during the next ten lease years through july 20xx of the extended lease_term the lessee shall expend a minimum of an additional dollar_figure million for improvements and equipment to the premises b million c during the final lease years through july 20xx of the extended lease_term lessee shall expend a minimum of an additional dollar_figure for improvements and equipment to the premises the expenditures of a total of dollar_figure million over the life of the extended lease_term as set out in paragraph sec_2 and b above shall be over and above the current obligations of the lessee under article 12‘ of the lease to keep and maintain the premises article of the lease agreement contains the provisions for care of premises alterations additions major capital improvements care of premises provides in part that lessee at lessee’s expense shall keep and maintain the premises and improvements in good order and repair ordinary wear_and_tear lessor’s casualty_loss and other lessor’s insured loss excepted alterations additions and capital improvements provides in part that lessee shall have the right to make alterations additions and capital improvements to the premises with any alternations additions and capital improvements that exceed dollar_figure being subject_to the lessor’s reasonable approval ‘org tin form_886 attachment revised report rental increase commencing with the lease year beginning july 20xx the annual rent shall be the base rent of dollar_figure plus an adjustment to the consumer_price_index revised per year not to exceed using the june 20xx average index as the basic standard index definitions all terms used in thi sec_1 amendment shall have the same meaning as contained in the lease except where specifically amended by thi sec_1 amendment remaining lease terms except as specifically amended by thi sec_1 amendment all other terms and conditions of the lease shall remain in full force and effect as set out therein law revocation of org’s exempt status under sec_501 sec_501 of the code requires that an organization be operated exclusively for charitable purposes in order to be exempt from federal_income_tax an organization is not operated exclusively for charitable purposes unless it serves a public rather than a private interest and its net_earnings do not inure to the benefit of any shareholder or individual sec_1_501_c_3_-1 the presence of a single substantial nonexempt purpose can destroy the exemption regardless of the number or importance of exempt purposes 326_us_279 90_led_67 66_sct_112 am campaign acad v commissioner 92_tc_1053 see also old dominion box co inc v united_states f2d cir cert_denied 413_us_910 operating for the benefit of private parties who are not members of a charitable_class constitutes a substantial nonexempt purpose when an organization operates for the benefit of private interest such as designated individuals the creator or his family or persons directly or indirectly controlled by such private interests the organization by definition does not operate exclusively for exempt purposes am campaign acad v commissioner supra pincite- if an organization serves both a public interest and a private interest however an organization will be exempt only if the benefit conferred to the private interest is incidental and not substantial to the exempt_purpose served see gcm date revrul_69_545 1969_2_cb_117 and revrul_78_86 1978_1_cb_151 a private benefit is considered incidental only if it is incidental in both a qualitative and a quantitative sense in order to be incidental in a qualitative sense the benefit must be a necessary concomitant of the activity which benefits the public at large ie the activity can be accomplished only by benefiting certain private individuals and the benefits are indirect or unintentional compare revrul_72_559 1972_2_cb_247 an organization is exempt which provides relief of the poor and distressed by providing training and salaries to recent law graduates who agreed to provide legal services to indigents with revrul_80_287 1980_2_cb_185 an organization is not exempt under sec_501 which provides assistance to persons in need of legal services by operating a lawyer referral service to be incidental in a quantitative sense the private benefit must not be substantial org tin form_886 attachment revised report after considering the overall public benefit conferred by the activity in other words the private benefit conferred by an activity or arrangement is balance only against the public benefit conferred by that activity or arrangement not the overall good accomplished by the organization the promotion of health has long been recognized as a charitable purpose see restatement second of trusts sec_368 sec_372 the service first recognized the promotion of health for the benefit of the community as a charitable purpose within the meaning of sec_501 in revrul_69_545 1969_2_cb_117 in revrul_69_545 1969_2_cb_117 the service compares two hospitals the first hospital discussed is controlled by a board_of trustees composed of independent civic leaders in addition the hospital maintains an open medical staff with privileges available to all qualified physicians it operates a full-time emergency room open to all regardless of ability to pay it otherwise admits all patents able to pay either themselves or through third party payers such as private health insurance or government programs such as medicare and it uses its surplus funds to improve the quality of patient care expand facilities and advance its medical training education and research programs in contrast the second hospital is controlled by physicians who have a substantial economic_interest in the hospital this hospital restricts the number of physicians admitted to the medical staff enters into favorable rental agreements with the individuals who control the hospital and limits emergency room and hospital admission substantially to the patients of the physicians who control the hospital revrul_69_545 notes that in considering whether a nonprofit_hospital is operated to serve a private benefit the service will weigh all the relevant facts and circumstances in each case including the use and control of the hospital the revenue_ruling concludes that the first hospital continues to qualify as an organization described in sec_501 and the second hospital does not because it is operated for the private benefit of the physicians who control the hospital the service has recognized that nonprofit hospitals may enter into certain arrangements with for profit entities to jointly operate a hospital without losing their tax-exempt status revrul_98_15 1998_1_cb_718 compares two situations where an exempt hospital forms a joint_venture with a for-profit entity and then contributes its hospital and all of its other operating_assets to the joint_venture which then operates the hospital in situation the revenue_ruling concludes that the exempt_organization will continue to further charitable purposes when it participates in the joint_venture favorable factors include the binding legal_obligation of the joint_venture to give charitable purposes priority over maximizing profits the community make-up and structure of the board the voting control held by the exempt organization's representatives on the board the specifically enumerated powers of the board and that the terms and conditions of the management_contract are reasonable in situation the revenue_ruling concludes that the organization will fail the operational_test when it participates in the joint_venture because activities of the joint_venture do not otherwise known as the community benefit standard org tin form_886 attachment revised report promote community health and will result in greater than incidental private benefit to the for-profit partner factors leading to this conclusion include shared voting control with the for-profit partner no binding obligation to serve the community which will not necessarily give priority to the health community over maximizing profits and the management company a subsidiary of the for-profit partner is given broad discretion over activities and assets a sec_501 organization may enter into a management_contract with a private party giving that private party authority to conduct activities on behalf of the organization and direct the use of the organization’s assets provided however that the organization retains ultimate authority over the assets and activities being managed and the terms and conditions of the contract are reasonable see broadway theatre league of lynchburg virginia inc v u s f sup w d va ifa private party is allowed to control or to use the nonprofit organization’s activities or assets for the benefit of the private party and the benefit is not incidental to the accomplishment of exempt purposes the organization will fail to be organized and operated exclusively for exempt purposes see 71_tc_1067 the service has also recognized that certain lease arrangements between nonprofit hospitals and private individuals are consistent with the pursuit of furthering a hospital’s exempt_purpose revrul_69_463 1969_2_cb_131 describes the leasing by an exempt hospital of an adjacent office building to a hospital-based medical group pursuant to arms- length negotiations the hospital leased the building to the medical group for use to provide medical services for its private patients the hospital provided the group with nursing secretarial billing collection and recordkeeping services in consideration of a fixed percentage of the group’s gross billings to patients the group was obligated under the contract to provide diagnostic and therapeutic procedures such as anesthesiology and radiology to all hospital patients and to operate the hospital’s emergency room on a hour basis based on the hospital’s showing that the group’s presence resulted in the hospital fulfilling its role as the health center of the community and otherwise contributed importantly to the hospital’s operations the service held the group practice was substantially related to the carrying on of hospital functions and therefore the leasing activity was not an unrelated_trade_or_business under sec_513 in revrul_73_313 1973_2_cb_174 the service specifically addressed the private benefit argument and held that an organization which used community funds to construct a medical complex intended to attract doctors to its medically underserved rural community was exempt because the personal benefits derived by the doctors did not detract from the public purpose of the organization nor lessen the public benefits flowing from its activities the organization made the medical building and facilities available at a reasonable rent to attract a doctor who would provide medical services to the entire community similarly in gcm the service concluded that the extent to which a hospital provided personal benefits to staff members by leasing land adjacent to it to members of its staff and providing the staff with the financing to build a medical center on the land did not detract from the public benefit flowing from these activities and did not constitute the type of private interest prohibited by the regulations the hospital in question was the ‘ org tin form_886 attachment revised report only non-profit general hospital in a rural community without any specialists in certain areas such as orthopedic surgery and gynecology the financing provided by the hospital was at a reasonable rate of return the lease of land was presented and considered in two contexts first at a rental of dollar_figure per year clearly below fair rental value and second at fair rental value the service determined that the financing at a reasonable rate and the lease at fair rental value resulted in only incidental private benefit but that a lease at below fair rental value resulted in more than incidental private benefit to the staff doctors capital expenditures sec_109 of the code provides that gross_income does not include income other than rent derived by a lessor of real_property on the termination of a lease representing the value of such property attributable to buildings erected or other improvements made by the lessee sec_1_109-1 of the regulations provides that the sec_109 exclusion applies only with respect to the income realized by the lessor upon the termination of the lease and has no application to income if any in the form of rent which may be derived by a lessor during the period of the lease and attributable to buildings erected or other improvements made by the lessee it has no application to income which may be realized by the lessor upon the termination of the lease but not attributable to the value of such buildings or improvements neither does it apply to income derived by the lessor subsequent to the termination of the lease incident to the ownership of such buildings or improvements accordingly in order for this exclusion not to apply the lessor and lessee must intend that some or all of the lessee’s capital expenditures are rent and this intent must be plainly disclosed in 305_us_267 the supreme court stated that whether the value of such improvements constitutes rent depends upon the intentions of the parties and that even when the improvements are required by the terms of the lease this value will not be deemed rent unless the intention that it shall be such is plainly disclosed such intent is to be derived not only from the terms of the lease but from the surrounding circumstances 28_tc_670 affd 258_f2d_231 cir government’s position private benefit lease agreement org initially entered into a year lease agreement in which it relinquished control_over the assets and operations of the org to co-1 for an annual rental fee of dollar_figure the assumption of its outstanding liabilities and dollar_figure million in capital improvements the lease was later renegotiated and extended for an additional years in which co-1 would provide an additional dollar_figure million in capital improvements but with no increase in the annual rental fee in analyzing whether the lease agreement is consistent with the pursuit of furthering org’s org tin form_886 attachment revised report exempt_purpose we must determine whether the private benefits that co-1 received under the lease were incidental both in a qualitative and quantitative sense control under the terms of the agreement co-1 was given complete control_over the assets and operations of the org although an advisory board_of trustees was required to be established by org’s org association under the terms of the lease the examination determined that the advisory board had no authority or voting control_over the manner in which co-1 managed the operations of the org under the terms of the lease agreement the revenues generated by the org were to go to co-1 with only dollar_figure going to org as annual rent co-1 thus had every incentive to operate the org in a way to maximize profits over the interests of the community board minutes indicate that the community made several complaints against the org for unreasonably high fees and aggressive collection tactics the examination revealed that the fees charged by co-1 were in fact excessive compared to other non profit orgs the examination also revealed that many of the complaints made by the community and org's advisory board fell on co-1's deaf ears and the fees were not lowered the board_of directors minutes noted org's advisory board's displeasure with co-1's org administrator yet they could not fire him even though he failed to attend meetings allowed for the timely review of doctors contracts subleases hiring and firing of doctors etc as spelled out in the minutes and co-1 verbalized in more than one occasion org was only a landlord and was treated as such when it came to org operations and residents complaints by co-1 we believe that for a nonprofit organization to relinquish complete control_over its affairs to a for profit organization that is also the principal recipient of most of its net_earnings constitutes an impermissible benefit accordingly the control conferred to co-1 is a direct and substantial benefit that is not incidental in either a qualitative or a quantitative sense org should have retained enough control_over the manner in which co-1 managed the org in order to adequately represent and protect the interests of the community capital expenditures rental fees under the terms of the lease agreement org’s received a constant flat rental fee of dollar_figure indexed to cpi with an additional dollar_figure million in capital improvements and expenditures co- agreed to provide as part of its rental obligation from 19xx through 19xx org invested a total of dollar_figure to construct an addition to the emergency room and provide dollar_figure worth of equipment to the org in 19xx org invested dollar_figure to renovate the org entrance and expended an additional dollar_figure for landscaping in 20xx in the years under examination org invested dollar_figure million to construct a new surgical wing and another dollar_figure to renovate the lobby area for the benefit and use of co-1 although org invested a substantial sum of its own the governing by-laws for the advisory board which is identified in the lease as exhibit e has allegedly been lost and cannot be found ‘org tin form_886 attachment revised report monies to improve the operations of the org which was under co-1’s control org’s received nothing in return at a minimum the amount received as rent should have increased in proportion to the capital expenditures made by org these capital expenditures undoubtedly improved the org’s overall profitability which directly benefited co-1 accordingly because org did not receive any benefit proportional to the amount of capital expenditures it made we believe that co-1 is reaping a benefit increased revenue stream from the capital improvements made by org which is more than incidental in both a qualitative and quantitative sense community benefit standard in revrul_69_545 the service considered the following factors in determining whether a hospital operates to serve a public rather than a private interest these factors are commonly known as the community benefit standard whether control of the hospital rests with a board_of trustees composed of independent civic leaders whether the hospital maintains an open medical staff with privileges available to all qualified physicians whether the hospital operates a full-time emergency room open to all regardless of ability to pay whether the hospital admits all patients able to pay either themselves or through third party payers such as private health insurance or government programs such as medicare whether the hospital uses its surplus funds to improve the quality of patient care expand facilities and advance its medical training education and research programs in the instant case the terms of the lease agreement required that a full time emergency room be operated on a 24-hour basis open to all regardless of their ability to pay co-1’s own financial statement states that the value of the health services provided to patients who are financially unable to pay is not material to co-1’s overall results of operations co-1’s priority is the return of investment to its stockholder their policy to patients as noted in the trustees minutes is that unless it is a life or death situation the patient has to pay co-1’s fee or go somewhere else for the elected procedures the examination also indicated that the rental fees org received under the lease agreement were used to expand the medical facilities of the org control of the org however rested entirely with co-1 a for profit entity which had a substantial economic_interest in the operations of the org based on the findings of our examination co-1 used its control of the org for its own private benefit mainly to maximize its own profits by relinquishing complete control of the org to co-1 org fails to meet the community benefit standard as set forth in revrul_69_545 and no longer operates for an exempt_purpose ‘org tin building purchases form_886 attachment revised report since entering into the lease co-1 has been the primary beneficiary of the buildings purchased by org co-1 did not paid rent for seven yet used the medical complex building to recruit medical doctors who in turn procured them patients for the org co-1 started paying rent in 19xx after org made additional leasehold improvements totaling dollar_figure the doctors benefited from the low rent and received an advantage over other doctors with established practices again the benefits provided to co-1 and the doctors far surpassed the benefit to org considering that no remuneration was received for seven years million and leased it to co-1 for an annual rent of dollar_figure the the examination also revealed that org purchased an adjacent medical office building from four doctors leased it to co-1 who subleased back to the four doctors org purchased the building fordollar_figure examination indicated that the primary purpose of org purchasing the building was to allow co-1 to gain control_over the building and be released of its legal liability from the on going suits between the doctors org claims that the purchase was a prudent investment and an irs engineer has determined that the rental fee charged to co-1 was at fair_market_value org also received a legal opinion stating the acquisition would not jeopardize its exempt status regardless of the fact that the purchase of the building may have been a prudent investment or that org received a legal opinion supporting the acquisition it appears that the primary purpose of org is purchasing the building was for the benefit of co-1 and the doctors which is an impermissible private benefit taxpayer’s position the taxpayer agrees with the government’s claim that they are no longer a org org’s negotiations attempts with co-1 have not been fruitful copies of co-1’s correspondence attest to their unwillingness to rescind the lease and give back effective_control to org at the last meeting held with the taxpayer and its representative the latter told of the organization’s plans to buy a building office space to accommodate the network and to proof that org continues to have a charitable exempt_purpose as of today no documentation has been received by the office that such purchase took place conclusion we conclude that org no longer qualifies as organization exempt from federal_income_tax and is no longer described under sec_501 of the internal_revenue_code under sec_6104 of the code the service would be required to notify the state of xyz if this action becomes final we conclude that the effective date of revocation of exempt status is january 19xx effective the date on which this notice of change_of status is made public contributions to org will not be deductible to donors as a charitable deduction under sec_170 and other provisions of the internal_revenue_code that relate to charitable gifts_and_bequests however effective the date of revocation contributions in part responsible for the acts that gave rise to revocation of exempt status are not deductible as charitable_contributions on - org tin form_886 attachment revised report their tax returns rev_proc income_tax returns for all tax years beginning with the tax_year ending january 19xx 1982_2_cb_759 org is required to file federal org tin form_886 attachment revised report legend org organization name companies xx date cco-1 co-2 whether org org continues to maintain its exempt status under sec_501 after entering into a lease agreement with co-1 and co-2 co-2 whether org should have its exempt status revoked and whether the effective’ date of revocation should be july 19xx department of the treasury internal_revenue_service sw 6th court plantation fl tax_exempt_and_government_entities_division org address uil form taxpayer_identification_number tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear sir we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in if we issue a determination_letter to you based on technical_advice no publication further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do _not protest this proposed determination within days from the date of this letter the irs will consider it to be a failuré to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies final revocation letter we within the internal_revenue_service we will then issue a will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination of extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance lf you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you thank you for your cooperation if you write please provide a telephone number and sincerely internal revenue_agent gulf coast eo enclosures publication publication report of examination letter catalog number 34809f


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-164016-04 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities -------------------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business ceased to be an employer under the railroad retirement act and the railroad unemployment insurance act effective -------------------------- --------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------- ------------------------------------------------------ we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that ---------------------------------------ceased to be an employer under the railroad_retirement_tax_act effective -------------------------- please take the appropriate action regarding this business cc _____________________________ janine cook


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 tege eoeg teb presp-148143-06 date date dear --------------- pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the project described in appendix a attached hereto is qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------------------------- --------------------------------------------------------------------------------------------------------------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure------------- of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the project described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met if you have any questions with respect to this allocation please contact --------------------- ---------------------------------------- of the office of division counsel associate chief_counsel tax-exempt and government entities on -------------------- not a toll-free call 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 presp-148143-06 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in appendix a is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above 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 form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation 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 application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-148143-06 borrower name appendix a project type project location ------------------------------- ---------- wind facility amount allocated dollar_figure-------------


number release date id office uilc cca_2010080908461637 ---------- from ------------------- sent monday august am to -------------------------------- cc ----------- subject re under section c last sentence a settlement by a pass-thru_partner binds indirect partners to the settlement of partnership items the problem is that the form 870-lt unlike the pt version of the form has a second part separately executed with respect to affected items a pas-thru partner cannot bind indirect partners as to partner-level items on part ii of this form so you are correct that the indirect partners should sign this form since the trust cannot sign part ii for them


internal_revenue_service number release date index numbers ----------------------------- ---------------------------------------------- ------------------------ ------------------------------------------------------------ ------- --------------------------------------- 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-112161-09 date date legend x --------------------------------------------------- ------------------------------------------------ d1 d2 country -------------------------- -------------------------- ----------------------- dear --------------- this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed on d1 under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d2 however x inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes effective d2 plr-112161-09 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single owner having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 and iii provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_7701-3 provides that an election under sec_301_7701-3 must be signed by - a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organizational documents to make the election and who represents to having such authorization under penalties of perjury sec_301_7701-3 provides that if a purchasing_corporation makes an election under sec_338 regarding an acquired subsidiary an election under sec_301 c i for the acquired subsidiary can be effective no earlier than the day after the acquisition_date within the meaning of sec_338 under sec_301_9100-1 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 internal_revenue_code except subtitles e g h and i section b 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 that 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 rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 plr-112161-09 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 conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a properly executed form_8832 effective d2 with the appropriate service_center to elect to be classified as a disregarded_entity a copy of this letter should be attached to the form_8832 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 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 curt g wilson curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


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 corp plr-119010-09 date date legend taxpayer ------------------------------------------------------------------------------------------------- ---------------------- state x ------------- date1 --------------------------- date --------------------------- dear ------------------ this letter responds to your date request for rulings as to the federal_income_tax consequences of a proposed transaction the information received in that request and in subsequent correspondence is summarized below the rulings contained in this letter are based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process summary of facts taxpayer is a state x limited_liability_company that elected to be treated as a corporation and regulated_investment_company ric for federal_income_tax purposes taxpayer represents that it qualifies as a ric under the internal_revenue_code the code that it intends to maintain such qualification as a ric and that it regularly plr-119010-09 distributes its earnings_and_profits as required under sec_852 taxpayer has outstanding one class of common_stock the common_stock which is not traded on any established_securities_market and preferred_stock and auction preferred_stock taxpayer intends to make a spillback dividend with respect to its taxable_year ending date and one or more future dividends and one or more future spillback dividends with respect to its taxable_year ending date collectively the special dividends common_stock shareholders will have the right to elect to receive special dividends in cash or stock of equivalent value as described below unless paid entirely in cash taxpayer expects to declare the special dividends using the following election mechanism each common_stock shareholder may elect to receive its dividend in the form of a cash the cash_option or b common_stock the stock_option by the election deadline if a stockholder fails to make a valid election by the election deadline that stockholder will be deemed to have elected the stock_option the total amount of cash payable in a special dividend will be limited to an amount equal to approximately percent or more of the special dividend the calculation of the number of shares to be received by any stockholder will be determined during the one to three business days following the election deadline based upon a formula utilizing net asset value that is designed to equate in value the number of shares to be received with the amount of money that could be received instead the special dividend payment_date will be as close as reasonably practicable following the end of the valuation period while each stockholder will have the option to elect to receive cash in lieu of stock for all of the stockholder's entire entitlement under a special dividend taxpayer will limit the amount of cash to be distributed in the aggregate to approximately percent or more of the special dividend such amount the cash limit any cash paid in lieu of fractional shares of common_stock will not count towards the cash limit in no event will the total amount of cash available be less than percent of the special dividend if the total number of shares of common_stock with respect to which an election to receive the dividend in cash is made cash election shares would result in the payment of cash in an aggregate amount that is less than or equal to the cash limit then all holders of cash election shares will receive the special dividend on all such shares in cash if the number of cash election shares would result in the payment of cash in an aggregate amount that is greater than the cash limit then stockholders electing to receive the special dividend in cash will receive the special dividend on their cash election shares as follows plr-119010-09 a cash on each stockholder's cash election shares equal to the proportion that such stockholder's cash election shares bear to the total cash election shares of all stockholders multiplied by an amount equal to the cash limit plus b shares of common_stock in payment of the special dividend on each stockholder's remaining cash election shares as a result if too many stockholders elect to receive the special dividend in cash the stockholder may instead receive a pro_rata amount of cash but in no event less than percent of their entitlement under the special dividend rulings based solely on the information provided and the representations made we rule as follows with respect to the special dividends any and all of the cash and stock distributed in the special dividends by taxpayer will be treated as a distribution_of_property with respect to its stock to which sec_301 applies sec_301 and sec_305 the amount of the distribution of the stock received by any stockholder electing to receive stock will be considered to equal the amount of the money which could have been received instead sec_1_305-1 caveats we express no opinion about the tax treatment of the proposed transaction under other provisions of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the proposed transaction that is not specifically covered by the above rulings in particular no opinion is expressed with regard to whether taxpayer qualifies as a ric under subchapter_m of the code or whether any of the dividends constitute a preferential_dividend under sec_562 furthermore no opinion is expressed as to the reasonableness of taxpayer’s stock valuation method procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 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 alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling in accordance with the power plr-119010-09 of attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely _____________________________ richard k passales senior counsel branch office of associate chief_counsel corporate cc


t c memo united_states tax_court susan f mostafa petitioner v commissioner of internal revenue respondent docket no filed date susan f mostafa pro_se nhi t luu-sanders and thomas j travers for respondent memorandum findings_of_fact and opinion haines judge respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure and additions to tax of dollar_figure and dollar_figure under sec_6651 and respectively all section references are to the internal_revenue_code continued after concessions the issues for decision are whether petitioner must include wages of dollar_figure in her gross_income whether she must include individual_retirement_account ira_distributions of dollar_figure in her gross_income whether she is liable for an addition_to_tax under sec_6651 of dollar_figure whether sec_6501 bars respondent from assessing any_tax due and whether petitioner is entitled to reasonable_litigation_costs findings_of_fact petitioner resided in a state within the jurisdiction of the court_of_appeals for the ninth circuit when she filed her petition during petitioner worked for a public school district and received wage income of dollar_figure petitioner had three iras during one account with t rowe price the t rowe price ira and two accounts with the lindner growth fund administered by star bank the first star bank ira and the second star bank ira respectively on date petitioner received a dollar_figure distribution from continued as amended and all rule references are to the tax_court rules_of_practice and procedure amounts are rounded to the nearest dollar respondent concedes that petitioner is not liable for an addition_to_tax under sec_6651 and as a result seeks to increase the addition_to_tax under sec_6651 to dollar_figure the first star bank ira on date petitioner made a dollar_figure contribution to the second star bank ira on date petitioner received a dollar_figure distribution from the second star bank ira petitioner did not have any_tax withheld from the ira_distributions petitioner did not file a federal_income_tax return for on date petitioner attempted to file a return for and elected married_filing_jointly status however respondent did not process the return because it was not signed by petitioner’s husband on date respondent sent petitioner a notice_of_deficiency covering her taxable_year using information received from third parties respondent determined that petitioner was required to include in gross_income wages of dollar_figure from the public school district and ira_distributions of dollar_figure from star bank respondent allowed petitioner a personal_exemption of dollar_figure and a standard_deduction of dollar_figure and determined a corresponding income_tax deficiency of dollar_figure respondent also determined that petitioner was liable for additions to tax of dollar_figure and dollar_figure under sec_6651 and respectively on date petitioner filed a petition with thi sec_3 respondent concedes petitioner is not liable for the sec_6651 addition_to_tax see supra note court upon order of this court petitioner filed an amended petition on date contesting respondent’s determinations opinion gross_income means all income from whatever source derived including income from compensation_for services sec_61 petitioner admitted receiving wage income of dollar_figure from the public school district therefore we find petitioner must include dollar_figure in her gross_income as determined by respondent generally distributions from an ira are includable in the distributee’s gross_income as provided in sec_72 sec_408 110_tc_110 however rollover_contributions are not includable in gross_income sec_408 lemishow v commissioner supra pincite to qualify as a rollover_contribution the ira distribution must be rolled over into an ira or other qualified_plan within days of the distribution sec_408 lemishow v commissioner supra pincite sec_1_408-4 and income_tax regs petitioner argues that the dollar_figure distribution from the first star bank ira is not included in her gross_income because the distribution was rolled over into her second star bank ira within days petitioner received the distribution from the on brief petitioner argues that she rolled over an additional dollar_figure into her t rowe price ira on date continued first star bank ira on date and did not make a contribution to the second star bank ira until date days later petitioner offered inconsistent testimony and explanations as to why the contribution was made days after the expiration of the rollover period the only facts in the record show that the contribution was made more than days after the date of distribution for this reason the distribution does not qualify as a rollover_distribution and it must be included in petitioner’s gross_income see sec_408 petitioner does not argue that the remaining dollar_figure distribution was rolled over or is otherwise not includable in her gross_income therefore we find that petitioner must continued petitioner did not introduce any evidence to substantiate the alleged rollover nor is it consistent with the facts the only ira distribution she received before the alleged rollover was dollar_figure on date thus she only had dollar_figure available to roll over the amount of the alleged star bank rollover and we do not consider the alleged t rowe price rollover further petitioner testified that if the bank received an ira rollover request after p m on a friday the rollover would not be reflected in the account until the following monday even if such a situation could offer petitioner relief from the 60-day requirement it would not do so in this case at times petitioner testified that she made the rollover request on date a thursday and at other times she testified that she made the request on date a friday to be consistent with her explanation of the delay the request would have been made on friday date if that were the case the rollover would have been reflected in her account on the following monday date it was not reflected in the account until tuesday date include ira_distributions of dollar_figure in her gross_income as determined by respondent because petitioner was required to include dollar_figure of wage income and dollar_figure of ira_distributions in her gross_income we sustain respondent’s determination of a dollar_figure deficiency in petitioner’s federal_income_tax sec_6651 imposes an addition_to_tax for failure_to_file a return on the date prescribed determined with regard to any extension of time for filing unless the taxpayer can establish that such failure is due to reasonable_cause and not due to willful neglect the commissioner bears the burden of production with respect to the taxpayer’s liability for the addition_to_tax sec_7491 116_tc_438 to meet his burden of production the commissioner must come forward with sufficient evidence indicating that it is appropriate to impose the addition_to_tax higbee v commissioner supra pincite respondent introduced into evidence form_4340 certificate of assessments payments and other specified matters which shows petitioner failed to file a return for we find that respondent has met his burden of production to avoid the respondent does not argue that the ira_distributions are subject_to a 10-percent additional tax under sec_72 addition_to_tax petitioner must show that her failure_to_file was due to reasonable_cause and not due to willful neglect petitioner testified that she did not file a return because her gross_income was less than the exemption_amount see sec_6012 however as found above petitioner was required to include dollar_figure in gross_income which exceeds the exemption_amount for a married_person filing separately as adjusted for inflation and she was thus required to file a return see id revproc_95_53 1995_2_cb_445 petitioner’s mistake as to or ignorance of the law does not amount to reasonable_cause that would relieve her from the addition_to_tax see 25_tc_13 joye v commissioner t c memo guthrie v commissioner tcmemo_1989_168 petitioner has not shown that her failure_to_file was due to reasonable_cause and not due to willful neglect therefore we hold that petitioner is liable for an addition_to_tax under sec_6651 of dollar_figure petitioner argues that respondent was barred from beginning an audit because the 3-year period of limitations had expired petitioner cites no authority for her proposition we assume petitioner is arguing that respondent is barred from assessing because respondent conceded that petitioner is not liable for an addition_to_tax under sec_6651 the sec_6651 addition_to_tax i sec_25 percent of the amount required to be shown on the return dollar_figure x dollar_figure dollar_figure see also supra note any_tax due because the 3-year period of limitations under sec_6501 has expired sec_6501 provides except as otherwise provided in this section the amount of any_tax imposed by this title shall be assessed within years after the return was filed whether or not such return was filed on or after the date prescribed however sec_6501 provides that in the case of a failure_to_file a return the tax may be assessed at any time petitioner argues that more than years has passed from the time she filed a return on date and thus respondent is barred from assessing the tax however the return was never filed because it was not signed by petitioner’s husband because petitioner did not file a return the period of limitations on assessment remained open indefinitely see sec_6501 on brief petitioner argues that she is entitled to recover reasonable litigation expenses from respondent petitioner did not raise the issue in a proper motion for reasonable_litigation_costs see rule a and b even if petitioner were to raise the issue at the proper time and in the proper manner she would not be entitled to reasonable litigation expenses because she is not the prevailing_party see sec_7430 rule e in reaching our holdings we have considered all arguments made and to the extent not mentioned we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


tcmemo_2008_104 united_states tax_court david j minor petitioner v commissioner of internal revenue respondent docket no filed date larry d harvey for petitioner randall l preheim for respondent memorandum opinion vasquez judge this case is before the court on respondent’s motion for summary_judgment pursuant to rule unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect for the year in issue after a concession the sole issue for decision is whether petitioner can exclude from income wages earned during from working in antarctica background at the time he filed the petition petitioner resided in california during petitioner performed services at mcmurdo station in ross island antarctica on hi sec_2002 federal_income_tax return petitioner excluded wage income earned and received during for services performed in antarctica i summary_judgment discussion rule a provides that either party may move for summary_judgment upon all or any part of the legal issues in controversy full or partial summary_judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact and that the legal issues presented by the motion may be decided as a matter of law see rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law respondent concedes that no penalty pursuant to sec_6662 is due from petitioner for ii in general sec_61 provides that gross_income means all income from whatever source derived accordingly citizens of the united_states generally are taxed on income earned outside the geographical boundaries of the united_states unless the income is specifically excluded from gross_income 117_tc_95 affd sub nom 68_fedappx_44 9th cir affd sub nom 357_f3d_1108 10th cir exclusions from income are construed narrowly and taxpayers must bring themselves within the clear scope of the exclusion id iii sec_911 in 126_tc_89 473_f3d_790 7th cir arnett ii we addressed the arguments made by the parties herein regarding sec_911 the u s court_of_appeals for the seventh circuit agreed with our analysis of sec_911 and affirmed our conclusion that antarctica is not a foreign_country pursuant to sec_911 and the regulations thereunder arnett v commissioner f 3d pincite we shall not repeat our analysis from arnett i herein we follow our analysis and holding in arnett i and the analysis and holding of the court_of_appeals in arnett ii in 126_tc_89 affd 473_f3d_790 7th cir we concluded our opinion with a continued iv conclusion accordingly for the reasons stated in arnett i arnett ii and herein we conclude that petitioner cannot exclude from gross_income wages earned during from working in antarctica to reflect the foregoing an appropriate order and decision will be entered continued citation of sec_863 suggesting that sec_863 provided an additional reason to rule against the taxpayer id pincite see also sec_863 providing that income earned in antarctica by a u_s_person is sourced in the united_states in arnett v commissioner f 3d pincite the u s court_of_appeals for the seventh circuit addressed sec_863 in greater detail stating at the outset we think that it is important to note that considering antarctica not to be a foreign_country is compatible with the general statutory scheme notably sec_911 is found under subtitle a chapter subchapter_n of the irc which is designated tax based on income from sources within or without the united_states part i of this subchapter entitled source_rules and other general rules relating to foreign_income deems any activity in antarctica to be space_or_ocean_activity in turn the united_states is designated the source country of income from such activity when earned by a citizen_of_the_united_states sec_863 although this provision does not provide a definitive answer as to whether antarctica is a foreign_country it supports the conclusion that sec_911 is not intended to apply to income earned for services provided in antarctica we take this opportunity to state our agreement with the court of appeals’ conclusion set forth above see also 450_us_1


internal_revenue_service department of the treasury index number u i l no washington dc number release date legend person to contact telephone number refer reply to cc dom p si plr-106228-99 date date company state shareholders a dear this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated on a in state company has two shareholders shareholders it is represented that company has intended to be an s co believing itself to be an s_corporation company has operated accordingly since a after the end of its taxable_year beginning on a however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on a sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 explains when an s election will be effective generally if an s election is made within the first two and one half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on a however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of a with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation 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 jeff erickson assistant to the chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes