t c summary opinion united_states tax_court moussa i kourouma petitioner v commissioner of internal revenue respondent docket no 20515-06s filed date moussa i kourouma pro_se harry j negro and joann f zidanic for respondent jacobs judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case subsequent section references are to the internal_revenue_code code as amended and all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies of dollar_figure and dollar_figure respectively in petitioner’s and federal_income_tax in addition respondent determined that petitioner is liable for accuracy-related_penalties under sec_6662 of dollar_figure for and dollar_figure for after concessions by petitioner the issues remaining for decision are whether an activity carried on by petitioner operated under the name excelix constituted a trade_or_business within the purview of sec_162 and if so whether petitioner is entitled to deduct certain expenses he claims he incurred with respect to the excelix activity in and or whether petitioner is entitled to charitable_contribution deductions for and or and whether petitioner is liable for accuracy-related_penalties under sec_6662 for and or 1respondent determined that petitioner’s correct_tax liability for is dollar_figure rather than dollar_figure as reported on petitioner’s tax_return also respondent disallowed an additional_child_tax_credit of dollar_figure thus the deficiency determined for is dollar_figure respondent determined that petitioner’s correct_tax liability for is dollar_figure rather than zero as reported on petitioner’s tax_return also respondent disallowed an additional_child_tax_credit of dollar_figure thus the deficiency determined for is dollar_figure 2respondent in his notice_of_deficiency disallowed various other claimed deductions petitioner either explicitly conceded those items or did not address them at trial consequently petitioner is deemed to have conceded entitlement to such deductions pursuant to rule b background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time petitioner filed his petition he resided in delaware petitioner a native of guinea is an electrical engineer from to petitioner worked full time as an analyst trader for phi service co phi a company which trades ie purchases and sells electrical power commencing in petitioner attempted to interest electric companies in acquiring software that he had developed which could be used to predict the future price of electricity accurately predicting the price of electricity enabled the electric company to purchase electricity when prices were low and sell electricity when prices were high in the state of delaware issued a business license to petitioner to conduct this activity under the name excelix petitioner’s excelix activity did not generate any revenues in petitioner’s excelix activity generated dollar_figure of revenues from one customer in petitioner’s excelix activity did not generate any revenues in excelix did not have any employees during or petitioner’s excelix activity was ultimately unsuccessful generating dollar_figure million of unpaid liabilities and or losses by the time of trial petitioner timely filed form sec_1040 u s individual_income_tax_return for and reporting dollar_figure of income from excelix in and no income from excelix in on a schedule c profit or loss from business attached to each return petitioner claimed an array of deductions stemming from his excelix activity amounting to dollar_figure in and dollar_figure in on schedules a itemized_deductions petitioner claimed charitable_contribution deductions of dollar_figure in and dollar_figure in petitioner reported tax of dollar_figure on his return and no tax obligation on his return after taking into account wage withholdings and child tax_credits petitioner claimed that he was entitled to tax refunds of dollar_figure for and dollar_figure for respondent asserts that petitioner’s excelix activity in and did not constitute a trade_or_business for which deductions under sec_162 are available and even if petitioner’s excelix activity constituted a trade_or_business petitioner failed to substantiate his claimed deductions with respect thereto respondent contends that any contributions petitioner made in and were not deductible under sec_170 because they were not made to an organization created or organized in the united_states respondent further claims that petitioner did not adequately substantiate his claim that he made deductible charitable_contributions finally respondent asserts that petitioner is liable for the sec_6662 accuracy-related_penalty for and for substantial understatements of income_tax discussion as a general_rule the commissioner’s determinations in the notice_of_deficiency are presumed correct and the burden of proving an error is on the taxpayer rule a however pursuant to sec_7491 the burden_of_proof with respect to any factual issue relating to ascertaining the liability for tax shifts to the commissioner if the taxpayer maintained adequate_records satisfied the substantiation requirements cooperated with the commissioner’s agents and during the court_proceeding introduced credible_evidence with respect to the factual issue involved the taxpayer bears the burden of proving that he has met the requirements of sec_7491 miner v commissioner tcmemo_2003_39 nichols v commissioner tcmemo_2003_24 affd 79_fedappx_282 9th cir although neither party has directly raised sec_7491 as an issue for the reasons discussed infra we conclude that petitioner has neither complied with all substantiation requirements of the code nor maintained all required records see sec_6001 sec_7491 consequently petitioner has the burden_of_proof respecting factual issues relevant to his liability for the deficiencies in tax determined by respondent petitioner’s excelix activity respondent determined that petitioner’s excelix activity did not constitute an active trade_or_business for which deductions under sec_162 are available to be engaged in a trade_or_business within the meaning of sec_162 an individual taxpayer must be involved in the activity with continuity regularity and the primary purpose of deriving a profit 480_us_23 whether the taxpayer is carrying_on_a_trade_or_business requires an examination of all of the facts in each case id pincite although a reasonable expectation of profit is not required the taxpayer’s profit objective must be actual and honest 78_tc_642 affd without published opinion 702_f2d_1205 d c cir sec_1_183-2 income_tax regs whether a taxpayer has an actual and honest profit objective is a question of fact to be answered from all of the relevant facts and circumstances hastings v commissioner tcmemo_2002_310 sec_1_183-2 income_tax regs the pertinent regulations set forth a nonexhaustive list of factors that may be considered in deciding whether a profit objective exists these factors include the manner in which the taxpayer carries on the activity the expertise of the taxpayer or his advisers the time and effort expended by the taxpayer in carrying on the activity the expectation that assets used in the activity may appreciate in value the success of the taxpayer in carrying on other similar or dissimilar activities the taxpayer’s history of income or losses with respect to the activity the amount of occasional profits if any which are earned the financial status of the taxpayer and the elements of personal pleasure or recreation 72_tc_411 affd without published opinion 647_f2d_170 9th cir sec_1_183-2 income_tax regs no single factor or group of factors is determinative golanty v commissioner supra pincite a final_determination is made only after a consideration of all of the relevant facts and circumstances we do not believe it necessary to analyze each of the factors enumerated in sec_1_183-2 income_tax regs in determining whether petitioner engaged in the excelix activity with an actual and honest objective of making a profit rather we focus on the factors we believe more important and applicable in this case our analysis of those factors leads to the conclusion that petitioner’s excelix activity was not a trade_or_business for purposes of sec_162 the record shows that petitioner’s excelix activity generated dollar_figure of revenue in and no revenue in or moreover it appears that the excelix activity did not generate revenues in any subsequent year consequently the excelix activity generated a substantial amount of debt and or losses it does not appear that petitioner kept contemporaneous or methodical records of any kind with respect to his excelix activity the scant documentation that petitioner submitted at trial in support of his claim that he incurred deductible business_expenses was unreliable and contradictory petitioner did not hire any employees or advisers in connection with his excelix activity with the possible exception of one person in in sum petitioner failed to carry his burden of proving 3for example petitioner attempted to substantiate claimed travel_expenses by submitting a mileage summary showing that in he made sixty-seven 64-mile trips to valley forge pa fourteen 72-mile trips to baltimore md four 283-mile trips to albany n y twelve 316-mile trips to pittsburgh pa twelve 283-mile trips to rensselaer n y and fourteen 295-mile trips to holyoke mass petitioner submitted a calendar which purported to reflect meetings he attended in pursuit of his excelix activity we do not find this evidence credible because in our opinion the timing and frequency of such meetings would have been incompatible with contemporaneous full-time employment at phi 4petitioner did not sufficiently investigate the background of that person also a native of guinea to determine whether that person was in the united_states lawfully following the arrest of that person petitioner posted a bond and thereafter the person absconded while these events do not reflect on the continued that he was involved in the excelix activity with the requisite continuity and regularity and with the primary purpose of deriving a profit see commissioner v groetzinger supra pincite because we agree with respondent’s determination that petitioner’s excelix activity was not a trade_or_business for purposes of sec_162 we hold that petitioner is not entitled to the deductions for expenses he claims he incurred with respect to the excelix activity in and respondent’s determination with respect to this issue is sustained petitioner’s charitable_contribution deductions petitioner claimed charitable_contribution deductions of dollar_figure in and dollar_figure in sec_170 a allows a deduction for charitable_contributions during the taxable_year if verified as provided in the regulations the term charitable_contribution includes a contribution or gift to a corporation trust or community chest fund or foundation with certain provisos sec_170 for example the recipient organization must have been created or organized in the united_states or in any possession thereof or continued expertise of the person as an adviser to petitioner with respect to his excelix activity if as petitioner claims the person did actually advise petitioner with respect to the excelix activity they highlight petitioner’s lack of a businesslike approach to his selection of an adviser as well as to his excelix activity generally under the law of the united_states any state the district of columbia or any possession_of_the_united_states sec_170 furthermore no part of the net_earnings of a qualified_organization may inure to the benefit of any private_shareholder_or_individual sec_170 the charitable_contribution_deduction is subject_to certain substantiation requirements sec_170 no deduction is allowed for any contribution of dollar_figure or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution from the qualified donee organization sec_170 this written acknowledgment must state the amount of cash and a description but not necessarily the value of any property other than cash the taxpayer donated and whether any consideration was given to the taxpayer sec_1_170a-13 income_tax regs it appears that the charitable_contributions petitioner claimed in and related to an organization in guinea and not to an organization described in sec_170 petitioner did not provide any documentary_evidence such as checks or wire transfers of having made payments to any charitable_organization either in the united_states or elsewhere therefore we hold that petitioner did not carry his burden of proving his entitlement to the claimed charitable_contribution deductions respondent’s determination with respect to this issue is sustained petitioner’s liability for accuracy-related_penalties under sec_7491 the commissioner has the burden of production with respect to any penalty once the commissioner meets the burden of production the taxpayer continues to have the burden_of_proof with respect to whether the commissioner’s determination of the penalty is correct rule a 116_tc_438 respondent determined that petitioner is liable for the sec_6662 penalty because he underpaid his tax for both and and that those underpayments are attributable to substantial understatements of income_tax within the meaning of sec_6662 for purposes of sec_6662 an understatement is equal to the excess of the amount of tax required to be shown in the tax_return over the amount of tax shown in the return sec_6662 and is substantial in the case of an individual if the amount of the understatement for the taxable_year exceeds the greater of percent of the tax required to be shown in the return for that taxable_year or dollar_figure sec_6662 petitioner’s return reported tax of dollar_figure respondent determined and we agree that the tax required to be shown on the return was dollar_figure petitioner’s return reported no tax respondent determined and we agree that the tax required to be shown on the return was dollar_figure the understatement for each year exceeds percent of the tax required to be shown in the returns and for each year the amount of the understatement is greater than dollar_figure there are substantial understatements for both and see sec_6662 the accuracy-related_penalty under sec_6662 does not apply to any portion of an underpayment if it is shown that there was reasonable_cause for and that the taxpayer acted in good_faith with respect to such portion sec_6664 the determination of whether the taxpayer acted with reasonable_cause and in good_faith depends on the pertinent facts and circumstances including the taxpayer’s efforts to assess the taxpayer’s proper tax_liability the knowledge and experience of the taxpayer and the reliance on the advice of a professional such as an accountant sec_1_6664-4 income_tax regs reliance on the advice of a professional such as an accountant does not necessarily demonstrate reasonable_cause and good_faith unless under all the circumstances such reliance was reasonable and the taxpayer acted in good_faith id in this connection a taxpayer must demonstrate that his her reliance on the advice of a professional concerning substantive tax law was objectively reasonable 66_f3d_729 5th cir affg in part and revg in part tcmemo_1994_228 39_f3d_402 2d cir affg tcmemo_1993_480 petitioner has not carried his burden of proving that he had reasonable_cause and acted in good_faith with respect to the underpayment for either or petitioner testified that he relied on a person who lived in the same housing complex as he did as his tax and legal assistant and later discovered that person was not qualified to render legal or accounting advice there is no corroborating evidence to substantiate petitioner’s claim that he relied on the assistance or collaboration of another person in connection with the preparation of either his or his tax_return assuming that petitioner relied on another person petitioner admitted that person was not qualified to render legal or accounting advice in any event there is nothing in the record to enable us to hold that petitioner’s reliance on that other person was reasonable finally we are mindful that neither the nor the tax_return was signed by a tax_return_preparer therefore we cannot hold that petitioner reasonably relied on the informed and studied advice of a competent tax professional although petitioner does not have a background in taxation he is an educated professional we doubt that petitioner reasonably and in good_faith could have believed that he was entitled to the deductions which respondent disallowed because petitioner has failed to prove that he is entitled to relief under sec_6664 we reject petitioner’s arguments that he should be relieved of the sec_6662 penalties respondent’s determination with respect to this issue is sustained to reflect the foregoing and concessions by petitioner decision will be entered for respondent


t c no united_states tax_court levon johnson petitioner v commissioner of internal revenue respondent docket no filed date in p received dollar_figure in monthly advance_payments of the premium_tax_credit ptc under the affordable_care_act p’s reported modified_adjusted_gross_income magi was within the amount needed to qualify him for the ptc p did not include in his magi all social_security_benefits received during which included a lump sum attributable to in his amended federal_income_tax return p made an sec_86 election to exclude a portion of the social_security_benefits received during from his gross_income p’s amended_return showed dollar_figure of excess advance_payments of the ptc respondent determined that p’s excess ptc was the entire dollar_figure because under sec_36b all of p’s social_security_benefits received during including those relating to must be included in computing whether p was entitled to the ptc the inclusion of all social_security_benefits would result in p’s having magi outside of the range for entitlement to the ptc held for purposes of determining a taxpayer’s eligibility for a ptc pursuant to sec_36b magi includes all social_security_benefits received during the taxable_year irrespective of any sec_86 election held further r’s determination is sustained walter edward afield for petitioner huiwen a xi and john w sheffield iii for respondent opinion gerber judge respondent determined a dollar_figure income_tax deficiency for petitioner’ sec_2014 taxable_year this case was submitted fully stipulated pursuant to rule the seminal legal issue one of first impression concerns whether for purposes of determining petitioner’s eligibility for a premium_tax_credit ptc sec_36b requires the inclusion of social_security_benefits in petitioner’s computation of modified_adjusted_gross_income magi in spite of a sec_86 election that is we consider whether petitioner must include in hi sec_1unless 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 at issue all amounts are rounded to the nearest dollar magi all the social_security_benefits received in including lump-sum amounts relating to for which petitioner filed a sec_86 election background the following facts are derived from the joint stipulation of facts and attached exhibits petitioner while residing in the state of georgia timely filed his petition with the court in petitioner received dollar_figure of social_security_benefits of which dollar_figure was attributable to a lump-sum payment relating to and dollar_figure was attributable to social_security_benefits during petitioner enrolled in a health insurance plan through the health insurance marketplace from march through date petitioner received monthly advance_payments of the ptc aptc of dollar_figure to cover a portion of the cost of the monthly health insurance premiums petitioner received a total of dollar_figure in aptcs during petitioner timely filed hi sec_2014 form_1040 u s individual_income_tax_return on which he reported dollar_figure of wages and dollar_figure of taxable social_security_benefits he did not report any excess aptcs on hi sec_2014 form_1040 and did not file the required form_8962 premium_tax_credit ptc respondent in a notice_of_deficiency dated date determined that petitioner must repay dollar_figure of excess aptcs on date petitioner made a sec_86 election on an amended form 1040a u s individual_income_tax_return on hi sec_2014 amended form 1040a he reported dollar_figure of adjusted_gross_income consisting of dollar_figure of wages and dollar_figure of taxable social_security_benefits on his form_8962 he reported magi of dollar_figure which included his social_security_benefits relating to and a portion relating to petitioner also reported an excess aptc repayment of dollar_figure on his amended form 1040a and form_8962 discussion as a general_rule the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of showing that those determinations are erroneous rule a 503_us_79 290_us_111 accordingly petitioner bears the burden of showing he was entitled to a ptc for congress enacted the patient protection and affordable_care_act aca publaw_111_148 124_stat_119 to improve access to and the delivery of health care services for all individuals particularly low income underserved 2there is no dispute between the parties concerning the burden_of_proof in this case and the facts were agreed to and submitted to the court by the parties uninsured minority health disparity and rural populations id sec_5001 sec_124 stat pincite sec_36b a provision enacted as aca sec_1401 and stat pincite permits certain specified taxpayers to receive a subsidy reducing the cost of health insurance purchased through a health insurance exchange in the form of a federal_income_tax credit equal to the ptc amount for the taxable_year sec_36b b and c see mcguire v commissioner 149_tc_254 providing a full discussion of eligibility requirements the ptc is generally available to taxpayers with a household_income of at least but not more than of the federal poverty_line sec_36b sec_1_36b-2 income_tax regs household_income is the sum of the taxpayer’s magi plus the magi of family members for whom the taxpayer properly claims deductions for personal exemptions and who were required to file a federal_income_tax return under sec_1 sec_36b the federal poverty_line is defined by the office of management and budget and is updated by the secretary of health and human services sec_36b balanced budget act of pub_l_no sec_4901 sec_111 stat pincite codified pincite u s c sec_1397jj c community opportunities accountability and training and educational_services act of pub_l_no sec stat pincite codified pincite u s c sec aptcs are paid directly to an insurance provider during the year and taxpayers are required to reconcile any aptcs received with the eligible credit_amount on form_8962 which is filed with their federal_income_tax returns sec_36b aca sec stat pincite codified pincite u s c sec i modified_adjusted_gross_income the parties’ dispute concerns whether petitioner is entitled to any part of the ptc before we are able to decide the amount of any credit we must first decide whether petitioner is required to include in magi any of the social_security_benefits he received during including the nontaxable amounts relating to even though he made a sec_86 election to exclude it from his gross_income sec_36b defines magi in relevant part as follows sec_36b terms relating to income and families --for purposes of this section-- household_income -- b modified_adjusted_gross_income --the term modified_adjusted_gross_income means adjusted_gross_income increased by-- iii an amount equal to the portion of the taxpayer’s social_security_benefits as defined in sec_86 which is not included in gross_income under sec_86 for the taxable_year see also sec_1_36b-1 income_tax regs the parties agree that petitioner’ sec_2014 adjusted_gross_income is dollar_figure including only dollar_figure of taxable social_security_benefits as a result of a sec_86 election and that he received dollar_figure of total social_security_benefits in petitioner contends relying primarily on the intended purpose of the aca its legislative_history and public policy arguments that his sec_86 election should result in the exclusion from hi sec_2014 magi all the social_security_benefits attributable to or alternatively the social_security_benefits attributable to except the portion of hi sec_2013 benefits included in hi sec_2014 gross_income respondent contends however that sec_36b is clear and that petitioner’s sec_86 election has no effect on the computation of hi sec_2014 magi respondent therefore contends that petitioner must include in hi sec_2014 magi all of the social_security_benefits received in ie dollar_figure of taxable and dollar_figure of nontaxable social_security benefits--the entire dollar_figure regardless of the year to which the benefits were attributable to properly consider the parties’ positions we first must analyze whether the language at issue has a plain and unambiguous meaning 534_us_438 quoting 519_us_337 see 541_us_176 we apply the plain meaning of the text unless the meaning is inescapably ambiguous 469_us_70 n jackson j concurring quoting 341_us_384 because w here legislative ‘will has been expressed in reasonably plain terms that language must ordinarily be regarded as conclusive’ 118_tc_1 quoting 507_us_99 see 110_tc_236 aff’d 198_f3d_248 6th cir when construing a statute however ‘ i t is our duty to give effect if possible to every clause and word ’ so as to avoid rendering any part of the statute meaningless surplusage w 17th st llc v commissioner 147_tc_557 quoting 348_us_528 and citing marbury v madison u s cranch a not included in gross_income we begin by analyzing the statutory phrase not included in gross_income under sec_86 for the taxable_year within the context of sec_36b sec_86 defines social_security_benefit s as any amount received by the taxpayer by reason of entitlement to-- a a monthly benefit under title ii of the social_security act or b a tier_1_railroad_retirement_benefit whether and to what extent social_security_benefits are included in a taxpayer’s gross_income ie the taxable_amount of social_security_benefits received is calculated pursuant to a statutory formula set forth in sec_86 sec_86 a - d see 118_tc_373 a taxpayer however may make a sec_86 election if the taxpayer receives a lump-sum social_security_benefit which is attributable to a prior year without a sec_86 election a taxpayer calculates his magi for purposes of sec_36b by increasing his adjusted_gross_income by the portion of social_security_benefits received in a taxable_year that is not included in gross_income see sec_36b sec_1_36b-1 income_tax regs see generally grant v commissioner tcmemo_2018_119 if petitioner had not made a sec_86 election his magi would be determined by increasing his adjusted_gross_income by dollar_figure the nontaxable amount petitioner however made a sec_86 election and we must now determine the effect if any a sec_86 election has on petitioner’s magi in general a sec_86 election affects the amount of social_security_benefits included in gross_income for the year of receipt the amount included in gross_income for the year of receipt by reason of the portion attributable to a prior year will not exceed the increase in gross_income for the prior year that would have resulted if the portion attributable to the prior year had been received in that year see sec_86 see also robbins v commissioner tcmemo_2017_247 pollard v commissioner tcmemo_2011_132 b under sec_86 for the taxable_year the plain text of sec_36b requires that a taxpayer include in computing his magi social_security_benefits which were not included in gross_income under sec_86 for the taxable_year sec_36b sec_36b and its accompanying regulations do not explicitly address the mechanics or meaning of a sec_86 election petitioner contends that sec_36b is ambiguous because of the confluence of the phrases for the taxable_year and under sec_86 petitioner argues that for the taxable_year references his taxable_year as defined in sec_441 ie his calendar_year and therefore his magi includes only social_security_benefits attributable to not those attributable to petitioner argues that the phrase under sec_86 requires that sec_36b be read to include the entirety of sec_86 including sec_86 the year of receipt as opposed to the year to which the social_security_benefits are attributable is the significant definitive factor see sec_441 sec_451 it is an established legal principle that a cash_method individual generally reports income in the year it is received even if the benefits are attributable to a prior year see sec_451 sec_1_451-1 income_tax regs in that regard petitioner agrees that the social_security_benefits attributable to are technically taxed in the year received accordingly the phrase for the taxable_year is not ambiguous petitioner argues however that a lthough the lump-sum payment relating to is technically taxed in the year the lump-sum payment is received a portion of it is includible in income only because it is attributable to tax owed in a prior taxable_year under s ection that is the social_security_benefits received in but attributable to are not social_security_benefits received under sec_86 for the taxable_year although sec_36b and its accompanying regulations are silent with regard to the effect if any on magi if a taxpayer makes a sec_86 election sec_36b and the underlying regulations provide that social_security_benefits received in a taxable_year that were not included in gross_income under sec_86 for the taxable_year must be added to a taxpayer’s magi sec_36b see sec_1_36b-1 income_tax regs petitioner however misinterprets the application of sec_36b when a sec_86 election has been made a sec_86 election determines the amount included in gross_income for the year of receipt petitioner’s sec_86 election simply determined which amount of the lump-sum payment attributable to should be included in his gross_income for we find that the phrase under sec_86 is not ambiguous and the cross-reference requires the consideration of sec_86 in its entirety including sec_86 for the aforementioned reasons we hold that the text of the statute is not ambiguous and that petitioner must include in his magi all of the social_security_benefits received in irrespective of the sec_86 election as a result petitioner’s adjusted_gross_income is increased by the amount of social_security_benefits not included in gross_income and as explained below his magi exceeds the established threshold for ptc eligibility by a relatively small amount we are cognizant that petitioner’s magi exceeded the threshold by a relatively small amount but we are bound by the statute as written see 87_tc_1412 assuming arguendo that sec_36b and its accompanying regulations were ambiguous the legislative_history supports our conclusion and holding that a taxpayer must include all social_security_benefits received during a taxable_year in a taxpayer’s magi for the taxable_year in question when the aca was initially enacted magi did not require the inclusion of nontaxable social_security_benefits see aca sec_1401 sec_124 stat pincite the definition of magi however was amended to specifically include the full amount of a taxpayer’s social_security_benefits see act of date pub_l_no sec_401 sec_125 stat pincite see also h_r 112th cong h_r rept no pincite petitioner contends that denying him the ptc because of income attributable to a prior year leads to an absurd result which is contrary to the intended purpose of the aca and that he is within the class of persons that the statute was intended to assist we however do not find that the interpretation of the statute leads to an absurd result in this case moreover we cannot ignore the law to achieve an equitable end see 484_us_3 mcguire v commissioner t c pincite while we are sympathetic to petitioner’s situation his magi exceeded eligible levels and we are bound by the statute as written ii eligibility and repayment of the ptc for the purpose of determining ptc eligibility a taxpayer eligible for ptcs is generally a taxpayer whose household_income is at least but not more than of the federal poverty_line for the taxpayer’s family size for the taxable_year sec_36b sec_1_36b-2 income_tax regs household_income is defined as the taxpayer’s magi plus the magi of certain family members sec_36b petitioner’s magi is his adjusted_gross_income increased by the total amount of social_security_benefits not included in his gross_income dollar_figure the parties stipulated and we find that dollar_figure i sec_441 of the federal poverty_line for see fed reg date because petitioner’s household_income exceeded of the federal poverty_line he did not qualify for the ptc and the full amount of the aptcs he received during must be included as a tax_liability on his tax_return sec_36b f a sec_1_36b-4 example income_tax regs see mcguire v commissioner t c pincite accordingly we sustain respondent’s determination to reflect the foregoing decision will be entered for respondent


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si plr-110044-99 date date legend x a d1 dear this letter responds to your letter dated date written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code that x's s_corporation status will be effective as of the taxable_year beginning d1 facts according to the information submitted x was incorporated on d1 and it was decided that x would be an s_corporation a the sole shareholder of x hired an attorney to file x's form_2553 election by a small_business_corporation with an effective date of d1 the attorney however failed to timely file x's form_2553 x requests a ruling that it will be recognized as an s_corporation effective for the taxable_year beginning d1 under sec_1362 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides when an s election will be effective if an s election is plr-110044-99 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 beginning the year in which the election is made if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year conclusions based solely on the facts submitted and representations made we conclude that x has established reasonable_cause for not making a timely election and is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 containing an effective date of d1 for the election within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent plr-110044-99 pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to x sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court andrew p and roseanne l gallagher petitioners v commissioner of internal revenue respondent docket no filed date andrew p and roseanne l gallagher pro_se thomas l fenner for respondent memorandum findings_of_fact and opinion cohen judge respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax for the issues for decision are whether the distribution to andrew p gallagher petitioner from an individual_retirement_account ira was includable in petitioners’ gross_income and whether that same - - distribution was subject_to the 10-percent additional tax imposed by sec_72 unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue findings_of_fact some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference petitioners resided in houston texas at the time they filed their petition in petitioner opened an ira as described in sec_408 petitioners made additional contributions to the ira over the next several years petitioners claimed deductions on their federal_income_tax returns under sec_219 for all of their contributions to the tra petitioners made no nondeductible_contributions to the ira petitioner was a civil engineer employed by the city of houston texas from date until sometime in petitioner was involuntarily demoted by the city of houston effective date the demotion resulted in a decrease of dollar_figure to petitioner’s annual salary in date petitioner began working full time for the city of pearland texas because of financial hardship in early petitioner requested a dollar_figure distribution from the administrator of the ira petitioner wa sec_46 years old at the time he received the - - distribution from the ira petitioners used the money to pay bills tuition at their son’s private high school and other personal expenses petitioners did not report the dollar_figure distribution on their federal_income_tax return for no portion of the distribution was rolled over into another ira or other retirement account the distribution was not paid on account of disability was not paid as part of a series of substantially_equal_periodic_payments made for life and was not paid for medical_care opinion petitioners contend that because of their financial hardship the dollar_figure distribution should not be included in their gross_income and if it is they should not be subject_to the 10-percent additional tax imposed by sec_72 petitioners seek relief from the income_tax and additional 10-percent tax imposed on the ira distribution based on their financial hardship there is however no hardship exception in the controlling statutes generally any amount_paid or distributed out of an individual_retirement_plan is included in gross_income by the payee or distributee see sec_408 sec_1_408-4 income_tax regs see also 111_tc_250 sec_408 provides an exception to the general_rule where the entire amount received is paid into an ira q4e- or individual_retirement_annuity for the benefit of the distributee within days after the receipt of the distribution petitioners do not qualify for the exception provided for in sec_408 because petitioners did not roll over the dollar_figure ira distribution into another ira or other retirement account but rather used the money to pay for personal expenses in general the basis of an ira is zero see sec_1 a income_tax regs see also costanza v commissioner tcmemo_1985_317 petitioners did not make any nondeductible or excess_contributions that would have increased their basis and thus petitioners’ tax basis in the ira was zero see patrick v commissioner tcmemo_1998_30 affd 181_f3d_103 6th cir sec_72 provides for a 10-percent additional tax on early distributions from an ira the 10-percent additional tax however does not apply to certain distributions sec_72 sets forth specific exemptions as the court stated in arnold v commissioner supra pincite the legislative purpose underlying the sec_72 tax is that premature distributions from iras frustrate the intention of saving for retirement and sec_72 discourages this from happening 106_tc_337 see also s rept pincite c b supp petitioners do not argue that any of the statutory exceptions apply to them petitioners instead seek relief from - - the income_tax or from the 10-percent additional tax imposed by statute based on their financial hardship however there is no exception under sec_72 for financial hardship this principle has been applied consistently in cases dealing with premature ira_distributions see arnold v commissioner supra pincite deal v commissioner tcmemo_1999_352 pulliam v commissioner tcmemo_1996_354 thus the ira distribution received by petitioners is taxable in and is also subject_to the 10-percent additional tax under sec_72 to reflect the foregoing decision will be entered for respondent


number release date id office uilc cca-717950-08 ---------------- 45l from ---------------------- sent thursday july am to -------------- cc subject sec_45 certifications ------ here are my thoughts the certification is only a certification that the taxpayer’s qualified_costs with respect to the facility will result in compliance with the applicable_epa_regulations the certification is not a certification that the taxpayer is allowed the credit for a particular year the taxpayer is a small_business_refiner the fuel produced_by_the_taxpayer is low_sulfur_diesel_fuel or any expenditure is a qualified_cost for purposes of sec_45h this taxpayer failed to receive the required certification within the 30-month period and therefore the taxpayer is not allowed the credit for ------ the taxpayer did not submit its application in time for the service to act on it in consultation with epa before the running of the 30-period because the taxpayer did not request certification more than days from the end of the 30-month period nothing in the statute or revproc_2007_69 causes the suspension or delay of the 30-month period before the period has run because issuance of the notice of certification is not a conclusion that the taxpayer will be allowed the credit i have two additional thoughts --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -------------------------------------- second i have looked at this very closely but it is something that could be developed by looking at the concept of credit determined in other parts of the code because sec_45h bases the credit on the diesel_fuel production credit determined during the taxable_year and the concept of credit determined is used in sec_45h sec_45h and sec_45h i believe that an argument might be made that no diesel_fuel production credit is determined for ------ and thus possibly a subsequent tax_year can be the first taxable_year in which the low_sulfur_diesel_fuel_production_credit is determined with respect to the taxpayer’s facility if this argument is viable then the taxpayer could claim the credit for the ------ or a following tax_year note that the references to the subsections of sec_45h above are to the provision after the amendments by the tax technical corrections act of and that sec_45h which was added by this act provides election to not take credit -no credit shall be determined under subsection a for the taxable_year if the taxpayer elects not to have subsection a apply to such taxable_year ----------------------------


omant cas n tax_exempt_and_government_entities_division qepartment of the treasury internal_revenue_service washington d c oct 201uu08032 se tep raty u i l xxxxx xxxxx xxxxx legend taxpayer a xxxxx ira x xxxxx financial_institution c xxxxx financial_institution d xxxxx amount n xxxxx amount o xxxxx bank e xxxxx account y xxxxx year xxxxx year xxxxx date xxxxx year xxxxx xxxxx page dear xxxxx 201uu5032 this is in response to your letter received date as supplemented by correspondence dated june and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations are made under penalties of perjury in support of your ruling_request taxpayer a age represents that she received a distribution totaling amount n from an individual_retirement_annuity ira x maintained by financial_institution d and that she intended to rot over amount n to another ira to be established at bank e taxpayer a asserts that her failure to accomplish a rollover of amount n within the 60-day period prescribed by sec_408 of the code was due to the failure of bank e to carry out her instructions and that as a result of a language barrier affecting taxpayer a's ability to read and comprehend in english taxpayer a failed to notice bank e's error until after the expiration of the 60-day period amount n has not been used for any purpose it is represented that taxpayer a relocated to the united_states as an adult that english is her second language and that she does not read or comprehend as well in english as she does in her own language taxpayer a maintained her ira savings for many years in certificates of deposit without incident and upon attaining age began receiving required minimum distributions it is represented that in year taxpayer a was persuaded by financial personnel to switch all of her ira investments from certificates of deposit to ira x an ira annuity in order to obtain a better rate of return initially taxpayer a received periodic financial statements from financial_institution c after financial_institution d acquired financial_institution c she received statements from financial_institution d taxpayer a represents that although documents from financial_institution c and subsequently financial_institution d show that monthly withdrawals were made from ira x she received one check per year at the end of each calendar_year and such check was distributed to her each year without her making a request it is represented that in year on date taxpayer a received a check from financial_institution d in the mail for amount o which was amount n less required withholding amount n was a distribution of the total surrender_value of ira x on date the same date taxpayer a received the check for amount n she went unaccompanied to bank e when she presented the check for amount n to bank e taxpayer a also presented proceeds from a non-ira certificate of deposit which had matured taxpayer a represents that she told the teller the check was ira money however bank e established account y a non-ira certificate of deposit for the benefit of taxpayer a in which both the distribution from ira x and the proceeds of the matured non-ira certificate of deposit were deposited taxpayer a xxxxx page ‘ se 2u1vu5032 represents that as a result of her difficulty with english she failed to recognize that the correct transaction had not been completed in year while preparing taxpayer a's income_tax return s for year taxpayer a’s son-in-law discovered that taxpayer a had received a total_distribution from ira x in year instead of only the required_minimum_distribution it was at that time more than days after the date taxpayer a had received the check for amount o from financial_institution d that taxpayer a first became aware that the certificate of deposit bank e had established on her behalf on date was a non-ira certificate of deposit based on the facts and representations presented herein you request that the service waive the 60-day rollover requirement with respect to the distribution of amount n from ira x sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if-- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers xxxxx page 2014v sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 revproc_2003_16 r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred taxpayer a has stated that she gave instructions to bank e which if followed would have resulted in the timely rollover of ira x taxpayer a has not submitted documentation that shows that taxpayer a communicated clearly to bank e that amount o was to be treated differently from the non-ira cd proceeds she presented during the same bank visit and that amount o was to be deposited into an ira to the contrary ira x proceeds and non-ira funds were commingled in the same non-ira account rather than two separate_accounts being established accordingly taxpayer a has not shown that the failure to complete a timely rollover of ira x was the result of any error on the part of a financial_institution taxpayer a also has not shown that any of the other factors described in revproc_2003_16 caused her to fail to complete the rollover therefore pursuant to sec_408 of the code the service declines to waive the 60-day rollover requirement with respect to the distribution of amount n from ira x this ruling assumes that ira x satisfies the qualification requirements of sec_408 of the code at all times relevant to this transaction no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as precedent xxxxx page 4v4032 pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact xxxxx d xxxxx by telephone at xxxxx please address all correspondence to sincerely yours yo - f t thu va cua laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc xxxxx xxxxx xxxxx


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom p si plr-113073-99 date date number release date legend x y z dear this letter responds to your letter dated date written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code that x’s s election will not terminate if x transfers shares of its stock to employees of a limited_partnership in which it is the general_partner facts according to the information submitted x is an s_corporation that is the sole general_partner of y a limited_partnership in accordance with a proposed deferred_compensation plan the plan x plans to transfer shares of its stock to a select number of y’s employees z the transfer under the plan will be between x and z and will not directly involve y however x is concerned that y will be treated as a momentary shareholder of x under sec_1361 because the stock will be used to compensate employees of y x requests a ruling that its proposed transaction will not cause its s election to be terminated under sec_1362 sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect law plr-113073-99 sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of this section to be an s_corporation sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation conclusions after applying the law to the facts submitted and the representations made we conclude that solely for purposes of sec_1361 y will not be treated as a momentary shareholder in connection with the transfer of its stock to z under the plan as a result we conclude that the transfer of stock to z will not cause x’s s election to be terminated under sec_1362 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including sec_1032 and sec_83 specifically no opinion is expressed concerning whether x is an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent under the power_of_attorney on file with this office we are sending a copy of this letter to x sincerely yours jeffrey a erickson assistant to the branch chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service 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 psi b06 plr-111548-14 date date legend taxpayer ------------------------------------------- --------------------- ----------------------------------- ---------------------- ----------------------------------------- -------------------------- ------------------------ ------------------------ ------------------ ---------------- ----------------------------------- ----------------------------------------------- ----------------- ------------- ---------------- ------------ ------------ ---------------- ---------------------- investor investor investor investor investor investor company a company b company c company d state a state b state c state d state e state f original site original generating station -------------------------------------- site generator generating station --------------------------------------- year a date a date b date c chemical a1 chemical a2 ------ ----------------- --------------------- --------------------- ------ ----------------------------- ----------------------------- ------------------------------------------------ plr-111548-14 chemical b center dear ----------- ------------------------ ------------------------------------------------------------------------------------------ ---------------------------------------------------------- this is in response to your request for rulings submitted by your authorized representative concerning the federal_income_tax consequences of the transaction described below background taxpayer is a state a limited_liability_company classified as a partnership for federal_income_tax purposes taxpayer is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes taxpayer is engaged in purchasing raw coal converting it to refined_coal and selling the refined_coal investor is a state b limited_liability_company that is classified as a corporation for u s federal_income_tax purposes investor is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes investor is a state a limited_liability_company that is classified as a corporation for u s federal_income_tax purposes investor is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes investor is a state a corporation investor is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes each of investor investor and investor is an individual resident in state a company a is a state a limited_liability_company that is classified as a corporation for u s federal_income_tax purposes company a is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes company a serves as manager of taxpayer company a is a wholly-owned subsidiary of company b a state a limited_liability_company company b is a wholly-owned subsidiary of company c a state a limited_liability_company and is disregarded as an entity separate from company c for u s federal_income_tax purposes company c is classified as a partnership for u s federal_income_tax purposes company c produces refined_coal that allows coal burning power plants to reduce nox and mercury emissions the members of taxpayer are investor investor investor investor investor investor and company a plr-111548-14 the facility taxpayer owns a refined_coal facility the facility located at the generating station near the site the generating station consists of two coal-fired steam-powered electric-generating units the facility was originally placed_in_service in year a by company b at the original generating station located near the original site subsequent to the installation and operation of the facility at the original generating station company b removed the facility from operation and stored it in a secure location on the grounds of the original generating station at the request of generator the facility was installed at the generating station on date a in order for the facility to operate at the generating station company b made certain modifications to the facility the cost of these improvements together with the cost of all other capital expenditures incurred with respect to the facility since it was placed_in_service was less than four times the value of the original facility assuming the original facility remains worth at least the original cost to construct taxpayer acquired the facility from company b on date b as a contribution to the capital of taxpayer company d a state a limited_liability_company serves as contract operator of the facility technology the facility utilizes proprietary technology sublicensed from company c to produce refined_coal the technology using the technology taxpayer treats the feedstock coal using a manufacturing process the process in which two chemical additives are metered on to the feedstock coal as it is transported through the facility on coal belts the application rate of the chemical additives is proportional to the weight of coal as measured by coal belt scales on each coal belt the resulting refined_coal is then deposited in the bunkers that feed the boilers the composition of the first chemical additive varies depending on the type of boiler and rank of coal for which the facility is being operated to produce refined_coal for circulating fluidized-bed boilers such as the one at original generating station where the facility was placed_in_service refined_coal is produced using chemical a1 for pulverized-coal boilers such as those at the generating station refined_coal is produced using a combination of chemical a1 and chemical a2 the second chemical additive is chemical b which will increase the fraction of mercury associated with particulates that can be removed in particulate collectors and the fraction of soluble mercury that can be removed in wet scrubbers taxpayer anticipates that from time to time generator may request that the application rate of the chemical additives be temporarily or permanently increased to plr-111548-14 assist generator in regulatory emissions compliance or to improve plant operations thus over time the application rate for the additives may increase or decrease but at no time will it be decreased below the application rate certified as achieving a qualified emissions reduction in the most recent certification or most recent applicable redetermination all of the coal that the generating facility burns in its boilers is low-sulfur sub- bituminous coal including sub-bituminous coal fines from state c state d state e and state f the source region generator does not currently depend on a single mine for feedstock coal and therefore expects to purchase feedstock coal from a number of mines in the source region that provide low-sulfur sub-bituminous coal testing as part of placing the facility in service company b conducted a full-scale continuous emissions monitoring system cems field test to measure the reduction in nitric oxide and nitrogen dioxide collectively nox and mercury emissions nox and mercury emissions were measured as required by the cems field testing procedures described in section of notice_2010_54 the notice emissions for both the feedstock coal and refined_coal were measured under the same operating conditions over a period of at least three hours during which the boiler operated at a steady state and at least percent of full load the original generating station had no separate nox air pollution equipment so nox was measured at the stack and mercury was measured downstream of the particulate control device the cems field test demonstrated the required reductions in both nox and total mercury emissions both determined on a lb btu basis to satisfy the requirements of at least nox reduction and at least mercury reduction at the generating station taxpayer intends to rely on pilot-scale combustion testing under section a of the notice and coal sampling laboratory analysis for redetermination testing pursuant to section b of the notice company c has engaged the center of a prominent university the center to conduct such testing using its pilot-scale combustion furnace the pilot furnace the pilot furnace has been extensively used to research and investigate sulfur oxide and nox emissions and the transformation of toxic trace metals mercury arsenic and lead during the combustion of coal and other fuels or waste materials taxpayer conducted emissions testing at the pilot furnace on date c in conformance to section a of the notice the tests were conducted using coal from the source region that is the same rank as the feedstock coal used at the generating station the tested coal the center tested emissions from both the feedstock coal and the refined_coal product according to the center the boiler and combustion conditions of the pilot furnace were designed to replicate the combustion conditions of a boiler that is coal-fired and steam-producing and of a size and type plr-111548-14 commonly used in commercial operations including full-scale boilers of the same type as those at the generating station each test at the pilot furnace lasted between and minutes three different add-rates of the chemical additives were tested all three add rates tested showed emissions reductions of at least for nox and for mercury compared to emissions measured from the feedstock coal the center’s report the report indicates that it is expected that the emissions reductions reported here would be achieved at full scale by using these treatment rates during the production of refined_coal the report signed by a qualified_individual with the center concluded that the pilot furnace testing accurately measured the emission reductions that would be achieved in a full-scale boiler if the process is changed unless it is solely to increase the add rate for one or both of the chemical additives taxpayer expects to repeat emissions qualification test at the pilot furnace or other pilot-scale combustion furnace in accordance with section a of the notice if there has not been a change in the process taxpayer expects to rely on coal sampling and analysis pursuant to section b of the notice for ongoing redeterminations within six months of the most recent determination or redetermination although the precise intervals may vary eg it may be only four or five months between tests for each a test at the pilot furnace as described below the feedstock coal and refined_coal are sampled the feedstock coal and refined_coal samples are submitted separately for laboratory analysis to determine the sulfur and mercury content of each fuel during each period of up to six months constituting the redetermination period samples of both feedstock coal and refined_coal will be collected at the generating facility on a regular basis currently expected to be daily taxpayer intends to collect all samples for redetermination from the moving coal belts before and after the coal has passed through the facility company d personnel will collect coal samples from both edges and the center of the belt using a manual sample collection device the daily samples will be blended manually or otherwise into a multi-day gross sample two samples of approximately two pounds each will be collected using a scoop from each gross sample sealed and labeled these samples will then be sent to an independent laboratory for preparation and analysis standard laboratory techniques will be used to measure the sulfur and mercury content of these samples the testing results for sulfur and mercury content of the gross samples of feedstock and refined_coal collected during the redetermination period respectively will then be averaged using a simple arithmetic mean for comparison to the sulfur and mercury content of the coal samples collected during the test period at the pilot furnace or any more recent determination that meets the requirements of section dollar_figure of the notice taxpayer expects to rely primarily on redetermination tests using coal sampling and laboratory analysis under section b of the notice and to conduct pilot plr-111548-14 furnace testing under section a of the notice only when required ie because of a change in the process rulings requested based on the foregoing you have requested that we rule as follows the refined_coal produced and sold using the process and technology constitutes refined_coal within the meaning of sec_45 of the internal_revenue_code_of_1986 as amended the code provided that such refined_coal is produced from feedstock coal that is from the same source region or rank as the tested coal described herein and provided further that the refined_coal satisfies the qualified_emission_reduction test in sec_45 of the code provided that the feedstock coals used to produce refined_coal during any determination_period is from the same source region and of the same rank as the coal subject_to the most recent determination or redetermination all feedstock coal that satisfies that criteria shall be treated as feedstock coal of the same source and rank for purposes of section dollar_figure of the notice regardless of the mines from which such feedstock coal is purchased and will not require a redetermination to establish qualified emission reductions testing by the center for qualified emissions reductions as described in the report satisfies the requirements of the notice the taxpayer may treat the required emission reductions in sec_45 of the code as having been met based on the results from the pilot furnace testing at the center or other similar pilot- scale combustion testing facilities and subsequent permitted laboratory testing as required for a redetermination described in section a or b of the notice regardless of subsequent normal fluctuations in operating conditions and emissions at the generating station increasing the amounts of chemical additives to the feedstock coal to a higher level per ton of feedstock coal than the rate shown to have produced a qualified emissions reduction in a determination or redetermination will not be construed as a change in the process of producing refined_coal from the feedstock coal requiring a redetermination under section dollar_figure of the notice nor will later resuming application at the rate used in such original determination or redetermination constitute such a change the results of a test set forth in a redetermination test report may be relied upon after the date of testing even if the report is not received until after the six-month period specified in section i of the notice or if the test was done before taxpayer acquired the facility plr-111548-14 pursuant to section b of the notice the redetermination requirement of section dollar_figure of the notice may be satisfied by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and refined_coal on average do not vary by more than percent below the bottom of nor more than percent above the top of the range of sulfur and mercury content of both the feedstock coal and refined_coal used in the most recent determination pursuant to section dollar_figure of the notice if the facility was placed_in_service prior to date within the meaning of sec_45 of the code a subsequent modification or relocation of the facility or replacement of part of the facility after that date will not result in a new placed-in-service date for the facility for purposes of sec_45 provided the fair_market_value of the original property of the modified or relocated facility is more than percent of the facility’s total fair_market_value at that time law and rationale sec_45 of the code generally provides a credit against federal_income_tax for_the_use_of renewable or alternative resources to produce electricity or fuel for the generation of steam sec_45 of the code provides that in the case of a producer of refined_coal the credit available under sec_45 of the code for any taxable_year shall be increased by an amount equal to dollar_figure5 per ton of qualified refined_coal i produced_by_the_taxpayer at a refined_coal_production_facility during the 10-year period beginning on the date that the facility was originally placed_in_service and which is ii sold by the taxpayer to an unrelated_person during such 10-year period and such taxable_year for purposes of sec_45 of the code section dollar_figure of notice_2010_54 provides that the term refined_coal means a fuel which is i a liquid gaseous or solid fuel including feedstock coal mixed with an additive or additives produced from coal including lignite or high carbon fly ash including such fuel used as a feedstock ii sold by the taxpayer with the reasonable expectation that it will be used for the purpose of producing steam and iii certified by the taxpayer as resulting when used in the production of steam in a qualified_emission_reduction section dollar_figure of the notice provides that the term qualified_emission_reduction means in the case of refined_coal produced at a facility placed_in_service after date a reduction of at least twenty percent of the emissions of nitrogen oxide and at least forty percent of the emissions of either sulfur dioxide or mercury released when burning the refined_coal excluding any dilution caused by materials combined or added during the production process as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of date plr-111548-14 sec_45 of the code generally provides that the term refined_coal_production_facility means a facility which is placed_in_service after date and before date section dollar_figure of notice_2010_54 provides that a refined_coal_production_facility will not be considered to have been placed_in_service after date if more than percent of the total fair_market_value of the facility the cost of the new property plus the value of the used_property is attributable to property that was placed_in_service on or before date section dollar_figure of notice_2010_54 generally provides that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining as defined in sec_613 a c or i of the code if performed by the mine owner or operator accordingly in determining whether a qualified_emission_reduction has been achieved the emissions released when burning the refined_coal must be compared to the emissions that would be released when burning the feedstock coal feedstock coal is the product resulting from processes that are treated as mining including any such processes that are actually applied by a taxpayer in any part of the taxpayer’s process of producing refined_coal from coal sec_613 of the code describes treatment processes that are not considered as mining unless they are provided for in sec_613 or are necessary or incidental to a process provided for in sec_613 any cleaning process such as a process that uses ash separation dewatering scrubbing through a centrifugal pump spiral concentration gravity concentration flotation application of liquid hydrocarbons or alcohol to the surface of the fuel particles or to the feed slurry provided such cleaning does not change the physical or chemical structure of the coal and drying to remove free water provided such drying does not change the physical or chemical identity of the coal will be considered as mining section of the notice provides in part that emissions reduction may be determined using continuous emission monitoring system cems field testing section a provides in part that cems field testing is testing that meets all the following requirements i the boiler used to conduct the test is coal-fired and steam-producing and is of a size and type commonly used in commercial operations ii emissions are measured using a cems iii if epa has promulgated a performance standard that applies at the time of the test to the pollutant emission being measured the cems must conform to that standard iv emissions for both the feedstock coal and the refined_coal are measured at the same operating conditions and over a period of at least hours during which the boiler is operating at a steady state at least percent of full load and v a qualified_individual verifies the test results in a manner that satisfies the requirement of section b plr-111548-14 section of the notice provides that methods other than cems field testing may be used to determine the emission reduction the permissible methods include a testing using a demonstration pilot-scale combustion furnace if it establishes that the method accurately measures the emission reduction that would be achieved in a boiler described in section a i of the notice and a qualified_individual verifies the test results in a manner that satisfies the requirements of section c i ii v and vi of the notice and b a laboratory analysis of the feedstock coal and the refined_coal that complies with a currently applicable epa or astm standard and is permitted under section b i or ii of the notice section of the notice provides that a taxpayer may establish that a qualified_emission_reduction determined under section dollar_figure applies to production from a facility by a determination or redetermination that is valid at the time the production occurs a determination or redetermination is valid for the period beginning on the date of the determination or redetermination and ending with the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of the feedstock coal that occurs after the date of such determination or redetermination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination section of the notice provides that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure must use a method that meets the requirements of section in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that a the sulfur or mercury content of the amount of refined_coal necessary to produce an amount of useful energy has been reduced by at least percent percent in the case of facilities placed_in_service after date in comparison to the sulfur or mercury content of the amount of feedstock coal necessary to produce the same amount of useful energy excluding any dilution caused by materials combined or added during the production process or b the sulfur or mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the sulfur and mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the notice section dollar_figure of the notice provides that the certification requirement of sec_3 c of the notice is satisfied with respect to fuel for which the refined_coal credit is claimed only if the taxpayer attaches to its tax_return on which the credit is claimed a certification that contains the following a statement that the fuel will result in a qualified emissions reduction when used in the production of steam a statement indicating whether cems field testing was used to determine the emissions reduction if cems field testing was not used to determine the emissions reduction a description of the method used a statement that the emissions reduction was determined or redetermined within the six months preceding the production of the fuel plr-111548-14 and that there have been no changes in the source or rank of the feedstock coal used in the process of producing refined_coal from feedstock coal since the emissions reduction was most recently determined or redetermined and a declaration signed by the taxpayer in the following form under penalties of perjury i declare that i have examined this certification and to the best of my knowledge and belief it is true correct and complete finally sec_45 of the code provides that a refined_coal_production_facility must be placed_in_service within certain timeframes for purposes of the refined_coal credit allowable with respect to refined_coal other than steel_industry_fuel the facility must be placed_in_service after date and before date section dollar_figure of the notice provides that the year in which property is placed_in_service is determined under the principles of sec_1_46-3 of the regulations ie when the property is placed in a condition or state of readiness and availability for a specifically assigned function section dollar_figure of the notice provides that a refined_coal_production_facility will not be treated a placed_in_service after date if more than percent of the facility’s total value the cost of the new property plus the value of the used_property is attributable to property placed_in_service on or before date the notice also states that the irs will not issue private letter rulings relating to when a refined_coal_production_facility has been placed_in_service with respect to the first issue the process starts with several chemical additives being added to the feedstock coal prior to its combustion in a furnace the additives provide the chemical structure that result in the reduction of emissions of nitrogen oxide and mercury during combustion section dollar_figure of the notice provides generally that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining if performed by the mine owner or operator in the instant case the process is not a mining process further section dollar_figure of the notice clarifies sec_45 of the code and specifically provides that refined_coal includes feedstock coal mixed with additives thus additive processes that mix certain chemicals or other additives with the coal in order to achieve emissions reductions may qualify for the refined_coal production_tax_credit additionally section dollar_figure of the notice defines comparable coal as coal that is of the same rank as the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal accordingly we conclude that the coal produced by using the process and technology constitutes a refined_coal within the meaning of sec_45 of the code provided that the refined_coal i is produced from feedstock coal that is the same source region or rank as the tested coal and ii satisfies the qualified_emission_reduction test stated in sec_45 of the code with respect to the second issue the emissions profile of the refined_coal product is compared to the emissions profile of either the feedstock coal or a comparable coal predominantly available in the marketplace as of date section dollar_figure of the notice provides that a comparable coal is defined as coal that is of the same rank as plr-111548-14 the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal section dollar_figure of the notice provides that a determination or redetermination of a qualified emissions reduction is valid until the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of the feedstock coal that occurs after the date of such determination or redetermination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination accordingly we conclude that provided that the feedstock coals during any determination_period are from the same coal source regions and of the same rank as the tested coal all feedstock coal that satisfies that criteria shall be treated as feedstock coal of the same source and rank for purposes of section dollar_figure of the notice regardless of the mines from which such feedstock coal is purchased with respect to the third issue section of the notice provides that any permissible testing method provided for in the notice can be used in emission testing for any pollutant that is a taxpayer can use different testing methods for each of nitrogen oxide sulfur dioxide or mercury provided the method used for any pollutant is a permissible method section of the notice provides that an emission test establishing a qualified_emission_reduction qualifies the refined_coal for a six-month period provided there is no change in the process for producing the refined_coal or in the source or rank of the feedstock coal therefore a taxpayer must redetermine the emission reductions to qualify for the succeeding six-month period using one or more approved methods in the instant case pilot-scale combustion testing will be arranged for and there will be no reliance on any continuous emissions monitoring system or other field testing which is permitted under section dollar_figure of the notice specifically the center will conduct testing including redetermination testing at the pilot furnace to determine the emissions reductions associated with burning the refined_coal product compared to the feedstock for purposes of qualifying the refined_coal produced at the facilities the center has conducted pilot-scale combustion tests at the pilot furnace as documented in the report in conducting such tests the center conducted tests on the feedstock and then mixed a separate sample of the feedstock with the additives so that it could conduct tests on the refined_coal product in each of its reports the center reported that the test results indicated that the blend of coal and additives achieved the required emissions reductions based on the foregoing we conclude that testing by the center for qualified emissions reductions as set forth in its test reports including interim reports satisfies the requirements of the notice qualified emissions reduction through testing by the center at its combustion research facility or similar pilot-scale combustion testing facilities under the notice may be relied upon with respect to the fourth issue section iii of the notice provides that a redetermination is required after a change in the process of producing refined_coal section of the notice further provides that in the case of a redetermination required by reason of a change in process any redetermination must be made using a plr-111548-14 method permitted under section dollar_figure of the notice rather than the simplified methods of section b we conclude that increasing the amounts of chemical additives to the feedstock coal will not be construed as a change in process requiring additional testing for qualified emissions reductions under section dollar_figure of the notice nor will it be construed as a change in process to later resume application at the rate used in the original test with respect to the fifth issue it is intended that redetermination testing will occur every six months or more frequently if required pursuant to the notice however the center is not always able to issue the written report required by section a of the notice within the six month period thus although redetermination testing is completed within the six month period the report may be received after the six month period nonetheless the center informed the interested parties of the results of the test on the day of the tests so that it was able to take into account the results of the redetermination within the six month period nevertheless the delay by the center in issuing its report cannot be indefinite accordingly we conclude that the results set forth by the center in a redetermination test report for production may be relied upon after the date of testing even if the report is not received until after the six-month period specified in section i of the notice so long as the written report is received within days from the date of testing however the redetermination of qualified emissions reduction must occur during the earliest of the events described in section dollar_figure of notice_2010_54 regardless of the time of the actual receipt of the center’s report with respect to the sixth issue section of the notice provides in part that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure of the notice must use a method that meets the requirements of section dollar_figure of the notice in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the sulfur and mercury content of the feedstock coal and refined_coal used in the most recent redetermination that meets the requirements of the notice accordingly we conclude the redetermination requirement of section dollar_figure of the notice may be satisfied by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and the refined_coal on average do not vary by more than percent below the bottom of nor more than ten percent above the top of the range of the sulfur and mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of section dollar_figure of the notice with respect to the seventh issue we understand that the facility has been relocated all of the essential components of the facility were relocated and retained similarly during the life of the facility it may be necessary to again relocate the facility or replace certain major components in the event of relocation or replacement of a component there should be no change in the placed_in_service_date of the facility as plr-111548-14 long as the test described in section dollar_figure of the notice has been met based on the foregoing we conclude that provided the facility was placed_in_service prior to date within the meaning of sec_45 of the code relocation of the facility to a different location after date or replacement of part of the facility after that date will not result in a new placed_in_service_date for the facility for purposes of sec_45 of the code provided the fair_market_value of the used_property is more than percent of the facility’s total fair_market_value at the time of relocation or replacement this ruling expresses no opinion regarding any issue not specifically addressed in this ruling letter including whether any person has sold refined_coal to an unrelated_person or when the facility was placed_in_service in particular we express or imply no opinion that taxpayer has sufficient risk or rewards of the production activity to qualify as the producer of the refined_coal the service may challenge an attempt to transfer the credit to a taxpayer who does not qualify as a producer including transfers structured as partnerships sales or leases that do not also transfer sufficient risks and rewards of the production activity in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives a copy of this ruling 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 sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs special industries