internal_revenue_service number release date index number --------------------------------- --------------------------------------------------------- --------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------- ---------------------------------------------------- telephone number --------------------- refer reply to cc ita plr-121674-09 date date re ------------------------------------------------------------------- legend taxpayer building a building b building c state location agreement agreement agreement agreement state authority city a b c d e ------------------------------------------------------------------------------------------ ----------------------- ----------------------------------------- ---------------------------------- ---------------------------------------------- --------------- 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------------------------------------------------------------------------------------------ ----------------------- ----------------------- ----------------------- ----------------------- plr-121674-09 f g h i j k l m n q r s t u v w x y z ------------------------------------------------------------------------------------------ ------------------------ ------------------------------------------------------------------------------------------ ------------------------ ----------------------- ------------------ ------------------ --------------------- ----------------------- ------ ---- ------------------ -------------------- ---- ----- ---- ------------------------- --------------- ----------------------------------- ---------------------------------- ------------------------------------------- dear ------------------ this letter responds to a letter dated date and subsequent correspondence submitted by taxpayer requesting a letter_ruling under sec_168 of the internal_revenue_code regarding a mixed-use development of three buildings taxpayer represents that the facts are as follows facts taxpayer a state limited_liability_company was organized on a to acquire develop renovate and construct three adjacent properties into a mixed-use development containing hotel rooms commercial retail_space commercial parking garage and residential apartments the project the three properties are existing_building a building b and building c the project is owned by taxpayer taxpayer is currently operating pursuant to its agreement dated k by and among b a state limited_liability_company as a member c a state limited_liability_company as a member and d a state limited_liability_company as the initial manager d’s members are e a subchapter_s_corporation formed under the laws of state and individuals f and g plr-121674-09 taxpayer acquired building a and building c from authority an urban renewal agency of city on h and acquired building b from authority on i building a building b and building c are located on contiguous parcels of real_property in downtown city specifically these three buildings occupy location in downtown city and are located in a low-income_community building a and building c are physically connected and are being renovated together building a will be renovated for use as commercial and residential space building c will be renovated for use as a commercial parking garage demolition work on building a and building c commenced in the month of acquisition and construction work on these two buildings commenced shortly after k the projected completion date and placed-in-service date for building a and building c are on or about l during the renovation building a and building c have not been and will not be in use building a will contain approximately m hotel rooms commercial retail_space and approximately n residential apartments building c will contain t parking spaces with respect to the hotel in building a taxpayer represents that for more than one-half of the days in which a dwelling_unit in the hotel will be occupied on a rental basis during taxpayer’s taxable_year such unit will be occupied by a tenant or series of tenants each of whom occupies the unit for less than calendar days building b also will be renovated for use as commercial and residential space construction work for the renovation of building b commenced shortly after i with a projected completion date in q and placed-in-service date on or about r during the renovation building b has not and will not be in use building b will contain approximately s residential units and a small amount of commercial space on the ground floor after the renovations are completed building c will be connected to building a by a breezeway this breezeway leads to the residential elevator bank in building a with direct access to the residential apartments in that building as well as the amenities located on building a’s rooftop for the residential residents these rooftop amenities will serve the residential residents located in building a and building b in addition to the t parking spaces in building c u surface parking spaces will be available on project property outside of building a building b and building c taxpayer is not obligated under any of the project financing documents or the hotel franchise agreement to reserve or set_aside a specific number of parking spaces for either hotel guests or apartment residents as such all of the parking spaces on the project property will be available both to apartment residents and hotel guests on as as- needed basis if an apartment resident or a hotel guest elects to utilize on-site parking the resident or guest will be charged a separate parking fee over and above the monthly apartment rent or hotel room charges as applicable all spaces not contracted for by the hotel guests or apartment residents will be available to the general_public plr-121674-09 on v and k taxpayer closed on a coordinated common plan of approximately dollar_figurew of federal new_markets_tax_credit financing for the renovation of building a and building c with one conventional lender and several community development entity lenders the cde lenders the loans of each of these lenders are evidenced by promissory notes and loan agreements and secured_by deeds of trust on building a and building c some of the loans will convert to equity in taxpayer upon completion of the renovation each of these lenders executed an intercreditor and subordination agreement establishing its respective right to repayment and the collateral securing its loan the overall financing terms were simultaneously negotiated among taxpayer and the cde lenders after acquisition of building b on i two of the cde lenders and the conventional lender increased their loans and taxpayer obtained additional local governmental financing to fund the acquisition and rehabilitation of building b regardless of any limits on the use of loan proceeds the loans of each of the cde lenders are evidenced by existing and or additional promissory notes and amended and restated loan agreements and secured_by amended deeds of trust on building a building b and building c and the new local governmental financing is also secured_by deeds of trust on the entire project in addition to the above financing financing for the project will come from historical rehabilitation credits ------ opportunity zone tax incentives and state tax incentives taxpayer plans to operate lease market manage and otherwise deal with the buildings composing the project as a single integrated mixed-use development the project will be operated under a single security services contract a single elevator contract a single on-site project maintenance director a single leasing director to whom all leasing agents report shared services shared parking facilities and a single supervisory on-site general manager taxpayer leased building a building b and building c to x pursuant to a master lease agreement to provide for unitary management of the project by a single management entity x in turn executed agreement with taxpayer’s affiliate y who will manage a the hotel and parking garage the hotel unit pursuant to a franchise agreement with a major hotel flag and b the apartments and the retail_space in and surface parking outside of building b the residential unit pursuant to agreement a base management fee and an incentive management fee will be paid to y for its management services under agreement the operation of the hotel unit is under the exclusive supervision and control of x which is responsible for the proper and efficient operation of the hotel unit further agreement provides that among other functions x establishes prices rates and charges for parking in building c including allocation of plr-121674-09 spaces within building c if any to the residential unit of the project however no specific allocations of parking to the various project activities hotel apartments and retail_space will be made until the market need and demand can be assessed moreover under agreement the operation of the residential unit is under the exclusive supervision and control of x which is responsible for the proper and efficient operation of the residential unit as recognized in agreement y subcontracted the management and operation of the residential unit of the project through agreement to z an affiliate of x under agreement y retained z to perform any and all functions including managerial coordination of pre-opening activities accounting services and management of repairs with regard to the residential unit that y is required to provide to x under agreement however pursuant to agreement y retains overall management responsibilities to x and will oversee the operation of all business activities of the project including hotel parking and residential operations additionally z has no contractual relationship with x and will report directly to y who retains supervisory management responsibilities over the performance of z with respect to management of the residential unit of the project moreover taxpayer is rehabilitating the entire project utilizing a single comprehensive development and construction budget each month during the construction phase of the project a single draw is submitted to the project lenders requesting loan proceeds to be utilized to make progress payments to the contractors agreement provides for separate pre-opening budgets for the hotel unit for the residential apartments in building a and the residential apartments in building b taxpayer represents that these separate pre-opening budgets are necessary given the need to comply with contractual hotel operating standards the advance booking of group business for the hotel and the separate marketing and lease-up requirements for the residential apartments while agreement also provides for separate budgets for the hotel unit and the residential unit these budgets flow into a single set of books a consolidated income statement and balance_sheet and a single federal tax_return reflecting the aggregate operations of the project further pursuant to agreement the books of control and account pertaining to the operations at the hotel unit and residential unit of the project including but not limited to preparation of tax filings employment reports and returns required by any federal state or local authority are kept by y further agreement provides that y must deliver monthly an interim accounting to x showing gross revenues deductions operating_profit and applications and distributions thereof and that y must deliver to x for its review an annual operating projection of among other things gross revenues for these purposes gross revenues deductions and operating_profit are defined in agreement as the sum of such amounts from all mixed-use activities conducted in the project moreover gross revenues is the base number upon which y the single plr-121674-09 manager of the project is compensated the cost of z is an expense of y not a project cost because z works for and is directly accountable to y rulings requested taxpayer requests the internal_revenue_service issue the following ruling building a building b and building c may be treated as a single building for purposes of determining whether the building and its structural_components is residential_rental_property or nonresidential_real_property under sec_168 law and analysis sec_168 defines the terms residential_rental_property and nonresidential_real_property for purposes of determining depreciation under sec_168 sec_168 provides that the term residential_rental_property means any building or structure if percent or more of the gross rental income from such building or structure for the taxable_year is rental income from dwelling units for this purpose sec_168 provides that the term dwelling_unit means a house or apartment used to provide living accommodations in a building or structure but does not include a unit in a hotel motel or other establishment more than one-half of the units in which are used_on_a_transient_basis sec_168 provides that the term nonresidential_real_property means sec_1250 property which is not i residential_rental_property or ii property with a class_life of less than years sec_168 provides that the term sec_1250 property has the meaning given such term by sec_1250 sec_1250 provides that the term sec_1250 property means any real_property other than sec_1245 property as defined in sec_1245 that is or has been property of a character subject_to the allowance for depreciation provided in sec_167 see also e of the income_tax regulations sec_1_1250-1 provides that for purposes of applying depreciation_recapture rules of sec_1250 the facts and circumstances of each disposition is considered in determining what is the appropriate item of sec_1250 property in general a building is an item of sec_1250 property but in an appropriate case more than one building may be treated as a single item for example if two or more buildings or structures on a single tract or parcel or contiguous tracts or parcels of land are operated as an integrated unit as evidenced by their actual operation management financing and accounting they may be treated as a single item of sec_1250 property plr-121674-09 sec_168 was amended by b a of the revenue reconciliation act of publaw_101_508 1991_2_cb_484 the 1990_act prior to this amendment sec_168 provided that the term residential_rental_property has the meaning given such term by sec_167 prior to the enactment of the 1990_act sec_167 provided in pertinent part that a building or structure shall be considered to be residential_rental_property for any taxable_year only if percent or more of the gross rental income from such building or structure for such year is rental income from dwelling units within the meaning of former sec_167 former sec_1 j -3 b ii provided that in any case where two or more buildings or structures on a single tract or parcel or contiguous tracts or parcels of land are operated as an integrated unit as evidenced by their actual operation management financing and accounting they may be treated as a single building for purposes of determining whether the building or structure is residential_rental_property thus for purposes of determining if building a building b and building c are residential_rental_property or nonresidential_real_property under sec_168 these buildings may be treated as a single building when they are on a single tract of land or parcel or contiguous tracts or parcels and they are operated as a single integrated unit for making the latter determination the relevant factors are the actual operation management financing and accounting for the buildings see sec_1_1250-1 see also former sec_1 j -3 b ii in this case taxpayer represents that building a building b and building c are located on contiguous parcels of real_property in downtown city with regard to operation of the project taxpayer represents that building a building b and building c will be placed_in_service within the same 12-month_period moreover the project will be operated under a single security services contract a single elevator contract a single on-site project maintenance director a single leasing director to whom all leasing agents report shared services shared parking facilities and a single supervisory on-site general manager further the apartment amenities located on the rooftop of building a will serve the residential residents located in building a and building b moreover building c will be connected to building a by a breezeway that leads to the residential elevator bank in building a providing direct access to the residential apartments and rooftop amenities in that building while none of the parking spaces in building c or the surface parking lot are currently reserved for the residential residents or hotel guests taxpayer has determined that no specific allocations of parking will be made until the market need and demand can be assessed plr-121674-09 with regard to management of the project taxpayer leased building a building b and building c to x pursuant to agreement to provide for unitary management of the project by a single management entity x in turn executed agreement with taxpayer’s affiliate y pursuant to agreement y will manage and operate the entire project while y subsequently subcontracted the management of the apartments through agreement to z y pursuant to agreement retains overall management responsibilities to x and will oversee the operation of all business activities of the project including hotel parking and residential operations additionally z has no contractual relationship with x and will report directly to y who retains supervisory management responsibilities over the performance of z with respect to management of the residential component of the project with regard to financing of the project taxpayer initially closed on a coordinated common plan of federal new_markets_tax_credit financing for the renovation of building a and building c with one conventional lender and the cde lenders however after acquisition of building b on i the loans of each of the cde lenders are evidenced by existing and or additional promissory notes and amended and restated loan agreements and secured_by amended deeds of trust on building a building b and building c moreover new local governmental financing obtained upon acquisition of building b is also secured_by deeds of trust on the entire project thus there is one overall plan of financing for the development of the project and the financing is secured_by deeds of trust on the entire project finally with regard to the accounting for the project taxpayer is rehabilitating the entire project utilizing a single comprehensive development and construction budget while there will be separate pre-opening budgets and separate budgets for the various profit centers of the project hotel unit and residential unit these budgets are needed for business reasons further these budgets will flow into a single set of books a consolidated income statement and balance_sheet and a single federal tax_return reflecting the aggregate operations of the project moreover interim accounting reports and annual operating projections will pertain to the entire project also the books of control and account pertaining to the entire project will be kept by y taxpayer’s facts and representations about the operation management financing and accounting of the project show that the three buildings composing the project building a building b and building c are to be operated as a single integrated unit as previously discussed taxpayer represents that these three buildings are on contiguous tracts of land accordingly taxpayer’s facts and representations support treating the three buildings composing the project as a single building for purposes of determining whether building a building b and building c are residential_rental_property or nonresidential_real_property under sec_168 conclusion plr-121674-09 based solely on the facts and representations submitted and the relevant law and analysis as set forth above we conclude that building a building b and building c may be treated as a single building for purposes of determining whether the building and its structural_components is residential_rental_property or nonresidential_real_property under sec_168 we also note that if building a building b and building c are treated as a single building for purposes of determining whether the building and its structural_components is residential_rental_property or nonresidential_real_property under sec_168 then building a building b and building c also are treated as a single item of sec_1250 property for purposes of sec_1250 except as specifically set forth above we express no opinion concerning the tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed or implied on i whether the buildings composing the project are nonresidential_real_property or residential_rental_property for any taxable_year under sec_168 ii what components of such buildings are sec_1245 property as defined in sec_1245 iii whether any of the buildings composing the project qualify for the rehabilitation_credit under sec_47 including whether such buildings may be treated as a single building under sec_47 iv whether the requirements of the new_markets_tax_credit under sec_45d are satisfied and v whether any gulf_opportunity_zone tax benefits under sec_1400n apply this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer’s authorized representative we are also sending a copy of this letter to the appropriate industry director lmsb sincerely kathleen reed kathleen reed chief branch office of associate chief_counsel income_tax and accounting 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 intl b02 plr-123837-11 date date ty ------ legend --------------------------------------------- taxpayer ----------------------------------------------------------- manager fc state x country y year -------------------------- ---------------------------- ------------ ---------- ------ dear --------------------- this is in response to your letter received by our office on date requesting the consent of the commissioner of the internal_revenue_service to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 with respect to your investment in fc the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the plr-123837-11 material submitted in support of the request for rulings it is subject_to verification on examination facts taxpayer is a privately held state x limited_partnership that was formed in year taxpayer’s activities consist solely of managing financial investments on behalf of its partners taxpayer is managed by a member of manager a large privately owned group of affiliated entities with substantial real_estate holdings among other investments in year taxpayer purchased shares of fc a county y publicly traded trust fc was a passive_foreign_investment_company pfic as defined under sec_1297 of the code taxpayer is a sophisticated investment and portfolio manager which maintains a well-qualified staff of investment and accounting professionals taxpayer has systems designed to capture and report critical financial_accounting and tax information on a timely basis further taxpayer has access to the professionals of manager’s tax department manager’s tax department was competent to render u s tax_advice with respect to stock ownership of a foreign_corporation taxpayer relied on the advice of its accounting professionals and manager’s tax department to comply with u s tax laws manager’s tax department has full access to the accounting information with respect to taxpayer’s investment in fc however manager’s tax department failed to identify fc as a pfic within the meaning of sec_1297 consequently manager’s tax department failed to advise taxpayer of the possibility of making a qef election under sec_1295 with respect to fc and of the consequences of making or failing to make such an election taxpayer recently became aware of fc’s status as a pfic taxpayer has submitted an affidavit signed under penalties of perjury describing the events that led to the failure to make the qef election by the election due_date including the role of its accounting professionals and manager’s tax department taxpayer represents that as of the date of this request_for_ruling the pfic status of fc has not been raised by the irs on audit for any of the taxable years at issue ruling requested taxpayer requests the consent of the commissioner to make a retroactive qef election with respect to fc for year under sec_1_1295-3 law sec_1295 of the code provides that any pfic shall be treated as a qef with respect to a taxpayer if an election by the taxpayer under sec_1295 plr-123837-11 applies to such company for the taxable_year and the company complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company under sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic under sec_1_1295-3 a taxpayer may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united state sec_3 government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe the events which led to the failure to make a qef election by the election due_date the discovery of such failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on such professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made with taxpayer’s ruling_request we conclude that taxpayer has satisfied sec_1_1295-3 accordingly consent is granted to taxpayer to make a retroactive qef election with respect to fc for year provided that taxpayer complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election plr-123837-11 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this ruling must be attached to any_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement attaching a statement to their return that provided the date and control number of the letter_ruling sincerely jeffery g mitchell branch chief international cc


internal_revenue_service number release date index number ------------ ------------------------------------------ ---------------------------------------- ---------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-140080-05 date date ------------------------------ ----------------- legend x --------------------------------------------------- y ---------------------------------------------------- country date date dear ------------- ------------------------- ------------------------- ---------- this is in response to a letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to treat y as an entity disregarded as separate from its owner for federal tax purposes under sec_301_7701-3 facts according to the information submitted and representations made within the request x is the ultimate owner of an affiliated_group of entities among this affiliated_group is y which is an entity that was formed under the laws of country on date x acquired y x timely made a sec_338 election relating to its acquisition of y due to inadvertence a form_8832 entity classification election to treat y as an entity disregarded as separate from its owner effective date was not filed plr-140080-05 law and analysis sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally unless the entity makes an election to be treated otherwise a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability if a foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 if a foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 further provides that an entity classification election must be filed on form_8832 entity classification election and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed if a purchasing_corporation makes an election under sec_338 regarding an acquired subsidiary an election under sec_301_7701-3 for the acquired subsidiary can be effective no earlier than the day after the acquisition_date within the meaning of sec_338 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 plr-140080-05 conclusion based solely upon the information submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result an extension of days from the date of this letter is granted to elect to treat y as disregarded as an entity separate from its owner for federal tax purposes effective date the entity classification election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter except as expressly provided herein no opinion is expressed or implied this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this sincerely letter will be sent to your authorized representative enclosures copy of this letter copy for sec_6110 purposes william p o’shea associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c contact person id number telephone number t- b ae sin - date cy legend a b dear taxpayer this is in response to your letter dated date wherein you requested certain rulings concerning the federal tax consequences of the proposed transaction described below you are a non-profit corporation exempt from federal_income_tax under sec_501 of the internal_revenue_code code you are classified as a private_foundation within the meaning of sec_509 your primary purpose is to receive contributions and make donations to organizations described in sec_501 you are governed by a eight-member board_of directors five of whom are also board members of b your original and subsequent financial support came from a a national banking institution you also received financial support from b the parent holding_company of a has agreed to merge with another national banking institution bank and_after the merger you expect that a will be merged into a subsidiary of that bank you represent that in view of the pending merger it is in your best interests for you to distribute all your assets to domestic organizations described in sec_501 c of the code you plan to terminate your private_foundation_status thereafter you represent that all your assets will be distributed to domestic exempt_organizations described in sec_501 sec_213 of which-are described in sec_509 or ie public_charities the remaining are private_foundations you represent that you will investigate and determine that these domestic organizations are in fact recognized as exempt from federal_income_tax under sec_501 all but five of the recipients were selected by the shareholders of b your board_of directors selected the remaining five recipients you represent that you will require an acknowledgement from any sec_501 transferee organization which is a private_foundation and is deemed controtled by disqualified persons of your organization that a pro_rata share of your tax_attributes will carry over to such sec_501 transferee organization the amount you will donate to a particular sec_501 organization will be determined on a basis proportional to the number of shares owned by a particular shareholder divided by the total number of issued and outstanding shares for example an individual holding of b’s stock will be permitted to direct the distribution of of your assets you represent that you will obtain from each of the sec_501 organizations commitments that it will use your distributions for charitable purposes you plan to complete the distribution during the calendar_year but will not file a notice of termination during that year once ail assets are distributed you will notify the service of your intention to voluntarily terminate your status as a private_foundation pursuant to sec_507 of the code in you represent that you will make the required amount of qualifying distributions in so that you will have no undistributed_income under sec_4942 of the code you also represent that you have made no grants to private_foundations over which you are required to exercise expenditure_responsibility under sec_4945 of the code law sec_501 of the internal_revenue_code cade provides for the exemption from federal_income_tax of non-profit organizations organized and operated exclusively for religious charitable educational and other exempt purposes sec_507 of the code provides that except as provided in sec_507 the status of any organization as a private_foundation shall be terminated only if it notifies the secretary of its intent to terminate or with respect to such organization there have been either willful repeated acts or failures to act or a willful and flagrant act or failure to act giving rise to liability for tax under chapter and the secretary notifies such organization that it is liable for tax imposed by sec_507 sec_507 of the code provides that in the case of a transfer of assets of any private_foundation to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization the transferee foundation shail not be treated as a newly created organization sec_507 of the code imposes on each organization a tax equal to the lower_of the amount which the private_foundation substantiates by adequate_records or other corroborating-evidence as the aggregate tax_benefit resulting from the sec_501 status of such foundation or the value of the net assets of such foundation -g901038079 sec_1_507-1 of the income_tax regulations regulations provides that if a private_foundation transfers ail or part of its assets to one or more private_foundations or one or more private_foundations and one or more sec_509 or organizations pursuant to a transfer described in sec_507 and sec_1 c such transferor foundation will not have terminated its private_foundation_status under sec_507 sec_1_507-1 of the regulations provides that neither a transfer of all of the assets of the a private_foundation nor a significant disposition of assets by a private_foundation whether or not any portion of such significant disposition of assets is made to anothér private_foundation shall be deemed to result in a termination of the transferor private_foundation under sec_507 unless the transferor private_foundation elects to terminate pursuant to sec_507 or sec_507 is applicable sec_1_507-3 of the regulations provides that in the case of a significant disposition of assets to one or more private_foundations within the meaning of paragraph c of this section the transferee organization shall not be treated as a newly created organization a transferee organization to which this paragraph applies shall be treated as possessing those attributes and characteristics of the transferor organizations which are described in subparagraphs and of this paragraph sec_1_507-3 of the regulations provides that except as provided in subparagraph of sec_1_507-3 a private_foundation is required to meet the distribution_requirements of sec_4942 of the code for any taxable_year in which it makes a sec_507 transfer of all or part of its net assets to another private_foundation such transfer shall itself be counted toward satisfaction of such requirements to the extent the amount transferred meets the requirements of sec_4942 however where the transferor has disposed of all of its assets the recordkeeping requirements of sec_4942 shail not apply during any period in which it has no assets such requirements are applicable for any taxable_year other than a taxable_year during which the transferor has no assets - sec_1_507-3 of the regulations provides that except as provided in sec_1_507-3 where the transferor foundation has disposed of all of its assets during any period in which the transferor has no assets sec_4945 and h of the code shall not apply to the transferee or the transferor with tespect to any expenditure_responsibility grants made by the transferor however this exception does not apply with respect to any information reporting requirements imposed by sec_4945 and the regulations thereunder for any year in which any transfer is made sec_1_507-3 of the regulations provides that the provisions of sec_4945 shall apply to a transferee foundation to the same extent and in the same manner that they would have applied to the transferor foundation had the transfer described in sec_507 not been effected sec_1_507-3 of the regulations provides that if a private_foundation transfers all of its net assets to one or more private_foundations which are effectively controlled directly or indirectly by the same person or persons which effectively controlied the transferor private_foundation for purposes of chapter and part ii of subchapter_f of chapter of the code such a transferee private_foundation shall be treated as if it were the transferor sec_1_507-3 of the regulations provides that a transfer under sec_507 of the code includes a transfer of assets from one private_foundation to one of more private_foundations pursuant to any reorganization partial_liquidation or any other significant disposition of assets the term significant disposition includes any disposition of percent or more of the transferor private foundation’s assets sec_1_507-3 of the regulations provides that unless a private_foundation voluntarily gives notice under sec_507 of the code a transfer of assets described in sec_507 will not constitute a termination of the transferor’s private_foundation_status sec_1_507-4 of the regulations provides that private_foundations which make transfers described in sec_507 or of the code are not subject_to the tax imposed under sec_507 with respect to such transfers unless the provisions of sec_507 become applicable sec_4941 of the code imposes a tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 of the code provides that the term self-dealing includes any direct or indirect transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation - sec_4942 of the code imposes a tax on the undistributed_income_of_a_private_foundation sec_4942 of the code provides that the term undistributed_income means with respect to any private_foundation for any taxable_year as of any time the amount by which the distributable_amount for such taxable_year exceeds the qualifying distributions made before such time out of such distributable_amount sec_53_4942_a_-3 of the foundation and similar excise_taxes regulations regulations provides in pertinent part that the term qualifying_distribution means any amount including program-related investments as defined in a sec_4944 and reasonable and necessary administrative expenses paid to accomplish one or more purposes described in sec_170 or b other than any contribution to a private_foundation which is not an operating_foundation as defined in sec_4942 sec_4942 of the code provides in pertinent part that the term qualifying_distribution means any amount including that portion of reasonable and necessary administrative expenses paid to accomplish one or more purposes described in sec_170 or for assets to be used for these purposes such distributions include payments to public_charities and operating_foundations but not payments made to organizations controlled by the foundation or disqualified persons or to private_foundations unless the requirements of sec_4942 are met sec_4942 of the code provides in pertinent part that the term qualifying_distribution includes a contribution to a sec_501 organization described in sec_4942 or ii if a not later than the close of the first taxable_year after its taxable_year in which such contribution is received such organization makes a distribution equal to the amount of such contribution and such distribution is a qualifying_distribution which is treated under sec_4945 as a distribution out of corpus and b the private_foundation making the contribution obtains adequate_records or other_sufficient_evidence from such organization showing that the qualifying_distribution described in subparagraph a has been made by such organization sec_4944 of the code imposes a tax on any amount invested by a private_foundation in a manner that jeopardizes the carrying out of any of its exempt purposes sec_4945 of the code imposes a tax on any taxable_expenditure made bya private_foundation as defined in pertinent part by sec_4945 sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to another organization unless - a such organization is described in paragraph or of sec_509 or is an exempt_operating_foundation as defined in sec_4940 or b the private_foundation exercises expenditure_responsibility with respect to such grant in accordance with sec_4945 sec_53_4945-5 of the regulations provides in pertinent part that the term taxable_expenditure includes any amount_paid or incurred by a private_foundation as a a100 f grant to an organization other than an organization described in sec_509 or unless the private_foundation exercises expenditure_responsibility with respect to such grant in accordance with sec_4945 sec_4945 of the code provides that expenditure_responsibility means that the private_foundation is responsible to exert all reasonable efforts and to establish adequate procedures to see that the grant is spent solely for the purpose for which made to obtain full and complete reports from the grantee on how the funds are spent and to make full and detailed reports with respect to such expenditures to the secretary sec_53_4945-5 of the regulations provides that sec_1_507-3 sec_1_507-3 f and a of the regulations will determine the extent to which the expenditure rules described in sec_4945 and h shall apply to the transfer of assets under sec_507 of the code sec_53_4945-6 of the regulations provides that any payment which constitutes a qualifying_distribution under sec_4942 or an allowable deduction under sec_4940 will not be treated as a taxable_expenditure under sec_4945 discussion you indicate that all your assets will be donated to domestic organizations that are described in sec_501 of the code you also indicate that these sec_501 organizations will be private_foundations or publicly supported charities accordingly the proposed transfers are described in sec_507 and will not be subject_to tax under sec_507 inasmuch as your proposed transfers of all your assets to sec_501 organizations are made pursuant to sec_507 the proposed transfers will not result in the termination of your private_foundation_status under sec_509 see sec_1_507-1 of the regulations they also-will not result in the imposition of the foundation status termination_tax under sec_507 see sec_1_507-4 of the regulations since the proposed transfers are donations they will not be treated as net_investment_income under sec_4940 of the code the proposed transfers will not constitute acts of self-dealing within the meaning of sec_4941 of the code because the assets will be donated to sec_501 organizations and be used for exempt purposes within the meaning of sec_501 of the code you must continue to meet the requirements of sec_4942 of the code specifically sec_1_507-3 of the regulations provides that a private_foundation is required to meet the distribution_requirements of sec_4942 of any taxable_year in which it makes a sec_507 gol o transfer of all or part of its net assets to another private_foundation we note that the record-keeping requirements of sec_4942 must be complied with for the tax_year of this proposed transaction this provision will not apply for the subsequent tax_year where you will have disposed all your assets see sec_1_507-3 of the regulations the proposed transfers will not constitute jeopardizing investments because the funds will be donated to sec_501 organizations and be used for purposes described in sec_170 of the code the proposed transfers will not constitute taxable_expenditures where the assets are donated to sec_501 organizations that are described in sec_509 or of the code see sec_4945 of the code the proposed transfers of assets to private feundations will not constitute taxable_expenditures because the transfers will be done pursuant to sec_507 of the code hence no expenditure_responsibility is required see sec_1_507-3 of the regulations you represent that you currently have no outstanding grants for which expenditure_responsibility is being exercised based upon the foregoing we rule as follows the proposed transfers will constitute a significant disposition of assets within the meaning of sec_507 of the code and will not result in the termination of your private_foundation_status within the meaning of sec_507 hence the tax imposed by sec_507 will not apply upon the distribution of your assets to sec_501 organizations once ail your assets are donated to the sec_501 organizations and you notify the service of your intention to terminate your private_foundation_status pursuant to sec_507 of the code the amount of the tax will be zero the proposed transfers will not subject you to any excise_tax on net_investment_income under sec_4940 of the code - the proposed transfers will not be acts of self-dealing within the meaning of sec_4941 of the code you will be subject_to the distribution_requirements of sec_4942 of the code for the tax_year of the proposed transfers this distribution_requirements will not apply in the subsequent tax_year the year of your dissolution you will be subject_to the record-keeping requirements of sec_4942 of the code with respect to the proposed transfers of assets for the tax_year of these transfers the record-keeping requirements will not be applicable in the l subsequent tax_year the proposed transfers will not constitute jeopardizing investments within the meaning of sec_4944 of the code the proposed transfers will not constitute taxable_expenditures within meaning of sec_4945 of the code you will not be required to exercise expenditure_responsibility under sec_4945 and sec_4945 of the code with respect to the transferred assets you will be subject_to the information reporting requirements of sec_4945 for the tax_year in which the proposed transfers occurred this ruling is conditioned on the understanding that there will be no material_change in the facts upon which it is based this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described above you should keep a copy for your permanent records the ruling is directed only to the organization that requested it sec_61 k of the internal_revenue_code provides that it may not be used or cited by others as precedent sincerely signed robert c harper ur robert c harper jr id manager exempt_organizations technical group go


internal_revenue_service number release date index number --------------------------- ----------------------------------------------- -------------------------------------- --------------------------- -------------------------------------- --------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------- telephone number -------------------- refer reply to cc psi b01 plr-152105-05 date date ------------------- --------------------- --------------------------- legend legend x -------------------------------------------------- country d dear -------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-152105-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-152105-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely enclosures heather c maloy associate chief_counsel passthroughs and special industries copy of this letter copy for ' purposes cc


internal_revenue_service number release date index number ---------------------------------------------- -------------------------------------- ------------------------- ------------------------------- ----------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ---------------- telephone number -------------------- refer reply to cc psi b01 plr-145168-13 date date legend x ------------------------------------------------- ---------------------------------------- country date dear ---------------- -------------- ------------------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed under the laws of country x represents that it is a foreign eligible_entity eligible to elect to be disregarded as a separate_entity for federal tax purposes x intended to elect to be treated as a disregarded_entity for federal tax purposes effective date however x inadvertently failed to timely file form_8832 entity classification election x represents that it and affected parties have timely filed all required federal tax and information returns consistent with x being treated as a disregarded_entity since date x further represents that it acted in good_faith and reasonably finally x represents that the interests of the government will not be prejudiced by granting the relief sought law and analysis plr-145168-13 sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single member having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_7701-3 provides that such an election must be signed by either a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organization documents to make the election and who represents to having such authorization under penalties of perjury sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the granting relief will not prejudice the interests of the government conclusion plr-145168-13 based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on the owner of x filing within days of this letter all required returns for all open years consistent with the requested relief these returns may include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to foreign disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except as specifically set forth above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representative sincerely laura c fields laura c fields senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------- --------------------------------- ------------------------------------ ---------------------------------------------- ty ------- ty ------- dear ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number --------------------- refer reply to cc intl b03 plr-134009-11 date date corp a country b business c ---------------------------------------------------------------- ---------------------------------------------------------- -------- this is in response to your letter dated date in which you request consent for corp a to revoke effective for it sec_2010 tax_year and for all subsequent taxable years its election to use the safe_harbor method described in sec_1_901-2a in determining the amount of foreign_income_tax paid_or_accrued by corp a to country b the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations you submitted and accompanied by your penalty of perjury statement while this office has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination corp a files its tax_return on a calendar_year basis and is the common parent of an affiliated_group_of_corporations that join in the filing of a consolidated u s federal_income_tax return the corp a group it uses the accrual_method of accounting the corp a group conducts business c in numerous countries including country b sec_1_901-2a permits dual capacity taxpayers in computing foreign tax_credits for qualifying levies of each country to use either a facts and circumstances method or a safe_harbor method to determine the amount of a levy that is not paid in exchange for a specific_economic_benefit the safe_harbor method is described in sec_1_901-2a sec_1_901-2a describes the manner in which taxpayers may elect and revoke the safe_harbor method sec_1_901-2a provides that the safe plr-134009-11 harbor method election may not be revoked without the consent of the commissioner the commissioner will normally give consent provided the conditions set forth in the regulation are satisfied the regulation provides that an application_for consent to revoke the election must be made not later than days before the due_date including extensions for the filing of the income_tax return for the first taxable_year for which the revocation is sought to be effective with certain exceptions not applicable to this situation the commissioner may make his consent to any revocation conditioned upon adjustments being made in one or more taxable years so as to prevent the revocation from resulting in a distortion of the amount of any item relating to tax_liability in any taxable_year the commissioner will normally consent to a revocation under the circumstances described in sec_1_901-2a through vi sec_1_901-2a provides that the commissioner will normally consent to a revocation of a safe_harbor election if the election has been in effect with respect to at least three taxable years prior to the taxable_year for which the revocation is to be effective the safe_harbor method has been used with respect to country b consistently for all qualifying levies since corp a’s application_for consent to revoke the safe_harbor election with respect to qualifying levies of country b was made not later than days before date the due_date including extensions for corp a’s u s consolidated federal_income_tax return for it sec_2010 tax_year and the applicable safe_harbor election with respect to country b has been in effect with respect to at least corp a’s last three taxable years prior to it sec_2010 tax_year accordingly consent is granted to corp a to revoke its safe_harbor election with respect to qualifying levies of country b effective for it sec_2010 tax_year and for all subsequent taxable years no opinion was requested and no opinion is expressed as to whether based upon all of the relevant facts and circumstances the amount if any paid pursuant to a levy or levies imposed by country b is not an amount_paid in exchange for a specific_economic_benefit except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to corp a the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-134009-11 corp a must attach a statement to its return that provides the date and control number of this letter_ruling sincerely richard l chewning senior counsel branch office of associate chief_counsel international enclosure copy for purposes


tax exempt and government entities department of the treasury internal_revenue_service washington d c may uniform issue list tep ra legend taxpayer a ira b bank c account d amount dear this is in response to a request for a private_letter_ruling dated date as supplemented by correspondences dated march april and 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 have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution of amount from ira b taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to her responsibility to care for her mother and her mother’s deteriorating medical_condition which impaired her ability to manage her financial affairs taxpayer a further represents that amount has not been used for any other purpose taxpayer a maintained ira b an individual_retirement_account ira under sec_408 of the code with bank c on date taxpayer a received notice from financial_institution c that her certificate of deposit cd within ira b was due for renewal seeking an investment vehicle offering a higher rate of return on date taxpayer a took a distribution of amount from ira b and deposited it into non-ira account d also with bank c taxpayer a represents she intended to rollover the distribution into a higher paying cd within the 60-day period taxpayer a is the primary caretaker for her 100-year old mother over the last several years the health of taxpayer a’s mother has declined and worsened in the period after the distribution specifically during the 60-day rollover period taxpayer a’s mother became completely sedentary and developed additional serious medical issues taxpayer a spent much of her time caring for her mother who required numerous medical visits physical therapy and surgery care as the result of her medical_condition as a result taxpayer a failed to roll over amount into another ira within her 60-day rollover deadline the ruling_request is accompanied by letters from taxpayer a’s mother’s physicians which describe the medical conditions and the care provided by taxpayer a during the 60-day rollover period based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to amount sec_408 of the code provides that except as otherwise provided in sec_408 of the code 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 provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code 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 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 ii 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 of the code does not apply to any amount described in sec_408 of the code 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 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers 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 of the code 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 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code 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 the information presented and the documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover of amount was due to her responsibility to care for her mother and her mother’s worsening medical_condition which impaired taxpayer a’s ability to manage her financial affairs during the 60-day rollover period therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b taxpayer a is granted a period of days from the issuance of this letter_ruling to transfer an amount not to exceed amount into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code 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 letter 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 if you wish to inquire about this ruling please contact at l d sincerely yours cotte a within manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice


t c memo united_states tax_court amy yu-wen chien petitioner v commissioner of internal revenue respondent docket no filed date timothy a doyle for petitioner karen lynne baker for respondent memorandum findings_of_fact and opinion morrison judge the respondent the irs determined that the petitioner chien is liable for deficiencies of dollar_figure dollar_figure and dollar_figure for tax years and respectively the deficiencies are predicated on the following determinations that the wages chien received from the international monetary fund imf were includable in her self-employment_income thus resulting in self-employment-tax liability under sec_1401 and that in calculating chien’s income-tax liability under sec_1 there should be deducted from her taxable_income one-half of her self-employment-tax liability the notice_of_deficiency also reflected a determination by the irs that chien is liable for section-6662 a penalties of dollar_figure dollar_figure and dollar_figure for tax years and respectively all references to sections are to sections of the internal_revenue_code as in effect for the tax years at issue chien concedes she is liable for the deficiencies the only issue remaining for resolution is whether she is liable for the section-6662 a penalties we hold that she is not liable findings_of_fact chien resided in california when she filed her petition she was a u s citizen during the years at issue while chien was in college her father prepared her tax returns chien’s first postcollege job was with the peace corps her income from the peace corp sec_1although we refer to the tax imposed by sec_1401 as the self-employment_tax it is treated as an income_tax for purposes of sec_6662 which imposes a penalty on underpayments attributable to any substantial_understatement_of_income_tax see sec_1_6662-4 income_tax regs 98_tc_123 aff’d without published opinion 15_f3d_1083 9th cir was below the threshold for filing tax returns in she quit the peace corps and began working for corestaff services l p a temporary staffing agency in washington d c the first tax_return that she prepared herself was her federal-income-tax return she prepared the return by consulting irs instructions on the internet chien joined the imf as a staff assistant in date she and the irs have stipulated that she was a contract employee of the imf she was initially hired at a salary of dollar_figure per year shortly after joining the imf chien met with j carter magill an employee of the imf who was conversant in taxation the meeting lasted five minutes magill explained to chien that she had to make an estimated-tax payment every quarter shortly after the meeting magill emailed chien a spreadsheet that calculated her next estimated-tax payment because an estimated-tax payment is based on the taxpayer’s tax_liability for the year see sec_6654 d a and b f the spreadsheet was based on magill’s calculation of chien’s tax_liability for the amount of liability as calculated on the spreadsheet included the income_tax imposed by sec_1 see sec_6654 and the self- employment_tax imposed by sec_1401 see sec_6654 with chien’s imf wages included in self-employment_income had chien understood that her estimated-tax payment was based on her liability for the income_tax imposed by sec_1 and the self-employment_tax imposed by sec_1401 she would presumably have inferred from the spreadsheet that she would be liable for the self- employment_tax however chien had no such understanding of the estimated-tax regime so she made no such inference from the spreadsheet other than the spreadsheet chien did not receive any other information from the imf informing her that she was considered self-employed or that she was liable for the self- employment_tax later we discuss information chien received at an irs presentation on site at the imf in date during chien earned dollar_figure for her services to the imf on date chien made an estimated-tax payment of dollar_figure for on date chien made another estimated-tax payment of dollar_figure for on date chien prepared a form_1040 u s individual_income_tax_return for the tax_year she timely filed the return in preparing the return chien consulted the irs instructions for the form_1040 she had been advised by magill at their meeting that preparing her federal tax returns would be easy as long as she followed the irs instructions line of the form_1040 stated one-half of self-employment_tax attach schedule se in completing line we find that chien referred to the form_1040 instructions for line the instructions stated if you were self-employed and owe self- employment_tax fill in schedule se to figure the amount of your deduction believing that she was not self-employed chien typed on line and did not complete a schedule se self-employment_tax line of the form_1040 stated self-employment_tax attach schedule se because she believed she was not self-employed chien typed on line and did not attach schedule se chien never read the irs instructions for completing schedule se if she had read the instructions she would have found this statement on the first page you must pay se tax on income you earned as a u s citizen employed by a foreign government or in certain cases by a wholly owned instrumentality of a foreign government or an international_organization under the international organizations immunities act for services performed in the united_states puerto rico guam american samoa the commonwealth of the northern mariana islands cnmi or the virgin islands thus she would have learned that even though she was not self-employed in the usual meaning of the term she might still be required to report and pay self- employment_tax instead chien mistakenly thought because that she was not 2these instructions were entitled form se-1 instructions for schedule se form_1040 self-employed in the usual meaning of the term she was not liable for the self-employment_tax she made this same mistake when she prepared her form sec_1040 for the and tax years the form_1040 for reported wage income of dollar_figure which included the dollar_figure that chien had received from the imf and dollar_figure in wages that she had received from corestaff services l p on line which is the place on form_1040 for reporting the income-tax liability imposed by sec_1 she reported a tax_liability of dollar_figure she reported that federal_income_tax withheld from forms w-2 and was dollar_figure she reported that the sum of her estimated-tax payments and the amount applied from her return was dollar_figure her actual estimated-tax payments for totaled dollar_figure the dollar_figure amount that she reported apparently included only one of her two estimated-tax payments she reported she had made total payments of tax of dollar_figure and requested a refund of dollar_figure attached to the form_1040 was a form_w-2 wage and tax statement from corestaff services l p it reflected that she had been paid wages of dollar_figure that dollar_figure of federal-income tax had been withheld from her wages that dollar_figure in social-security tax had been withheld from her wages and that dollar_figure in medicare_tax had been withheld from her wages also attached was a form_w-2 from the imf it reflected that she had been paid wages of dollar_figure the word none was printed under federal_income_tax withheld the word none was printed under social_security_tax withheld there was no entry for medicare_tax withheld in chien earned dollar_figure for her services to the imf on or about date chien made an estimated-tax payment of dollar_figure for on date the irs paid chien a dollar_figure refund of income_tax for the payment was equal to the dollar_figure of tax that chien reported on her tax_return minus her dollar_figure of payments ie withholding by corestaff services l p of dollar_figure the date estimated-tax payment of dollar_figure and the date estimated-tax payment of dollar_figure on or about date chien made another estimated-tax payment of dollar_figure for on or about date chien made an estimated-tax payment of dollar_figure for on date shirley kelly a representative of the irs delivered a slide presentation to imf employees to educate them about their tax responsibilities attendance at the presentation was not mandatory chien’s duties caused her to be late to the presentation she arrived only a few minutes before the end but she picked up a copy of the slides chien looked over the slides later if chien was knowledgeable about taxes she could have realized from the slides that her imf wages were subject_to self-employment_tax the fourth slide advises that in general u s citizens employed at the international monetary fund are subject_to both u s income_tax and social_security_taxes on the gross amount of their wages the eighth slide says employees of embassies and international organizations u s citizens working in the u s your employer files a w-2 form with the internal_revenue_service but does not withhold u s taxes your responsibilities for this wage income --report wages on form_1040 line --complete schedule se for self-employment_tax on your wage income --make estimated_tax payments when asked at trial to explain how she could not have understood from the slides that she should have reported her imf wages as self-employment_income chien said that when she read the slides she would not have immediately understood the meaning of many of the terms used for example she testified--credibly--that she would not have understood the difference between income_tax and self- employment_tax or the relationship between estimated-tax payments and self- employment_tax also we find that chien missed the portion of the slide presentation in which kelly had orally explained the two slides we referred to above chien did not later make a sustained effort to understand the slides in the sense that she did not analyze what was meant by the various phrases used nor did she analyze how the phrases used in the slide presentation corresponded to the phrases used in the form_1040 and the instructions to the form_1040 instead having missed most of the slide presentation the lesson that chien took away from the event was that she should follow the form_1040 instructions on date chien prepared a form_1040 for the tax_year she timely filed the return her reporting was similar in most respects to that on the form_1040 she had filed for as on her return she reported her imf wages as wage income she also reported that she had no self-employment_income and did not owe self-employment_tax the form_1040 for reported wage income of dollar_figure which was the dollar_figure that chien had received from the imf on line which is the place on form_1040 for reporting the income-tax liability imposed by sec_1 she reported a tax_liability of dollar_figure she reported no self-employment_tax she did not attach schedule se she reported that federal_income_tax withheld from forms w-2 and was zero she reported that the sum of the estimated-tax payments and the amount applied from her return was dollar_figure her actual estimated-tax payments for totaled dollar_figure ie dollar_figure dollar_figure dollar_figure she reported that she had made total payments of dollar_figure including a dollar_figure credit for payment of the federal telephone_excise_tax and that she owed a balance of dollar_figure attached to the form_1040 was a form_w-2 from the imf it reflected that she was paid wages of dollar_figure the word none was printed under federal_income_tax withheld the word none was printed under social_security_tax withheld there was no entry for medicare_tax withheld in chien earned dollar_figure for her services to the imf she also received dollar_figure in wages from a source not disclosed by the record on or about date chien made an estimated-tax payment of dollar_figure for in the middle of chien left her position with the imf to attend school on or about date chien made an estimated-tax payment of dollar_figure for on or about date chien made another estimated-tax payment of dollar_figure for on date the irs paid chien a dollar_figure refund of income_tax for the refund was not equal to the tax reported on the form_1040 ie dollar_figure minus estimated-tax payments ie dollar_figure dollar_figure dollar_figure because in calculating the refund the irs had made other allowances for various payments refundable credits and interest on date chien prepared her form_1040 for the tax_year she filed the return timely as on her and returns she reported her imf wages as wage income she also reported that she had no self-employment_income and did not owe self-employment_tax the form_1040 for reported wage income of dollar_figure which comprised the dollar_figure that she had received from the imf and the dollar_figure in other wage income on line which is the place on form_1040 for reporting the income-tax liability imposed by sec_1 she reported a tax_liability of dollar_figure before subtracting a dollar_figure credit she reported no self-employment_tax she did not attach schedule se she reported that federal_income_tax withheld from forms w-2 and was zero she reported that the sum of the estimated- tax_payments and the amount applied from her return was dollar_figure her actual estimated-tax payments totaled dollar_figure ie dollar_figure dollar_figure dollar_figure the form_1040 reported that she had made total payments of dollar_figure the sum of her reported estimated-tax payments but not the dollar_figure credit and it requested a refund of dollar_figure attached to the form_1040 was a form_w-2 from the imf it reflected that she had been paid wages of dollar_figure the word none was printed under federal_income_tax withheld the word none was printed under social_security_tax withheld there was no entry for medicare_tax withheld on date the irs paid chien a dollar_figure refund of her income taxes this amount was equal to the dollar_figure that she reported as her tax_liability on her form_1040 minus her dollar_figure in estimated-tax payments opinion the federal_insurance_contributions_act fica tax is imposed on wages paid with respect to employment sec_3101 and b a and b the employer is liable for half of the fica tax sec_3111 and b the employee is liable for the other half of the fica tax sec_3101 and b but the employer must withhold this portion of the tax from the employee’s wages as it pays the employee sec_3102 amounts so withheld are credited by the irs to the account of the employee see 436_us_238 the term employment is defined by sec_3121 as any service of whatever nature performed a by an employee for the person employing him irrespective of the citizenship or residence of either i within the united_states or ii on or in connection with an american_vessel or american_aircraft under a contract_of_service which is entered into within the united_states or during the performance of which and while the employee is employed on the vessel_or_aircraft it touches at a port in the united_states if the employee is employed on and in connection with such vessel_or_aircraft when outside the united_states or b outside the united_states by a citizen or resident_of_the_united_states as an employee for an american_employer as defined in subsection h or c if it is service regardless of where or by whom performed which is designated as employment or recognized as equivalent to employment under an agreement entered into under section of the social_security act except that such term shall not include-- service performed in the employ of an international_organization an international_organization is defined by sec_7701 as a public international_organization entitled to enjoy privileges exemptions and immunities as an international_organization under the international organizations immunities act u s c sec 288-288f it is undisputed that the imf is such an international_organization under sec_3121 service performed in the employ of an international_organization such as the imf is not employment payment for such service is therefore not subject_to the fica tax the self-employment_tax is a tax on the self-employment_income of an individual sec_1401 and b self-employment_income is defined as net earnings from self-employment sec_1402 net_earnings from self- employment is generally defined as income from a trade_or_business minus deductions sec_1402 the term trade_or_business is generally defined as excluding the performance of service by an individual as an employee but the performance of service by an individual as an employee is considered a trade_or_business if it is a service described in sec_3121 performed in the united_states by a citizen_of_the_united_states sec_1402 because service performed by an employee of the imf is undisputedly described in sec_3121 the performance of service within the united_states by a u s -citizen employee of the imf is considered a trade_or_business income from such service is therefore subject_to the self-employment_tax see 95_tc_639 service performed for international telecommunications satellite organization 222_fsupp_65 s d n y service performed for united nations aff’d 332_f2d_283 2d cir one-half of the amount of self-employment-tax liability for the year is deducted in calculating taxable_income for purposes of the income_tax imposed by sec_1 sec_164 the irs contends that chien is liable for the section-6662 a penalty for each of her tax years and because it contends her underpayments of tax for these three years were due to negligence or disregard of rules or regulations and her underpayment_of_tax for was due to a substantial_understatement_of_income_tax sec_6662 imposes an accuracy-related_penalty equal to of an underpayment attributable to a substantial_understatement_of_income_tax or negligence or disregard of rules or regulations sec_6662 and b and a substantial_understatement_of_income_tax exists if the understatement is greater than of the income_tax required to be shown on the return and the understatement is greater than dollar_figure sec_6662 negligence includes any failure to make a reasonable attempt to comply with the tax laws sec_6662 sec_1_6662-3 income_tax regs negligence is strongly indicated where a taxpayer fails to make a reasonable attempt to determine the correctness of a deduction credit or exclusion that would seem to a reasonable person to be too good to be true sec_1_6662-3 income_tax regs the accuracy-related_penalty 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 in determining whether the taxpayer acted with reasonable_cause and in good_faith the guidance in sec_1_6664-4 income_tax regs is applicable generally the most important factor is the extent of the taxpayer's effort to assess the taxpayer’s proper tax_liability circumstances that may indicate reasonable_cause and good_faith include an honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances including the experience knowledge and education of the taxpayer the irs has the burden of production under sec_7491 with respect to the accuracy-related_penalty to meet that burden the irs must come forward with sufficient evidence that it is appropriate to impose this penalty see 116_tc_438 although the irs bears the burden of production with respect to the accuracy-related_penalty the irs need not introduce evidence regarding reasonable_cause substantial_authority or similar provisions id the taxpayer bears the burden_of_proof with regard those issues id the irs is correct that for the tax_year chien had an underpayment attributable to a substantial_understatement_of_income_tax the understatement of income_tax on her return was dollar_figure this is greater than of the tax required to be shown on the return ie dollar_figure or of dollar_figure it is also greater than dollar_figure therefore chien had a substantial_understatement_of_income_tax for the irs also contends that chien was negligent or disregarded rules and regulations in preparing her returns for all three tax years the irs has multiple theories as to how chien was negligent first chien failed to seek further advice from magill to clarify whether she was liable for the self-employment_tax second chien attended kelly’s presentation at the imf and or reviewed the slides thus she should have known that she was liable for self-employment_tax third the tax chien reported was far exceeded by her estimated-tax payments and she received refunds for all three tax years thus she should have realized that she had likely misreported her tax_liabilities for these and other reasons the irs also contends that chien did not have reasonable_cause for failing to report her imf wages as self- employment income and did not act in good_faith with respect to this omission we find that chien had reasonable_cause for failing to report her imf wages as self-employment_income and that she acted in good_faith with respect to this omission within the meaning of sec_6664 chien’s inexperience was the reason she failed to understand--from her interactions with magill from the imf slide presentation or from the disparity between her estimated-tax payments and her reported tax liability--that she was liable for the self-employment_tax on her imf wages she consulted the instructions for the form_1040 she formed the impression that she did not need to report her wages as self-employment_income on the form_1040 and the schedule se because in the words of the form_1040 instructions she was not self-employed chien made an honest mistake in applying the instructions thus she qualified for the reasonable-cause-and-good- faith exception to the section-6662 a penalties to reflect the foregoing and concessions decision will be entered for respondent as to deficiencies and for petitioner as to the sec_6662 penalties 3the irs cites 620_f2d_153 7th cir aff’g tcmemo_1978_426 for the proposition that a taxpayer may not rely on an informal irs publication if it is inconsistent with the statute the issue in johnson was the proper tax treatment of a transaction not whether the taxpayer was liable for the accuracy-related_penalty it is therefore distinguishable