internal_revenue_service number release date index number -------------------------------- ---------------------------------------------------------- ------------------------------------ ------------------------------- in re --------------------------------------------------- ------------------------------------------------------------ ----------------------------------- 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 b09 plr-127286-04 date date legend trust trust trust trust trust trust trust trust trust trust trust trust trust ------------------------------------------------------------------------------------------ ----------------------- ------------------------------------------------------------------------------------------ ----------------------- 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------------------------------------------------------------------------------------------ ----------------------- ------------------------------------------------------------------------------------------ ----------------------- ------------------------------------------------------------------------------------------ ----------------------- plr-127286-04 trust ------------------------------------------------------------------------------------------ ----------------------- ------------------------------- ------------------ decedent date beneficiary ---------------------- beneficiary ----------------------- beneficiary ---------------------- beneficiary -------------------------- beneficiary -------------------- beneficiary ------------------------- beneficiary ---------------------- beneficiary ----------------------------- beneficiary ------------------------ beneficiary ------------------------------------------ beneficiary -------------------------------------------------- beneficiary -------------------------------- beneficiary ---------------------------- beneficiary ------------------------------------ trustee foundation x date consultant consultant consultant date court state date county dear ---- requesting rulings relating to the estate gift and generation-skipping_transfer_tax consequences of modifying trust trust trust trust trust trust trust trust trust trust trust trust trust and trust collectively the testamentary trusts article iv of decedent’s will trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the -------------------------------- ----------------------------------------------- ----------- ------------------ --------------------------- ------------------------- ----------------------------------- ------------------- ----------------------------------------------------------- -------- ------------------- ---------------------------- this letter responds to your letter dated date and prior correspondence decedent died on date and the testamentary trusts were created under article iv paragraph of decedent’s will provides in relevant part that the plr-127286-04 benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trust is for the benefit of beneficiary trustee currently serves as the trustee of the testamentary trusts date is prior to date the testamentary trusts each have the same operating provisions trustee shall divide the initial trust property into equal shares one share for each living grandchild of decedent and one share for the living descendants collectively of each deceased grandchild of decedent each share set_aside for the descendants of a deceased grandchild shall be further divided into portions for such descendants per stirpes each such share set_aside for a living grandchild and each such portion set_aside for a descendant of a deceased grandchild shall constitute a separate trust each trust created under article iv shall be known by the name of the grandchild or descendant of a deceased grandchild for whom it was set_aside the beneficiary article iv paragraph a of decedent’s will provides that the trustee shall for thirty years after decedent’s death distribute each year to foundation collectively from the testamentary trusts a guaranteed annuity of dollar_figurex payable in installments at the end of each quarter the annuity shall be taken pro_rata from each of the testamentary trusts any trust income in excess of the dollar_figurex annuity shall be accumulated annually in the trusts and after payment of any necessary taxes and trust expenses be used as a further guarantee of the payment of the annuity article iv paragraph of decedent’s will provides that beginning thirty years from the date of decedent’s death date the trustees shall distribute all of the trust net_income of each testamentary_trust to the beneficiary of the trust in addition beginning on date the trustee shall provide each beneficiary and each descendant of such beneficiary with distributions from the principal of the beneficiary’s trust as needed to maintain the beneficiary or descendant of the beneficiary in accordance with the standard of living enjoyed by decedent’s grandchildren at the time of decedent’s death article iv paragraph of decedent’s will provides that no testamentary_trust shall terminate prior to date a_trust created for a beneficiary who is a grandchild of decedent shall continue for such beneficiary’s lifetime unless earlier terminated by a distribution of the entire principal of the trust a_trust created for a beneficiary who is a descendant of decedent other than a grandchild shall terminate on date or the beneficiary’s thirtieth birthday whichever event occurs later paragraph provides that unless otherwise terminated each testamentary_trust shall terminate one day less than twenty-one years after the death of the last to survive of decedent’s descendants living on date upon such termination all of the then remaining income and principal of each trust shall absolutely and indefeasibly vest in and be distributed to the trust_beneficiary article vi paragraph of decedent’s will provides that consultant on date trustee petitioned court to modify the testamentary trusts to plr-127286-04 consultant consultant and beneficiary collectively the consultants shall act as consultants to the executor and trustees monitoring the administration of decedent’s will the consultants provide investment advice only and have no authority with respect to discretionary distribution decisions paragraph further provides that the trustee of a testamentary_trust must notify the consultants in writing prior to selling or disposing trust property with a value in excess of dollar_figure and before investing trust funds in excess of dollar_figure in any one asset paragraph provides that the consultants may remove a corporate trustee at any time with or without cause if a corporate trustee resigns is removed or fails to serve or continue to serve for any other reason the consultants shall appoint a successor corporate trustee to serve any successor trustee shall be a bank or trust company with trust powers either state or national with a combined capital and surplus of at least dollar_figure there shall always be a corporate trustee allow a trust’s beneficiaries to remove and replace trustees modify the capital requirements for successor corporate fiduciaries and modify the notification provision in paragraph of decedent’s will the modification will insert a new article z court approved the modifications as follows under state law on date the date court order provides that the judgment shall become effective as of the date that the internal_revenue_service issues a favorable ruling holding that the modifications made under the judgment will not result in the loss of the testamentary trusts’ exemption from the generation-skipping_transfer_tax will not otherwise subject the trusts to the generation-skipping_transfer_tax and will not cause any trust_beneficiary to have a general_power_of_appointment pursuant to sec_2041 or sec_2514 of the internal_revenue_code contrary in the event all the consultants have either died resigned or shall have ceased to serve for any reason those persons who are then living and competent who have attained the age of thirty-five years of age and who are entitled to receive income or principal distributions the powerholders shall have the power to remove any corporate trustee with or without cause be created or organized in the united_states or under the law of the united_states or any state any successor trustee must be a bank with trust powers either state or national or a_trust company with a combined capital and surplus of at least dollar_figure at the time of its appointment the powerholders of a_trust may petition a court having jurisdiction in county to seek the appointment by such court of a bank with trust powers either state or national or a_trust company having at least the minimum capital and surplus required by applicable state or federal_law for that type of entity if such a paragraph z will provide that any successor corporate trustee appointed must article vi paragraph will be modified by replacing dollar_figure with dollar_figure article z paragraph z will provide that notwithstanding any provision to the paragraph z will provide that the powers granted to the powerholders under paragraph z will provide that if the power to remove and replace a trustee is paragraph z will provide that any trustee must not be related or subordinate to plr-127286-04 petition is filed prior to the time the entity to be named as successor trustee has obtained the necessary approvals of the appropriate regulatory agency under state or federal_law any order appointing such entity as a successor trustee shall be contingent upon obtaining such regulatory approvals any such petition must seek the appointment of a guardian ad litem to represent those beneficiaries of a_trust who are unknown or who are under a legal disability any powerholder within the meaning of sec_672 of the internal_revenue_code article z to appoint a successor trustee shall be exercised by a majority of all such persons whether or not one or more of such persons declines to exercise such powers when there are only two such persons such powers must be exercised jointly and if only one such person qualifies such person shall exercise such powers alone exercised by the powerholder with respect to any trust created under article iv then in no event may such power be exercised again for such trust for a five year period beginning from the date of the exercise of such power as evidenced by the effective date of the required writing acknowledged instrument signed by all of the powerholders exercising the removal and replacement powers provided for in article z must be actually delivered to the trustee being removed must contain the acceptance of the successor trustee endorsed on it and must include the effective date of such removal and acceptance only be exercised by a person who then qualifies as a powerholder and may not be exercised by an assignee guardian attorney-in-fact or any other agent of the powerholder deemed to be so vested in a fiduciary capacity trusts will not cause the trusts to lose their generation-skipping_transfer_tax exempt status or otherwise become subject_to the generation-skipping_transfer_tax in addition you have requested a ruling that the proposed modifications to the terms of the trusts will not result in the trusts’ beneficiaries possessing a general_power_of_appointment for the trusts you have requested a ruling that the proposed modifications to the terms of the paragraph z will provide that the power to remove and replace a trustee may paragraph z will provide in relevant part that any removal notice must be by sec_2601 imposes a tax on every generation-skipping_transfer paragraph z will provide that the powers vested in the powerholder shall not be sec_2611 defines the term ageneration-skipping transfer to include a each of the testamentary trusts is a generation-skipping_transfer_trust because plr-127286-04 taxable_distribution taxable_termination and a direct_skip the trust provisions allow for distributions to one or more generation of beneficiaries below the decedent’s generation each of the testamentary trusts was irrevocable on date the trustees represent that there have been no additions actual or constructive to these trusts after date under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date but only to the extent that the transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 provides that any trust in existence on date is considered an irrevocable_trust except as provided in sec_26_2601-1 or c that relate to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 in the present case the testamentary trusts are considered to have been irrevocable on date because neither sec_2038 nor sec_2042 applies judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided for otherwise the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 instrument of an exempt trust by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided in the original trust furthermore a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered a shift in a beneficial_interest in a_trust sec_26_2601-1 provides that a modification of the governing sec_26_2601-1 provides rules for determining when a modification plr-127286-04 the proposed modifications to the testamentary trusts are administrative changes and will not be considered a shift in a beneficial_interest in a_trust under sec_26_2601-1 therefore the testamentary trusts will not lose their status as exempt from the generation-skipping_transfer_tax under sec_26_2601-1 accordingly based on the facts submitted and the representations made future distributions from or terminations of a testamentary_trust will not be subject_to the generation-skipping_transfer_tax sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of his death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released a power_of_appointment by a disposition that is of such nature that if it were a transfer of property owned by the decedent the property would be includible in the decedent’s gross_estate under sec_2035 to inclusive for purposes of sec_2041 the power_of_appointment shall be considered to exist on the date of the decedent’s death even though the exercise of the power is subject_to a precedent giving of notice or even though the exercise of the power takes effect only on the expiration of a stated period after its exercise whether or not on or before the date of the decedent’s death notice has been given or the power has been exercised sec_2041 provides that a general_power_of_appointment is a power that is exercisable in favor of the decedent the decedent’s estate the decedent’s creditors or the creditors of the decedent’s estate however a power to consume invade or appropriate property for the benefit of the decedent that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent shall not be deemed a general_power_of_appointment sec_20_2041-1 of the estate_tax regulations provides in part that a donee may have a power_of_appointment if he has the power remove or discharge a trustee and appoint himself for example if under the terms of the instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and the decedent has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself the decedent is considered as having a power_of_appointment however the mere power of management investment custody of assets or the power to allocate receipts and disbursements as between income and principal exercisable in a fiduciary capacity whereby the holder has no power to enlarge or shift any of the beneficial interests therein except as an incidental consequence of the discharge of the fiduciary duties is not a power_of_appointment appointment created after date shall be deemed a transfer of property by the individual possession such power sec_2514 provides that the exercise or release of a general power of sec_25_2514-1 of the gift_tax regulations provides in part that a plr-127286-04 sec_2514 provides that a general_power_of_appointment is a power that is exercisable in favor of the individual possessing the power the possessor his estate his creditors or the creditors of his estate however a power to consume invade or appropriate property for the benefit of the posessor that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent shall not be deemed a general_power_of_appointment donee may have a power_of_appointment if he has the power remove or discharge a trustee and appoint himself for example if under the terms of the instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and the decedent has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself the decedent is considered as having a power_of_appointment however the mere power of management investment custody of assets or the power to allocate receipts and disbursements as between income and principal exercisable in a fiduciary capacity whereby the holder has no power to enlarge or shift any of the beneficial interests therein except as an incidental consequence of the discharge of the fiduciary duties is not a power_of_appointment an unqualified power to remove a trustee and to appoint an individual or corporate successor trustee that is not related or subordinate to the decedent within the meaning of sec_672 is not considered a reservation of the trustee’s discretionary powers of distribution over the property transferred by the decedent grantor to the trust accordingly the trust corpus is not included in the decedent’s gross_estate under sec_2036 or sec_2038 the ruling notes that the eighth circuit in 973_f2d_1409 8th cir concluded that the decedent had not retained dominion and control_over assets transferred to a_trust by reason of his power to remove and replace the trustee with a party that was not related or subordinate to the decedent accordingly the court held that under sec_25_2511-2 the decedent made a completed_gift when he created the trust and transferred assets to it nonadverse_party who is the grantor’s spouse if living with the grantor or any one of the following the grantor’s father mother issue brother or sister an employee of the grantor a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control a subordinate employee of a corporation in which the grantor is an executive after the proposed modifications the individual beneficiaries of the testamentary trusts as powerholders will have an unqualified power either alone or in conjuction with the other beneficiaries to remove a trustee and to appoint a successor corporate trustee the article z modifications restrict any appointment to a successor corporate revrul_95_58 1995_2_cb_191 holds that a decedent grantor’s reservation of sec_672 defines the term related_or_subordinate_party to mean any except as expressly provided herein no opinion is expressed or implied plr-127286-04 trustee that is not related or subordinate to any powerholder within the meaning of sec_672 the article z power granted to the testamentary_trust beneficiaries is not the equivalent of the power referenced in the examples in sec_20_2041-1 and sec_25_2514-1 where an individual may remove a trustee and appoint himself instead the article z power granted to the testamentary_trust beneficiaries is the equivalent of the power referenced in revrul_95_58 where a replacement trustee may not be related or subordinate to the powerholder within the meaning of sec_672 accordingly based on the facts submitted and the representations made the proposed modifications will not cause any trust_beneficiary to have a general_power_of_appointment under sec_2041 or sec_2514 concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination being sent to your attorney provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer s requesting it sec_6110 the rulings contained in this letter are based upon information and sincerely james f hogan senior technician reviewer branch passthroughs special industries enclosure copy of this letter for sec_6110 purposes


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 b07 plr-131923-14 date date legend taxpayer -------------------------------------- trailer --------------------------- material ------------------------------------------------------- axles ---------------------------- dear ----------------- this replies to a letter_ruling request dated date submitted on your behalf by your authorized representative with regard to whether a certain semitrailer body that you sell at retail are exempt under sec_4053 of the internal_revenue_code code from the tax imposed by sec_4051 taxpayer designs manufactures and sells specialty trailers and other solutions for transportation and material handling at issue in this case is taxpayer’s trailer trailer is specifically designed and built by taxpayer to haul and unload various agricultural commodities such as feed seed and fertilizer to and on farms and fields trailer is an open-top rectangular box that incorporates the special design features discussed below trailer’s design evolved over many years and currently has the following special agricultural industry-specific features first trailer is built with alloy aluminum panels and rails this feature reduces the overall weight of trailer in comparison to standard heavy-duty trailers which allows trailer to carry approximately the same volume of commodities as a heavy-duty trailer without exceeding the hauling capacity of the semi- plr-131923-14 tractor pulling it in addition alloy aluminum resists the corrosive properties of feed seed and fertilizer second trailer’s floor features a light-weight ----------------- floor slat constructed out of material this feature further reduces the overall weight of trailer and provides leak prevention the quality of the floor seal allows trailer to carry feed seed and fertilizer commodities it otherwise could not handle such as wet distiller grain modified distiller grain dry distiller grain finely ground feeds flour agricultural lime and poultry litter taxpayer states that the floor design makes trailer incompatible with forklift loading and unloading therefore trailer is not designed to carry palletized cargo in fact this method of loading and unloading cargo will result in significant damage to trailer third trailer is assembled using bolts rather than with welds this feature allows trailer to flex when it is pulled off road onto secondary roads fields and farms welds are used to assemble general hauling trailers for use on improved roads but are not adequate for long-term use on the types of surfaces trailer was designed to encounter fourth trailer features sloped side seals that facilitate unloading of bulk materials in addition stainless steel mounting plates rather than aluminum were added to the bottom rail of trailer these two features help prevent corrosion that would result from hauling feed seed and fertilizer commodities fifth trailer uses axles rather than the big_number pound or big_number pound axles that are found on general hauling trailers that cannot use secondary roads this feature along with the bolted construction described above allow trailer to use secondary roadways and to directly access fields sec_4051 imposes a tax on the first_retail_sale of among other things automobile truck bodies and truck trailer and semitrailer bodies sec_4053 provides that the tax imposed by sec_4051 shall not be imposed on any body primarily designed- a to process or prepare seed feed or fertilizer for use on farms b to haul feed seed or fertilizer on farms c to spread feed seed or fertilizer on farms d to load or unload feed seed or fertilizer on farms or e for any combination of the foregoing revrul_69_579 1969_2_cb_200 holds that certain automotive truck bodies equipped with heavy-duty unloading equipment and used primarily for hauling feed seed and fertilizer to and on farms are exempt from the manufacturers tax under sec_4063 the predecessor to the sec_4053 exemption provided for retailers tax purposes revrul_69_579 describes truck trailer and semitrailer bodies that contain heavy-duty mechanical or pneumatic type unloading equipment specially designed to facilitate plr-131923-14 unloading on the farm the unloading equipment is built into and forms an integral part of the bodies adding substantially to their cost and weight and limiting their load- carrying capacity the mechanical system uses conveyors and augers and unloads from the top of the body the pneumatic system uses a blower and hose and usually unloads from the bottom and rear of the body each system is activated by a power take-off from the truck engine the bodies are usually divided into separate compartments and are either open at the top or completely enclosed the revenue_ruling states that the elaborate and expensive unloading systems built into these bodies and the modifications of the bodies required to accommodate the unloading systems make it impracticable to purchase the bodies for use other than in hauling feed seed or fertilizer to and unloading it on farms the revenue_ruling concludes that the bodies are primarily designed to haul and unload feed seed or fertilizer on farms and are exempt from the manufacturers tax by virtue of the sec_4063 exemption revrul_75_462 1975_2_cb_419 provides that highway bodies that are used for the general hauling of feed seed or fertilizer over the highway are subject_to the manufacturers excise_tax unless they have specific features that indicate they are primarily designed to haul feed seed or fertilizer to and on farms revrul_2004_80 2004_2_cb_164 addresses the definition of the term primarily designed as that term is used in distinguishing a truck from a tractor for purposes of sec_4051 the revenue_ruling states that the term primarily designed means principally designed it does not mean exclusively designed the exemption from tax provided by sec_4053 does not extend to bodies primarily designed for general use even though the bodies may be capable of hauling feed seed and fertilizer to and on farms or performing other functions described in sec_4053 to be exempt a body must be primarily designed for one or a combination of functions described in sec_4053 in requesting tax-exempt treatment for trailer taxpayer submitted a letter_ruling request that was detailed and comprehensive to complement the extensive factual discussion the letter_ruling request included engineering schematics full-color brochures as well as a comprehensive legal analysis with regard to trailer the body contains an unloading system that is built into and forms an integral part of the body the special unloading system that uses material is elaborate expensive and adds substantially to the cost of each body thus like the specially designed bodies described in revrul_69_579 purchase of the subject bodies for use other than in hauling feed seed or fertilizer to and unloading it on farms would be impractical plr-131923-14 further the detailed information provided by taxpayer highlights a number of specific features including the alloy aluminum panels the bolted as opposed to welded construction the sloped design and self-cleaning nature of the rails at the top of the trailer the fabrication of the lower rails to limit corrosion and contamination of the trailer’s cargo and the heavy duty axles that also add to the cost of each body and indicate trailer is primarily designed for use on farms accordingly the semitrailer body described herein as trailer falls within the exemption provided by sec_4053 and taxpayer's retail sales thereof are exempt from the tax imposed by sec_4051 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s charles j langley jr charles j langley jr senior technician reviewer branch passthroughs special industries


internal_revenue_service department of the treasury number release date index number 468a washington dc person to contact telephone number refer reply to cc psi 6-plr-120703-03 date date re revised schedule of ruling amounts taxpayer state parent company plant location commission a commission b independent engineer fund dear this letter responds to the request of taxpayer dated date for a revised schedule of ruling amounts pursuant to sec_1_468a-3 of the income_tax regulations information was submitted pursuant to sec_1_468a-3 we understand the facts as submitted by taxpayer to be as follows taxpayer is an investor-owned electric utility incorporated and operating in state taxpayer is a wholly-owned subsidiary of parent taxpayer owns percent of plant as a tenant in common prior to taxpayer was known as company taxpayer is subject_to the jurisdiction of commission a which covers percent of the taxpayer's total electric sales and commission b which covers percent these plr-120703-03 percentages may fluctuate slightly from year to year there are no pending proceedings before commission a or commission b that may result in an increase or decrease in the amount of decommissioning costs to be included in cost of service on taxpayer entered into an offer of settlement with certain of its customers that included decommissioning expenses of dollar_figure per year the offer of settlement adopted the annual decommissioning cost amount for the plant as found by commission a in docket no commission a's final order in docket no in turn adopted the decommissioning costs as set forth in the motion and stipulation on commission b issued an order in docket no approving the offer of settlement on an interim basis on commission b issued an order in docket no approving the offer of settlement that order determined the amount of decommissioning costs for the plant beginning with the taxable_year to be included in cost of service for ratemaking purposes as defined by sec_1_468a-2 commission b has not reviewed taxpayer's decommissioning costs to be included in cost of service for ratemaking purposes since or the date that taxpayer's prior schedule of ruling amounts for commission b was issued by the internal_revenue_service the amount of decommissioning costs for the plant that commission b included in cost of service in docket no is dollar_figure per year for through in determining these amounts commission b relied upon the report prepared by independent engineer in the assumptions estimates and other factors used by commission b in docket to determine the amount of decommissioning costs with respect to the plant are as follows the proposed method of decommissioning is the prompt removal dismantlement method the estimated year in which substantial decommissioning costs will first be incurred is the estimated year in which decommissioning of the plant is expected to be substantially complete is the total estimated cost for decommissioning taxpayer's ownership_interest in the plant is dollar_figure dollars the base cost for decommissioning the plant was escalated at the rate of percent annually resulting in an estimated future decommissioning cost of dollar_figure through and the average annual after-tax rate of return assumed to be earned by amounts collected for decommissioning is percent under the ratemaking assumptions used to determine the last and only electric service rates that were established and approved by commission b in docket no prior to the filing of this request the plant will no longer be included in rate base at the end of moreover under the ratemaking assumptions used to determine the first and only electric service rates that were established and approved by commission b in docket no prior to the filing of this request the plant will no longer be included in rate base at the end of taxpayer made the following assumptions and estimates to determine the proposed revised schedule of ruling amounts the level_funding limitation period extends from to the funding_period extends from to the plr-120703-03 assumed after-tax rate of return to be earned by assets of the fund is percent the fair_market_value of the commission b-jurisdictional assets of the fund as of was dollar_figure the expected earnings_of the commission b- jurisdictional assets of the fund over the period through is dollar_figure the amount of taxpayer's percent share of decommissioning costs allocable to the fund pursuant to sec_1_468a-3 is dollar_figure escalated to the year incurred the commission b-jurisdictional amount of decommissioning costs allocable to the fund is dollar_figure the total estimated future cost for decommissioning taxpayer's ownership_interest in the plant is dollar_figure dollars the qualifying percentage pursuant to sec_1_468a-3 is percent the estimated period for which the decommissioning fund is to be in effect is years through and the estimated_useful_life of the plant is years through sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any_tax year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year within ½ months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or the ruling_amount applicable to the plr-120703-03 nuclear decommissioning fund for such tax_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 bases the schedule of ruling amounts on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a tax_year sec_1_468a-3 of the regulations permits the service to provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any taxable_year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier taxable_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the funding_period for a nuclear decommissioning fund is the period that begins on the first day of the first taxable_year for which a deductible payment is made or deemed to be made to such nuclear decommissioning fund and ends the later of i the last day of the taxable_year that includes the estimated date on which decommissioning costs of the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's cost of service for ratemaking purposes or ii the last day of the taxable plr-120703-03 year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant under sec_1_468a-3 this separate determination shall be based on the reasonable assumptions and determinations used by the relevant public_utility commission and shall take into account only that portion of the total estimated cost of decommissioning that is properly allocable to the ratepayer whose rates are established or approved by the public_utility commission according to sec_1_468a-3 the ruling amounts for any_tax year is the sum of the ruling amounts for such tax_year determined under the separate schedules of ruling amounts plr-120703-03 sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations provides that any taxpayer that has obtained a schedule of ruling amounts must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline for the 10th taxable_year that begins after the taxable_year in which the most recent schedule of ruling amounts was received the first taxable_year to which the revised schedule of ruling applies shall be the 10th taxable_year that begins after the taxable_year in which the most recent schedule of ruling amounts was received sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates a increases the proposed period over which decommissioning costs of such nuclear power plant will be included in cost of service for ratemaking purposes b adjusts the estimated date on which such nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes or c reduces the amount of decommissioning costs to be included in cost of service for any taxable_year the taxpayer's most recent request for a schedule of ruling amounts did not provide notice to the service of such action by the public_utility commission and in the case of a taxpayer that determines its schedule or ruling amounts under a formula or method obtained under sec_1_468a-3 the item increased adjusted or reduced is a fixed rather than a variable element of that formula or method sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a tax_year in response to a request for a schedule of ruling amounts that is filed after the deemed deadline date for such tax_year sections a and c of the energy policy act of the act eliminated for taxable years beginning after date the investment plr-120703-03 restrictions contained in sec_468a sections b and c of the act revised sec_468a by lowering the tax_rate applicable to a nuclear decommissioning fund for taxable years beginning after date we have examined the representations and data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely on these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commissions a and b have determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations the taxpayer as one the owners of the plant has calculated its share of the decommissioning costs under sec_1_468a-3 of the regulations the taxpayer subject_to the jurisdiction of two or more public_utility commissions for ratemaking purposes has calculated the total decommissioning costs allocable to commission a and commission b as required by sec_1_468a-3 of the regulations the taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commissions a and b and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund pursuant to sec_1_468a-3 of the regulations taxpayer has determined that percent is the qualifying percentage the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the lesser amount of the decommissioning costs applicable to such fund or the ruling applicable to this fund as set forth under sec_1_468a-2 of the regulations based on the above determinations we conclude that the taxpayer's proposed plr-120703-03 schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts tax years through commissions a1 and b year a b total 1amounts for commission a are not specifically reviewed herein and are merely reprinted to arrive at the amount for the total annual ruling_amount for purposes of the review and revision under sec_1_468a-3 of the regulations the date of the schedule of ruling amounts approved by the service on governs the review period for the commission a ruling amounts plr-120703-03 the approved schedule of ruling amounts for commission b is being limited to a five-year period as a result of the statutory changes made by the act the elimination of the investment restrictions and the reduction of the tax_rate applicable to income earned by the fund may result in a greater after-tax of return than was estimated prior to the enactment of the act by commission b which based its determinations as to the approved after-tax rate of return on restricted investments and a higher tax_rate this increased after-tax rate of return would over the life of the fund result in a balance in the fund on the last day of the funding_period that would exceed the amount of decommissioning costs allocable to the fund in order to prevent the excess accumulation in the fund this schedule of ruling amounts is limited to a five year period for commission b approval of a revised schedule of ruling amounts may be approved after a determination by the applicable public_utility commissions of an after-tax rate of return that accounts for the reduced_tax_rate and unrestricted investments approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated earlier payments made to such fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax plr-120703-03 return for each tax_year in which the taxpayer claims a deduction for payments made to the fund pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives a copy of this letter is also being sent to the industry director natural_resources lm nrc cc sincerely yours peter friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries


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 corp plr-103865-18 date date legend target ----------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------- purchaser ------------------------------------------------------------------ ------------------------------------------------ selling shareholders ------------------------------------------------------------------- --------------- ------------------------------------------------------------------- ---------------- ----------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------- ---------------------- ------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------- date ---------------- plr-103865-18 tax professionals -------------------------------------------------------- --------------------------------------------------------------------------- ---------------------------- --------------------------------------------------------------------- ------------------------------------------------------ -------------------------------------------------------------- company officials ----------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------- dear ------------ this letter_ruling responds to a letter dated date from your authorized representative submitted on behalf of target requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election target is requesting an extension of time to file the election statement under sec_1_336-2 election statement with respect to purchaser’s acquisition of all the stock of target on date from selling shareholders additional information was submitted in letters dated date date date date and date the material information submitted for consideration is summarized below on date purchaser an entity taxable as a partnership for federal_income_tax purposes acquired all the stock of target from selling shareholders in exchange for valuable consideration the disposition target purchaser and selling shareholders entered into an agreement to treat the stock sale as an asset sale pursuant to sec_336 of the internal_revenue_code for various reasons the election statement was not filed and subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election statement target purchaser and selling shareholders have represented that they are not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time this relief was requested target has further represented that the disposition qualified as a qualified_stock_disposition as defined in sec_1_336-1 regulations promulgated under sec_336 permit certain_sales exchanges or distributions of stock of a corporation to be treated as an asset disposition if the plr-103865-18 stock disposition is a qualified_stock_disposition as defined in sec_1_336-1 and a sec_336 election is made sec_1_336-2 provides that an s_corporation target must attach the sec_336 election statement described in paragraphs h and of this section to its timely filed including extensions federal_income_tax return for the taxable_year that includes the disposition date under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election requests for relief under sec_301_9100-3 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 that granting relief will not prejudice the interests of the government the time for filing the election statement is fixed by sec_1_336-2 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time to file the election statement provided the taxpayers acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief would not prejudice the interest of the government information affidavits and representations submitted by target purchaser selling shareholders company officials and tax professionals explain the circumstances that resulted in the failure to timely file a valid election statement the information establishes that the taxpayers reasonably relied on a qualified_tax professional who failed to file or advise them to timely file the election statement and that the request for relief was filed before the failure to timely file the election statement was discovered by the internal_revenue_service sec_301_9100-3 and v based on the facts and information submitted including the affidavits submitted and the representations made we conclude that the taxpayers have shown they acted reasonably and in good_faith that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and that granting relief will not prejudice the interests of the government accordingly we grant an extension of time under sec_301_9100-3 until days from the date on this letter for target to file the election statement and attach it to its federal_income_tax return for the taxable_year that includes date in addition a copy of this letter must be attached to target’s tax_return alternatively if target files its return electronically it may satisfy the requirement of attaching a copy of this letter to the plr-103865-18 return by attaching a statement to its return that provides the date on this letter and control number plr-103865-18 of this letter_ruling within days of the date on this letter all relevant parties must file or amend as applicable all returns and amended returns if any necessary to report the transaction consistently with the making of a sec_336 for the taxable_year in which the transaction was consummated and for any other affected_taxable_year the above extension of time is conditioned on the target purchaser and selling shareholders’ tax_liabilities if any being not lower in the aggregate for all years to which the sec_336 election applies than it would have been if the election statement had been timely filed taking into account the time_value_of_money no opinion is expressed as to their tax_liabilities for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved we express no opinion as to whether the disposition qualifies as a qualified_stock_disposition under sec_1_336-1 or any other tax consequences arising from the sec_336 election in addition we express no opinion as to the tax consequences of filing the return or making the sec_336 election late under the provisions of any other sections of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the sec_336 late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we have relied on certain statements and representations made by target purchaser selling shareholders company officials and tax professionals however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the sec_336 election penalties and interest that would otherwise be applicable if any continue to apply 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 plr-103865-18 in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely ken cohen senior technician reviewer branch office of associate chief_counsel corporate


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 ------------------------- ------------------- telephone number --------------------- refer reply to cc psi b02 plr-148415-08 date date legend x ------------------------------------------------------------------------------------------------------ ----------------------- state ---------------- d1 --------------------------- dear ----------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x's authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was formed in state on d1 it was intended for x to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x accordingly x requests a ruling that it will be treated as an s_corporation effective d1 sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the plr-148415-08 corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning d1 a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 this ruling is directed only to the taxpayer who requested 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 bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------------------- ------------------------------- --------------------- ------------------------------------ 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 corp plr-126296-17 date date legend distributing ----------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ----------------------------------------------- controlled ----------------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------- ---------------------------------------- company a ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- corporation b ----------------------------------------------------------------------------- --------------------------------------------------------------------- ---------------------------------- business a business b business c business d state a -------------------------------- ---------------------------------------- -------------------------------------------------------- --------------------------- -------------- plr-126296-17 month notes ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- month notes --------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- month notes ---------------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- month notes ----------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- month notes ------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- month notes -------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- month notes ---------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- month notes ---------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- month notes -------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------------------------------------------------------------------ revolving credit facility ---------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------- plr-126296-17 ------------------------------------------------------------------------ revolving credit facility ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------ ---------------------------------------------------------------- term_loan -------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ investment banks ------------------------------------------------------------------- ---------------------------- date a date b date c date d month month a b c d e f g h i --------------------- --------------------------- ------------------------ -------------------------- --------------------- ----------------- ---------------- ---------------- ------------ -- ---------------- -- ---- ---- ---- plr-126296-17 j ---- dear ---------------- this letter responds to your representative’s date letter requesting rulings on certain federal_income_tax consequences of the proposed transaction defined below the information provided in that letter and in later correspondence is summarized below the rulings contained in this letter are based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this letter is issued pursuant to section dollar_figure of revproc_2017_1 2017_1_irb_1 regarding one or more significant issues under sec_355 and sec_368 the rulings contained in this letter only address one or more discrete legal issues involved in the proposed transaction this office expresses no opinion as to the overall tax consequences of the proposed transaction or as to any issue not specifically addressed by the rulings below facts distributing a publicly traded state a corporation is the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return distributing is directly and indirectly engaged in business a business b business c and business d through its domestic and foreign subsidiaries together the distributing group distributing and its worldwide group will engage in certain internal restructuring transactions to align business a business b business c and business d in anticipation of the proposed transaction business d assets held indirectly by distributing will be separated through internal restructurings into controlled a newly formed domestic_corporation wholly owned by distributing such that controlled will own all of the assets and operations of business d distributing publicly announced its intention to undertake the proposed transaction on date a distributing has several tranches of debt owed to third parties the distributing debt including the month notes the month notes the month notes the month notes the month notes the month notes the month notes the month notes and the month notes collectively the notes in addition distributing has outstanding commercial paper and has entered into revolving credit facility plr-126296-17 revolving credit facility and the term_loan each tranche of notes and the term_loan were borrowed before date a immediately following the announcement of distributing’s intention to undertake the proposed transaction on date a distributing drew approximately dollar_figurea on its revolving credit facility to refinance certain outstanding commercial paper since date a the balance on revolving credit facility has fluctuated in the ordinary course of business additional borrowings under revolving credit facility have financed expenses_incurred by distributing in the course of conducting and expanding its trades_or_businesses including the acquisition of company a regular quarterly dividends to its public shareholders share repurchases under a board-authorized share repurchase program and general operating_expenses in addition distributing put in place revolving credit facility on date b in order to ensure available liquidity to retire the month and month notes which are scheduled to mature in month and month respectively the maturing notes distributing currently plans to retire the maturing notes with a combination of proceeds from borrowings under revolving credit facility and revolving credit facility in a total amount of approximately dollar_figureb distributing may borrow additional_amounts under both revolving credit facilities to fund ongoing cash needs of its businesses on date c distributing entered into an agreement pursuant to which distributing or at distributing’s election a subsidiary of distributing will acquire of the outstanding_stock of corporation b a publicly traded corporation engaged in business d the merger agreement in the event that the acquisition of corporation b closes prior to the distribution distributing expects to cause controlled to acquire of the outstanding_stock of corporation b in accordance with the merger agreement in the event that the acquisition of corporation b has not closed at the time of the distribution distributing expects to assign its rights under the merger agreement to controlled at the time of the distribution such that controlled will acquire of the outstanding_stock of corporation b following the distribution in each case distributing expects controlled to incur indebtedness of approximately dollar_figurec to fund the acquisition of corporation b on date d distributing entered into an agreement pursuant to which certain subsidiaries of distributing will sell a division of business b the business b sale in the event the business b sale closes prior to the distribution distributing intends to use all or a portion of the proceeds of the business b sale to repay existing creditors of distributing a portion of the proceeds from the business b sale may also be used to fund share repurchases to pay dividends to shareholders of distributing or to fund the acquisition of corporation b proposed transaction in furtherance of the plan_of_reorganization defined below distributing has undertaken or proposes to undertake the following transactions pursuant to a single plr-126296-17 integrated_plan together the proposed transaction and certain of such steps may take place in a different order in a manner that will not affect the rulings below i distributing has formed controlled a state a corporation ii prior to or on the effective date of the plan_of_reorganization and through a series of internal reorganization transactions the business d assets will be transferred between and among distributing group entities such that distributing will hold business d through subsidiaries that neither own any assets nor are subject_to any of the liabilities of businesses a b and c iii controlled will issue new debt to third parties for cash iv distributing will contribute business d to controlled in exchange for a combination of a all of the stock of controlled the controlled stock b senior unsecured notes with a minimum term of d years the controlled securities and c all or a portion but in any case not exceeding dollar_figuree of the cash borrowed in step iii the controlled cash the contribution because the business d assets will consist in part of certain entities that are disregarded for federal_income_tax purposes controlled will be treated as assuming certain liabilities as part of the transaction to effectuate the contribution distributing and controlled will enter into an agreement that will serve as the plan_of_reorganization for purposes of sec_361 which in combination with certain other documents effecting the proposed transactions will constitute the plan_of_reorganization v the investment banks may acquire certain distributing debt together with any such distributing debt currently held by the investment banks the distributing exchange debt from existing holders for their own accounts and not as agents of distributing the distributing exchange debt may include a portion or all of the term_loan and distributing’s various tranches of then-outstanding notes vi no fewer than f days after the investment banks acquire the distributing exchange debt distributing and the investment banks are expected to enter into an exchange_agreement the securities-for-debt exchange_agreement pursuant to which the parties would agree to exchange the distributing exchange debt for the controlled securities vii no fewer than g days after the investment banks acquire the distributing exchange debt distributing is expected to transfer the controlled securities to the investment banks pursuant to the securities-for-debt exchange_agreement and in satisfaction of the distributing exchange debt the securities-for-debt exchange the investment banks are expected to sell the controlled securities received in the securities-for-debt exchange to third party investors the investment banks may hedge various risks related to holding the distributing exchange debt with third parties plr-126296-17 viii distributing will distribute the controlled stock to holders of the distributing stock on a pro_rata basis the distribution ix distributing will distribute the controlled cash to creditors of distributing in full or partial repayment of some or all of the following distributing debt the term_loan outstanding balances under revolving credit facility and revolving credit facility and the notes including interest and associated fees such as consent fees as well as principal in each case not to exceed the sum of a the amount outstanding with respect to such distributing debt on date a the announcement date distributing debt and b the amount of such distributing debt incurred after date a to refinance announcement date distributing debt the boot purge the boot purge will be completed within h months of the distribution distributing will distribute at least i of the controlled cash within j days of the distribution to creditors in satisfaction of its debt under revolving credit facility and revolving credit facility representations the following representations are made with respect to the proposed transaction a together with the distribution the contribution will qualify as a reorganization under sec_368 b the distribution will qualify under sec_355 c all of the distributing debt was issued in the ordinary course of business including for purposes of refinancing existing debt and to finance acquisitions regular quarterly dividends to its public shareholders share repurchases under existing plans and operating_expenses d the total adjusted bases and the fair_market_value of the assets transferred to controlled each equals or exceeds the sum of i the liabilities assumed within the meaning of sec_357 by controlled plus any liabilities to which the transferred assets are subject excluding liabilities to which sec_357 applies and ii the total amount of cash and the fair_market_value of other_property within the meaning of sec_361 received by distributing in the contribution e the sum of distributing debt to be paid with controlled cash will not exceed the weighted quarterly average of the distributing debt for the 24-month-period ending on the close of business on the last full business_day before the date on which distributing’s board_of directors initially discussed the proposed transaction rulings plr-126296-17 based solely on the information submitted and the representations made we rule as follows the controlled securities will constitute securities for purposes of sec_361 no gain_or_loss will be recognized by distributing in the securities-for-debt exchange pursuant to sec_361 other than any i deductions attributable to the fact that the distributing exchange debt may be redeemed at a premium ii income attributable to the fact that the distributing exchange debt may be redeemed at a discount and iii interest_expense accrued with respect to the distributing exchange debt the controlled cash will be treated as being distributed by distributing pursuant to a plan_of_reorganization for purposes of sec_361 and sec_361 procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely richard k passales senior counsel branch office of associate chief_counsel corporate cc


internal_revenue_service index number number release date cc dom fi p plr-109979-99 date re trust fund fund fund fund fund fund fund fund year a year b year c state dear this is in reply to a letter dated date seeking consent to revoke for year a and subsequent calendar years an election previously made by fund sec_1 and funds under sec_4982 of the internal revenue plr-109979-99 code additionally funds request that the calculation of their required_distribution of capital_gain_net_income under sec_4982 and foreign_currency gains and losses under sec_4982 for the calendar_year ending december year a be determined on the basis of capital and foreign_currency gains and losses realized and recognized during the ten-month period from january year a through october year a facts each fund is a series of trust a business_trust organized under the law of state trust is an open-end management investment_company under the investment_company act of u s c 80a-1 et seq each fund is treated as a separate corporation under sec_851 of the code and has elected to be treated as a regulated_investment_company ric under subchapter_m of the code each fund uses the accrual_method of accounting for tax and financial_accounting purposes and uses a calendar_year for tax purposes in calendar_year b funds elected under sec_4982 of the code to use their taxable years the calendar_year in lieu of the one-year period ending on october for purposes of calculating the required_distribution amount under sec_4982 and sec_4982 each fund’s taxable_year has also been used in determining the treatment of foreign_currency gains and losses under sec_4982 each fund assumed that the election under sec_4982 would relieve the administrative burden associated with dual calculations of capital_gain_net_income and sec_988 gain_or_loss under the excise_tax and subchapter_m provisions of the code the funds’ experience has been that the election has created additional administrative complexities primarily due to time constraints in declaring required excise_tax distributions further the promulgation of regulations coordinating the excise_tax and subchapter_m provisions has greatly reduced the administrative burden of having a tax_year different from the period used for determining its required_distribution under sec_4982 accordingly each fund seeks consent to revoke its election to use its taxable_year the calendar_year for purposes of sec_4982 sec_4982 and sec_4982 each fund represents that the desire to revoke its election is due to administrative and non-tax related financial burdens caused by the election plr-109979-99 it is not seeking to revoke its election for the purpose of preserving or securing a tax_benefit it will neither benefit through hindsight nor prejudice the interests of the government as a result of being permitted to revoke the election and it will not make a subsequent election under sec_4982 of the code for five calendar years following the year of the grant of revocation law and analysis sec_4982 of the code which was enacted as part of the tax_reform_act_of_1986 and is effective for tax years beginning after date imposes an excise_tax on every ric for each calendar_year equal to percent of the excess if any of the required_distribution for the calendar_year over the distributed_amount for the calendar_year sec_4982 defines required_distribution to mean with respect to any calendar_year the sum of percent of the ric’s ordinary_income for such calendar_year plus percent of its capital_gain_net_income for the 1-year period ending on october of such calendar_year sec_4982 provides that if the tax_year of a ric ends with the month of november or december the ric may elect to have the capital_gain_net_income for its tax_year applied in lieu of the 1-year period ending on october of the calendar_year for purposes of satisfying the required_distribution defined in sec_4982 sec_4982 provides that once made such election may be revoked only with the consent of the secretary sec_4982 provides that any foreign_currency_gain_or_loss which is attributable to a sec_988 transaction and which is properly taken into account for the portion of the calendar_year after october shall not be taken into account in determining the amount of the ordinary_income of the ric for such calendar_year but shall be taken into account in determining the ordinary_income of the investment_company for the following calendar_year in the case of any company making an election under sec_4982 however the preceding sentence shall be applied by substituting the last day of the company’s taxable_year for october based on the information submitted and the representations made we conclude that each fund’s desire to revoke its election under sec_4982 is because of administrative burdens and not because of any federal tax-related financial burden plr-109979-99 caused by the election no fund seeks to revoke its election for the purpose of preserving or securing a federal tax_benefit additionally the funds will neither benefit through hindsight nor prejudice the interests of the government as a result of being permitted to revoke its election conclusion accordingly pursuant to sec_4982 the secretary consents to the revocation of the election made by each fund under sec_4982 effective for calendar_year a and subsequent years in addition in calculating the required_distribution for calendar_year a for purposes of sec_4982 and sec_4982 the capital_gain_net_income and any foreign_currency gains and losses of each fund will be determined on the basis of the capital and foreign_currency gains and losses taken into account during the 10-month period from january year a through october year a as a condition to the secretary’s consent to the revocation pursuant to sec_4982 each fund may not make a subsequent election under sec_4982 for a period of calendar years following the year to which the grant of revocation applies that is year a through year c except as specifically ruled upon above no opinion is expressed or implied as to the federal excise or income_tax consequences regarding funds this ruling is directed only to the taxpayers that requested it sec_6110 of the code provides that it may not be used or cited as precedent it is important that a copy of this letter be attached to the federal income and excise_tax return filed by each fund for the first year to which this ruling applies in accordance with the terms of a power_of_attorney on file in this office the original of this letter is being sent to you and copies are being sent to the taxpayer and the second-named representative on the power_of_attorney sincerely yours assistant chief_counsel financial institutions products by william e coppersmith chief branch enclosure copy for sec_6110 purposes