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-151993-05 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-151993-05 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-151993-05 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 heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc


qwhuqdo cid 5hyhqxh cid 6huylfh index no number release date re tax_year ’hsduwphqw cid ri cid wkh cid 7uhdvxu dvklqjwrq cid cid ’ cid cid cid cid cid cid 3huvrq cid wr cid rqwdfw cid 7hohskrqh cid 1xpehu 5hihu cid 5hso cid wr cid plr-115469-98 ’dwh cid date a country b town c date d dear this is in response to your letter dated date requesting a ruling under sec_877 of the internal_revenue_code_of_1986 code that a’s termination of long-term u s residence did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by penalty of perjury statements 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 a a long-term_resident of the united_states within the meaning of sec_877 was born in country b a first came to the united_states to work as an employee for a manufacturer located in town c prior to moving to the u s a worked for the majority owner of the manufacturer for years when the owner decided to move to the u s to carry on the business in the united_states he asked a to accompany him a has had an alien registration card since the owner has told a that due to ill health he wishes to retire from the business and return to country b until he came to the u s a had spent his entire life in country b his wife and all three of his children are citizens of country b and plr-115469-98 his two older children live in country b a’s parents are citizens of country b a’s wife is a resident of the u s and intends to repatriate along with her husband a plans to relinquish his u s lawful permanent resident status expatriated on date d by returning his green card to a u s consulate in country b on the date of a's expatriation his net_worth will exceed dollar_figure and his average annual tax_liability for the five-year period prior to expatriation will exceed dollar_figure sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be taxed on u s source income as modified by sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former citizen or former long term-resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual's average income_tax_liability or the individual's net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary's determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 under notice_98_34 1998_27_irb_40 modifying notice_97_19 1997_1_cb_394 a former long-term_resident whose net_worth or average tax_liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax_avoidance if that former resident is described within certain categories and submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes notice_98_34 requires that certain information be submitted with a request for a ruling that an individual's expatriation did not have for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_98_34 because he is described in three categories of individuals eligible to submit ruling requests first on the date of a's expatriation a was and continues to be a resident fully liable to income_tax in country b plr-115469-98 the country where a was born second a is also eligible to submit a request because his spouse was born in country b third a is also eligible to submit a request because his parents were born in country b a submitted all the information required by notice_98_34 including any additional information requested by the service after review of the submission accordingly based solely on the information and representations submitted it is held that a has made a complete and full faith submission in accordance with sec_877 and notice_97_19 as modified by notice_98_34 it is further held that a will not be treated under sec_877 as having as one of his principal purposes for expatriating the avoidance of u s taxes because the information submitted clearly establish the lack of a principal purpose to avoid tax under subtitle a or subtitle b of the code 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 in particular no opinion is expressed as to a’s u s tax_liability for the taxable years prior to expatriation or his united_states tax_liability for periods after his loss of permanent resident status under sections of the code other than sec_877 sec_2107 and sec_2501 a copy of this letter must be attached to a’s u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return 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 a sincerely yours w edward williams senior technical reviewer branch office of the associate chief_counsel international cc assistant_commissioner international chief international district operations


t c memo united_states tax_court estate of ambrosina blanche lopes deceased james w lopes trustee petitioner v commissioner of internal revenue respondent docket no filed date paul j barulich for petitioner marion t robus for respondent memorandum opinion gerber judge this case is before the court on cross-- motions for partial summary_judgment under rule respondent determined a deficiency of dollar_figure in the federal estate_tax all section references are to the internal_revenue_code in effect as of the date of decedent's death and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated of the estate of ambrosina blanche lopes decedent the sole issue for our consideration is whether fractional ownership interests in realty held in a survivor's trust and in a qualified terminal interest property qtip marital trust should be aggregated in order to determine whether discounts should apply to those interests at the time these motions were brought before us 112_tc_26 was pending before another division of this court the parties agreed that the estate of mellinger opinion would likely be determinative of the remaining issue in this case all other issues determined in the deficiency_notice have been resolved background decedent died on date at the time of her death decedent had undivided interests in separate california ranch properties these interests had been held in two trusts a survivor's trust and a qtip marital trust as established ina trust agreement between decedent and her husband joaquim c lopes joaquim decedent's son james w lopes james also held undivided interests in some of the ranch properties joaquim predeceased decedent in at that time the properties were allocated between the trusts according to the agreement the community_property and separate_property of decedent were placed in the survivor's trust while all of joaquim's community_property was placed in the marital trust the marital trust allowed for a qtip_election by the trustee under sec_2056 because the qotip marital trust met the test in sec_2056 respondent allowed a marital_deduction in the estate of joaquim lopes for the value of the property interests passing into that trust after joaquim's death decedent made gifts of undivided interests in properties held in the survivor's trust to james james also purchased interests in more of the survivor's trust properties decedent died shortly after the last of these transfers though the validity of the transfers of these interests was debated at one time the parties have come to an agreement about the gross fair market values of a 100-percent interest in the properties and about which of the fractional interests in each of the properties are to be included in decedent's gross_estate the parties also have reached an agreement as to the percentage amount of the fractional_interest_discount to the undivided fair_market_value of each of the properties the parties' stipulation of settled issues contains the agreed amounts of each adjustment if we decide either to aggregate the interests for valuation purposes or to value the properties in each trust separately rule b provides that a motion for summary_judgment shall be allowed and considered if the pleadings and admissions show that there is no genuine issue of material fact and that a decision may be rendered as a matter of law see 98_tc_518 affd 17_f3d_965 7th cir 90_tc_753 in this case both parties agree that no issues of material fact remain in dispute and that a decision may be rendered as a matter of law we agree with them consequently the issue herein is ripe for summary_judgment discussion sec_2031 provides that the value of property described in sec_2033 through shall be included ina decedent's gross_estate under sec_2033 all property beneficially owned by the decedent at the time of death will be included in the gross_estate sec_2044 includes in the gross_estate the value of all property in which the decedent had a gualified income_interest for life and for which a deduction was allowed to the estate of a predeceased spouse under sec_2056 qtip upon the death of the second spouse the qtip is taxed as part of the second spouse's estate see sec_2044 c property includable in the gross_estate is generally included at its fair_market_value at the time of death see secs the fair_market_value is defined as that price at which the property would change hands between a willing buyer and a willing seller neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts see 411_us_546 sec_20_2031-1 estate_tax regs the issue here is whether the property interests held in the survivor's trust should be aggregated with the property interests held by the qtip marital trust for the purpose of determining the fair_market_value of the property passing from decedent if the interests are not aggregated the values will be discounted to reflect lack of marketability and minority interests see estate of mellinger v commissioner supra pincite we have already rejected the same aggregation argument advanced by respondent in estate of mellinger and in estate of nowell v commissioner tcmemo_1999_15 we find no factual or legal distinction that would result ina different conclusion in this case in estate of mellinger the decedent died holding stock in her revocable_trust and in a qotip trust much like decedent in this case see estate of mellinger v commissioner supra pincite bach of the trusts held shares of stock which when combined would have represented a controlling block of shares in the company see id the commissioner argued that the shares should be aggregated for valuation purposes this court citing the reasoning of the fifth circuit in 84_f3d_196 5th cir held that the fractional interests held in qtip trusts should not be merged into 100-percent fee ownership with other fractional interests owned by an estate see estate of mellinger v commissioner t c pincite in estate of bonner the court specifically stated that there was nothing in sec_2044 to require the merger of qotip assets with other assets see estate of bonner v united_states supra pincite in estate of mellinger it was explained that nothing in sec_2044 nor in the legislative_history indicated that the decedent should be treated as the owner of the qotip shares see estate of mellinger v commissioner supra pincite this analysis is equally applicable to the facts before us nothing in sec_2044 or the accompanying legislative_history indicates that congress intended that the property that passes through a decedent's_estate under sec_2044 be treated as if the decedent actually owned that property for purposes of aggregation nor is there any indication that those property interests should be merged or aggregated with interests in the same property includable in the decedent's gross_estate pursuant to other code sections for purposes of determining federal estate_tax_value sec_2044 provides only that the fair_market_value of property in which the decedent had a qualifying_income_interest_for_life should be included in the gross_estate see sec_2044 thus the fractional interests of the survivor's trust and the qtip_trust should be valued separately because the parties have resolved all remaining issues and stipulated the amounts to be included in the gross_estate an appropriate order and decision will be entered


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 intl plr-111504-04 date july taxpayer legend legend ---------------------------------------------------------------------------------------- ------------------------ ------------- --------------------------------------------- -------------------------- ------------------------- ----------------------------- ------- ------- ------- --------------------------------------- --------------------------------------------------- state y foreign_country x date a date b corp y year year year cpa firm a cpa firm b dear ----- ---------- this replies to your representative’s letter dated date in which your representative requests on behalf of taxpayer an extension of time under sec_301_9100-3 to file the election and agreement described in sec_1 g i and the annual certification described in sec_1_1503-2 in accordance with schedule a which is attached to and made a part of this ruling letter additional information was submitted in letters dated date date date and date the information submitted for consideration is substantially as set forth below plr-111504-04 the ruling contained in this letter is predicated upon facts and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process taxpayer was incorporated in state y on date a and was incorporated in foreign_country x on date b during year sec_1 and taxpayer was indirectly owned by corp y a foreign_corporation taxpayer was the common parent of a group of affiliated corporations that filed a consolidated u s income_tax return taxpayer is a dual_resident_corporation as defined in sec_1_1503-2 taxpayer incurred dual consolidated losses dcls as defined in sec_1 c in year sec_1 and that were included in taxpayer’s consolidated u s income_tax return for those years however for various reasons discussed in the facts and affidavits the requisite election agreement described in sec_1_1503-2 and the requisite annual certification described in sec_1_1503-2 were not included with the consolidated u s income_tax returns for the years indicated in schedule a this omission occurred despite the fact that taxpayer relied on the tax professionals in corp y’s tax department which was responsible for all u s tax matters of taxpayer and on outside tax professionals with cpa firms a and b to ensure that the dcls would be properly claimed in each year this omission was subsequently discovered during a review of the tax_return filings for year sec_1 and sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation the election and agreement and the annual certification described in sec_1_1503-2 and vi b respectively are regulatory elections as defined in sec_301_9100-1 therefore the commissioner has discretionary plr-111504-04 authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the rules set forth in sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies the standards set forth in sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the election and agreement described in sec_1_1503-2 and the annual certification described in sec_1_1503-2 in accordance with schedule a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the elections and agreements and the annual certifications sec_301_9100-1 a copy of this ruling letter should be associated with the elections and agreements and the annual certifications this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your first and second listed authorized representatives sincerely associate chief_counsel international by thomas beem senior technical reviewer office of the associate chief_counsel international enclosures schedule a copy for purposes cc schedule a ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- -------------------------------------------- ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ------------- ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- -------------------------------------------------------------------- ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ------------ ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ---------------------------- plr-111504-04 ------------------------- --------- ------------------------- --------- ------------------------- ---------


t c summary opinion united_states tax_court david jackson and betty s jackson petitioners v commissioner of internal revenue respondent docket no 525-04s filed date david and betty s jackson pro sese vicken abajian for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_6330 and sec_7463 of the internal_revenue_code in effect at the time that the petition was filed the decision to be entered is not reviewable by any other court unless otherwise indicated subsequent references to sections other than sec_6320 and sec_6330 are to the internal_revenue_code_of_1986 in effect for and the taxable years in issue and all rule references are to the tax_court rules_of_practice and procedure and this opinion should not be cited as authority the petition in this case was filed in response to a notice_of_determination concerning collection action under section for the taxable years and years in issue the issues for decision are whether respondent abused his discretion in failing to abate interest for the years in issue that had accrued from march through date we hold that he did to the extent provided herein whether respondent improperly refused to abate assessment for the addition_to_tax for failure to timely pay under sec_6651 for the years in issue we hold that he did not whether respondent abused his discretion in denying petitioners’ claim for damages for respondent’s unnecessary filing of a lien we hold that the court lacks jurisdiction to consider this claim background some of the facts have been stipulated and they are so found the stipulation of facts the supplemental stipulation of facts and the attached exhibits are incorporated herein by this reference sec_6320 is effective with respect to collection actions initiated more than days after date ie date see internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_750 petitioners resided in rancho santa margarita california at the time that the petition was filed with the court a petitioners’ income_tax returns petitioners filed federal_income_tax returns for each year in issue reporting tax due as follows tax_year date filed extension of time to file -0- -0- tax due dollar_figure big_number big_number big_number big_number big_number at the time that they filed each return petitioners did not pay the tax shown as due on the return based on the returns filed by petitioners respondent assessed the tax shown as due on each return statutory interest for the years in issue an addition_to_tax for failure to timely file a return under sec_6651 for and an addition_to_tax for failure to timely pay tax under sec_6651 for the years in issue and an addition_to_tax for failure to pay estimated_tax under sec_6654 for the years in issue on date petitioners entered into an installment_agreement for and but defaulted on april and date respectively on date petitioners entered into an installment_agreement for and but defaulted on date on date respondent’s ogden service_center received from petitioners a form_656 offer_in_compromise oic offering dollar_figure to satisfy their income_tax liabilities for the years in issue petitioners attached to the oic a statement stating in part we are not able to pay the entire amount owed but we are refinancing our current_assets borrowing from friends and family and will use our income to pay the amount we are offering although the record does not definitively disclose what events have transpired since date it appears that on or about date petitioners requested from respondent a payoff amount in response petitioners received from respondent computer printouts dated date for each of the years in issue reflecting their names and social_security numbers account balance accrued interest and accrued additions to tax as of date on date s partridge ms partridge in respondent’s laguna niguel office sent petitioners a letter rejecting their oic ms partridge determined that petitioners could pay in full the amount due based on financial information submitted by them to demonstrate that they were obtaining funds to pay their tax_liabilities petitioners faxed a letter to ms partridge on date informing her of the name and phone number of their loan officer at world savings who was handling the refinancing of their home b filing of the notice_of_federal_tax_lien on date respondent filed a notice_of_federal_tax_lien against petitioners for income taxes including interest and additions to tax for the years in issue on date respondent sent each petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 for the years in issue on date petitioners sent a letter to respondent’s laguna niguel office requesting that their case be forwarded to the office of appeals in their request petitioners stated that mrs partridge stated that she would work with me and not file a lien if i would refinance and that such a filing would impede my ability to pay taxes on or about date petitioners submitted to world savings a loan application_for approximately dollar_figure at an interest rate of percent on date world savings denied petitioners’ date loan application because of petitioners’ poor credit performance with us world savings on date petitioners submitted to respondent a form request for a collection_due_process_hearing petitioners attached to the form a statement stating in part i disagree with the filing of the federal_tax_lien because it has prohibited me from refinancing to pay the tax debt i notified the internal_revenue_service that i was in the process of refinancing i sent a fax to them and the lender so that they could check with the lender to see that this process was in place the internal revenue told me that they would work with me and they realized that filing the tax_lien would be a hindrance to me getting a loan they filed the tax_lien anyway in addition to the lien causing a rejection for the loan to pay you it also caused a rejection for a line of credit for me to even out my cash_flow for the immediate period on date petitioners faxed to the internal_revenue_service irs lien desk a letter requesting a payoff for the attached lien that will be good until date on date petitioners faxed to revenue_officer gloria owen ms owen in respondent’s laguna niguel office a third request for a demand to pay off my lien on date ms owen faxed to petitioners computer printouts dated date for each year in issue reflecting petitioner david jackson’s social_security_number and the balance due including accrued interest and accrued penalties the first page had a handwritten notation stating total of all years through dollar_figure at some point in time petitioners began working with carol nguyen ms nguyen a settlement officer in respondent’s laguna niguel office to obtain a payoff demand for their lender on date ms nguyen faxed to petitioners a document signed by r bonzer lien advisor reflecting petitioners’ escrow number instructions for payment and their tax_liabilities for each year in issue as of date as follows unpaid balance dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure tax_year total interest dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure additions to tax -0- dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure payment dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure in her cover letter ms nguyen referred to this document as an escrow demand letter the cover letter also requested petitioners to sign an offer withdrawal letter concerning their oic which petitioners signed on date on or about date petitioners submitted to world savings another loan application along with the escrow demand letter world savings approved the date loan application_for dollar_figure at an interest rate of dollar_figure percent with a closing date of date c petitioners’ sec_6330 hearing on date petitioners attended a hearing before appeals officer j t minor mr minor at the hearing petitioners requested that respondent release the lien because they were refinancing their home to pay in full their tax_liabilities and that respondent abate the additions to tax and the interest for the period during which respondent delayed although the document appears to be a standard internal_revenue_service form it does not indicate a form number providing petitioners with an escrow demand letter for their lender mr minor abated for reasonable_cause dollar_figure of the addition_to_tax for failure to timely pay tax accruing from july to date as follows no penalty applicable for this period because the 50-month period for assessment of this penalty has already expired dollar_figure dollar_figure tax due per return multiplied by percent ie percent for months dollar_figure dollar_figure tax due per return less dollar_figure general tax_credit multiplied by percent dollar_figure dollar_figure tax due per return multiplied by percent on date petitioners paid in full their outstanding income_tax liabilities for the years in issue of dollar_figure d notice_of_determination on date respondent sent to each petitioner a notice_of_determination concerning collection action under sec_6320 notice_of_determination in the notice_of_determination respondent denied all of petitioners’ requests with respect to petitioners’ request to abate interest respondent denied their request because the jacksons have not fully paid their liabilities they state that the delay of their refinance caused them to accrue additional interest but the refinance was not secured had it been secured there was insufficient funds available in the refinance to fully pay their delinquent income_tax liabilities with respect to petitioners’ request to abate the additions to tax respondent sustained the abatement of dollar_figure of the addition_to_tax for late payment because there was some delay in providing the taxpayer’s timely information regarding the amounts due on their delinquent income_tax liabilities e petition on date petitioners filed with the court a petition under sec_6330 disputing respondent’s determinations see sec_6320 paragraph of the petition states i request that i be relieved from all interest and penalties in connection with the tax years described in paragraph the cdp determination_letter attached indicated that there was delay in providing the taxpayer timely information and therefore abated a portion of the failure to pay penalties for reasonable_cause the dollar_figure did not address the irs action regarding the lien and other damages and costs incurred as a result of their actions i have since acquired a loan and paid the taxes of dollar_figure in full this amount includes dollar_figure interest and dollar_figure in penalties i respectfully request a return of the interest and penalties less the dollar_figure for a total of dollar_figure for cause and hardship f release of the lien on date respondent released the federal_tax_lien because petitioners paid in full their tax_liabilities including interest and additions to tax for the years in issue the record does not explain why it took respondent continued discussion sec_6321 imposes a lien in favor of the united_states on all property and rights to property of a taxpayer liable for unpaid taxes after demand for payment within business days after the day of filing the notice of lien the secretary must notify the taxpayer in writing that a tax_lien was filed and inform the taxpayer of his or her right to a hearing before an impartial appeals officer sec_6320 sec_6320 provides that the appeals_office hearing generally shall be conducted consistent with the procedures set forth in sec_6330 d and e once the appeals officer has issued a determination_letter the taxpayer may seek judicial review of the commissioner’s administrative determination sec_6330 a abatement of interest we have jurisdiction over petitioners’ request for abatement of interest because such request was made as part of a sec_6330 proceeding see 115_tc_329 this court may order an abatement of interest if the commissioner abuses his discretion in failing to abate interest sec_6404 the taxpayer must prove that the commissioner continued months to release the lien sec_6404 formerly sec_6404 is applicable to continued exercised his discretion arbitrarily capriciously or without sound basis in fact or law see rule a 112_tc_19 as applicable to and preamendment sec_6404 permits the commissioner to abate all or any part of an assessment of interest on any payment of tax if an error or delay in such payment is attributable to an officer_or_employee of the irs being erroneous or dilatory in performing a ministerial_act and the taxpayer caused no significant aspect of the delay as applicable to through sec_6404 permits the commissioner to abate interest with respect to any unreasonable error or delay resulting from managerial or ministerial acts see taxpayer bill of right sec_2 sec_301 and publaw_104_168 110_stat_1457 effective for interest accruing with respect to tax years beginning after date sec_301_6404-2t b temporary proced admin regs fed reg date defines a ministerial_act as a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer’s case after all prerequisites to the continued requests for abatement after date taxpayer bill of right sec_2 publaw_104_168 110_stat_1457 act such as conferences and review by supervisors have taken place the final regulations under sec_6404 provide the same definition see sec_301_6404-2 proced admin regs the final regulations define a managerial act as an administrative act that occurs during the processing of a taxpayer’s case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel sec_301_6404-2 proced admin regs petitioners do not dispute that they are liable for the interest that had accrued on their outstanding tax_liabilities petitioners contend however that respondent abused his discretion in not abating interest that had accrued since date the earliest date that petitioners requested an escrow demand letter petitioners argue that had respondent provided them with the escrow demand letter at that time then petitioners would have been able to refinance their home and to pay in full their tax_liabilities thus petitioners contend that respondent’s failure to send them the escrow demand letter on date was an unreasonable ministerial delay on or about date petitioners requested a payoff the final regulations were issued on date generally effective with respect to interest accruing on deficiencies or payments of tax for tax years beginning after date amount to refinance their home to pay their tax_liabilities respondent sent petitioners a computer printout for each year disclosing their total outstanding tax_liabilities including interest and additions to tax petitioners however did not submit a loan application_for the refinancing of their home until almost months later on or about date which was rejected on date because of petitioners’ poor performance with world savings from march until on or about date there was no erroneous or dilatory performance of a ministerial_act by respondent nor was there any unreasonable error or delay resulting from any managerial or ministerial_act that contributed to a delay in the payment of petitioners’ tax_liabilities under these circumstances respondent did not abuse his discretion to refuse to abate interest that accrued for that period for the period july to date respondent determined that there was some delay in providing the taxpayer’s sic timely information regarding the amounts due on their delinquent income_tax liabilities it is reasonable to assume that the delay in the payment of petitioners’ tax_liabilities for petitioners allege that world savings rejected their loan application because of the lien the allegation however is unproven there is no explanation in the record as to the significance of date this period was caused by respondent’s failure to provide petitioners with an escrow demand letter see douponce v commissioner tcmemo_1999_398 holding that respondent’s failure to provide the taxpayer with a correct payoff amount was a ministerial_act that warranted the abatement of interest on date petitioners submitted to respondent a form stating that the lien prohibited them from refinancing their home on date petitioners requested another payoff amount but they did not receive a response from respondent almost month later petitioners again requested a payoff amount which they received on date in the form of computer printouts after appealing to an appeals officer petitioners finally received an escrow demand letter on date once petitioners received the escrow demand letter world savings promptly approved their date loan application and assigned a closing date of date on date petitioners paid in full their outstanding tax_liabilities including interest and additions to tax we note that the internal_revenue_manual sec_25 date provides a procedure for preparing a form notice of federal taxes due in the case of an escrow payoff request during a ch proceeding the form contains the identity of the taxpayer the amounts due for taxes secured_by a lien on the property and calculations for interest and penalties form enables the escrow company to pay respondent directly from the escrow funds in a sale or refinancing of real_property a similar procedure appears equally applicable to a refinancing of real_property in a non- bankruptcy case based on the entirety of the record we conclude that there was dilatory performance of a ministerial_act by respondent that contributed to an unreasonable delay in the payment of petitioners’ tax_liabilities from july to date accordingly respondent abused his discretion in refusing to abate interest that had accrued for the years in issue for that period b additions to tax the income_tax assessments against petitioners include additions to tax under sec_6651 for and and sec_6651 and sec_6654 for all the years in issue petitioners did not have an opportunity to dispute the additions to tax relating to their income_tax liabilities therefore they can challenge them during the sec_6330 proceeding sec_6330 we review de novo respondent’s determination with respect to these additions to tax see 114_tc_176 petitioners first contend that respondent agreed to waive all additions to tax upon payment in full of their income_tax liabilities including interest and additions to tax for the years in issue in support of their contention petitioners rely on an alleged oral agreement that they had with ms owen wherein she agreed that respondent would cooperate with petitioners and not file a tax_lien as long as petitioners were moving forward and that respondent would waive the additions to tax if petitioners paid off the total principal balance plus interest consistent with this agreement petitioners paid in full their outstanding tax_liabilities for the years in issue petitioners allege however that respondent did not waive the penalties and thus failed to comply with the agreement sec_7121 and sec_7122 and the regulations thereunder set forth the exclusive means by which closing agreements and compromises between the commissioner and a taxpayer concerning the latter’s tax_liability may be accorded finality 122_tc_384 65_tc_351 rohn v commissioner tcmemo_1994_244 sec_301_7121-1 sec_301_7122-1 proced admin regs a closing_agreement or compromise must be submitted on special forms prescribed by the secretary and is not considered accepted until the taxpayer is notified of the acceptance in writing 889_f2d_910 9th cir affg norman v commissioner tcmemo_1987_265 sec_301_7122-1 proced admin regs petitioners admitted at trial that the purported agreement was oral and that they do not have any written document or form to that effect based on the record there was no compliance with sec_7121 or sec_7122 accordingly we hold that petitioners and respondent did not enter into a binding agreement to waive all additions to tax in the alternative petitioners contend that respondent should abate the addition_to_tax for late payment that accrued from march through july dollar_figure petitioners assert that they would have paid their outstanding tax_liabilities on or about date but that respondent failed to timely provide them with an escrow demand letter petitioners’ contention is misplaced sec_6651 imposes an addition_to_tax for failure to pay the amount shown as tax on the return on or before the date prescribed for payment of that tax unless the failure was due to reasonable_cause and not willful neglect see sec_301 c proced admin regs petitioners may demonstrate reasonable_cause for late payment by showing that they exercised ordinary business care and prudence in providing for payment of their tax_liability and were nevertheless either unable to pay the tax or would suffer an undue_hardship if they paid on the due_date sec_301_6651-1 proced admin regs at the time that petitioners filed their returns they failed to remit the amount shown as tax based on the entirety petitioners concede that they are liable for the additions to tax for failure to timely file and for failure to pay estimated_tax petitioners however contend that respondent should have also abated the addition_to_tax for failure to pay from july to date we note that this addition for those years did not accrue for that period see sec_6651 of the record petitioners have not shown that their failure to timely pay tax was due to reasonable_cause and not willful neglect therefore respondent did not improperly refuse to abate the addition_to_tax for late payment from date through date c petitioners’ claim for damages petitioners claim emotional damages of dollar_figure and monetary compensation of dollar_figure alleging that the premature and unnecessary filing of the lien adversely affected their credit rating which prevented them from refinancing their home and hindered their ability to pay their tax_liabilities as a result the lien caused them to incur a loan at a higher interest rate petitioners however do not cite or rely on any specific statute as a basis for this claim although we recognize that the filing of such a lien may have the negative effects of creating a cloud on the taxpayer’s title to property and impairing the taxpayer’s creditworthiness see 118_tc_488 we generally have no jurisdiction over such claims sec_7433 see gerakios v commissioner tcmemo_2004_203 holding that petitioners calculate this amount as the difference payable over a 10-year term between the 4-percent interest rate on the date loan application and the dollar_figure percent interest rate on the date loan application ie dollar_figure dollar_figure tax owed pincite 25-percent amortized over years less dollar_figure dollar_figure tax owed pincite-percent amortized over years multiplied by years equals dollar_figure the court has no jurisdiction over taxpayer’s compensatory claim that his credit rating was adversely affected by the filing of a lien chocallo v commissioner tcmemo_2004_152 holding that the court has no jurisdiction over taxpayer’s damages claim for alleged wrongs committed by respondent’s employees if petitioners’ claim for monetary compensation were meant to be predicated on sec_7432 and or which provide for civil damages for failure to release a lien or certain unauthorized collection actions respectively we note that such claims must be brought in a district_court of the united_states d conclusion we have considered all of petitioners’ arguments and to the extent that we have not specifically addressed them we conclude that they are without merit reviewed and adopted as the report of the small_tax_case division to reflect our disposition of the disputed issues decision will be entered under rule


t c no united_states tax_court kenneth b and marie l boyd petitioners v commissioner of internal revenue respondent docket no 17660-03l filed date r applied an overpayment in tax from ps’ taxable_year to other taxes owed by ps and notified ps of that fact the notice ps rely on language in sec_6331 i r c describing any levy to carry out an offset in support of their assignment that r erred in levying against their property without first giving them notice of their right to a sec_6330 i r c prelevy hearing ps also assign error to r’s application of the overpayment to p husband’s liability under an installment_agreement r has moved to dismiss for lack of jurisdiction on the grounds that ps have received no statutory_notice_of_deficiency or any other determination that would give the court jurisdiction to consider ps’ assignments of error and ps concede as much r also disputes that an offset is a levy we need not interpret sec_6331 i r c since even were we to consider the notice as evidence of a determination to proceed to collect tax by levy ps did not timely petition the court within the 30-day period prescribed by sec_6330 i r c so that we must dismiss for lack of jurisdiction held motion to dismiss for lack of jurisdiction will be granted peter l banis for petitioners michael r fiore for respondent opinion halpern judge this matter is before the court on respondent’s motion to dismiss for lack of jurisdiction the motion petitioners object for the reasons stated we shall grant the motion unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended the code and all rule references are to the tax_court rules_of_practice and procedure background the petition in this case was filed on date at the time they filed the petition petitioners resided in dennis massachusetts accompanying the petition are various documents including a copy of a notice dated date addressed to petitioner wife but pertaining to the account of both petitioners which states that the internal_revenue_service irs has applied an overpayment of dollar_figure in petitioners’ income the wrapper containing the petition has a postmark bearing the date date tax for the overpayment to other taxes owed by petitioners viz their form_1040 liability for their tax period ended date there are also copies of an irs form_9423 collection appeal request dated date and accompanying letter which petitioners submitted to the irs in protest of the application of the overpayment to other taxes owed by them finally there is a copy of a letter from the irs dated date rejecting petitioners’ protest on the ground the application of the overpayment was appropriate petitioners’ principal assignment of error is that the irs respondent erred in applying the overpayment to other taxes owed by petitioners without giving them the opportunity for a hearing pursuant to sec_6330 a sec_6330 hearing or simply hearing petitioners further claim that respondent erred in applying the overpayment to petitioner husband’s liability under an agreement to pay certain taxes in installments it was an error to do so petitioners claim since neither was petitioner husband in default under the agreement nor had respondent complied with the terms of sec_6159 in the case of default or certain other occurrences in connection with an installment_agreement to pay tax sec_6159 generally requires at least days’ notice if respondent intends to terminate the agreement or modify its terms respondent did not answer the petition but instead made the motion see rule a in support of the motion respondent argues that no statutory_notice_of_deficiency as authorized by sec_6212 and required by sec_6213 to form the basis for a petition to this court has been sent to petitioners with respect to the taxable_year in question nor has respondent made any other determination with respect to that would confer jurisdiction on the court replying to petitioner’s opposition to the motion respondent points out that in their papers opposing the motion petitioners concede that no notice_of_deficiency or other determination was issued by respondent respondent argues that on those grounds alone the motion should be granted nevertheless respondent addresses petitioners’ assignments of error he denies that petitioners were entitled to a sec_6330 hearing since the overpayment was applied to other taxes by way of offset and not by way of levy the notice and hearing requirements of sec_6330 he claims apply only to proposed levy actions and not to administrative offsets moreover he claims that since an offset is not a levy there was no violation of any prohibition under sec_6331 that no levy with respect to unpaid tax may be made while an installment_agreement for payment of such tax is in effect discussion i sec_6330 and sec_6331 sec_6331 authorizes the secretary_of_the_treasury secretary to levy against property and property rights where a taxpayer liable for taxes fails to pay those taxes within days after notice_and_demand for payment is made sec_6331 requires the secretary to send written notice of an intent to levy to the taxpayer and sec_6330 requires the secretary to send a written notice to the taxpayer of his right to a sec_6330 hearing at least days before any levy is begun if a sec_6330 hearing is requested the hearing is to be conducted by the commissioner’s appeals_office and at the hearing the appeals officer conducting it must verify that the requirements of any applicable law or administrative procedure have been met sec_6330 c the taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy sec_6330 at the conclusion of the hearing the appeals officer must determine whether and how to proceed with collection taking into account among other things collection alternatives proposed by the taxpayer and whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer a taxpayer receiving a notice_of_federal_tax_lien has hearing rights similar to the hearing rights accorded a taxpayer receiving notice_of_intent_to_levy see sec_6320 that the collection action be no more intrusive than necessary see sec_6330 after the hearing the taxpayer ha sec_30 days to appeal the determination of the appeals officer to the appropriate court sec_6330 we have jurisdiction to review the appeals officer’s determination where we have jurisdiction over the type of tax involved in the case sec_6330 in 114_tc_492 we held that prerequisites to the exercise of our jurisdiction under sec_6330 are the issuance of a valid notice_of_determination and a timely petition for review see also 117_tc_159 sec_6330 jurisdiction is dependent on written notice of a sec_6330 determination if a hearing is timely requested sec_6330 suspends the levy action until the conclusion of the hearing and any judicial review the section also overrides the so-called anti-injunction_act sec_7421 and permits proceedings in the proper court including the tax_court to enjoin the beginning of a levy during the period the levy action is suspended with respect to such proceedings brought in the tax_court the court has no jurisdiction to enjoin a levy unless the taxpayer has timely appealed to the court to review the appeals officer’s determination and then only in respect of the unpaid tax or proposed levy to which the determination being appealed relates sec_6330 ii levy versus offset a levy is distinguishable from an offset see eg 996_f2d_607 2d cir comparing discussion of levy in 472_us_713 with setoff in 332_us_234 affg tcmemo_1991_350 the commissioner’s levy authority derives from the code sec_6331 and it allows the commissioner to proceed administratively to assert the government’s rights in the property of the taxpayer held by any person see united_states v natl bank of commerce supra pincite offset is the common_law right of a creditor shared by the government and all creditors to apply the unappropriated moneys of the debtor in the hands of the creditor in extinguishment of the debts of the debtor’s due the creditor united_states v munsey trust co supra pincite sec_6402 contains a statutory counterpart which authorizes the secretary to credit a taxpayer’s overpayment_of_tax against any_tax liability of the taxpayer based on the distinction between levy and offset and the limitation of sec_6330 to levy actions we have held that the commissioner’s application of a taxpayer’s overpayment for one taxable_year to offset the taxpayer’s liability for another taxable_year does not constitute a collection action that is subject_to review under sec_6330 bullock v commissioner tcmemo_2003_5 we have relied on the same distinction in a case involving restrictions applicable to levy actions during the pendency of an action for relief from joint_and_several_liability trent v commissioner tcmemo_2002_285 in sec_301_6330-1 q a-g3 proced admin regs the secretary_of_the_treasury has provided that offset is a nonlevy collection activity that the irs may take during the suspension_period provided in sec_6330 see also sec_301 b proced admin regs iii petitioners’ defense to the motion petitioners’ defense to the motion rests on two propositions set forth in the petition in applying the overpayment to other taxes respondent effected an offset and a levy must be carried out to effect an offset they claim that because the offset was by levy respondent erred in not according them their rights under sec_6330 to notice and a hearing they pray that on account of such error the court compel respondent to return the overpayment to them petitioners argue that an offset can be effected only by levy they believe that we erred in bullock v commissioner supra in holding that offset is not a levy subject_to the provisions of sec_6330 petitioners support their argument by pointing to the language of sec_6331 sec_6331 provides that no levy may be made during the pendency of proceedings for the refund of a divisible_tax eg any employment_tax in pertinent part sec_6331 provides certain levies this subsection shall not apply to- - i any levy to carry out an offset under sec_6402 by reference to the language of sec_6331 a similar exception is incorporated into sec_6331 which provides that no levy may be made while an offer_in_compromise is pending or an installment_agreement is pending or in effect sec_6331 petitioners sum up their argument as follows so there we have it to carry out an offset you must levy first that is how the commissioner acquires a taxpayer’s property by levy if a levy upon an overpayment were not required and as the respondent contends an offset has independent authority to operate without the predicate act of a levy the statute would read differently petitioners acknowledge that they received no notice_of_determination but they ask us to overrule our holdings in 114_tc_492 and 117_tc_159 that a notice_of_determination is a prerequisite to our sec_6330 jurisdiction they argue that in a case where the secretary has levied on property of the taxpayer without first providing the taxpayer the written notice of the taxpayer’s right to a prelevy hearing required by sec_6330 we have injunctive power under sec_6330 to undo the levy notwithstanding that the taxpayer has not received the posthearing notice_of_determination to levy contemplated in offiler and lunsford in support of their argument they claim that if we lack authority to act they have no remedy for the secretary’s unlawful conduct in levying on their property without complying with the terms of sec_6330 a result they believe congress plainly did not intend iv discussion a sec_6331 both subsections i and k of sec_6331 as they presently read were added to that section by the internal_revenue_service restructuring and reform act of the act publaw_105_206 secs a b 112_stat_759 s rept 1998_3_cb_537 is the report of the committee on finance that accompanied h_r 105th cong 2d sess which became the act that report makes clear the committee’s intent that new sec_6331 which originated in the senate would not affect the irs’s ability to offset refunds s rept supra pincite c b pincite given the historic distinction between levy and offset there is no indication why the committee thought necessary the exception found in sec_6331 nor is there any explanation of the language levy to carry out an offset we need not solve the puzzle of sec_6331 however because we agree with respondent that we cannot grant petitioners the relief they request in any event b lack of jurisdiction as the supreme court observed in 437_us_365 it is a fundamental precept that federal courts are courts of limited jurisdiction the limits upon federal jurisdiction whether imposed by the constitution or by congress must be neither disregarded nor evaded we have only the authority given to us by congress sec_7442 eg 120_tc_102 petitioners invoke our authority under sec_6330 to review a determination made pursuant to that section to proceed with a collection action a sec_6330 determination and under certain circumstances to enjoin that action they pray that we compel respondent to return the overpayment to them with respect to the content of the petition in an action brought under sec_6330 rule b provides that a copy of the notice_of_determination accompany the petition we have described the notice_of_determination as the taxpayer’s ticket to the tax_court 122_tc_258 we have held that the absence of a sec_6330 determination is grounds for dismissal of a petition that purports to be based on sec_6330 offiler v commissioner t c pincite petitioners argue that if written notice of the taxpayer’s right to a hearing is a prerequisite to a levy the secretary cannot avoid court review of a levy by failing to give the requisite notice what petitioners consider to be a levy in this case was respondent’s application of the overpayment to other taxes owed by petitioners the irs notified petitioners of that action by a notice dated date the notice the petition was filed on date our jurisdiction under sec_6330 to enjoin an improper levy is dependent on both a sec_6330 determination and an appeal to this court within days of that determination sec_6330 e thus even if we were to consider the notice as evidence of a concurrent sec_6330 determination petitioners failed to seek our review of that determination within days of date and for that reason alone we would be required to dismiss for lack of jurisdiction see eg jones v commissioner tcmemo_2003_ statutory periods are jurisdictional and cannot be extended we do not have facts in front of us that provide by letter dated date the letter the irs rejected petitioners’ protest of the application of the overpayment to other taxes owed by them the letter was in response to an irs form_9423 collection appeal request form with accompanying correspondence submitted by petitioners in 114_tc_492 continued any basis to overrule offiler v commissioner supra and lunsford v commissioner supra petitioners also claim that respondent erred in applying the overpayment to a liability subject_to an installment_agreement thus violating the provisions of sec_6159 while petitioners do not claim that sec_6159 provides a jurisdictional basis for the court to take any_action in that regard they do claim that had they been allowed a sec_6330 hearing and had they been allowed to offer a collection alternative they would have had the opportunity to demonstrate not only their entitlement to the collection alternative of an installment_agreement but that petitioner husband already had an installment_agreement to pay the unpaid tax against which was applied the overpayment because petitioners have not satisfied the prerequisites to invoke our jurisdiction under sec_6330 we have no authority to consider petitioners’ claim continued the taxpayer after receiving a notice_of_intent_to_levy and being advised of her right to a sec_6330 hearing but failing to make a timely request for such hearing submitted a form_9423 to the irs accepting the offer of a sec_6330 hearing the request was rejected the rejection we observed that the commissioner’s collection_appeals_program is an administrative review program not required by statute id pincite we found that the rejection was not and did not purport to be a notice_of_determination pursuant to sec_6330 since petitioners do not rely on the exception to the so- called anti-injunction_act sec_7421 found in sec_6331 we do not rule on its application or consider continued v conclusion we shall grant the motion since we have no jurisdiction to consider the errors assigned by petitioners to reflect the foregoing an order of dismissal for lack of jurisdiction will be entered continued whether we have injunctive power under that provision


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 b03 plr-100607-14 date march legend parent -------------------------------------------------------------- ----------------------------------------- date date -------------------------- --------------------------- company official --------------------------------------------------------------------------------- -------------------------------- tax professional ----------------------------------------------------------------- ----------------------------------------- dear -------------- this is in response to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election the extension is being requested for parent to file an election under sec_1_1502-21 to relinquish the entire carryback period for the parent consolidated group’s consolidated net operating losses cnols for the tax_year ending date the election additional information was submitted in a letter dated date the material information submitted for consideration is summarized below parent is the common parent of a consolidated_group parent group parent group incurred a cnol for the tax_year ending date parent has represented that parent group has not and will not carry any portion of the cnol to a prior consolidated_return_year of parent group parent has also represented that no member plr-100607-14 of the consolidated_group of which parent was the common parent for the tax_year ending date had a separate_return_year within the meaning of sec_1_1502-1 at any time during the carryback period parent has also represented that parent group is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 parent intended to file the election the election was required to be filed by date but for various reasons parent failed to file a valid election the period of limitations on assessment under sec_6501 has not expired for parent group’s tax_year ending date or any subsequent taxable_year sec_1_1502-21 provides that a consolidated_group may make an irrevocable election under sec_172 to relinquish the entire carryback period with respect to a cnol for any consolidated_return_year the election is made in a separate statement entitled this is an election under sec_1_1502-21 to waive the entire carryback period pursuant to sec_172 for the insert consolidated_return_year cnols of the consolidated_group of which insert name and employer_identification_number of common parent is the common parent sec_1_1502-21 also provides that the statement must be filed with the group's income_tax return for the consolidated_return_year in which the loss arises 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 sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections 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 sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_1502-21 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for parent to file the election provided parent shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government plr-100607-14 information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file the election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the request for relief was filed before the failure to timely make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for parent to file the election with respect to the relinquishment of the entire carryback period for the cnol for the tax_year ending date as described above the above extension of time is conditioned on the taxpayers’ parent’s and the members of its consolidated_group tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the federal_income_tax returns involved parent should file the election in accordance with sec_1_1502-21 parent group’s returns must be amended to attach the election statement required by sec_1_1502-21 a copy of this letter should be attached to the election statement alternatively if parent group files its returns electronically parent may satisfy this latter requirement by attaching a statement to its return that provides the date and control number of this letter_ruling we express no opinion as to the tax effects or consequences of filing the election late under the provisions of any other section of the code or regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by parent company official and tax professional however the director should verify all essential facts moreover notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any still apply this ruling is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent plr-100607-14 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 ___________________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc


t c memo united_states tax_court stephen s ziegler petitioner v commissioner of internal revenue respondent docket no filed date michael j grace for petitioner roger w bracken for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined the following defi- ciencies in additions under sec_6651 to and accuracy-related_penalties under sec_6662 on petitioner’ sec_1unless otherwise indicated all section references are to the internal_revenue_code code in effect for the years at issue all rule references are to the tax_court rules of prac- tice and procedure federal_income_tax tax_year deficiency addition_to_tax dollar_figure big_number big_number big_number big_number dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure accuracy-related_penalty dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure the only issue remaining for decision is whether the appli- cation of sec_469 to petitioner’s claimed partnership losses for the respective years at issue violates the due process clause of the fifth_amendment to the constitution of the united_states findings_of_fact all of the facts in this case which the parties submitted under rule have been stipulated by the parties and are so found petitioner resided in jericho new york at the time he filed the petition in this case petitioner practiced law as a tax attorney for decades specializing in providing legal services to developers of real_property including low-income apartment complexes similar to those purchased and operated by the partnership in which peti- 2in violation of rule b petitioner alleges on brief various facts petitioner’s alleged facts not stipulated by the parties and not otherwise supported by the record in this case in further violation of that rule petitioner attached to his opening brief various documents petitioner’s documents that are not part of the record and that the court had returned to peti- tioner we shall not rely on petitioner’s alleged facts or petitioner’s documents tioner invested as discussed below during through the years at issue petitioner practiced law full time with the law firm of ziegler sagal winters pc in new york new york during the years at issue petitioner was a limited_partner of aldus green company aldus green a limited_partnership formed under the laws of the state of new york as a limited_partner of aldus green petitioner owned two percent of aldus green’s capital profits and losses in aldus green purchased and operated certain low- income rental apartment buildings located in bronx new york aldus green rented apartments in those buildings to low-income individuals who received rent subsidies under section of the united_states housing act as amended petitioner filed form_1040 u s individual_income_tax_return for each of his taxable years through peti- tioner’s returns in each such return petitioner claimed in schedule e supplemental income and loss schedule e a loss attributable to his investment in aldus green petitioner’s claimed aldus green loss in arriving at total partnership and s_corporation income or loss in each such schedule as a result in schedule e for each of the years at issue petitioner claimed a total partnership and s_corporation loss in each of petitioner’s returns for the years at issue petitioner offset the total partnership and s_corporation loss claimed in schedule e against income from other sources in arriving at total income for each such year respondent issued to petitioner a notice_of_deficiency notice with respect to his taxable years through in that notice respondent determined petitioner’s claimed aldus green loss for each of those years to be a passive_activity_loss under sec_469 allowed each such loss to the extent of income from passive activities for each such year and disallowed the following amount of petitioner’s claimed aldus green loss for each such year year amount dollar_figure big_number big_number big_number big_number opinion petitioner concedes that petitioner’s claimed aldus green loss for each of the years at issue is a passive_activity_loss as defined in sec_469 and that sec_469 disallows each such loss it is petitioner’s position however that the application of sec_469 to petitioner’s claimed aldus green 3petitioner also concedes that he is liable for additions to tax under sec_6651 for the taxable years and and for accuracy-related_penalties under sec_6662 for all the taxable years at issue loss for each of the years at issue violates the due process clause of the fifth_amendment due process clause to the united_states constitution constitution and that therefore he should be allowed to offset each such loss against his income from sources other than passive activities for each such year we shall refer to income from sources other than passive activities as other income in support of his position under the due process clause petitioner argues that sec_469 is retroactive and that the retroactive application of sec_469 to petitioner’s claimed aldus green loss for each of the years at issue is unconstitu- tional in further support of his position petitioner argues that the transitional rule that congress provided in enacting sec_469 into the code transitional rule violates his equal protection rights under the due process clause because it treats him differently than certain other taxpayers the due process clause provides that no person shall be deprived of life liberty or property without due process of law the due process clause provides protection against federal discriminatory action so unjustifiable as to be violative of due process 394_us_618 see 114_f3d_17 2d cir the due process clause also has been held to incorporate the equal protection clause of the fourteenth amendment to the constitution 415_us_361 n 398_f2d_705 n 2d cir before considering petitioner’s constitutional arguments we shall summarize in pertinent part the legislative_history and provisions of sec_469 on date congress enacted sec_469 into the code in the tax_reform_act_of_1986 publaw_99_514 act or tra sec_501 100_stat_2233 in the report of the senate committee on finance senate_finance_committee report with respect to the act that committee set forth the following reasons for enacting sec_469 in recent years it has become increasingly clear that taxpayers are losing faith in the federal_income_tax system this loss of confidence has resulted in large part from the interaction of two of the system’s principal features its high marginal rates and the opportunities it provides for taxpayers to offset income from one source with tax_shelter deductions and credits from another the prevalence of tax_shelters in recent years has been well documented such patterns give rise to a number of undesirable consequences even aside from their effect in reducing federal tax revenues extensive shelter activity contributes to public concerns that the tax system is unfair and to the belief that tax is paid only by the naive and the unsophisticated this in turn not only undermines compliance but encourages further expansion of the tax_shelter market in many cases diverting investment capital from productive activities to those principally or exclusively serving tax_avoidance goals the committee believes that the most important sources of support for the federal_income_tax system are the average citizens who simply report their income typically consisting predominantly of items such as salaries wages pensions interest and dividends and pay tax under the general rules to the extent that these citizens feel that they are bearing a dispropor- tionate burden with regard to the costs of government because of their unwillingness or inability to engage in tax-oriented investment activity the tax system itself is threatened under these circumstances the committee believes that decisive action is needed to curb the expansion of tax sheltering and to restore to the tax system the degree of equity that is a necessary precondition to a beneficial and widely desired reduction in rates so long as tax_shelters are permitted to erode the federal tax_base a low-rate system can provide neither suffi- cient revenues nor sufficient progressivity to sat- isfy the general_public that tax_liability bears a fair relationship to the ability to pay in particular a provision significantly limiting the use of tax_shelter losses is unavoidable if substantial rate reductions are to be provided to high-income taxpayers without disproportionately reducing the share of total liabil- ity under the individual income_tax that is borne by high-income taxpayers as a group s rept pincite c b vol in the senate_finance_committee report the senate committee on finance focused specifically on the use of rental activities for tax_shelter purposes such as the use by aldus green of rental activities for such purposes that report stated in pertinent part the extensive use of rental activities for tax_shelter purposes under present law combined with the reduced level of personal involvement necessary to conduct such activities make clear that the effectiveness of the basic passive loss provision could be seriously compro- mised if material_participation were sufficient to avoid the limitations in the case of rental activities id pincite having summarized the concerns of congress in enacting sec_469 into the code we shall now summarize certain provi- sions of that section that are pertinent here pursuant to sec_469 a taxpayer is not allowed to offset a passive_activity_loss for the taxable_year against other income for such year for purposes of sec_469 a passive_activity_loss for the taxable_year is the amount if any by which the aggregate losses from all passive activities for the taxable_year exceed the aggregate income from all passive activities for such year sec_469 sec_1_469-2t temporary income_tax regs fed reg date the term passive_activity is defined in pertinent part as any activity in which the tax- payer does not materially participate sec_469 any rental_activity is a passive_activity regardless whether the taxpayer materially participates in the activity see sec_469 under sec_469 a passive_activity_loss is treated as a deduction allocable to the passive_activity giving rise to such loss for the succeeding taxable_year under that section a passive_activity_loss may be carried forward indefinitely in addition sec_469 provides in pertinent part sec_469 passive_activity_losses and credits limited g dispositions of entire_interest in passive_activity --if during the taxable_year a taxpayer dis- poses of his entire_interest in any passive_activity or former_passive_activity the following rules shall apply fully taxable transaction -- a in general --if all gain_or_loss realized on such disposition is recognized the excess of-- i any loss from such activity for such taxable_year determined after the applica- tion of subsection b over ii any net_income or gain for such taxable_year from all other passive activi- ties determined after the application of subsection b shall be treated as a loss which is not from a passive_activity we now turn to petitioner’s arguments we first address his argument that sec_469 is retroactive petitioner maintains that sec_469 is retroactive because the effect of the act passive loss provisions is to deny a current deduction for depreciation ie a segment of the expenditure for a property already purchased and for interest on a mortgage loan already committed to the extent that said deductions exceed the net operating income from the property in this case the expenditures were made by the partnership aldus green - and the taxpayer made his investment in the partnership - before the law was enacted or pro- posed and the passive loss rule is disallowing the deduction for the expenditure in support of his argument that sec_469 is retroactive petitioner contends that he decided to invest in aldus green in according to petitioner based on the tax incentives in place at that time petitioner reasonably expected that he would be allowed to deduct tax losses from the partnership and would not have made the investment if he knew that the losses from the project could not be offset against his compensation and portfo- lio income since in that case there would be no economic return from the investment petitioner maintains that he was induced to make an investment based upon the prior set of tax rules deliberately enacted by congress to induce such investment from those premises petitioner argues that sec_469 is retroactive and that such retroactivity is unconstitutional because it violates the due process clause before considering petitioner’s argument that sec_469 is unconstitutionally retroactive we note that the grounds on which petitioner relies to support that argument are similar to the grounds on which the taxpayer relied in 512_us_26 to support his argument that the tax statute involved there was unconstitutionally retroactive in carlton the taxpayer the executor of an estate maintained that the retroactive_amendment of a federal estate_tax provision sec_4with respect to petitioner’s contention that he made his investment in aldus green in respondent states on brief we note that petitioner offered no evidence that his investment in agc aldus green actually was made two years before the enactment of sec_469 nor was the date of his investment in agc contained in the stipulation of facts filed in this case violated the due process clause because he specifically and detrimentally relied on the preamendment version id pincite of that provision when he engaged in a transaction prior to its amendment by congress id in rejecting the taxpayer’s posi- tion the supreme court of the united_states observed that the taxpayer’s reliance alone is insufficient to establish a constitu- tional violation tax legislation is not a promise and a taxpayer has no vested right in the internal_revenue_code justice stone explained in welch v henry u s pincite taxation is neither a penalty imposed on the taxpayer nor a liability which he assumes by con- tract it is but a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must bear its burdens since no citizen enjoys immunity from that burden its retroactive imposition does not necessarily infringe due process moreover the detrimental reliance principle is not limited to retroactive legislation an entirely pro- spective change in the law may disturb the relied-upon expectations of individuals but such a change would not be deemed therefore to be violative of due process id pincite we consider now whether as petitioner argues sec_469 is retroactive as pertinent here sec_469 applies only to a passive_activity_loss as defined in sec_469 for a taxable_year that began after date see tra sec_501 100_stat_2241 sec_469 does not apply to any loss for any taxable_year that began prior to date see id we hold that sec_469 is not retroactive we next address petitioner’s argument that the transitional rule that congress provided in enacting sec_469 into the code violates his equal protection rights under the due process clause we first describe the transitional rule that congress provided tra sec_502 100_stat_2241 when it enacted sec_469 into the code that transitional rule provides that any loss sustained by certain investors6 with respect to inter- 5see polone v commissioner tcmemo_2003_339 affd 479_f3d_1019 9th cir cf 512_us_26 6the investors qualifying under the transitional rule are so-called qualified investors the term qualified investor is defined to mean in general any natural_person who holds directly or through or more entities an interest in a qualified low-income_housing project-- a if-- i in the case of a project placed in ser- vice before date such person held an interest in such project on date and the taxpayer made his initial investment after date or ii in the case of a project not described in subparagraph a such investor held an inter- est in such project on date and b if such investor is required to make payments after date of percent or more of the total original obligated investment for such interest tra sec_502 100_stat_2242 ests in certain low-income_housing projects7 for any taxable_year in a prescribed period8 is not to be treated as a loss from a 7the low-income_housing projects qualifying under the tran- sitional rule are so-called qualified low-income_housing pro- jects the term qualified_low-income_housing_project is defined to mean any project if-- such project meets the requirements of clause i ii iii or iv of sec_1250 as of the date placed_in_service and for each taxable_year thereafter which begins after and for which a passive loss may be allowable with respect to such project the operator certifies to the secretary_of_the_treasury or_his_delegate that such project met the requirements of paragraph on the date of the enact- ment of this act date or if later when placed_in_service and annually thereafter such project is constructed or acquired pursu- ant to a binding written contract entered into on or before date and such project is placed_in_service before date tra sec_502 100_stat_2242 8the period prescribed under the transitional rule is a so- called relief period the term relief period is defined to mean the period beginning with the taxable_year in which the investor made his initial investment in the qualified_low-income_housing_project and ending with whichever of the following is the earliest-- the 6th taxable_year after the taxable_year in which the investor made his initial in- vestment continued passive_activity for purposes of sec_469 tra sec_502 100_stat_2241 in support of his argument that the transitional rule violates his equal protection rights under the due process clause petitioner contends that because he is not entitled to the relief provided by the transitional rule congress treated him differently than certain other taxpayers entitled to such relief according to petitioner the provisions of the transi- tional rule are arbitrary capricious and unreasonable in support of that claim petitioner asserts in this case the conditions for the act exemptions for low and moderate income housing are worse than unreasonable that is worse than conditions without any reasonable basis the conditions evidence and indeed were meant to evidence an intention by the opponents of any exemption to take private property without compensation the exemption is conditional upon the taxpayer not having yet paid in over of the taxpayer’s invest- ment commitment it is obvious - and beyond dispute - that the purpose of this condition was to encourage the taxpayer to pay in the balance of his investment - and this was the very purpose of the tax incentives for subsidized housing in the first place however there is no exemption for the investor who has already paid continued the 1st taxable_year after the taxable_year in which the investor is obligated to make his last investment or the taxable_year preceding the 1st tax- able year for which such project ceased to be a qualified_low-income_housing_project tra sec_502 100_stat_2241 in his investment even if he is an investor in the same project as a taxpayer who has not yet paid in his investment hence limiting the exemption to investors who have not yet paid in over of their investments reflects a purpose antithetical to our system of juris- prudence that is perpetuating a fraud by having the government pay a further portion of the consideration it promised to persons who had not yet completed their performance in reliance on the government’s promised consideration to the persons who had already fully performed in reliance upon the government promise reproduced literally in order to prevail on his equal protection argument petitioner must show that the transitional rule was not premised upon a rational basis see 461_us_540 and instead was premised upon an impermissible basis such as race religion or the desire to prevent the exercise of petitioner’s constitutional rights see 501_f2d_1207 2d cir we reject petitioner’s argument that the transitional rule violates his equal protection rights under the due process clause in enacting sec_469 congress considered whether any relief from the application of sec_469 was appropriate after giving consideration to that question congress decided to provide in the transitional rule certain relief but only for certain taxable years to certain taxpayers in certain circum- stances 9congress also decided to provide in sec_469 certain continued on the instant record we find that petitioner has failed to carry his burden of establishing that the transitional rule was not premised upon a rational basis and instead was based upon a continued other relief but only for certain taxable years to taxpayers who were not entitled to the relief provided by the transitional rule and who therefore were subject_to sec_469 sec_469 provides in pertinent part sec_469 passive_activity_losses and credits limited m phase-in of disallowance of losses and credits for interest held before date of enactment -- in general --in the case of any passive_activity_loss or passive_activity_credit for any taxable_year beginning in calendar years through subsection a shall not apply to the applicable_percentage of that portion of such loss or such credit which is attributable to preenactment interests applicable_percentage --for purposes of this subsection the applicable_percentage shall be determined in accordance with the following table in the case of taxable years beginning in the applicable_percentage is dollar_figure dollar_figure dollar_figure dollar_figure sec_469 defines the term pre-enactment_interest to mean in general any interest in a passive_activity held by a taxpayer on the date of the enactment of the tax_reform_act_of_1986 and at all times thereafter petitioner appears to have qualified for the relief from the application of sec_469 that congress provided in sec_469 constitutionally impermissible standard we hold that the transitional rule does not violate petitioner’s equal protection rights under the due process clause we have considered all of the parties’ contentions and arguments that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing and the concessions of petitioner decision will be entered for respondent