internal_revenue_service department of the treasury washington dc index number person to contact number release date telephone number refer reply to cc dom p si - plr-114220-99 date date x a b d1 year dear this letter responds to your letter dated date and subsequent correspondence requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 a the sole shareholder of x intended for x to be an s_corporation beginning in year its first taxable_year a was not aware of the requirement that x file a form_2553 election by a small_business_corporation and relied on x’s accountant to file any necessary papers concerning x’s s_corporation_election b x’s accountant states in an affidavit that when the formation of x was being discussed with a it was decided that x would be an s_corporation however a form_2553 election by a small_business_corporation was not timely filed for x for year sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may mr thomas f o’connor treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's first taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours branch j thomas hines acting branch chief office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court kenneth o and althea c garcia petitioners v commissioner of internal revenue respondent docket no 30831-08s filed date kenneth o garcia and althea c garcia pro sese adam c silva for respondent laro judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and 1section references are to the applicable versions of the internal_revenue_code rule references are to the tax_court rules_of_practice and procedure this opinion shall not be treated as precedent for any other case petitioners petitioned the court under sec_6330 to review the determination of the internal_revenue_service office of appeals appeals sustaining a proposed levy related to their federal_income_tax the petition alleges primarily that the proposed levy is improper because appeals refused to consider any offer-in-compromise by petitioners this case is currently before the court on respondent’s motion to decide by summary_judgment that he is entitled to proceed with collection of petitioners’ federal_income_tax liability we agree with the substance of that motion and we shall grant it background petitioners failed to file a federal_income_tax return for on date respondent sent to petitioners a notice_of_deficiency for the notice_of_deficiency determined a dollar_figure deficiency in petitioners’ federal_income_tax a dollar_figure addition_to_tax under sec_6651 and a dollar_figure accuracy-related_penalty under sec_6662 petitioners received the notice_of_deficiency but did not petition the court with respect to it respondent subsequently assessed the deficiency addition_to_tax and accuracy-related_penalty plus applicable_interest on or about date respondent notified petitioners that respondent was proposing a levy to collect their unpaid federal_income_tax liability for and that they could request a hearing with appeals as to the matter petitioners requested the hearing stating that they desired to enter into an offer_in_compromise for appeals subsequently advised petitioners on date that it would consider an offer_in_compromise only if petitioners filed their and federal_income_tax returns so as to be in compliance with their tax_return filing_requirements and petitioners completed and timely submitted a form 433-a collection information statement for wage earners and self-employed individuals with appropriate attachments to a named officer of appeals at her fresno california address listed on the advice included with the advice was a copy of form 433-a on date appeals notified petitioners that it had set a telephone conference with them for date and reminded petitioners that the named officer of appeals still needed to receive the form 433-a and other previously requested items to consider any request by them for an offer_in_compromise included with that notification was another copy of form 433-a on the scheduled date appeals conducted the telephone hearing with petitioner kenneth garcia mr garcia during the hearing mr garcia informed appeals that his accountant was supposed to have rescheduled the hearing for a later date appeals noted it had not received from petitioner either a power_of_attorney as to the matter or the requested form 433-a with attachments mr garcia asked appeals for more time to submit the form 433-a with attachments appeals responded that it had twice previously requested that document from petitioners on date appeals issued each petitioner a notice_of_determination sustaining the proposed levy the determination stated in part that petitioners had filed the requested tax returns but had failed to submit the requested form 433-a with attachments to the designated appeals officer at the listed address the determination also stated that petitioners disagreed with their underlying tax_liability as shown in respondent’s books but were not allowed to dispute that liability at the hearing because they had had a prior opportunity to do so when petitioners petitioned the court in commencement of this case they resided in california discussion summary_judgment may be granted with respect to any part of the legal issues in controversy if the records before the court show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule a and b 119_tc_252 respondent bears the burden of proving there is no genuine issue of material fact and all facts are interpreted in the light most favorable to petitioners see craig v commissioner supra pincite however petitioners must do more than merely allege or deny facts they must set forth specific facts showing that there is a genuine issue for trial see rule d 477_us_317 under this standard petitioners have failed to raise any genuine issue of material fact and summary_judgment is appropriate sec_6330 provides for notice and opportunity for a hearing before the commissioner may levy upon the property of any person the person may raise at the hearing any relevant issue relating to the unpaid tax or proposed levy including challenges to the appropriateness of the collection action and offers of collection alternatives the person may challenge the existence or amount of the underlying tax_liability for the year only if the person did not receive a notice_of_deficiency or did not otherwise have an opportunity to dispute the liability see sec_6330 114_tc_604 once appeals issues a notice_of_determination the person may seek judicial review in this court see sec_6330 unless the validity of the underlying tax_liability is properly at issue we review the determination for abuse_of_discretion see sego v commissioner supra pincite petitioners indicated in their response to respondent’s motion that their underlying tax_liability is less than that now sought by respondent the validity of their underlying tax_liability however is not properly at issue because petitioners previously received a notice_of_deficiency for and had an opportunity to dispute their tax_liability for at that time the mere fact that petitioners’ accountant may not have filed with the court a petition in dispute of the notice_of_deficiency as petitioners claim they wanted him to do is not sufficient for them to prevail on this issue nor do we believe that appeals abused its discretion when it declined to consider any offer_in_compromise from petitioners petitioners failed to provide the form 433-a with attachments to the designated officer of appeals at the listed address although appeals twice asked them to do so see 414_f3d_144 1st cir huntress v commissioner tcmemo_2009_161 mccall v commissioner tcmemo_2009_75 petitioners assert in their response to respondent’s motion that they did timely provide appeals with the requested form to that end petitioners note their response includes a completed form 433-f collection information statement and a u s postal service receipt showing that they mailed a letter to the internal_revenue_service on date the letter however was mailed not to the named appeals officer at her listed address in fresno california but to an internal_revenue_service center at a post office box in holtsville new york moreover even if we were to presume favorably to petitioners that the letter actually was the form 433-f included with the response that form is different than the form 433-a a copy of which was provided to petitioners by appeals on two occasions and lacked any of the referenced attachments we sustain the determinations of appeals that the proposed levy is appropriate in so doing we have considered all of petitioners’ contentions and have concluded that those contentions not discussed herein are without merit to reflect the foregoing an appropriate order and decision will be entered for respondent


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc it a 2-plr-104104-01 date date legend x y z year dear this is in response to a ruling_request dated date and supplemented date both the original ruling_request and the supplemental information were submitted on your behalf by your authorized representatives you are seeking rulings on the federal_income_tax consequences of the proposed transaction described below you have already received a private_letter_ruling from exempt_organizations concerning the proposed transaction this letter responds to your request for a ruling concerning the charitable_contribution_deduction issue we are responding to the following ruling that you have requested x will be entitled to a charitable_contribution_deduction under sec_170 of the internal_revenue_code upon the exercise of the option whether by y or by a permitted transferee in an amount equal to the difference between the exercise price and the fair_market_value of the common_stock received upon the exercise of the option on the date of exercise subject_to the limitations under sec_170 on the amount of a charitable_contribution_deduction allowed a corporation conclusion sec_1 x will be entitled to a charitable_contribution_deduction under sec_170 of the internal_revenue_code on the date the common_stock is transferred to a permitted plr-104104-01 transferee in an amount equal to the difference between the exercise price and the fair_market_value of the common_stock received upon the exercise of the option subject_to the limitations under sec_170 on the amount of a charitable_contribution_deduction allowed a corporation this ruling is based on the assumption that the permitted transferee is described in sec_170 at the time that the transfer of common_stock is made by x to the permitted transferee x will be entitled to a charitable_contribution_deduction under sec_170 of the internal_revenue_code on the date the common_stock is transferred to y or a permitted transferee pursuant to the net exercise procedure described below in an amount equal to the fair_market_value of the common_stock received upon the exercise of the option subject_to the limitations under sec_170 on the amount of a charitable_contribution_deduction allowed a corporation this ruling is based on the assumption that y or the permitted transferee is described in sec_170 at the time that the transfer of common_stock is made by x to y or to the permitted transferee x is a for-profit corporation facts y is a non-profit corporation described in sec_501 of the code the service has recognized y as a private_foundation as defined in sec_509 of the code in year x pledged to y an option to acquire z shares of common_stock of x common_stock at an option_price representing the fair_market_value of the common_stock as determined by the board_of directors of x on the date that x pledged the option y may transfer and assign the option or any portion thereof only to one or more unrelated charitable organizations described in sec_170 and sec_501 a permitted transferee a permitted transferee may not transfer or assign the option or any portion thereof without the written consent of x generally the option is exercisable in whole or in part and from time to time by a written notice of exercise delivered to x payment of the purchase_price of any shares with respect to which the option will be exercised generally will be by certified or bank cashier’s or teller’s check or wire transfer and will be delivered with the notice of exercise upon exercise of the option the certificate or certificates for shares of common_stock as to which the option was exercised will be registered in the name of the person or persons exercising the option according to paragraph of the option agreement the shares that x will transfer to y or a permitted transferee upon exercise of the option may be subject_to restrictions plr-104104-01 in addition the option agreement provides a cashless procedure a net exercise in which no consideration is paid to x under the net exercise procedure y elects to receive shares of common_stock equal to the value of the option if y were to elect the net exercise procedure y would provide x with written notice of y’s election to utilize the net exercise procedure and x would issue to y the number of shares of the common_stock computed using a formula specified in the stock_option pledge agreement these shares would satisfy x’s pledge obligation for the shares subject_to the net exercise it is expected that y will collect the option in two parts with respect to a portion of the option y will utilize the net exercise procedures described above to effect a transfer of common_stock from x in satisfaction of its pledge obligation for the second part y will transfer the option to an unrelated permitted transferee which will pay y a price for the option equal to the difference between the fair_market_value of the common_stock subject_to the option on the date of the transfer and the exercise price of the option less an agreed upon discount these terms would be negotiated at arm’s- length law and analysis sec_170 of the code allows as a deduction any charitable_contribution as defined in sec_170 payment of which is made within the taxable_year sec_170 provides that in the case of a corporation the total deductions under sec_170 for any taxable_year shall not exceed percent of the taxpayer’s taxable_income computed with certain adjustments listed in sec_170 under sec_1_170a-1 of the income_tax regulations a deduction generally is allowed to a corporation for any charitable_contribution actually paid during the taxable_year irrespective of the method_of_accounting employed or the date on which the contribution is pledged in the case of a corporation reporting its taxable_income on the accrual basis sec_170 provides that in certain limited cases a corporation may elect to treat a contribution as paid in the year that it is authorized by the board_of directors revrul_75_348 1975_2_cb_75 holds that a corporation that pledges an option to purchase shares of its common_stock at a specified price to an educational_organization described in sec_170 of the code is entitled to a charitable_contribution_deduction in the taxable_year that the option is exercised for the excess of the fair_market_value on the date of exercise over the exercise price see also revrul_82_197 1982_2_cb_72 holding that an individual who grants an option to purchase real_property to a charitable_organization described in sec_170 is allowed a charitable_contribution_deduction for the year in which the organization exercises the option in the amount of the excess of the property’s fair_market_value on the date of exercise over the option’s exercise price revrul_82_197 states that although the promise to pay may be enforceable a promise to pay money or sell property in the future is not itself a payment for purposes of sec_170 plr-104104-01 where a charitable_contribution is made in property other than money sec_1_170a-1 of the regulations provides in part that the amount of the contribution is the fair_market_value of the property at the time of the contribution reduced as provided in sec_170 and sec_1_170a-4 where a property is sold to a charity for less than its fair_market_value sec_1011 of the code provides for the adjustment of the donor’s basis for purposes of computing its gain from the portion of the property sold in the bargain sale see also sec_1_1011-2 and sec_1_170a-4 of the regulations in addition sec_170 provides in certain circumstances for a reduction in the amount of the charitable_contribution if at the time of the contribution a sale of the property by the donor at its fair_market_value would have resulted in gain sec_1032 of the code provides that no gain_or_loss shall be recognized to a corporation on the receipt of money or other_property in exchange for stock including treasury_stock of such corporation since sec_1032 provides that a corporation does not recognize gain_or_loss on the sale of its own stock the reductions to fair market provided in sec_170 do not apply when a corporation contributes its own stock to charity see revrul_75_348 for the same reason the bargain sale provisions of sec_1011 and sec_1_1011-2 and sec_1_170a-4 do not apply when a corporation sells its stock to a charity for less than the fair_market_value of the stock see revrul_75_348 sec_1_170a-1 provides that the charitable_contribution_deduction under sec_170 for a payment that a taxpayer makes partly in consideration for goods or services may not exceed the excess of a the amount of any cash paid and the fair_market_value of any property other than cash transferred by the taxpayer to an organization described in sec_170 over b the fair_market_value of the goods or services the organization provides in return if the option is exercised by a permitted transferee paying the option_price for shares of stock we conclude that under the reasoning set forth in revrul_75_348 and revrul_82_197 x is treated as making a charitable_contribution described in sec_170 in the year that the stock is transferred to a charity described in sec_170 and the amount of x’s charitable_contribution is the excess of the fair_market_value of the shares on the date of exercise over the option_price under the reasoning set forth in revrul_75_348 and revrul_82_197 we conclude that x will be entitled to the charitable_contribution_deduction in the manner and to the extent provided in sec_170 if the option is exercised by a charity either y or a permitted transferee using the net exercise procedure which is described above we conclude that under the reasoning set forth in revrul_75_348 and revrul_82_197 x is treated as making a charitable_contribution described in sec_170 in the year that the stock is transferred to a charity described in sec_170 because no payment is made by the charity to x under the net exercise procedure the amount of the charitable_contribution is the fair_market_value of the shares at the time of the contribution that are paid to the charity under the reasoning set forth in revrul_75_348 and revrul_82_197 we conclude that x will be entitled to the charitable_contribution_deduction in the manner and to the extent provided in sec_170 plr-104104-01 our conclusions are based on the assumption that the charity either y or a permitted transferee is described in sec_170 at the time that the transfer of stock is made by x to that charity our ruling is based on the assumption that x will comply with all applicable_requirements of sec_170 and the regulations under sec_170 if the stock that x transfers to y or a permitted transferee is subject_to restrictions that may materially affect the fair_market_value of the stock see sec_1_170a-13 of the regulations no opinion is expressed about the federal_income_tax treatment of the transaction under other provisions of the code the above rulings are directed only to the taxpayer who requested them sec_6110 of the code provides that these rulings may not be used or cited as precedent sincerely associate chief_counsel income_tax accounting by karin g gross senior technician reviewer branch enclosure cc copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------ ------------------------------------------- ---------------------- ------------------------------------------- ------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-136158-09 date date legend x d1 country ------------------------------------------------------------------ ------------------ ------------ dear ------------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed on d1 under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d1 however x inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be plr-136158-09 disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single member having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective d1 x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form 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 plr-136158-09 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely curt g wilson curt g wilson associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


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 b02 plr-116633-09 date april internal_revenue_service number release date index number -------------------------------- ---------------------------------- ---------------------------------- -------------------------- legend x ----------------------------------- ----------------------------------- state ------------- date1 ------------------- date2 ---------------------- dear --------------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was formed on date1 under the laws of state x represents that x intended to be an s_corporation effective date2 however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed plr-116633-09 sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year based solely on the facts submitted and the representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date2 accordingly provided that x makes an election to be an s_corporation by filing a complete form_2553 effective date2 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for date2 except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the 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 sent to your authorized representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 1-plr-106004-00 date date legend x date this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on date the sole shareholder of x desired that x elect s_corporation treatment for x effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s plr-106004-00 corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely signed dianna k miosi dianna k miosi chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


id office uilc cca_2009010511544717 ------------------------ number release date from -------------------------- sent monday january am to ---------------------- cc -------------------------------------- subject re d employer health and welfare issues dear ----- -------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ----------------do not have a preference and defer to you on how you would like to handle that unless -------feels differently i followed up with ------------------on the section regarding uncooperative taxpayers it is sec_6503 which suspends the running of any period of limitations provided in sec_6501 on assessment in the case of certain summonses for any further information on the section though -------will have to be consulted if you would like we can help you coordinate with them happy new year --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- ------------


internal_revenue_service number release date index number ------------------------------- ------------------------ ------------------------------- - department of the treasury washington dc person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-111415-05 date october ------------------------------------------------- ------------------------------------------------------------ re ----------------------------------------- re ----------------------------------------- legend taxpayer - - trust ---------------------------------------------------- date dollar_figurex attorney state ----------------------- --------- -------------------------- -------- - - - - dear ------------------- this is in response to a letter dated date and prior correspondence submitted by your authorized representative requesting an extension of time under sec_301 of the procedure and administration regulations to make an allocation of generation-skipping_transfer gst_exemption taxpayer resides in state a community_property_state on date taxpayer and husband established and funded an irrevocable_trust trust for the primary benefit of daughter’s descendants husband contributed community_property of dollar_figurex to trust on date husband filed a gift_tax_return but no gift_tax_return was filed by the taxpayer attorney assisted in the planning and preparation of the trust instrument and did not advise taxpayer with regard to the necessity to file gift_tax returns allocating her gst_exemption to the transfer to trust upon the death of attorney subsequent counsel advise taxpayer that no gst_exemption allocation was made sec_2601 imposes a tax on every generation-skipping_transfer a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 as in effect at the time of the transfer provides that for purposes of determining the gst tax every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_26_2632-1 of the generation-skipping_transfer_tax regulations sec_2642 provides in part that except as provided in sec_2642 if the provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime is made on form_709 allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 and such allocation shall be effective on and after the date of such transfer sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute see notice_2001_50 2001_2_cb_189 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the 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 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to make an allocation of her available gst_exemption with respect to the transfer to trust the allocations will be effective as of the date of transfer and should be made based on the value of the property transferred to trust as of the date of transfer taxpayer should file a form_709 united_states gift and generation-skipping_transfer_tax return with the internal_revenue_service cincinnati ohio the rulings contained in this letter are based upon information and except as specifically ruled herein we express or imply no opinion on the federal representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination tax consequences of the transaction under the cited provisions or under any other provisions of the code authorized representative pursuant to a power_of_attorney on file a copy of this letter is being sent to your this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely ----------------------------------------------------------william p o’shea associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


number release date id office uilc cca_2012022414450916 -------------- from ---------------------- sent friday date pm to -------------------------- cc ----------------------- subject re questions hi ------------ - sec_6103 requires the irs to maintain the confidentiality of return_information unless a provision of title_26 provides otherwise courts interpret the term return_information broadly to include the taxpayer’s identity and all other information received acquired or generated by the irs in connection with the determination of a taxpayer’s tax_liability see sec_6103 289_f3d_377 5th cir in the situation presented the issue is whether return_information gathered during the examination of an estate_tax_return can be disclosed to the subject of a sec_6695a examination the subject of the sec_6695a examination an appraiser drafted an appraisal for purposes of the estate_tax_return the irs may disclose return_information in a federal or state judicial or administrative_proceeding related to tax_administration if the proceeding arose out of a determination of the taxpayer’s liability or if the return_information directly relates to the outcome of the proceeding sec_6103 although not defined by statute or regulation we have interpreted an administrative_proceeding to be a proceeding conducted by an administrative agency body or commission charged by law to make determinations regarding a taxpayer’s liability under the code or related statutes thus an administrative_proceeding includes examination procedures the irs may disclose the return_information gathered from the estate_tax examination to the subject of the sec_6695a examination but only if the estate_tax_return information directly relates to the determination under sec_6695a any of the estate_tax_return information that does not directly relate to the determination of the sec_6695a penalty such as information about the executor or items of income and deductions unrelated to the appraisal may not be disclosed to the appraiser return_information also includes the fact that a taxpayer is under examination accordingly the fact that the service is examining the corporation is the corporation’s return_information and the fact that the service is examining the corporation’s employee is the employee’s return_information neither of these items of return_information may be disclosed unless a provision of title_26 provides otherwise based on the facts available no provision of title_26 would appear to authorize the disclosure to the corporation that its employee is under examination or to the employee that the corporation is under examination i hope that this response answers the questions presented please contact me if you have additional questions or need further assistance thanks ------------------------ ------------------------- ---------------------------------------- ------------------------------------- -------------------


t c memo united_states tax_court ralf zacky petitioner v commissioner of internal revenue respondent docket no filed date ralph g zacky pro_se laura beth salant for respondent memorandum findings_of_fact and opinion laro judge petitioner petitioned the court to redetermine respondent’s determination that petitioner is liable for the following deficiencies in federal excise_tax and additions thereto first-tier second-tier year sec_4975 sec_4975 initial deficiency additional deficiency addition_to_tax sec_6651 dollar_figure -- dollar_figure big_number -- dollar_figure big_number -- dollar_figure big_number -- dollar_figure big_number -- dollar_figure -- dollar_figure dollar_figure we decide whether petitioner is liable for these amounts we hold he is unless otherwise stated section references are to the applicable versions of the internal_revenue_code rule references are to the tax_court rules_of_practice and procedure findings_of_fact some facts were stipulated we incorporate herein by this reference the parties’ stipulation of facts and the exhibits submitted therewith we find the stipulated facts accordingly petitioner resided in mentone california when his petition was filed aspects inc aspects is a c_corporation of which petitioner is the president and sole shareholder it has a profit sharing plan plan that was adopted effective date and was amended on date the plan is qualified under sec_401 the plan’s underlying trust is exempt from federal tax under sec_501 from the inception of the plan through date the date on which the notice_of_deficiency was issued in this case the plan has had many participants one of these participants was petitioner petitioner also was the plan’s sole trustee pursuant to the plan the trustee was required to provide the plan with services which included investing managing and controlling plan assets maintaining records of plan receipts and disbursements and preparing a written annual report borrowing and raising funds for the plan and making loans from the plan to plan participants from the inception of the plan through date petitioner has had access to the plan’s books records and assets as of date neither aspects nor petitioner had the funds necessary to pay aspects’s payroll liability of dollar_figure which was imminently coming due petitioner on that date borrowed dollar_figure from the plan first loan to pay that liability the first loan was supported by a promissory note signed by petitioner and dated date the note stated that interest of percent per annum would accrue on the unpaid principal and that repayment would be made over years through quarterly installments of dollar_figure beginning on date the note stated that the first loan was secured_by petitioner’s vested interest in the plan the balance of that interest was dollar_figure on date and dollar_figure on date inland empire properties inc inland was a licensed california corporation from date until date its business during that time was the ownership and leasing to aspects and other tenants of a commercial building inland’s president and sole shareholder was petitioner and it had no employees on date the plan lent dollar_figure to inland second loan so that petitioner could pay off his car loan which was about to go into default an unsigned document drafted on aspects stationery and bearing the typewritten name of petitioner stated that the second loan was due in year that the interest rate payable on the second loan was percent and that the second loan was secured_by a pontiac bonneville sse bearing a stated vehicle identification_number the document also stated that the second loan was renewable after the first year at the then-prevailing interest rate plu sec_3 percent shortly after the making of the second loan petitioner transferred to inland the title to the referenced pontiac bonneville sse on date the plan lent dollar_figure to inland third loan so that inland could pay the mortgage and real_estate_taxes due on the building an unsigned promissory note with a signature block for petitioner in his capacity as inland’s president stated that interest was accruing on the unpaid principal pincite percent per annum and that repayment was to be made through monthly installments of dollar_figure beginning on date the third loan was unsecured to date no principal or interest has been paid on the first second or third loan collectively the three loans the plan has during its existence made two other loans to participants other than petitioner and it has required that those individuals repay those loans petitioner knew at the times of the three loans that his creditworthiness was poor and he knew at the times of the second and third loans that inland’s creditworthiness was poor when petitioner and inland failed to pay back the three loans according to their terms petitioner in his capacity as plan trustee neither sought nor attempted to compel payment the relevant provisions of the plan are as follows investment powers and duties of the trustee a the trustee shall invest and reinvest the trust fund to keep the trust fund invested without distinction between principal and income and in such securities or property real or personal wherever situated as the trustee shall deem advisable including but not limited to stocks common or preferred bonds and other evidences of indebtedness or ownership and real_estate or any interest therein loans to participants a the trustee may in the trustee’s discretion make loans to participants and beneficiaries under the following circumstances loans shall be made available to all participants and beneficiaries on a reasonably equivalent basis loans shall not be available to highly compensated employees in an amount greater than the amount available to other participants and beneficiaries loans shall bear a reasonable rate of interest loans shall be adequately secured and shall provide for repayment over a reasonable period of time c loans made pursuant to this section when added to the outstanding balance of all other loans made by the plan to the participant shall be limited to the lesser_of dollar_figure reduced by the excess if any of the highest outstanding balance of loans from the plan to the participant during the one year period ending on the day before the date on which such loan is made over the outstanding balance of loans from the plan to the participant on the date on which such loan was made or one-half of the present_value of the non-forfeitable accrued_benefit of the participant under the plan d loans shall provide for level amortization with payments to be made not less frequently than quarterly over a period not to exceed five years f any loans granted or renewed on or after the last day of the first plan_year beginning after date shall be made pursuant to a participant_loan program such loan program shall be established in writing and must include but need not be limited to the following the identity of the person or positions authorized to administer the participant_loan program a procedure for applying for loans the basis on which loans will be approved or denied limitations if any on the types and amounts of loans offered the procedure under the program for determining a reasonable rate of interest the types of collateral which may secure a participant_loan and the events constituting default and the steps that will be taken to preserve plan assets such participant_loan program shall be contained in a separate written document which when properly executed is hereby incorporated by reference and made a part of the plan petitioner has never filed a form_5330 return of excise_taxes for any period relevant herein the plan filed a form 5500-c r return report of employee_benefit_plan for its plan years ended date and the plan has not filed a form 5500-c r for any plan_year thereafter the plan reported on its form 5500-c r for its plan_year ended date that it had as of date other investments of dollar_figure respondent determined that these investments were the three loans that each of the three loans was a prohibited_transaction under sec_4975 and that the principal of the three loans totaled dollar_figure as of date respondent also determined that a stated_interest rate of percent applied to each subject year for purposes of computing the amount_involved under sec_4975 and that on the basis of this 10-percent rate the amounts involved for the subject years were as follows date principal interest amount_involved dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number respondent noted that sec_53_4941_e_-1 foundation excise_tax regs treats prohibited_transaction loans as occurring on the first day of each taxable_year in the taxable_period after the year in which the loan occurs and determined on the basis of these regulations that petitioner owed first-tier excise_taxes as follows dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure -- big_number big_number big_number big_number -- -- big_number big_number big_number -- -- -- big_number big_number -- -- -- -- big_number big_number big_number big_number big_number big_number respondent also determined on the basis of these regulations that petitioner owed a second-tier_excise_tax of dollar_figure for on date aspects filed a voluntary petition for bankruptcy aspects stated on that petition that it owed dollar_figure to the plan and that the plan was an unsecured creditor on date the bankruptcy court overseeing the bankruptcy proceeding confirmed aspects’s first amended plan_of_reorganization confirmed plan under the confirmed plan the plan continued to be listed as an unsecured creditor opinion respondent determined that petitioner is liable for both tiers of excise_taxes under sec_4975 and b respondent asserts on brief that petitioner is a disqualified_person under sec_4975 as to each of the three loans that the plan is a plan under sec_4975 that each of the three loans is a prohibited_transaction under sec_4975 and that none of the three loans has been corrected within the meaning of sec_4975 petitioner does not dispute that he was a disqualified_person as to each of the three loans he was see eg sec_4975 e nor does petitioner under subpars a and e respectively of sec_4975 a disqualified_person is a person who is a fiduciary or an owner direct or indirect of percent or more of the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation which is an employer of any employees covered by the plan as relevant herein petitioner was a fiduciary ie a trustee of the plan who was the sole owner of the stock of an employer aspects whose employees were covered by the plan under sec_4975 a disqualified_person also is a corporation of which percent or more of the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock is owned by a person described in sec_4975 or e thus by virtue of its ownership by petitioner inland also was a disqualified_person as to the second and third loans the possibility that inland may be liable for excise_taxes under sec_4975 or b as to the second and third loans is unimportant to our analysis in that petitioner is jointly and severally liable for any excise_tax imposed on those loans by sec_4975 and b see sec continued dispute that the plan was a plan within the meaning of sec_4975 it was see sec_4975 as we understand petitioner’s argument on brief he is not liable for any of the excise_taxes respondent determined because none of the three loans is a prohibited_transaction the three loans are not prohibited_transactions petitioner asserts because the loans were permitted by the plan the bankruptcy court has through its confirmation of the confirmed plan prescribed rules under which aspects will repay the loans the department of labor has reviewed the loans and approved them and the loans were made in the best interest of the plan and its participants petitioner also asserts in this regard that the period of limitation has expired on the assessment of all of the excise_taxes respondent determined as to the three loans petitioner does not challenge respondent’s calculation of the excise_taxes shown in the notice_of_deficiency including respondent’s use of the 10-percent rate we agree with respondent that petitioner is liable for the excise_taxes as determined sec_4975 was added to the code in by the employee_retirement_income_security_act_of_1974 erisa publaw_93_406 sec a 88_stat_971 congress enacted sec_4975 to effect its intent to tax disqualified continued f persons who engage in self-dealing rather than penalize innocent employees who were previously faced with plan disqualification on account of a prohibited_transaction s rept pincite c b supp disqualification penalized employee plan participants in that they were denied favorable tax consequences such as deferral of taxation id pincite c b supp pincite the goal of congress in enacting sec_4975 was to bar categorically a transaction that was likely to injure the pension_plan 508_us_152 citing s rept supra pincite c b supp pincite sec_4975 imposes two tiers of excise_taxes on a prohibited_transaction the first-tier tax the rate of which depends on the date on which a prohibited_transaction occurs is imposed on the amount_involved in a prohibited_transaction for each year or part thereof in the taxable_period sec_4975 for prohibited_transactions occurring before date the rate of the first-tier tax i sec_5 percent see sec_4975 before amendment by the small_business job protection act of sbjpa publaw_104_188 sec 110_stat_1817 for prohibited_transactions occurring after date and before date the rate of the first-tier tax is percent see sec_4975 after amendment by sbjpa sec first-tier tax_rate increased from percent to percent for prohibited_transactions occurring after date the rate of the first-tier tax i sec_15 percent see sec_4975 after amendment by the taxpayer_relief_act_of_1997 publaw_105_34 sec 111_stat_949 first-tier tax_rate increased from percent to percent the second-tier_excise_tax equal to percent of the amount_involved is imposed when a transaction to which the first-tier tax applies is not corrected within the taxable_period see sec_4975 in this context the taxable_period begins with the date on which the prohibited_transaction occurs and ends on the earliest of a the date of mailing of a notice_of_deficiency with respect thereto b the date on which the tax imposed by sec_4975 is assessed or c the date on which correction of the prohibited_transaction is completed sec_4975 a correction of a prohibited_transaction may be accomplished by undoing the transaction to the extent possible but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified_person were acting under the highest fiduciary standards sec_4975 as to the first-tier tax each of the three loans falls within the wide span of sec_4975 each of these loans i sec_2 here the earliest of these three dates is date ie the date of which the notice_of_deficiency was mailed to petitioner the taxable_period therefore ends on that date absent an earlier correction of a prohibited_transaction a prohibited_transaction under sec_4975 d and e and none of these loans is exempted from that definition by sec_4975 under sec_4975 the plan’s lending of money to petitioner or to inland was a direct or indirect lending of money between a plan and a disqualified_person under sec_4975 each of the three loans also was a direct or indirect transfer to or use by or for the benefit of a disqualified_person of the income or assets of a plan see 96_tc_644 affd 972_f2d_150 7th cir under sec_4975 each of the three loans also was a direct or indirect act by a disqualified_person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account cf greenlee v commissioner tcmemo_1996_378 492_fsupp_1255 d n j petitioner aims to avoid an application of sec_4975 by advancing his five assertions set forth above petitioner’s reliance on these assertions is misplaced first petitioner asserts incorrectly that because each of the three loans wa sec_3 specifically the three loans benefited petitioner in that he used the first loan to pay the payroll of his wholly owned corporation aspects he caused the second loan to pay his personal car payment and he caused the third loan to pay the mortgage and payroll_taxes on the building owned by a second wholly owned corporation inland permitted by the plan none was a prohibited_transaction the first loan was not permitted by the plan in that it has yet to be repaid more than years after its making the first loan failed the plan’s explicit requirement that participant loans provide for level amortization with payments to be made not less frequently than quarterly over a period not to exceed five years the second and third loans both of which are different from the first loan in that they are not participant loans were specifically prohibited by the statute upon their making in other words even if the plan did allow the second and third loans to inland we read nothing in sec_4975 that would exempt these loans from that section’s definition of a prohibited_transaction as to petitioner’s second assertion the mere fact that the bankruptcy court confirmed a plan under which aspects may repay each of the three loans is of no consequence to our decision in addition to the fact that aspects has not yet made any payment on those loans we read nothing in the confirmed plan nor has petitioner pointed us to anything that persuades us that aspects will eventually repay any or all amounts due on the three loans in fact as we read the confirmed plan the plan’s status is simply that of an unsecured creditor with rights no greater than those of any other unsecured creditor such an unfulfilled third-party obligation does not transmute the prohibited_transaction loans into acceptable loans does not correct the prohibited_transactions and does not eliminate petitioner’s liabilities for the excise_taxes respondent determined as to the three loans see 112_tc_51 as to petitioner’s third assertion we find no evidence in the record that establishes as petitioner asks us to find that the department of labor has reviewed and approved each of the three loans although petitioner in his brief asks the court to rely upon a certain letter from the department of labor that letter was not admitted into evidence and hence is not evidence see rule b as to petitioner’s fourth assertion petitioner relies mistakenly on his claim that the three loans were in the best interest of the plan and its participants from a factual point of view we are unable to find in the record that the loans were in the best interest of the plan and its participants from a legal point of view even if we could make such a finding our conclusion would be the same that the loans are prohibited_transactions as we noted in 89_tc_1137 the language and legislative_history of erisa indicate a congressional intention to create in sec_4975 a blanket prohibition against certain transactions regardless of whether the transaction was entered into prudently or in good_faith or whether the plan benefitted as a result good intentions and a pure heart are no defense to liability under sec_4975 88_tc_1474 as to petitioner’s final assertion petitioner is mistaken in his belief that the period of limitation has expired on an assessment of the excise_taxes at issue although an assessment of excise_taxes of that type must generally be made within years of the date that the relevant return is filed and more than years have passed from the due_date of most of the relevant returns which were required to be filed for the subject years an exception applies where as here a return is never filed sec_6501 c in a case such as this the commissioner may assess an excise_tax at any time see sec_6501 see also sec_301_6501_e_-1 sec_301_6501_n_-1 proced admin regs we conclude that petitioner is a disqualified_person who participated in three prohibited_transactions by way of the three loans we also conclude that he did so other than as a fiduciary acting only as such a disqualified_person such as petitioner participates in a prohibited_transaction under sec_4975 by approving the transaction or by receiving its benefit 96_tc_644 petitioner’s participation in the three loans other than as a fiduciary is seen from the fact that he approved them for the purpose of receiving their benefit personally and that he did not take collection action when payment on the loans was overdue we sustain respondent’s determination under sec_4975 and turn to his determination under sec_4975 petitioner sets forth in his brief no specific objection to the latter determination respondent asserts as to this matter that petitioner has never corrected any of the three loans and that plan beneficiaries risk losing plan benefits as a result of those loans respondent concludes that petitioner also is liable for the second-tier_excise_tax we agree sec_141_4975-13 temporary excise_tax regs fed reg date and fed reg date provides that absent permanent regulations for sec_4975 and sec_53_4941_e_-1 foundation excise_tax regs shall be relied upon to interpret terms contained in sec_4975 sec_53_4941_e_-1 foundation excise_tax regs provides in the case of the use by a disqualified_person of property owned by a private_foundation undoing the transaction includes but is not limited to terminating the use of such property in addition to termination the disqualified_person must pay the foundation- a the excess if any of the fair_market_value of the use of the property over the amount_paid by the disqualified_person for such use until such termination and b the excess if any of the amount which would have been paid_by the disqualified_person for_the_use_of the property on or after the date of such termination for the period such disqualified_person would have used the property without regard to any further extensions or renewals of such period if such termination had not occurred over the fair_market_value of such use for such period in applying a of this subdivision the fair_market_value of the use of property shall be the higher of the rate that is fair rental value per period in the case of use of property other than money or fair interest rate in the case of use of money at the time of the act of self-dealing within the meaning of paragraph e of this section or such rate at the time of correction of such act of self-dealing in applying b of this subdivision the fair_market_value of the use of property shall be the rate at the time of correction pursuant to these regulations where as here a prohibited_transaction is the lending of money correction of the prohibited_transaction requires termination of the loan by its repayment plus reasonable interest sec_53_4941_e_-1 foundation excise_tax regs see also medina v commissioner supra pincite kadivar v commissioner tcmemo_1989_404 given that none of the three loans has been repaid we conclude that petitioner did not correct any of the prohibited_transactions by date the end of the applicable taxable_period and that the plan was not in a financial position not worse than that in which it would be if the disqualified_person were acting under the highest fiduciary standards see sec_4975 we sustain respondent’s determination that petitioner is liable for the second-tier_excise_tax under sec_4975 we note however that sec_4961 and sec_4963 generally allow for the abatement of a second-tier_excise_tax if the prohibited_transaction giving rise thereto is corrected within days after our decision sustaining the tax becomes final because the issue of whether petitioner will or would qualify for an abatement is not yet ripe for decision we express no opinion on this issue at this time we turn to the additions to tax respondent determined under sec_6651 respondent determined that petitioner is liable for these additions to tax because he did not file an excise_tax return for or petitioner argues that these additions to tax do not apply because the plan did not have the money to pay its plan_administrator to prepare those returns we agree with respondent a disqualified_person who engages in a prohibited_transaction is required to file an excise_tax return for each taxable_year in the taxable_period sec_4975 sec_6011 sec_54_6011-1 pension excise_tax regs see also 102_tc_499 such a person who fails to do so timely is generally liable under sec_6651 for a monthly addition_to_tax equal to percent of the amount of tax that should have been shown on the return up to a maximum charge of percent see janpol v commissioner supra pincite this addition_to_tax does not apply where the failure_to_file was due to reasonable_cause and was not due to willful neglect 469_us_241 janpol v commissioner supra pincite reasonable_cause is present where the person exercised ordinary business care and prudence but was unable to file the return within the prescribed time united_states v boyle supra pincite sec_301_6651-1 proced admin regs willful neglect means a conscious intentional failure or reckless indifference united_states v boyle supra pincite because petitioner was a disqualified_person who engaged in prohibited_transactions and the transactions remained uncorrected upon issuance of the notice_of_deficiency he was required to file an excise_tax return for each year in issue petitioner did not file an excise_tax return for any of these years nor has he established to our satisfaction that he had reasonable_cause not to file those returns cf united_states v boyle supra pincite taxpayers have a personal and nondelegable duty to file a timely return reliance on an accountant to file a return does not provide reasonable_cause for an untimely filing we hold that petitioner is liable for the sec_6651 additions to tax respondent determined we have considered all arguments in this case and to the extent not discussed above find those arguments to be without merit or irrelevant to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court harry r gross petitioner v commissioner of internal revenue respondent docket no filed date harry r gross pro_se michael d zima for respondent memorandum opinion dawson judge this case was assigned to special_trial_judge d irvin couvillion pursuant to rule sec_180 sec_181 and sec_183 all rule references are to the tax_court rules_of_practice and procedure the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge couvillion special_trial_judge respondent issued a notice of final_determination denying petitioner's claim to abate interest for his taxable_year petitioner filed a timely petition for review of that determination with this court the sole issue for decision is whether petitioner is entitled to an abatement of interest pursuant to sec_6404 e background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner's legal residence at the time the petition was filed was tampa florida after receiving an extension of time to file petitioner filed his federal_income_tax return timely on date on the return petitioner reported adjusted_gross_income of dollar_figure income_tax due of dollar_figure self-employment_tax due unless otherwise indicated all section references are to the internal_revenue_code in effect for the year at issue petitioner reported a dollar_figure loss and no tax due on his federal_income_tax return the dollar_figure loss reported on petitioner's return was applied as a net_operating_loss carryforward in the calculation of petitioner's adjusted_gross_income figure of dollar_figure and an addition_to_tax due of dollar_figure' under sec_6654 for failure to pay estimated_taxes petitioner made no federal tax deposits and had no withholding credit during further petitioner did not remit a payment with the return on his federal_income_tax return petitioner reported a dollar_figure loss he filed with his return an irs form_1045 application_for tentative refund computing the net_operating_loss for and electing a carryback of the loss to petitioner's tax_year on date the irs allowed the net_operating_loss_carryback and applied it to petitioner's account as of date the net_operating_loss reduced petitioner's income_tax_liability by dollar_figure after the carryback of the loss to petitioner’s account reflected the following amounts still owing for dollar_figure income_tax dollar_figure self-employment_tax dollar_figure sec_6654 failure to pay estimated_taxes dollar_figure sec_6651 failure_to_pay_tax dollar_figure interest to date dollar_figure total in an amended_return petitioner recalculated the addition_to_tax under sec_6654 reducing it to dollar_figure for our purposes here the amended amount was accepted by the internal_revenue_service petitioner's balance due was assigned to an irs revenue_officer in nashville tennessee where petitioner resided at the time the revenue_officer worked with petitioner to determine whether petitioner could satisfy his tax_liability by letter dated date petitioner among other things not relevant here stated that he expected to eliminate his tax_liabilities with a loss he expected to report on his tax_return on date the revenue_officer closed his collection file on petitioner's account deeming it uncollectible after determining petitioner was unable to pay the amount due on that same date petitioner sent the revenue_officer a letter and a copy of petitioner’s return petitioner filed his federal_income_tax return timely which reported a loss of dollar_figure however petitioner did not file a form_1045 with his return with respect to the net_operating_loss he sustained in date petitioner contacted the irs and learned that he still owed tax additions to tax and interest for by letter dated date petitioner requested the revenue_officer to remove the tax additions to tax and interest from his account as he thought they had been satisfied by his loss the revenue_officer by letter dated date responded to petitioner’s letter and provided a summary of petitioner’s account balance while the summary reflected that petitioner’s loss had been carried back to and that certain levied amounts had been applied to petitioner’s liability the summary did not reflect that petitioner’s loss had been carried back there was no communication between petitioner and the nashville revenue_officer after this letter at some point between date and date petitioner moved to tampa florida the collection file relating to petitioner’s balance due was reassigned to a revenue_officer in the irs office at tampa florida in date petitioner began communicating with an appeals officer in tampa after working with petitioner on his case the revenue_officer referred petitioner’s case to the irs examination_division upon reviewing petitioner’s return a revenue_agent concluded that petitioner had a valid net_operating_loss for although the revenue_agent did make some adjustments to petitioner’s return the parties agreed to the adjustments proposed in the revenue agent’s report on date and petitioner subsequently filed an amended_return for requesting a carryback of the net_operating_loss on date respondent allowed the carryback of the net_operating_loss and posted it to petitioner’s account as of date the levied amounts totaled dollar_figure and it appears from the underpayment summary offered into evidence at trial that this amount was applied toward the self-employment taxes of dollar_figure thus reducing the self-employment taxes to dollar_figure the date the net_operating_loss became available the date the return was due petitioner’s net_operating_loss_carryback the carryback satisfied all of petitioner’s income_tax_liability for however petitioner’s account continued to have a balance due for additions to tax and interest additionally petitioner continued to have a balance due for self-employment taxes since the net_operating_loss_carryback could not be used to offset self-employment_income see sec_1402 at this point petitioner owed the following amounts for s -0- income taxes dollar_figure self-employment taxes’ dollar_figure sec_6654 failure to pay estimated_taxes dollar_figure sec_6651 failure_to_pay_tax dollar_figure interest to dollar_figure total on brief respondent stated that there was a mathematical error in the application of the dollar_figure levied amounts and the correct balance of self-employment taxes should have been dollar_figure instead of dollar_figure on date petitioner filed an irs form_843 claim_for_refund and request for abatement with respondent requesting the commissioner to abate all interest and penalties associated with petitioner’s tax_year on date the commissioner issued a notice of final_determination denying petitioner's claim to abate the interest and penalties for on date petitioner petitioned this court to review the commissioner's failure to abate the additions to tax and interest associated with his and tax years at trial and on brief petitioner narrowed his request for review to discussion a abatement of additions to tax this court is a court of limited jurisdiction and we may exercise our jurisdiction only to the extent authorized by congress see 85_tc_527 sec_6404 does not give this court jurisdiction to review respondent’s failure to abate additions to income_tax see 112_tc_230 therefore we may not review the commissioner’s failure to abate the additions to tax associated with petitioner’s tax_year b abatement of interest the commissioner's authority to abate an assessment of interest involves the exercise of discretion and this court gives due deference to the commissioner's discretion see 112_tc_19 91_tc_1079 however this court may order abatement where the commissioner abuses his discretion by sec_6404 was redesignated sec_6404 by the internal_revenue_service restructuring and reform act of publaw_105_206 sec_3309 112_stat_743 failing to abate interest see sec_6404 krugman v commissioner supra pincite sec_6404 b provides in pertinent part that the commissioner may abate the assessment of interest on any payment of tax if an error or delay by the taxpayer in paying his or her tax is attributable to an officer_or_employee of the irs being erroneous or dilatory in performing a ministerial_act ’ for purposes of sec_6404 an error or delay is taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer and after the irs has contacted the taxpayer in writing with respect to such deficiency or payment see sec_6404 congress intended the secretary to abate interest where failure to abate interest would be widely perceived as grossly unfair h rept 1986_3_cb_844 s rept 1986_3_cb_208 however congress did not intend that abatement be used routinely to avoid payment of interest id in sec_6404 e was amended under sec_301 of the taxpayer bill of right sec_2 publaw_104_168 110_stat_1452 to permit the secretary to abate interest with respect to an unreasonable error or delay resulting from managerial and ministerial acts this amendment however applies to interest accruing with respect to deficiencies or payments for tax years beginning after date this case involves petitioner's tax_year therefore the amendment is inapplicable to the case at bar see 112_tc_19 n the regulations in relevant part provide that the term ministerial_act means a procedural or mechanical act that does not involve the exercise of judgment or discretion see sec_301_6404-2t b temporary proced admin regs fed reg date the regulations issued by the secretary provide several examples of what does and does not constitute a ministerial_act although petitioner requested an abatement of all interest associated with his tax_year the acts petitioner contends delayed the payment of his tax_liability did not occur until march of or later thus petitioner’s failure to pay his tax_liability prior to march of was solely attributable to petitioner therefore the interest that accrued on petitioner’s tax_liability before march of is not abatable the commissioner therefore did not abuse his discretion in refusing to abate the interest for this time period although the carryback was not applied to the tax_year until date petitioner concedes that no interest the final treasury regulation under sec_6404 was issued on date the final_regulation contains the same definition of ministerial_act as the temporary_regulation see sec_301_6404-2 proced admin regs the final_regulation generally applies to interest accruing on deficiencies or payments of tax described in sec_6212 for tax years beginning after date see sec_301_6404-2 proced admin regs -- - accrued on petitioner’s income_tax_liability after the due_date of his return date because of respondent’s retroactive application of the carryback on that date however petitioner contends that respondent should abate the interest that accrued on petitioner’s outstanding self-employment taxes and additions to tax from date to the present petitioner claims the revenue_officer in respondent's nashville office agreed to apply petitioner’s carryback to eliminate completely petitioner’s income and self-employment_tax liabilities as well as all the additions to tax and interest associated with petitioner’s tax_year petitioner claims the revenue_officer in respondent’s nashville office told him not to file a form_1045 with his return while petitioner conceded at trial that the carryback could not be used to eliminate his liability for self-employment taxes additions to tax or interest petitioner claims he was unaware of this fact until early petitioner claims that if the revenue_agent had not advised him not to file a form_1045 or if respondent had properly applied the carryback in then petitioner would have become aware at that time that the carryback could only be used to eliminate income_tax_liability petitioner claims he could have paid the remaining liabilities in thus petitioner contends the interest that accrued on his account from date to the present is attributable to delays in the performance of ministerial acts by irs employees there is no evidence other than petitioner’s self-serving testimony to support his assertion that the irs revenue_officer made any promises to him or advised him not to file a form_1045 with his return rather the record indicates that the correspondence between petitioner and the revenue_officer brought out the fact that petitioner’s loss had never been carried back to the tax_year as a result of that correspondence petitioner’s income_tax return was audited the amount of the loss was accepted with some modifications and ultimately applied as of date to completely offset the income_tax_liability however the parties never reached an agreement or compromise on settling the remainder of petitioner’s liability moreover there is no persuasive evidence that the revenue_agent advised petitioner against filing a form_1045 while petitioner claimed the irs abused and threatened him his petitioner made this statement at trial believing that his only remaining liability was the self-employment taxes of dollar_figure as he testified i perhaps could have found dollar_figure begged or borrowed it from friends a whole lot easier than i could have come forward with dollar_figure petitioner however misapprehended what his liability was in as noted earlier petitioner’s total remaining liability as of date was dollar_figure own correspondence and testimony indicate that the irs employees he interacted with were cooperative and patient with petitioner petitioner admits he was aware that the law required him to file a form_1045 to elect whether his loss was to be carried back or carried forward however petitioner did not file a form_1045 with his return without instruction from petitioner respondent did not act on petitioner’s net_operating_loss more pointedly petitioner was able to ascertain the nature or amount of his tax_liabilities when he contacted the irs employees in date but did not attempt to pay his liabilities further when the revenue_agent confirmed petitioner’s account balance by letter in date petitioner did nothing for almost years petitioner’s delay in paying his tax_liabilities is solely attributable to petitioner thus the interest that accrued on petitioner’s tax_liability between date and the present is not abatable on this record the commissioner’s refusal to abate interest was not an abuse_of_discretion under sec_6404 respondent’s determination is sustained decision will be entered for respondent


internal_revenue_service lot tb ay sin no third party contacts v coniact persona tehepbone umber vo aeferencelo op eb ebo t date nay is08 legend x y z a b x dear sir or madam this refers to your rulings r quest concerning sec_507 b of the internal_revenue_code the code x is exempt under sec_501 c of the code anda private_foundation under a a value of approximately x dollars significant pledges to sec_170 grants which require x a i vi of a number of public_charities described in x has no outstanding to exercise expenditure_responsibility the code x owns marketable assets having x has made several x was incorporated by a cc currently serve as directors of x a has died and his two sons b and y and z were recently formed for providing financial support to organizations exempt under section its sole member c y and z are recognized incorporated z and is a ag exemp b incorporated y and its soie member under sec_501ic the code and are private the code of of is the same purpose as x of page foundations under sec_509 for efficiency of operation it x be equally distributed between and z of anticipated that all be also equally assumed by y and z of the pledges to public_charities made by x is proposed that the assets is furthermore it x has not provided a notification that it intends to terminate its private_foundation_status nor has it ever received a notification that its status as terminated private_foundation has been sec_507 of the code provides that except as the status of provided in sec_507 private_foundation shall be terminated if notifies the secretary in the manner prescribed in the income_tax regulations of organization either pays the tax imposed by sec_507 any porticn not abated under sec_507 under sec_507 its intent to accomplish such termination and the an organization as the organization or the tax is abated or a of sec_507 in the case of transfer of assets of any private_foundation to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorgan’ zation a newly created organization the transferee soundat on shall the code provides that no be treated as a sec_507 c of the de organization which terminates its sec_507 tax on eacn ses vate foundation status under sec_1_507-1 of the income_tax regulations the or part of regulations provides that all foundations pursuant to of its private_foundation_status under sec_507 a a transfer described in sec_507 b such transferor foundation will not have terminated its assets to one or more other private a private_foundation transfers the code if sec_1_507-3 of in a significant disposition of assets to one or more the regulations provides that the transferee crganization shall not the case of private_foundations within the meaning of paragraph c section newly created organization this paragraph applies shall be treated as possessing those attributes and characteristics of which are described in subparagraphs paragraph the transferor organization a transferee organization to which be treated as of this of this and a co page sec_1_507-3 i of the regulations provides that a transferee organization to which tris paragraph applies shall succeed to the aggregate tax benefic of the transferor organization sec_1_507-3 of the regulations provides that if or as a or any penalty resulting therefrom private_foundation incurs liability for one or more of imposed under chapter prior to described in sec_507 foundations transferee foundation shall be treated as receiving the transferred assets subject_to such liability to the extent that the transferor foundation does not satisfy such liability in any case where transferee_liability applies each result of making a transfer of assets to one or more private a the taxes sec_1_507-3 ii of che regulations provides that the provisions enumerated in subparagraphs a paragraph and in the same manner as they would have applied to the transferor foundation had the transfer described in sec_507 a transferee foundation to the same extent not been effected apply to through g of sec_1_507-3 of the regulations provides in part if that a transfer of assets is described in sec_507 is made by a private_foundation to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization reorganization include any partial_liquidation or any other significant disposition of asset3 to one or more private and adequate foundations other than transfers fer consideration or distributions cut the terms other adjustment organization or of current income full it sec_1_507-3 c of in part that the term significant disposition of assets to one or more private_foundations includes any disposition for the taxable_year of the foundation at the regulations provides fair mar et value of the taxable_year the beginning of or more of the net assets of the sec_1_507-3 of the regulations provides that unless a private_foundation voluntarily gives notice pursuant to section a transfer of assets described in sec_507 b a will not constitute a termination of the transferor’s private_foundation_status under sec_507 nevertheless satisfy the requirements of any pertinent provisions of chapter such transfer must sec_1_507-4 of the regulations provides that private_foundations which make transfers described in sec_507 b rn page are not subject_to the tax imposed under sec_507 c respect to such transfers unless the provisions of sec_507 a become applicable with sec_4940 of the code imposes on a private_foundation its activities a tax equal to with respect to the carrying on of its net_investment_income for of the taxable_year sec_4941 of a tax on each act of self-dealing between a disqualified_person and a private_foundation the code provides for the imposition of section dollar_figure46-1 a of the foundation and similar excise_tax regulations also the regulations provides that purposes of sec_4941 only shall not include any organization which is described in sec_501 a other than an organization described in section the term disqualified_person for the cede prov des in part the undistriputed income of for the a private sec_4942 of imposition of foundation a tax on sec_4942 c of the code provides in part that the term undistributed_income means foundation for any taxable_year distributable_amount for such taxa distributions made before sucn ‘ime amount the with respect to any private cunt by which the eds the qualifying distributable sec_1_507-3 of the vegulations provides that of this paragraph a the distribution except as provided in subparagraph private_foundation is required to meet requirements of sec_4942 makes a sec_507 transfer of such transfer shall itself assets to another private_foundation the extent be counted toward satisfaction of such requirements to the amount transferred meets the requirements of sec_4942 gq for any taxable_year in which it or part of its net all sec_4944 of a tax on imposition of manager if investments are made in such a manner as the carrying out of the foundation’s exempt purposes a private_foundation and a foundation to jeopardize the code provides generally for the sec_4945 of the code imposes a tax on each taxable_expenditure as defined in sec_4945 of foundation the private sec_4945 aa of the ode provides that the term page taxable_expenditure means an amount_paid or incurred by a private_foundation for any purpose other than one specified in sec_170 b sec_53_4945-6 of the regulations provides that if a private_foundation makes a transfer of assets pursuant to any liquidation merger redemption recapitalization or other the adjustment organization or reorganization to any person transferred assets will not be considered used exclusively for purposes described in sec_170 b unless the assets are transferred to 501l c a a fund or organization described in section other than an organization described in section sec_53_4945-5 of the regulations provides that for rules relating to the extent to which the expenditure and responsibility rules contained in sec_4945 this section apply to transfers of assets described in section e and b a see sec_1_507-3 a h and sec_1_507-3 a of the regulations provides that except as provided in subparagraph of the transferor has disposed of period in which the transferor has no assets the transferee or and respect to any expenditure_responsibility grants made by transferor not apply to its assets during any sec_4945 d the transferor with this paragraph where shall all the h of sec_1 a fi of the regulations provides that net assets co one or its ot of chapter sec_4940 et seq a private_foundation transfers all more private_foundations which are effectively controlled directly or indirectly by the same person or persons which effectively controlled the transferor private_foundation and part ii purposes of chapter subchapter_f such a transferee private_foundation shall be treated as were the transferor appropriate such a transferee private_foundation shall be treated as fair_market_value of to such transferee bears to less encumbrances of transfer it were the transferor in the proportion which the the assets less encumbrances transferred the assets the transferor immediately before the the ccue sec_507 through however where proportionality is the fair_market_value of for of of if if it the proposed transaction involves a significant disposition of assets within the meaning of sec_1_507-3 of requlatio s section o accordingly the proposed transfer 1s described in fe to tax under the code and subject not of the bi a page 199908vu5 x consistent with tne provisions of section and the regulations promulgated thereunder and sec_507 b will not be treated as newly created organizations z will be deemed to possess certain attributes and a pro-rata characteristics of portion of x's aggregate tax_benefit not exceeding the fair_market_value of proposed transfer the transfer of x's exempt under sec_501l c assets to them will constitute a distribution for a charitable purpose and will be not be treated as self-dealing jeopardizing investments or taxable_expenditures within the meaning of sec_4941 including being entitled to in addition and as long as the transferred assets pincite and the time of y and z are the code y and also the of based on the foregoing we rule as requested as follows of of all its assets to the transfer by x y and z a significant disposition of assets to one or the requlations made pursuant will be more private_foundations as described in sec_1_507-3 of adjustment or reors a private assets by described in sec_507 accordingly y and z total assets of for purposes of sections hrough through be indat ion to anotner the code all as transferees of will be treated as if they were x the cod- and will ization the of oo an of of x a transfer of foundation and sections ed qual ficat in section cransfer of a p43 wil i tot it oat othe urganization the code tnat is exempt from federai income_tax under sec_501 a will not result in foundation status pursuant to sec_507 to the time that it files notice of terminate and will not result in the the termination of k's private tax imposed by c its intent to the year of x being subject_to in of the transfer prior and be subject_to the termination_tax xk will not imposed by section s07 c assets as termination under section so07 a the date notice the of of code if it has no intent to accomplish 1s given pursuant to sec_1 a regulations y and z will succeed to the aggregate tax benefits of value of transfer y and z may each pi portionately reduce the amount the assets transferred to them in proportion to fair market rhion sounder sk the net following the pen red the oof x of the n page by the amount if any of x's excess of the code qualifying distributions carryover for prior years as defined under sec_4942 as having received the transferred assets subject_to the proportionate amount of any liability that x may have incurred under chapter extent not satisfied by xx the code y and z will be treated to the of following the transfer x will be liable for the tax imposed by sec_4940 of until the date of the transfer occurred y and z will be liable for the tax imposed under sec_4940 with respect to their respective share 'of assets as the code on assets held after the transfer has the transfer the date of of the provisions of a ii a through g the regulations will apply to and z with respect of to the assets transferred to them from xx the transfer of x’s assets to the newly created of self-dealing entities will not constitute an act under sec_4941 of foundation by the transferee foundations or disqualified_person the code by the transferor by any the transfer of x’s assets to constitute a jeopardizing investment within the meaning of sec_4944 foundation by the transferee foundations or disqualified_person the code by the transferor y and z will not by any of the transfer of x's assets to entities will not constitute taxable_expenditures within the meaning of sec_4945 of will such transfer constitute a grant for which x z will be required to exercise expenditure_responsibility within the meaning of sec_4945 d the code the newly created nor or x's transfer of transferee foundations may in itself be counted toward satisfaction of sec_4942 sec_4942 and to the extent that section it its charitable requirements under in that specific regard if is met by ite assets to all of the x will not be required to comply with the record-keeping requirements of q code with respect to and z for any taxable_year subsequent to the transfer of b of its assets to the taxable the a page year in which the transfer of its assets occurs the proposed assignment vy x of all of outstanding pledges to y and z and the assumption by and z self-dealing under of of those pledges will not constitute an act the code its of the proposed assignment and assumption will violate any of the other chapter excise_tax provisions will not constitute a taxable_expenditure within the meaning of sectior of will such transfer constitute a grant for which x will be required to exercise expenditure_responsibility within the meaning of sec_4945 d of the code the code nor not or the proposed assignment and assumption will not obligate x requirements of sec_4942 respect to the assigned pledges to comply with the record-keeping rb of the code with we are informing your key district of this ruling keep a copy of it in your permanent records please we express or imply no opinion as to the federal tax the transactions under any other provisions of consequences of the codu requested it may not be used or cited by others as precedent this ruling is directed to the organization that the code provides that sec_6110 of it sincerely hope de creseigt- earnest kenneth j acting chief uxempt organizations technical branch