id office uilc cca_2009011409470453 ---------------------------- number release date from -------------------- sent wednesday date am to -------------------- cc subject rounding rules hello ---------- per our conversation here is some basic information for your benefit when you talk to the taxpayer sec_301_6102-1 provides that to the extent permitted by any internal revenue form or instructions prescribed for use with respect to any internal revenue return declaration statement other document or supporting schedules any amount required to be reported on such form shall be entered at the nearest whole dollar amount the instructions to any form shall indicate the extent to which whole dollars shall be entered see sec_301_6102-1 thus the form instructions should indicate if rounding is appropriate rounding to the nearest dollar amount shall be done in accordance with the following examples exact amount dollar_figure through dollar_figure dollar_figure dollar_figure through dollar_figure see sec_301_6102-1 reported amount dollar_figure dollar_figure dollar_figure alternatively sec_6012 allows a taxpayer to elect to report dollar amounts without regard to the rounding rules in sec_301_6102-1 instead reporting the exact dollar amounts the taxpayer must make this election at the time of filing the return declaration statement or other document sec_301 b the election is irrevocable id generally speaking if a taxpayer has an amount that is dollar_figure or less and rounds down to zero the zero figure may not negate the taxpayer’s reporting requirement depending upon the form declaration etc there may be a requirement to file the form even if that amount on the form is zero if the taxpayer in this case is only concerned about dollar_figure------of interest_income rounding down to zero would give the taxpayer no interest_income thus there would be nothing to report on the schedule b regarding that particular interest_income and no need to file a schedule b based upon that particular income item if you have any questions or need clarification please feel free to contact me at ------------ have a good day ------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -


internal_revenue_service department of the treasury index number washinaton dc refer reply to cc intl br1-plr-122593-97 date date date b country c date d dear this is in response to a letter dated date requesting a ruling under sec_877 of the internal_revenue_code_of_1986 code that a’s proposed loss of u s citizenship expatriation will not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code additional information was submitted in letters dated march and date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by penalty of perjury statements executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination a became a u s citizen by reason of her birth in the united_states on date b to u s citizens a’s husband was born and raised in country c a became a citizen of country c on date d on the date of a's expatriation her net_worth will exceed dollar_figure plr-122593-97 sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate’ within the 10-year period immediately preceding the close of the taxable_year will be subject_to the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former citizen or former long term-resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 a if the individual's average income_tax_liability or the individual's net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary's determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 under r b modifying notice_97_19 1997_1_cb_394 an eligible will not be presumed to have a principal purpose of tax_avoidance if that former citizen submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling under sec_877 because she is a citizen of country b where her husband was born notice_98_34 requires that certain information be submitted with a request for a ruling that an individual's expatriation did not have for one of its principal purposes the avoidance of u s taxes a submitted all the information required by notice_97_19 as modified by notice_98_ including any additional information requested by the service after review of the submission accordingly based solely on the information submitted and the representations made it is held that a has made a complete and good_faith submission in accordance with sec_877 c b and notice_98_34 and therefore a’s expatriation will not be presumed to have a principal purpose of tax_avoidance olf plr-122593-97 however because the information submitted does not clearly establish the existence or lack of a principal purpose to avoid taxes under subtitle a or b of the code no opinion is expressed as to whether a's expatriation will have for one of its principal purposes the avoidance of such taxes while this ruling rebuts the presumption of tax_avoidance under sec_877 it is not conclusive as to whether a subsequently may be found to have a principal purpose of tax_avoidance under sec_877 sec_2107 and sec_2501 based on all the facts and circumstances see sec_877 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 taxable periods prior to or after her loss of citizenship under sections of the code other than sec_877 sec_2107 and sec_2501 in addition no opinion is expressed as to a's u s tax_liability for this ruling is conditioned on the net_worth or tax_liability tests thresholds as described in section i of notice_98_34 being met on the date of expatriation a copy of this letter must be attached to a's u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-122593-97 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to a sincerely yours w edward williams senior technician reviewer branch office of associate chief_counsel international


t c memo united_states tax_court michael james heun petitioner v commissioner of internal revenue respondent docket no filed date michael james heun pro_se osmun r latrobe for respondent memorandum opinion chiechi judge respondent determined the following deficiencies in and additions to petitioner's federal_income_tax additions to tax_year deficiency sec_6653 dollar_figure big_number big_number dollar_figure big_number big_number -- -- big_number section sec_6653 b a -- -- -- dollar_figure big_number -- b -- -- -- -- sec_6653 sec_6654 -- -- -- -- -- -- dollar_figure -- big_number percent of the interest on the portion of the underpayment attributable to fraud previously assessed upon filing of delinquent federal_income_tax return return the issues for decision are is petitioner liable for the deficiencies determined in the notices of deficiency notices we hold that he is is petitioner liable for the additions to tax for fraud for the years at issue we hold that he is is petitioner liable for the additions to tax under sec_6654 for and we hold that he is background this case was submitted on the basis of the facts and evidence that the court deemed to be established for purposes of this case in its order under rule f dated date at the time the petition was filed petitioner resided in bethany oklahoma petitioner filed a joint_return for he did not all section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure thereafter file a return for that year claiming married filing separate status petitioner did not timely file returns for and on date petitioner was convicted by a jury of attempting to evade or defeat tax for under sec_7201 and of willfully making and subscribing a false return for the same year under sec_7206 on the same date petitioner was convicted by a jury of willfully failing to file returns for and under sec_7203 the u s court_of_appeals for the ninth circuit affirmed those convic- tions after serving a portion of his sentence for the foregoing crimes petitioner was placed on probation as one of the conditions of that probation petitioner was required to file a return for each of the years through as required_by_law petitioner was to report in those returns his wages from employment during those years as well as other income and deduc- tions on or about august or date petitioner filed returns for the years through with the internal_revenue_service center in austin texas austin service_center each of those returns bore petitioner's signature and the words without prejudice appeared above his signature petitioner claimed married_filing_separately status in each of the returns for the years through and reported total income from wages for those years in the following amounts year wages dollar_figure big_number big_number big_number big_number attached to each of the returns for through were documents entitled statements and declarations of petitioner in which among other things he asserted that the wages that he received were not taxable_income and that he was a nonresident_alien at or very shortly before the time petitioner filed returns for through with the austin service_center he filed a form 1040nr u s nonresident_alien income_tax return for each of those years with the internal_revenue_service center in philadelphia pennsylvania in which he reasserted his claim that he was a nonresident_alien and that he owed no taxes to the united_states during each of the years at issue petitioner who was licensed as a certified_public_accountant by the state of ari- zona was employed by dixon properties inc and or dixon international holdings u s a inc dixon as vice president in charge of finance and corporate comptroller the major source_of_income for petitioner during the years through was dixon in his capacity as financial officer of dixon petitioner was able to and did prevent a form_w-2 wage and tax statement from being sent by that company to him the internal_revenue_service or the state of arizona with respect to his wage income for each of the years through nor were any forms filed in the name of petitioner for those years during petitioner established the five star trust and began to transfer certain of his assets into the name of that trust discussion petitioner bears the burden of proving that respondent's determinations in the notices of the deficiencies and the addi- tions to tax under sec_6654 are in error rule a 290_us_111 respondent bears the burden_of_proof on the fraud issue and that burden is to be carried by clear_and_convincing evidence rule b sec_7454 throughout the course of this proceeding from its commence- ment when petitioner timely filed a petition in this court through the brief that he filed after this case was submitted petitioner has persisted in advancing matters that are inter alia frivolous groundless irrelevant immaterial and or nonsensical on the record before us we find that petitioner has failed to show error in respondent's determinations of the deficiencies and the additions to tax under consequently we sustain those determinations we now turn to the fraud issue we deal separately with the year for which petitioner was convicted of inter alia criminal_tax_evasion under sec_7201 we conclude that that conviction collaterally estops petitioner from denying that the underpayment for is due to fraud for purposes of sec_6653 e g 96_tc_858 affd 959_f2d_16 2d cir with respect to each of the years through respondent must prove by clear_and_convincing evidence that an underpayment exists and fraudulent intent rule b sec_7454 petitioner filed delinquent returns for each of those years in which he showed that he received wages on the record before us we find that an underpayment exists for each of the years through in order to prove fraudulent intent the u s court_of_appeals for the tenth circuit_court of appeals to which an appeal in this case would ordinarily lie has held that a taxpayer is not liable for the civil_fraud penalties unless he commits some affirmative act of concealment or misrepresentation mere failure_to_file whether disclosed or not does not justify the fraud penalties even when the taxpayer knows that taxes are due 763_f2d_1139 10th cir affg tcmemo_1984_152 applying the foregoing proof requirements that the court_of_appeals imposes on respondent see 54_tc_742 affd 445_f2d_985 10th cir respondent must show by clear_and_convincing evidence some affirmative act by petitioner of concealment or misrepresentation such as filing false information or attempting to mislead respondent see zell v commissioner supra pincite in order to prove fraudulent intent for each of the years through the record in this case establishes that in his capacity as financial officer of dixon his employer petitioner a licensed certified_public_accountant was able to and did prevent a form_w-2 from being sent by that company to the internal_revenue_service with respect to the money that that company paid him during each of the years through it is implausible to us that petitioner's training and experience as a certified_public_accountant would lead him to conclude that his employer was not required to file a form_w-2 for any of those years we find petitioner's preventing his employer from filing a form_w-2 for any of the years through to be an affirmative act by petitioner of concealing the money that that company paid him during those years see zell v commissioner supra pincite in addition for each of the years through petitioner failed to file timely a return was convicted of willfully failing to file a return under sec_7203 and attempted to evade reporting a substantial amount of income by such failure petitioner filed delinquent returns for the years through because he was required to do so as one of the conditions of his being placed on probation after he served a portion of his sentence for his convictions under sec_7201 sec_7206 and sec_7203 based on our review of the record in this case respondent has persuaded us by clear_and_convincing evidence of petitioner's fraudulent intent with respect to the underpayment for each of the years through that is attributable to his wage income accordingly we sustain respondent's determinations for each of the years and a under sec_6653 and b under sec_6653 to the extent based on the previously assessed underpayment for each such year that is attributable to petitioner's wage income for each of the years and under sec_6653 and b and for under sec_6653 although respondent has not requested a penalty under sec_6673 this court is authorized to impose such a penalty in cases where the taxpayer's position is frivolous or groundless or the proceeding was instituted or maintained primarily for delay sec_6673 and b coulter v commissioner 82_tc_580 under the circumstances presented here we conclude that petitioner's positions in this case that the notice_of_deficiency for petitioner's taxable years and determined inter alia that petitioner is liable for each such year for the addition_to_tax under sec_6653 with respect to a previously assessed underpayment that is attribut- able to not only petitioner's wage income for and in the amounts of dollar_figure and dollar_figure respectively but also capital_gain and interest_income of dollar_figure and dollar_figure respec- tively respondent has failed to prove the requisite fraudulent intent with respect to such assessed underpayment for each of the years and that is attributable to such capital_gain and interest_income see sec_6653 inter alia he is not liable for income_tax on the wages that he received during the years throughout and that he was a nonresident_alien during those years are frivolous and ground- less we further conclude that petitioner instituted and main- tained this proceeding primarily for delay accordingly we hold that petitioner is liable for a penalty under sec_6673 in the amount of dollar_figure to reflect the foregoing decision will be entered under rule


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 plr-101693-19 plr-101695-19 date july legend x --------------------------- ---------------------------------------- y ------------------------------ ---------------------------------------- date ---------------------- date ------------------ country --------------- dear ------------------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x and y requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x and y to file an entity classification election to be classified as a partnership for federal tax purposes facts the information submitted states that x is a limited_liability_company formed under the laws of country on date y is a limited_liability_company formed under the laws of country on date x and y are not classified as a corporation under sec_301 b or x intended to be classified as a partnership effective on date y intended to be classified as a partnership effective on date plr-101693-19 however x and y did not timely file form_8832 entity classification election electing to be treated as a partnership x and y represent that they acted reasonably and in good_faith and that the interests of the government will not be prejudiced by granting relief x and y further represent that no hindsight is involved in seeking the relief requested law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center under sec_301_7701-3 this election can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government plr-101693-19 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 partnership for federal tax purposes effective beginning date y is granted an extension of time of days from the date of this letter to make an election to be treated as a partnership for federal tax purposes effective beginning date x and y must 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 if applicable the elections made by x and y are disregarded for purposes of determining the amounts of all sec_965 elements of all united_states_shareholders of x and y if the election otherwise would change the amount of any sec_965 element of any such united_states_shareholder see sec_1_965-4 except as specifically set forth above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer 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 taxpayer_representative pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x and y's authorized representatives sincerely associate chief_counsel passthroughs special industries by david r haglund david r haglund branch chief branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c apr tax_exempt_and_government_entities_division set ep rat uniform issue list legend taxpayer a taxpayer b ira c ira d non-ira account e non-ira account f financial_institution g financial_institution h financial_institution financia institution j conservator k state m - amount amount dear os this is in response to your request dated date in which you request through your authorized representative a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested conservator k represents that taxpayer a received a distribution equal to amount from ira c which was maintained by financial_institution g conservator k represents that taxpayer a’s failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to taxpayer a's deteriorating mental condition taxpayer b taxpayer a’s spouse represents that she received a distribution equal to amount from ira d which was maintained by financial_institution h taxpayer b asserts that her failure to accomplish a rollover within the 60-day period was because taxpayer b relied on taxpayer a to handle her financial affairs and was also preoccupied with taxpayer a’s illness on date taxpayer a withdrew amount from ira c on date taxpayer a deposited amount into a non-ira savings account non-ira account f which was maintained by financial_institution j the documentation submitted shows that amount has not been used for any other purpose on date taxpayer a withdrew amount from taxpayer b’s ira d and on date he deposited amount into a non-ira checking account non- ira account e which was maintained by financial_institution the documentation submitted shows that amount has not been used for any other purpose taxpayer a and taxpayer b are elderly diagnosed with alzheimer’s on date taxpayer a’s and taxpayer b’s daughter conservator k was appointed by state m to manage taxpayer a’s financial affairs conservator k discovered the failed rollovers when taxpayer a and taxpayer b received a notice_of_deficiency from the service for the year in february of taxpayer a was based on the above facts and representations you request a waiver of the 60-day rollover requirement with respect to the distributions of amount from ira c and amount from ira d sec_408 of the code defines an ira to mean a_trust created or organized in the united_states and requires that the trustee be a bank or an approved non- bank trustee sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 sec_408 of the code provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money or any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary_of_the_treasury may waive the 60-day requirement under sec_408 and sec_408 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement revproc_2003_16 r b provides that the service will issue a ruling waiving the 60-day rollover requirement in cases where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the taxpayer in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information and documentation submitted are consistent with conservator k’s assertion that taxpayer a’s failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to his deteriorating mental condition the information and documentation submitted are consistent with taxpayer b’s assertion that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was because she relied on taxpayer a to handle her financial affairs therefore pursuant to sec_408 of the code the service waives the day rollover requirement with respect to the distribution equal to amount and amount provided all other requirements of sec_408 of the code except the 60-day requirement will be met with respect to the contributions of amount and amount to iras such contributions will be considered rollover_contributions within the meaning of sec_408 taxpayer a and taxpayer b have days from the issuance of this letter_ruling to complete the rollovers of amount and amount into their own iras this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as precedent 2901y pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact at please address all correspondence to carlton a watkins manager employee_plans technical group enclosures notice of intention to disclose deleted copy of this letter ce


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp 2-plr-112913-00 date date legend parent fsub fsub target company employee state a country b country c d business date date date date date date date date dear this responds to your letter dated date requesting rulings on behalf of the above referenced taxpayer as to the federal_income_tax treatment of a proposed transaction specifically rulings were requested under sec_305 of the internal_revenue_code additional information was provided in letters dated date date and date the information submitted for consideration is summarized below the information submitted indicates that parent is a publicly-held domestic_corporation organized under the laws of state a parent is the common parent of a consolidated_group the p group that files a consolidated_return based on a week fiscal_year ending on the friday nearest january parent is engaged directly and indirectly through its subsidiaries in business on date parent formed fsub a wholly owned subsidiary under the laws of country b in order to acquire the assets of unrelated target company which engaged in a similar_business on date fsub purchased target company’s assets the asset purchase in connection with the asset purchase parent entered into two agreements with employee an officer of company to ensure that employee would continue to run the acquired_business the first agreement agreement granted employee options to acquire from parent a percent equity_interest in fsub for a sum certain such options would vest over a 3-year period ending on date the second agreement agreement provided that upon the vesting of the options under agreement parent could offer to repurchase all of the stock in fsub at fair_market_value the agreement further provides that if parent fails to make such offer within days of employee’s exercise of his option parent would grant employee an option to acquire an additional percent of fsub for a sum certain taxpayer represents that each agreement was valid and enforceable under the laws of country b on date employee exercised the option rights granted under agreement to receive a percent equity_interest in fsub on date under agreement parent paid employee dollar_figured fair_market_value in exchange for employee’s percent equity_interest in fsub on date parent formed fsub under the laws of country c also on date parent contributed all of the stock of fsub to fsub on date fsub filed an election pursuant to sec_301_7701-3 of the procedure and administration regulations to be disregarded as an entity separate from its owner the election the election was effective as of date the taxpayer has represented that the contribution by parent of all the stock of fsub to fsub followed by the election constituted a reorganization under sec_368 of the internal_revenue_code for valid business reasons the following transaction is proposed i fsub will make a dollar_figured payment to parent ii parent will use the payment described in step i to subscribe for additional deemed shares in fsub on date parent and fsub entered into an agreement agreement providing that contingent on receipt of the dollar_figured payment parent is irrevocably bound to use the dollar_figured payment from fsub which is now a division of fsub to subscribe for additional deemed shares in fsub no additional shares will be issued the following representations are made in connection with the proposed transaction a the sole purpose of the proposed transaction is to enable fsub to claim a deduction for country b tax purposes b parent is irrevocably bound to utilize the dollar_figured payment to be received from fsub a division of fsub to cover a new share issuance in fsub and there is no option to apply the proceeds in any other manner or to any other purpose c at the time that parent entered into agreement and agreement there was no agreement or understanding that fsub would reimburse parent for any amounts paid to employee under those agreements d on date when parent made the payment to employee to repurchase his stock in fsub there was no agreement or understanding that fsub would reimburse parent for the payment to employee e fsub will have earnings_and_profits sufficient to support dividend treatment of the dollar_figured payment from fsub to parent f the agreement binding parent to cover the new shares in fsub with the dollar_figured payment is valid and enforceable under the law of country b g parent did not take a deduction for the payment of the dollar_figured to employee h there is no current intention to dispose_of a or greater interest in fsub within the next months i taxpayer will comply with the foreign_currency rules under sec_987 and sec_988 j other than the deduction in the country b parent fsub and fsub will not be claiming any benefits under either the us country b or country c income_tax treaty k no foreign tax_credits under will be claimed by parent on the distribution the representations submitted form a material basis for the issuance of our rulings provided fsub is an association_taxable_as_a_corporation for federal_income_tax purposes and based solely on the information submitted and on the representations set forth above we rule as follows the proposed transaction as described in steps i and ii above will be treated as a distribution by fsub of its common_stock with respect to its common_stock the stock_distribution will not constitute gross_income of fsub 2’s shareholder parent sec_305 and revrul_80_154 c b the distribution by fsub to parent as described above will not be considered a distribution of earnings_and_profits sec_312 temporary or final regulations pertaining to one or more of the issues addressed in this ruling letter have not yet been adopted therefore this ruling letter may be revoked or modified upon the issuance of temporary or final regulations or a notice with respect to their future issuance see section dollar_figure of revproc_2000_1 2000_1_irb_4 which discusses in greater detail the revocation or modification of ruling letters however when the criteria in section dollar_figure of rev_proc are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances the rulings contained in this letter are predicated upon the facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for a ruling verification of the information representations and other data may be required as part of the audit process no opinion is expressed about the tax treatment of the proposed transactions under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transactions that are not directly covered by the above rulings in particular no opinion is expressed under sec_301_7701-3 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 a copy of this letter should be attached to the federal_income_tax returns of the corporations involved for the taxable_year in which the proposed transaction is completed in accordance with a power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer sincerely associate chief_counsel corporate by lewis k brickates assistant to the chief branch


t c summary opinion united_states tax_court trwin and jeannine radnitz petitioners v commissioner of internal revenue respondent docket no 2162-01s filed date irwin and jeannine radnitz pro_se jonathan h sloat for respondent couvillion special_trial_judge this case was heard pursuant to sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the years at issue rule references are to the tax_court rules_of_practice and procedure is not reviewable by any other court and this opinion should not be cited as authority respondent determined deficiencies in petitioners' federal income taxes of dollar_figure and dollar_figure respectively for and after concessions by respondent the issues for decision are whether under sec_280a petitioners are entitled to deductions for office expenses for the years at issue in connection with the use of their home and two rental apartments in their respective trade_or_business activities in excess of amounts allowed by respondent and whether sec_280a is unconstitutional as applied to petitioners ’ some of the facts were stipulated those facts with the annexed exhibits are so found and are made part hereof petitioners’ legal residence at the time the petition was filed was san luis obispo california petitioners were married during the years at issue from january through date they resided at a vista loma address in rancho mirage california in date petitioners moved from the vista loma address to a deepak street address in palm springs california petitioners resided at the deepak addre sec_2 at trial respondent conceded the deductibility of a dollar_figure tuxedo rental expense and a dollar_figure furniture expense for petitioners conceded a foreign royalties issue for another adjustment involving taxable social_security_benefits is a computational adjustment throughout all of petitioners were lessees of both properties mr radnitz has been engaged as a full-time freelance writer since under the pseudonym brad radnitz mrs radnitz is an actress mr radnitz primarily wrote screenplays for the film and television industry and occasionally wrote novels he described the nature of his work as a writer as follows my work is speculative it consists of researching and developing story ideas film treatments tv series concepts scripts and or novels with the intent of selling them to prospective employers namely the movie studios the networks independent producers and publishers by his estimate mr radnitz has written material for several films and movies of the week and over television shows including the lucy show gilligan’s island my three sons the brady bunch tronside and columbo he is a former president of the writer’s guild of america writer's guild and has had professional involvement with that organization in the earlier part of his writing career mr radnitz wrote and sold story ideas or screenplay treatments in the episodic television field these ideas were merely outlines for the ultimate script in his later career he wrote more materials to completion then had an agent shop for a buyer his works therefore were not necessarily sold in the year of completion and accordingly the compensation_for his work product often occurred months or years after the completion of a script due to the speculative nature of his writing activity every script proposed idea and treatment created remained a potential income source depending on the interest of a buyer therefore mr radnitz retained all of his works and rented storage space for such purpose he claimed no deduction for this rental expense which was dollar_figure per month the types of income mr radnitz received from his writing activity depended on the type of work sold and contract terms that were negotiated for a new story idea requiring additional writing mr radnitz was paid in stages as each draft or script was completed in the case of more speculative projects he received payment only when a buyer was found for a finished work mr radnitz also received royalty and residual payments referred to as income from residuals for reruns of shows he had written in the past during the years at issue he also received income from a pension fund established by the writer’s guild mr radnitz reported taxable pension income of dollar_figure and dollar_figure respectively in and none of which is at issue in this case he received wage income from residuals of dollar_figure in and dollar_figure in he did not receive income from current writings during and as he was drafting speculative screenplays during those years mrs radnitz received wage income of dollar_figure in and dollar_figure in the relationship of mr radnitz with the film and television industry for whom his writings were created and sold was that of an employee and was not an independent_contractor relationship respondent does not challenge that characterization accordingly the moneys mr radnitz received for his work products were reflected on forms w-2 wage and tax statement screenwriters are generally not provided office space in which to do their writing they are expected to provide their own offices as a result during the years at issue mr radnitz provided himself with office space for his compositions the type and location of the spaces depended on various factors including cost convenience the length of the writing project and the need for privacy and quiet for the majority of the time mr radnitz used his residence as an office however for two 3-month periods during he used rented spaces that were outside of his main residence during mr radnitz spent most of his time writing a screenplay entitled home again his office was exclusively at his residence at the vista loma address for the first part of the year and at the deepak address in the latter part in mr radnitz used the office at the deepak residence in january and february again from june through august and in december from march through date he used a rented apartment on north indian avenue in palm springs california as his office from september through date he used another rented apartment on ravenspur in rancho palos verdes california as his office both rented apartments are referred to hereafter as the north indian avenue and ravenspur apartments when mr radnitz worked out of an office in his residence as he has done for years he set_aside one room for the exclusive use of his work in and that room occupied percent of the total space of his residence the room contained novels dictionaries encyclopedias research books computer equipment a typewriter a desk one or two chairs lamps a corkboard a television set and a video cassette recorder vcr no one in mr radnitz’s family was allowed to use the room and it was locked when visitors came there was no bed in the room and no one slept there mr radnitz used the television and vcr in the research aspect of his work to record or watch broadcasts that were related to his writing projects the subject equipment was not used for personal or family enjoyment mr radnitz generally worked alone and occasionally met with collaborators to work on projects mr radnitz rented both the north indian avenue and the ravenspur apartments in date because as he stated we had a house full of relatives and suddenly having that office within his residence wasn’t going to work even though i locked the door he used the north indian avenue apartment to work on a script called in for the kill from march through date he used the ravenspur apartment from september through date to finish and rewrite that script prior to mr radnitz’s use of the ravenspur apartment mrs radnitz used it from march through date mr radnitz explained that the earlier use of that site was by my wife who is pursuing her career as an actress and it was used as her office no further evidence of mrs radnitz’s use was provided at trial however petitioners claimed no deductions for mrs radnitz’s use of the ravenspur space during this time period during when mr radnitz used his two residences vista loma and deepak as offices for his writing activity petitioners determined that percent of the floor space of each home was devoted to the home_office respondent has not challenged this determination based on expenses for both homes totaling dollar_figure for petitioners deducted percent of that amount less an additional percent of the resulting figure for possible overage thus on the return petitioners claimed a deduction for an office in the home of dollar_figure in the notice_of_deficiency respondent allowed petitioners a dollar_figure home_office the total annual home expenses of dollar_figure for consisted of rent dollar_figure gas dollar_figure electricity dollar_figure water dollar_figure television cable dollar_figure and disposal dollar_figure expense deduction at trial respondent took the position that the dollar_figure had been erroneously allowed however respondent did not move to disallow that amount or to increase the deficiency in taxes attributable to the dollar_figure the record is not clear as to the basis upon which the dollar_figure was allowed nor as to the basis for respondent’s claim at trial that the allowed dollar_figure was in error for the year petitioners again determined that percent of their deepak residence constituted the home_office for the writing activity of mr radnitz however since petitioners agree that their residence was used only for months on their return they only deducted expenses for one-half of that year for mr radnitz’s writing activity for this 6-month period petitioners deducted dollar_figure as a home_office expense on their return in the notice_of_deficiency respondent allowed dollar_figure as with regard to the year respondent claimed at trial that the amount allowed for was erroneous but did not move at trial to disallow that amount or to increase the deficiency also for petitioners deducted expenses for the two rented apartments the north indian avenue and the ravenspur apartments which were used by mrs radnitz and mr radnitz the north indian avenue apartment was used by mr radnitz for months during and the total expenses_incurred for that time period dollar_figure were claimed as an unreimbursed employee_business_expense deduction on petitioners’ return with respect to the ravenspur apartment petitioners claimed an unreimbursed employee expense deduction of dollar_figure for the months mr radnitz used the apartment during as noted earlier mrs radnitz also used the ravenspur apartment during for months in connection with her activity as an actress however petitioners did not claim any expense deduction on their tax_return for that period in summary petitioners deducted the following home_office and employee business_expenses related to the three described dwellings on their return home_office expense for deepak residence months s big_number unreimbursed employee business_expenses for the north indian ave rented apartment months' use by mr radnitz big_number unreimbursed employee business_expenses for the ravenspur rented apartment months' use by mr radnitz big_number total dollar_figure the above expenses were essentially all for rent gas electricity and cable television ’ ‘ for the claimed deepak apartment expenses of dollar_figure as prorated consisted of rent dollar_figure gas dollar_figure electricity dollar_figure and television cable dollar_figure the claimed north indiana avenue apartment expenses of dollar_figure consisted of rent dollar_figure gas dollar_figure electricity dollar_figure and television cable dollar_figure the claimed ravenspur apartment expenses of dollar_figure consisted of rent dollar_figure electricity dollar_figure and television cable dollar_figure -- - in addition to the rent and utilities expenses petitioners deducted expenses for furnishing the north indian avenue and ravenspur apartments during totaling dollar_figure in the notice_of_deficiency respondent disallowed the dollar_figure on the ground that although substantiated the claimed amount did not constitute deductible ordinary and necessary business_expenses the court first addresses petitioners’ entitlement to the deductions claimed for and relating to their residences vista loma and deepak and next considers the deductions claimed for relating to the two rented apartments north indian avenue and ravenspur under sec_162 a taxpayer is allowed to deduct all ordinary and necessary expenses paid_or_incurred in carrying_on_a_trade_or_business however sec_280a generally disallows deductions with respect to the use of a dwelling_unit that is used by a taxpayer as a residence during the taxable_year with certain exceptions one of those exceptions applies to use of a home_office the home_office exception sec_280a provides generally the burden_of_proof is on a taxpayer to establish entitlement to deductions which are a matter of legislative grace 292_us_435 in certain circumstances however sec_7491 shifts this burden_of_proof with respect to examinations of returns commencing after date there is no evidence in the record regarding the date the examination of petitioners’ returns commenced and petitioners do not contend that sec_7491 applies in any event the court decides this case without regard to the burden_of_proof sec_280a exceptions for certain business or rental use limitation on deductions for such use -- certain business use ----subsection a shall not apply to any item to the extent such item is allocable to a portion of the dwelling_unit which is exclusively used on a regular basis---- a as the principal_place_of_business for any trade_or_business of the taxpayer b as a place of business which is used by patients clients or customers in meeting or dealing with the taxpayer in the normal course of his trade_or_business or c in the case of a separate structure which is not attached to the dwelling_unit in connection with the taxpayer’s trade_or_business in the case of an employee the preceding sentence shall apply only if the exclusive use referred to in the preceding sentence is for the convenience of his employer for purposes of subparagraph a the term principal_place_of_business includes a place of business which is used by the taxpayer for the administrative or management activities of any trade_or_business of the taxpayer if there is no other fixed location of such trade_or_business where the taxpayer conducts substantial administrative or management activities of such trade_or_business for a deduction to be allowed under sec_280a the taxpayer must establish that a portion of the dwelling_unit is exclusively used on a regular basis for the purposes enumerated in subparagraphs a b or c of sec_280a and if the taxpayer is an employee the office is maintained for the convenience_of_the_employer 94_tc_348 the court finds that mr radnitz’s use of home offices at the vista loma and deepak residences satisfies the tests of sec_280a first petitioners met the exclusive use test with respect to the office portions of their personal residences mr radnitz allowed no personal_use of the space that was used in their home as his office second the offices were used on a regular basis and mr radnitz worked full time as a writer third the offices represented mr radnitz’s principal_place_of_business during and half of the home space was the only office space he used since mr radnitz was an employee sec_280a further requires that the home_office space must be for the convenience_of_the_employer that test has been met mr radnitz was a speculative writer who was on his own in creating the work that he sold or later hoped to sell he was never provided with office space by his employers in such a situation the home or self-funded office can only be said to be for the employer’s convenience see 94_tc_20 affd 935_f2d_52 revd on other grounds 506_us_168 cf 74_tc_525 affd without published opinion 681_f2d_805 3d cir on this record the court holds that petitioners are allowed deductions for their rent and utilities expenses for_the_use_of the home offices at their vista loma and deepak residences to the extent the amounts claimed do not exceed the gross_income limitations of sec_280a by contrast the limitations of sec_280a do not apply to the rent and utilities expenses for the office space at the north indian avenue apartment because that space was not used by petitioners as a residence sec_280a limits deductions with respect to the use of a dwelling_unit which is used by the taxpayer during the taxable_year as a residence although the north indian avenue space was technically an apartment and thus falls within the definition of dwelling_unit under sec_280a f petitioners did not use the space as a residence during it was used exclusively by mr radnitz in his writing activity petitioners’ expenses in maintaining and furnishing the north indian avenue apartment are deductible as ordinary and necessary business_expenses similarly the limitations of sec_280a do not apply to the rent and utilities expenses for the office space at the ravenspur apartment there is no evidence in the record that the ravenspur apartment was used as a residence or for any personal purposes by either mr radnitz or mrs radnitz during petitioners were not separated from each other and neither mr radnitz nor mrs radnitz used the apartment as a place of personal abode during this period or any other period during no other possible motives for rental of this apartment were established at trial other than the use thereof by petitioners in their professional careers accordingly the court holds that the only and exclusive use of that apartment during was for trade_or_business purposes the limitations of sec_280a therefore are not applicable petitioners’ expenses in maintaining and furnishing the ravenspur apartment are deductible as ordinary and necessary business_expenses the court next addresses whether the expenses deducted by petitioners have been substantiated the court notes that mr radnitz testified credibly regarding his usage of offices both within his residence and at the two outside locations moreover petitioners cooperated with respondent throughout the examination of their returns and produced sufficient documentation of their utilities expenses to convince the court of their veracity petitioners provided the court with a summary of their utilities expenses but provided only partial expense records to support their summary they incorrectly assumed that since they had provided the complete set of bills and expense records to respondent during the audit reproducing them in court was not necessary in the absence of adequate substantiation this court may estimate the amount of deductible expenses_incurred bearing heavily against the taxpayer whose inexactitude in substantiating the amount of the expense is of his own making 39_f2d_540 2d cir however -- - there must be sufficient evidence on which to base such an estimate 85_tc_731 considering the evidence as a whole the court finds that petitioners paid the following amounts with respect to utilities expenses for the court finds as a utilities expense dollar_figure for the combined usage of the vista loma and deepak spaces for the court finds as utilities expenses dollar_figure for the deepak apartment dollar_figure for the north indian avenue apartment and dollar_figure for the ravenspur apartment as respondent made no issue of the rents paid the court finds that petitioners paid rent expenses in the amounts deducted on their and returns for the court also finds that petitioners paid furnishings expenses of dollar_figure with respect to the north indian avenue and ravenspur apartments as petitioners provided sufficient evidence to substantiate these expenditures finally the court addresses the gross_income provisions of sec_280a even if the requirements of sec_280a are met the deductions allowed are limited by sec_280a that section provides sec_280a limitation on deductions --in the case of a use described in paragraph or and in the case of a use described in paragraph where the dwelling_unit is used by the taxpayer during the taxable_year as a residence the deductions allowed under this chapter for the taxable_year by reason of being attributed to such use shall not exceed the excess of-- -- - a the gross_income derived from such use for the taxable_year over b the sum of-- the deductions allocable to such use which are allowable under this chapter for the taxable_year whether or not such unit or portion thereof was so used and the deductions allocable to the trade_or_business or rental_activity in which such use occurs but which are not allocable to such use for such taxable_year any amount not allowable as a deduction under this chapter by reason of the preceding sentence shall be taken into account as a deduction allocable to such use under this chapter for the succeeding taxable_year any amount taken into account for any taxable_year under the preceding sentence shall be subject_to the limitation of the 1st sentence of this paragraph whether or not the dwelling_unit is used as a residence during such taxable_year this court has held on several occasions that the home_office deduction of a writer is limited to the gross_income from writing 74_tc_525 warganz v commissioner tcmemo_1981_403 affd without published opinion 696_f2d_987 3d cir barker v commissioner tcmemo_1984_233 sec_280a thus limits petitioners’ deduction of their office expenses attributable to the vista loma and deepak addresses their deduction is limited to the amount of petitioners’ gross_income derived from mr radnitz’s use of the home offices reduced by the deductions allowable without regard to such business use 84_tc_683 petitioners have already been allowed home_office expense deductions to the extent of mr radnitz’s income from residuals in both and his pension income as respondent points out is in the nature of deferred_compensation and therefore is not considered income attributable to the use of those spaces estate of sussman v commissioner tcmemo_1978_344 n pension income was not from taxpayer’s trade_or_business but rather was merely deferred_compensation for his earlier services and properly allocable to his active employment prior to retirement moreover since petitioners rented the vista loma and deepak apartments there do not appear to be any deductions otherwise allowable with respect to them such as mortgage interest or real_property_taxes green v commissioner tcmemo_1989_599 n as a result under sec_280a petitioners are not entitled to greater home_office_deductions for the vista loma and deepak apartments than the amounts respondent has already allowed petitioners raised a constitutional issue with respect to sec_280a which the court next addresses petitioners objected to the application of the income limitation of sec_280a to them based on equal protection and fairness principles they argued that they may never be able to deduct the expenses of mr radnitz’s home_office because he may not -- - realize income on his speculative writings for years after they are completed in essence petitioners contend that sec_280a departs from the traditional principle of matching income and expenses and that the application of that section is unconstitutionally unfair to authors of speculative works sec_280a applies to all taxpayers and treats speculative authors no differently from all other citizens who maintain offices in their residences cook v commissioner tcmemo_1997_378 moreover sec_280a contains a carryover provision for disallowed deductions the court rejects petitioners’ constitutional arguments respondent is sustained with respect to the application of sec_280a as noted earlier the limitation provisions of sec_280a are not applicable to petitioners’ expenses relating to the north indian avenue and ravenspur offices reviewed and adopted as the report of the small_tax_case division decision will be entered under rule


t c memo united_states tax_court association for honest attorneys petitioner v commissioner of internal revenue respondent docket no 14562-15x filed date joan farr an officer for petitioner patrick a greenleaf for respondent memorandum opinion chiechi judge respondent determined that effective as of date petitioner no longer operated in accordance with sec_501 conse- quently respondent further determined to revoke effective as of date 1all section references are to the internal_revenue_code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure petitioner’s status as an organization exempt from federal_income_tax tax under sec_501 after having exhausted its administrative remedies peti- tioner challenged those determinations by timely seeking a declaratory_judgment pursuant to sec_7428 in accordance with rule b respondent filed the administrative record underlying respondent’s determinations which was not paginated and an identical first amended administrative record underlying those determinations amended administrative record which was paginated thereafter at the request of petitioner to which respondent did not object we conducted a trial for purposes of this proceeding the facts and the representations in the administrative record and the amended administrative record are accepted as true see rule b and are incorporated herein we must decide whether to sustain respondent’s determinations to revoke effective as of date petitioner’s tax-exempt status under sec_501 because effective as of that date it no longer operated in accordance with sec_501 we hold that we will sustain those determinations 2joan farr f k a joan heffington ms farr was the only witness at the trial in this case we found no facts on the basis of the record ie her testimony established at the trial in this case background at the time it filed the petition petitioner’s principal_place_of_business was in kansas at the residence of ms farr on date ms farr had organized petitioner as a nonprofit corpora- tion under the laws of the state of kansas the purposes for which petitioner was organized as set forth in its articles of incorporation were discouraging civil litigation increasing public awareness of the legal system and seeking ‘justice for all’ the bylaws of petitioner provided that it was to be managed by a board_of directors board consisting of three members one of whom was to serve for a 10-year term simultaneously as both its chief_executive_officer ceo and the president of its board ceo board president ms farr served as the initial ceo board president of petitioner and continued to serve in that role at all rele- vant times thereafter the bylaws of petitioner also provided that the ceo board president was as part of the responsibilities of that position to present an annual report to the board_of directors following the fiscal_year sign all checks and be a trustee of the properties of the association and shall assume and or appoint as neces- sary the secretarial treasury accounting and other duties and or responsibili- ties necessary to attain the goals of the association the bylaws of petitioner further provided the ceo board president and or appointed accountant treasurer shall receive all revenue of the association and shall maintain a complete and accurate account of all funds received and disbursed he she shall deposit and disburse all such funds the ceo board presi- dent treasurer shall present an annual report to the board immediately after the close of the fiscal_year listing all receipts and disbursements by budget categories on date petitioner submitted to the internal_revenue_service form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code form or application_for tax exemption in the application_for tax exemption petitioner represented inter alia that it would conduct five activities the first two consisted of mass mailings of postcards and brochures or send ing e-mails in order to create public awareness seek dona- tions to discourage litigation improve our legal system keep attorneys honest save people money reduce their stress and seek ‘justice for all’ petitioner represented in its application_for tax exemption that it would spend in the aggre- gate percent of its time on those two activities in form_1023 petitioner further represented that it would spend percent of its time in order to sell a book called ten secrets you must know before hiring a lawyer to convince people to work out their issues instead of fil ing lawsuits educate public ms farr was the author of ten secrets you must know before hiring a lawyer in its application_for tax exemption petitioner also represented that it would spend percent of its time in order to monitor a h a website to assist people having attorney difficulties sell book answer questions discourage litigation and acquire atty members in form_1023 petitioner further represented that the fifth activity in which it would engage would be the preparation of legal documents in anticipation of taking current case before the u s supreme court for public awareness in seeking ‘justice for all’ and that it would spend less than percent of its time on that activity on date respondent sent a letter to petitioner date determination_letter in which respondent made the following determina- tions effective as of date based on information you supplied and assuming your operations will be as stated in your application_for recognition of exemption we have determined you are exempt from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 respondent emphasized in the date determination_letter that respondent’s determination is based on evidence that your funds are dedicated to the purposes listed in sec_501 of the code to assure your continued exemption you should keep records to show that funds are spent only for those purposes if you distribute funds to other organi- zations your records should show whether they are exempt under sec_501 in cases where the recipient organization is not exempt under sec_501 you must have evidence that the funds will remain dedicated to the required purposes and that the recipient will use the funds for those purposes if you distribute funds to individuals you should keep case histories showing the recipients’ names addresses purposes of awards manner of selection and relationship if any to members officers trustees or donors of funds to you so that you can substanti- ate upon request by the internal_revenue_service any and all dis- tributions you made to individuals revenue_ruling c b page respondent also informed petitioner in the date determina- tion letter inter alia that petitioner is not required to file form_990 return of organization exempt from income_tax if your petitioner’s gross_receipts each year are normally dollar_figure or less by letter dated date and sent to joan heffington ie ms farr respondent confirmed that respondent had decided to examine petitioner’s opera- tion and activities with respect to as a result of respondent’s examination for that year respondent decided to expand respondent’s examination of peti- tioner’s operation and activities to include and and so notified petitioner in form_4564 information_document_request dated date during and ms farr used certain of petitioner’s funds when she engaged primarily in three activities on behalf of petitioner and or on her own behalf she provided assistance to individuals with respect to legal matters produced a quarterly newsletter and maintained a website in petition- er’s name and paid certain of her personal expenses including paying ex- penses for the exhumation and dna testing of the remains of jack farr her father during and petitioner maintained a checking account at verus bank in derby kansas petitioner’s checking account during those years ms farr had exclusive signature_authority for that checking account during and ms farr used petitioner’s checking account to make certain purchases from certain third parties and certain cash withdrawals totaling dollar_figure dollar_figure and dollar_figure respectively collectively pay- ments and withdrawals in question specifically ms farr used petitioner’s checking account in and to make certain purchases from certain department stores and grocery stores such as dillard’s walmart kwik shop kohl’s walgreens and dillons in addition ms farr used petitioner’s checking account in and to make automobile-related purchases from certain vendors such as quiktrip a a auto salvage derby quick lube k-15 auto salvage and meineke ms farr also used petitioner’s checking account in and to make certain home-related and real-estate- related purchases from certain stores such as slumberland westar energy lowes t s tree service gene’s stump grinding service dutch’s echostar dish allstate roberts overdoors inc lusco brick stone my construction and star lumber supply in addition ms farr used petitioner’s checking account in and to make certain payments with respect to a usaa credit card ms farr also used petitioner’s checking account in to make a dollar_figure payment to an animal clinic and a dollar_figure payment to st john’s military school for tuition for her son and another dollar_figure payment to that school in addition ms farr used petitioner’s checking account in to pay dollar_figure for the exhumation and dna testing of ms farr’s father’s remains petitioner did not pay ms farr a salary during any of the year sec_2010 through in an action that the state of kansas commenced in against ms farr for the unlawful practice of law discussed below ms farr claimed that she was a volunteer for petitioner petitioner did not issue to ms farr form_w-2 wage and tax statement or any type of form_1099 for any of those years during respondent’s examination of petitioner’s operation and activities with respect to and respondent’s revenue_agent responsible for that examination agent asked ms farr for documentation establishing the nature and or the purpose of each of the payments and withdrawals in question that she had made during those years with funds from petitioner’s checking account and that the agent found to be questionable transactions for petitioner an organization that respondent had determined to be exempt from tax under sec_501 because it was an organization described in sec_501 ms farr did not provide any such documentation to the agent instead ms farr informed the agent that the payments and withdrawals in question constituted repayments of one or more loans that she had made to peti- tioner the agent asked ms farr to provide him with documentation establishing the loans that she claimed she had made to petitioner ms farr did not give the agent any such documentation but instead reconstructed for the years through the loans that she claimed she had made to petitioner and the hours that she claimed she had worked for petitioner thereafter ms farr gave the agent a list of those reconstructed claimed loans and a list of those recon- structed claimed hours during the period through petitioner did not execute any promissory notes payable to ms farr and did not make any payments of interest to her on date the state of kansas commenced an action in the eighteenth judicial district_court sedgwick county kansas sedgwick county district_court against ms farr for the unauthorized practice of law and for violations of the kansas consumer protection act kansas action against ms farr at a proceeding on date that the sedgwick county district_court held that court issued its findings and rulings with respect to the kansas action against ms farr including in pertinent part the following one of the issues that has been argued is who is the defendant and when i say who is the defendant mrs heffington ms farr versus the association petitioner the state never raised the issue of alter ego in this case and the association has not been named as a party in this case so any relief that i order is solely against mrs heffington mrs heffington has raised the distinction between the associa- tion doing the work and mrs heffington doing the work she’s testified that and repeatedly attempted to elicit testimony that aha was doing the work and not mrs heffington now the only evidence in that regard or any of the remedies that i’m considering concerns mrs heffington’s actions that is all the court is going to consider now in this case i’ve heard the evidence and i’ve heard the testimony of several witnesses both for the state and for mrs heffington i went back and i’ve looked at the sic all documents that have been admitted and just listening to what mrs heffington has said and or the testimony that’s come through some of her wit- nesses there has been seventy thousand dollars in contributions for services in assisting people in legal matters there have been at least four clients she’s dodged in my opinion a significant bullet by not pro- ducing the documents that were ordered produced because it’s very real very conceivable that the number of clients or people she has consulted whether or not they made payments could be higher more than one party entered into the contingency contract i note even mrs heffington slipped one time and called it a legal agreement and since mrs heffington has known that the attorney_general was reviewing her activity she concedes that she drafted pleadings and court papers she drafted demand letters she negotiated on behalf of the clients she mediated and the court notes it was to the detriment to mr frank her actions in this court’s experience were detrimental to mr frank she also participated in preparing settlement proposals and the court notes she stated she gave personal opinion based upon research that she obtained at the law library under any definition under any burden_of_proof at law it’s clear that mrs heffington was practicing law and that there’s been no proof that she has as sic license to practice law under the state of kansas merely saying you are not a lawyer and that you do not give legal advice does not negate giving legal advice in the fashion a lawyer would merely saying you are not a lawyer and do not give legal advice does not negate preparing legal papers for someone as giving legal advice so in addition the court finds for purposes of this hearing that sigg keck frank and brunch were consumers the state has proven were given assistance by mrs heffington illegally without a license this is not family and friends sitting round griping about litigation it’s conceivable and i’m assuming everybody has had a family_member who has been involved in litigation has complained about their lawyers or you know one family_member says you really ought to do this or another family_member says that that’s not what we’re talking about in this instance arguably that’s prohibitive conduct that’s not what this is these are third-parties these were third-parties who were brought into contact with mrs heffington through solicitation and other similar commercial means on date the sedgwick county district_court entered a default judgment and an injunction against ms farr date injunction for the unauthorized practice of law and for committing deceptive practices in violation of the kansas consumer protection act j sigg m sigg e keck and t frank were shown as members of petitioner in a list of members during that ms farr maintained on behalf of petitioner ms farr was evidently undeterred by the date injunction of the sedgwick county district_court prohibiting her from advising or assisting others in legal matters in date john sigg mr sigg entered into an agreement with petitioner to accept dollar_figure as a purported donation from him in exchange for reviewing the files of his attorney s past and present and to assist him in filing a ‘writ of mandamus’ with the supreme court of the united_states supreme court concerning mr sigg’s divorce and certain other civil matters and preparing possible contact letter to sue lawyers judge state of ks mr sigg wired dollar_figure to petitioner’s checking account on date petitioner had a prior history of accepting purported donations from mr sigg and certain other individuals in exchange for services performed by ms farr on date mr sigg filed purportedly pro_se with the supreme court a document titled petition for extraordinary writ mr sigg’s petition the question presented for supreme court review as set forth in mr sigg’s petition was whether mr sigg was deprived of due process of law in his divorce under the 5th amendment to the united_states constitution due to his attorneys and the court engaging in abuse_of_discretion fraud on the court and outrageous government conduct for over years to deplete him and his son mitch of their assets mr sigg’s petition also stated in pertinent part more frustrated than ever john again sought help from the association for honest attorneys a h a on date he told them that back in attorneys sevart and mills had persuad- ed john and mitch they could handle all of their legal matters up to the u s supreme court for dollar_figure million that sevart had been paid almost all of this money and that another dollar_figure million had been ille- gally taken from their assets on a supercedeas bond on date he told the a h a that the trial_court stated that the dollar_figure million judgment against mitch was now up to dollar_figure million because interest was being added on date mitch sent a letter intending to sue the lawyers court and others in a federal suit alleging theft of his assets and the a h a helped john prepare this petition for an extraordinary writ ms farr continued in to provide in petitioner’s name unauthorized legal assistance to certain individuals including herself with respect to inter alia her challenges to the date injunction and the fines imposed by the sedgwick county district_court against her for practicing law without a license her arrest for hosting an underage drinking party and a lawsuit filed against a local school district regarding her son petitioner ceased sending newsletters via mail in date during and petitioner maintained a website at www assocforhonest- attys com information links on petitioner’s website included topics such as a h a news update lawyers to avoid consider how to file a federal suit and book order membership petitioner’s news update for date included information that petitioner helped mr sigg file a writ of mandamus with the united_states supreme court and information regarding the attempted exhumation of the remains of jack farr and the results of that attempted exhumation a summary of petitioner’s board meetings in board meeting summary indicated that at the board meeting on date the board discussed petitioner’s news update for date which indicated that ms farr was falsely put in jail on for ‘hosting an underage drinking party’ when her 16-yr old son had a party for spring break the board meeting summary further indicated that at the board meeting on date the board discussed how govt officials continue to try and thwart the medal of honor award for ceo’s ms farr’s father ms farr filed an appeal with the court_of_appeals for the state of kansas kansas court_of_appeals with respect to the rulings and findings of the sedgwick county district_court in the kansas action against ms farr for the unauthorized practice of law and the violation of certain kansas consumer protection laws the kansas court_of_appeals issued an opinion on date in which it inter alia sustained the date injunction in doing so the kansas court_of_appeals stated inter alia heffington admitted that aha helped prepare letters and documents including petitions on behalf of donors to the corporation heffing- ton also admitted that she had gone to court with donors but only to offer personal advice guidance and emotional support k s a states that a volunteer for a nonprofit cor- poration may be immune from liability under certain circumstances but in order to be a volunteer one must not directly or indirectly receive compensation_for his or her services here the sedgwick county district_court found that heffington accepted payment from consumers in connection with legal services and that t his payment was made in the form of a donation to heffington’s organization in exchange for the services provided to consumers on date respondent timely mailed a final adverse determi- nation letter to petitioner adverse determination_letter in that letter respondent revoked effective as of date petitioner’s tax-exempt status under sec_501 because it no longer operated in accordance with sec_501 in the adverse determination_letter respondent explained the basis for respon- dent’s revocation of petitioner’s tax-exempt status under sec_501 in perti- nent part as follows you have failed to demonstrate that you are operated exclusively for exempt purposes and that no part of your net_earnings inures to the benefit of private shareholders and individuals as required by sec_501 of the code in addition your activities more than insub- stantially further non-exempt purposes and you operate primarily for the benefit of private rather than public interests during and petitioner did not through ms farr or any- one else engage primarily in the activities described in its articles of incorporation and its bylaws during and the net_earnings of petitioner inured to the benefit of ms farr its ceo board president petitioner operated primarily for the benefit of private rather than public interests and more than an insubstan- tial part of petitioner’s activities furthered nonexempt private purposes discussion petitioner has the burden of establishing that the determinations in the adverse determination_letter are erroneous see rule a 141_tc_151 before addressing whether petitioner has carried that burden we shall set forth the legal principles that control whether to sustain respondent’s determinations in the adverse determina- tion letter sec_501 exempts from tax organizations described in inter alia sec_501 as pertinent here organizations described in sec_501 include corporations organized and operated exclusively for charitable or educational_purposes or for the prevention of cruelty to children no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h an organization is organized exclusively for one or more purposes specified in sec_501 only if its articles of organization articles limit the pur- pose of such organization to one or more purposes specified in that section and do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities that in themselves are not in further- ance of one or more of those purposes see sec_1_501_c_3_-1 income_tax regs an organization will be treated as operated exclusively for one or more purposes specified in sec_501 only if it engages primarily in activities that accomplish one or more of those purposes an organization will not be regarded as operated exclusively for one or more purposes specified in sec_501 if more than an insubstantial part of its activities is not in furtherance of one or more of those purposes see sec_1_501_c_3_-1 income_tax regs as pertinent here an organization generally may be exempt from tax as an organization described in sec_501 if it is organized and operated exclu- sively for charitable4 or educational_purposes see sec_1 c - d i 4the term charitable in sec_501 is used in its generally accepted continued income_tax regs an organization is not organized or operated exclusively for charitable or educational_purposes unless it serves the public rather than a private interest in other words in order to be organized and operated exclusively for charitable or educational_purposes specified in sec_501 an organiza- tion must establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or the creator’s family or persons controlled directly or indirectly by such private interests see sec_1_501_c_3_-1 income_tax regs the term educational in sec_501 relates to the instruction or training of the individual for the purpose of improving or developing the individ- ual’s capabilities or the instruction of the public on subjects useful to the individ- ual and beneficial to the community see sec_1_501_c_3_-1 income_tax regs an organization may be educational even though it advocates a particular position or viewpoint so long as it presents sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent continued legal sense therefore that term is not to be construed as limited by the separate enumeration in that section of other purposes that may fall within the broad outlines of charity as developed by judicial decisions see sec_1 c - d income_tax regs as pertinent here the term charitable in sec_501 includes the advancement of education opinion or conclusion id however an organization is not educational if its principal function is the mere presentation of unsupported opinion see id an organization may meet the requirements of sec_501 only if it serves the public rather than a private interest see sec_1_501_c_3_-1 income_tax regs the presence of a single substantial purpose that is not de- scribed in sec_501 precludes exemption from tax under sec_501 regardless of the number or the importance of the purposes that are present and that are described in sec_501 see 326_us_279 79_tc_793 the determination of an organization’s purposes and the purposes the organization’s activities support are questions of fact see pulpit 70_tc_594 in reviewing the administrative record in proceedings under sec_7428 the court may draw factual inferences from the entire administrative record see 82_tc_18 in order to determine whether the purposes of an organization are described in sec_501 it is necessary to examine the actual purposes that the organization’s activities are intended to accomplish and not only the nature of the activities of the organization or its statement of purpose see 950_f2d_365 7th cir aff’g tcmemo_1990_484 am campaign acad v commissioner 92_tc_1053 if an organization is engaged in a single activity directed at achieving various purposes some of which are described in sec_501 and some of which are not described in that section the organization will fail the operational_test where the purpose not described in that section is more than insubstantial see 113_tc_47 aff’d 242_f3d_904 9th cir in determining whether an organization complies with the operational_test of sec_501 it is necessary to look beyond the organization’s articles in order to ascertain the actual objects motivating the organization and the subse- quent conduct of the organization see 585_f2d_1219 4th cir quoting 144_fsupp_74 d n j see also 71_tc_661 we shall now consider whether petitioner has carried its burden of estab- lishing that the determinations in the adverse determination_letter are erroneous we summarized in the background section of this memorandum opinion certain salient facts in the record before us virtually all of which consists of the administrative record and the amended administrative record on that record we found that during and petitioner did not through ms farr or anyone else engage primarily in the activities described in its articles of incorpo- ration and its bylaws we also found that during and the net_earnings of petitioner inured to the benefit of ms farr its ceo board president petitioner operated primarily for the benefit of private rather than public interests and more than an insubstantial part of petitioner’s activities furthered nonexempt private purposes based upon our examination of the entire record before us we find that petitioner has failed to carry its burden of establishing error in respondent’s determination in the adverse determination_letter that effective as of date petitioner no longer operated in accordance with sec_501 on that record we further find that petitioner has failed to carry its burden of establishing that respondent erred in determining in the adverse determination_letter to revoke effective as of date petitioner’s status as an organization exempt from tax under sec_501 on the record before us we sustain respondent’s deter- 5see supra note in addition as noted above the only difference between the administrative record and the amended administrative record is that the former is not paginated and the latter is paginated minations in the adverse determination_letter to revoke effective as of date petitioner’s tax-exempt status under sec_501 because effective as of that date it no longer operated in accordance with sec_501 we have considered all of the contentions and arguments of petitioner that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing decision will be entered for respondent