internal_revenue_service number release date index number --------------------- ------------------------- --------------------------------- ------------------------ in re ------------------------------------------ ---------------------------- ---------------------- department of the treasury washington dc person to contact -------------------- telephone number --------------------- refer reply to cc intl - plr-109404-03 date date legend ---------------------- --------------------------------- ------------------------------------------- ---------------------------------------------- ---------------------------------------- ----------------------- taxpayer entity entity taxpayer’s tax director cpa firm date a date b date c date d dear ------------------ this replies to a letter dated date a in which taxpayer requests an extension of time under sec_301_9100-3 to file an election and agreement described in sec_1_1503-2 the g i agreement the election for entity is for the tax_year ended on date c and the election for entity is for the tax years ended on dates b and c the information submitted for consideration is substantially as set forth below ---------------------------- ---------------------------- ---------------------------- ------------------------ in re plr-109404-03 the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process taxpayer employs cpa firm to assist with its tax compliance cpa firm has represented that due to turnover of personnel in both taxpayer and cpa firm’s offices and the complex and voluminous nature of taxpayer’s return cpa firm and taxpayer inadvertently failed to submit the g i agreement for entitie sec_1 and for years ending dates b and c approximately one week after filing for date c taxpayer’s tax director attended a seminar at which the topic of dual consolidated losses and the election under sec_1_1503-2 were discussed consequently the tax director realized the required elections had not been made sec_301_9100-1 provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 that establishes to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation the agreement described in sec_1_1503-2 is a regulatory election as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the rules set forth in sec_301_9100-3 based on the facts submitted and representations made we grant taxpayer an extension of time under sec_301_9100-3 to submit it sec_2 agreements for entity for the tax_year ended on date c and for entity for the tax years ended on dates b and c accordingly taxpayer is granted an extension of time of days from in re plr-109404-03 the date of this ruling to file an agreement described in sec_1_1503-2 for tax years ending dates b and c the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the g i agreements sec_301_9100-1 a copy of this letter_ruling should be attached to the g i agreements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented specifically no opinion is expressed with respect to the fact that the annual certification as described in sec_1_1503-2 was not filed with the tax_return for the tax_year ended on date c and with the tax_return for the year ended on date d with respect to the dual consolidated losses entity incurred for the years ended on dates b and c pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to taxpayer sincerely associate chief_counsel international by s allen goldstein al goldstein reviewer enclosure copy for purposes


------------------------------------------------------------------------------- internal_revenue_service number release date index numbers ------------------------------------------ ------------------------------ ------------------------------------ ---------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------ telephone number -------------------- refer reply to cc corp b03 plr-120879-06 date june ----------------------------------------------------------------- purchaser ------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------- target ---------------------------------------------------------------------------------------------------- target subsidiaries sellers ---------- -------------------------------------------------------------------- state x date a date b tax professional ----------- ------------------------------------------------------------- ------------------------------------------------------------ ----------------------------------------------- --------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ------------------------- ------------------------------ company official ------- -------------------------------------------------------------------------------- ----- ------------------------------------------------------ dear purchaser requesting an extension of time under sec_301_9100-1 through of this letter responds to a letter dated date submitted on behalf of purchaser a state x corporation is the common parent of a consolidated_group plr-120879-06 the procedure and administration regulations to file an election purchaser is requesting an extension to file a sec_338 election under sec_338 with respect to purchaser’s acquisition of the stock of target and the deemed acquisition of the stock of target subsidiaries sometimes hereinafter referred to as the election on date a additional information was received in letters dated date date and date the material information is summarized below target and target subsidiaries are foreign_corporations purchaser to acquire all of the target stock from sellers also on date a purchaser acquired all of the stock of target from sellers in exchange for cash and stock pursuant to the purchase agreement it is represented that purchaser’s acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 passive_foreign_investment_company or a foreign_personal_holding_company at any time during the portion of its taxable_year that ends on the acquisition_date as defined in sec_338 on date a purchaser and sellers entered into a purchase agreement for none of target and target subsidiaries was a controlled_foreign_corporation a purchaser intended to file the election the election was due on date b sec_338 permits certain stock purchases to be treated as asset however after the due_date for the election purchaser has been unable to demonstrate that a valid election has been filed accordingly this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for purchaser’s target’s or target subsidiaries’ taxable years in which the acquisition occurred the taxable years in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i under sec_301_9100-1 the commissioner has discretion to grant a reasonable sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension for time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 plr-120879-06 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interest of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1 based on the facts and information submitted including the representations information affidavits and representations submitted by purchaser company d therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for purchaser to file the election provided purchaser acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government_official and tax professional explain the circumstances surrounding the intended filing of the election the information establishes that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the interests of the government will not be prejudiced if relief is granted see sec_301_9100-3 made we conclude that purchaser has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 through are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for purchaser to file the election with respect to the acquisition of the stock of target and the deemed acquisition of the stock of target subsidiaries as described above election on form_8023 in accordance with sec_1_338-2 and the instructions to the form a copy of this letter must be attached to form_8023 file or amend as applicable all returns and amended returns if any necessary to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year a copy of this letter and a copy of form_8883 must be attached to any_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy the requirement of attaching a copy of this letter by attaching a statement to their return that provides the date and control number of the letter_ruling target’s and target subsidiaries’ tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal income within days of the date on this letter all relevant parties must within days of the date on this letter purchaser must file the the above extension of time is conditioned on the taxpayers’ purchaser’s we express no opinion as to whether the acquisition of the target stock plr-120879-06 tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 qualifies as a qualified_stock_purchase under sec_338 or any other tax consequences arising from the election election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing as the time or or resulting form filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts moreover notwithstanding that the extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable still apply in addition we express no opinion as to the tax consequences of filing the this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely _________________________________ ken cohen senior technician reviewer branch office of associate chief_counsel ------ ---- --------------------------------- ---------------------------------------------------------------------------------- ------------- ---------------------------------------- --------------------------- ----------------------- ---------------------------- ----------------------------------- ---------------------------------------


tax_exempt_and_government_entities_division number release date date date u ll se t eo ra t department of the treasury internal_revenue_service washington d c contact person identification_number contact number employer_identification_number form required to be filed tax years all dear this is our final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code sec_501 as an organization described in code sec_501 we made this determination for the following reason s you were not primarily engaged in activities that promote social welfare your activities primarily constituted direct and indirect participation in political campaigns on behalf of or in opposition to candidates for public_office in a letter dated date you submitted a copy of the minutes of the meeting of your board_of directors dated date which approved your dissolution effective date astatement of your dissolution was filed with your state on date you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions f you disagree with our proposed deletions follow the instructions in notice if you agree with our deletions you do not need to take any further action if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your or the irs customer service number for businesses the irs customer service number for people with hearing impairments is sincerely robert choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c u i l no third party contacts date contact person id number telephone number employer_identification_number legend x year state state we seminar newsletter conference a dear we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 based upon all of the materials you have submitted in connection with your application we have concluded that your activities primarily constitute direct and indirect participation or intervention in political campaigns on behalf of or in 6pposition to candidates for public_office accordingly we have concluded that you are not primarily engaged in activities that promote social welfare and do not qualify for recognition of exemption under sec_501 statement of facts the information you have provided for our consideration of your application_for recognition of exemption indicates that you were incorporated on year as a nonprofit organization under the laws of the state you were formed for purposes that include the following to educate inform and mobilize ws to become active in the public arena in support of causes which reflect w values and to uphold propagate and disseminate by all lawful means w principles and values you entered into an affiliation agreement with x a national organization based in state x’s page five-fold mission is to-- under the affiliation agreement x has granted you a charter pursuant to which you shall represent x in state and shall be known as the said state affiliate of x the agreement further grants you a non- exclusive revocable license to use x's name logo and any and all trademarks or service marks that x owns during the agreement in addition the affiliation agreement consists of the following provisions you shall incorporate as a nonprofit corporation and apply for recognition of exemption under sec_501 of the code copies of your corporate charter bylaws and exemption application will be provided to x you shall adopt bylaws which will be substantially in the form of or consistent with the bylaws of x any amendments to your bylaws shall be sent to x for review and approval with your agreement not to adopt any amendments not approved by x you may organize and recognize local x chapters in state provided you enter into an affiliation agreement with each local chapter and each such agreement is approved by x once a quarter you shall provide x with the names and addresses of each local chapter as well as the names addresses and phone numbers of the leader in each local chapter_4 a portion of x’s annual net_revenues shall be segregated as a state project fund from which you may request funds for special projects from time to time these funds may be distributed throughout the course of the year and must be requested in writing you may send mailings to certain x proprietary maiting lists for a reasonable computer and label tape charge x shall assist you in preparing mailings to these lists x shall provide you with a fund-raising purposes list of activities on x’s database for you to use for x shall conduct for you regular workshops to teach fund-raising and organizing skills for state leadership x will schedule at least one leadership school per calendar_year in your state to be sponsored by you that includes audio tapes instructional manual and all related materials you are responsible for recruiting at least paid registrants while the national_office shall provide all materials audio and video tapes a national or regional instructor and one mailing from the national_office to promote and publicize the school x will work with you to hold at least one major fund-raising event per calendar_year to be page attended by a as schedule permits and or other nationally recognized individuals x will provide you with access with to its flagship publication w_ place a four-page insert into all copies of w_ mailed to all x members in state you will be able to x shall provide state and local leaders with a regular update of events in the nation’s capital this update will be provided free of charge to state and chapter leaders with fax machines x shall provide you with voter education material specific to your state congressional scorecards will be provided at cost and federal voter guides will be provided free of charge your activities include the development of county chapters distribution of voter guides organizing and conducting training seminars publishing and distributing monthly newsletters and updates on legislation and lobbying_activities you have been involved in the formation and development of county chapters in state in the local chapter chairman’s handbook a manual published and provided to you by x in providing step-by- step instruction on how to develop a successful chapter states in chapter - the goals of a chapter are to the x handbook refers to the neighborhoods as precincts and it states the ultimate goal of x activists in every precinct in america neighborhoods precincts are in order to effectively organize your county you must organize neighborhoods establishing a is to have ten identified crucial coordinator in each neighborhood will very effectively give you political control_over your county and ultimately your state follow three simple steps identify inform and mobilize voters the x precinct organization plan consists of getting neighborhood helpers to you distribute voter guides for federal state and local elections the voter guides are distributed to voters prior to election day for their use on that day the voter guides for elections on the federal level were prepared by x you prepare the voter guides for elections on state and local levels the format of the voter guides includes the names and pictures of the democratic and republican candidates for various elective offices beneath each candidate's name and picture is the candidate's position on each of a list of selected issues the with a response of either opposes or supports to the selected issue while many candidates were shown to have no response or undecided to most of the issues the selected issues included voter guides indicate that most candidates were shown page the voter guides state in very small print that t his voter guide is provided for educational_purposes only and is not to be construed as an endorsement of any candidate or political_party however x’s training materials called the x_ under the heading states -- the year marked the emergence of x onto the national political scene election_year went into full swing x began distributing nonpartisan churches nationwide x's voter education efforts led to the largest voters in modern history with exit polls showing that percent of voter turnout the results of such as the voter guides in turnout of all voters were self-identified were remarkable an estimated council state legislature and candidates ran for school board city percent won x's commitment to the movement was now set in stone x's activity in the arena x distributed well as election_year proved that x was a major player in the political voter guides during the presidential and other primaries as voter guides in churches during the general election you also conduct a seminar called w seminar the seminar uses training manuals produced and supplied by x in his foreword to the training manual a states the following you also publish state newsletter a monthly newsletter consisting of two pages updating members primarily on chapter meetings and events status of legislation and the political scene the issues included information regarding the conference an annual and conference conducted by x that features speeches by prominent members of the party you also engage in lobbying_activities you distribute materials urging members and others in a training manual published by x which supporting or defeating certain you use in your training seminars contains the following information on the topic of the basic lobbying that x and you as one of its affiliates implement issue legislation page legal analysis sec_501 of the code provides for exemption from federal income taxes under sec_501 for organizations not organized for profit but operated exclusively for the promotion of social welfare sec_1 c -i a i of the income_tax regulations states that an organization is operated exclusively for the promotion of social welfare if the common good and general welfare of the people of the community whether an organization is primarily engaged in promoting social welfare is a facts_and_circumstances_test the regulation states it is primarily engaged in promoting in some way an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community an organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements sec_1 c -i a i sec_1 c -l a ii of the regulations provides that political campaign activities do not promote social welfare as defined in sec_501 the regulations under sec_501 clearly distinguish between acceptable social welfare activities such as lobbying and unacceptable activities such as political campaign intervention the regulation states the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public_office sec_1 c -i a ii in order for an organization to engage in political campaign activities there generally must be a candidate for public_office on whose behalf or against whom the activity or intervention occurs sec_1 c -i c iii of the regulations states that the term ‘candidate for public office' means an individual who offers himself or is proposed by others as a contestant for an elective_public_office in revrul_76_456 1976_2_cb_151 the organization at issue was formed for the purpose of elevating the standards of ethics in the conduct of campaigns for election to public_office at the national state and local levels and had disseminated information concerning general campaign practices the organization proposed a code of fair campaign practices but did not solicit the signing or endorsement of the code by candidates for political office we concluded that this did not constitute political intervention since the organization's activities only allowed citizens to increase their knowledge and understanding of election processes and participate more effectively in their selection of government officials without any candidates even mentioned at the same time we modified revrul_66_258 1966_2_cb_213 which was an identical organization except that it did solicit the signing or endorsement of its code of fair campaign practices by candidates for political office we concluded that the latter organization was engaged in political intervention and therefore was not exempt under sec_501 of the code because these rev ruls contain a sec_501 analysis which prohibits all political campaign activities the activities should be considered in absolute terms however for purposes of sec_501 we are determining whether political intervention is the primary activity of the organization whether an organization is primarily engaged in promoting social welfare is a facts and circumstances determination relevant factors include the manner in which the organization's activities page are conducted resources used in conducting such activities such as buildings and equipment the time devoted to activities by volunteers as well as employees the purposes furthered by various activities and the amount of funds received from and devoted to particular activities see eg revrul_74_361 1974_2_cb_159 volunteer fire company that provides recreational facilities for members is primarily engaged in promoting social welfare where providing facilities primarily furthers exempt purposes revrul_68_45 1968_1_cb_259 organization's principal source_of_income is not sole factor in determining whether it is primarily engaged in promoting social welfare in revrul_81_95 1981_1_cb_332 we concluded that an organization may carry on lawful political activities and remain exempt under sec_501 of the code as long as it is primarily engaged in activities that promote social welfare the corollary to this is that if an organization's primary activities do not promote social welfare but are direct or indirect political intervention the organization is not exempt under sec_501 the key is to determine the character of the organization's primary activities by looking at all of the facts and circumstances precinct organization your activities with regard to recruitment of people to become active in local politics at the precinct level appear to be identical to the recruitment and organization that takes place in a political_party the leadership school trains people to work in campaigns and political involvement and get-out-the-vote activities are advocated in order to intervene and influence elections your focus is on getting people to become candidates and activists while organizing down to the precinct or neighborhood level has enabled you to mobilize some limited legislative grassroots campaigns this organizational basis has primarily been used to mobilize targeted been used to identify and encourage you have been part of x's precinct organization intended to facilitate intervention in the political process at every level of government as stated above it is also evident that you were interested in legislation and lobbying_activities however after a careful review of the materials presented it is apparent that the lobbying_activities were secondary to political intervention you primarily engage in activities intended to intervene in the political process and to influence the elections of those candidates who reflected your views your emphasis is focused on activities which were designed to result in the election of to public_office at every level of government using the facts_and_circumstances_test we conclude that your precinct organizational basis was implemented primarily to intervene in political campaigns to run for local office from your inception voters to get to the polls on election day it has also voter guides an organization which publishes and distributes candidate questionnaire results in the form of voter guides must demonstrate neutrality in order for the voter guides to be considered educational a facts_and_circumstances_test is utilized to determine whether activities involving voter guides are educational or whether they are political campaign activities examples are given as to the factors which should be considered when applying a facts_and_circumstances_test the factors which are indications that the activities are educational are as follows the publication reports on a neutral group of elected officials or candidates such as all members of congress or all candidates for a particular office the publication reports elected officials' or candidates’ views or their voting records on a wide range of subjects the publication includes no editorial opinion on the elected officials or candidates or on their views the publication does not indicate approval of elected officials or candidates in the contents or structure of the publication and the organization makes the publication generally available to the public in revrul_78_248 1978_1_cb_154 after looking at your voter guides several patterns emerge first as mentioned above the page candidates regularly have no response or undecided listed after all or part of the issues whereas very few candidates were listed without a complete list of opposes or supports underneath their name and picture second the issues chosen seem to have a direct correlation to the desired response from x's preferred candidate as against the lack of responses from particular response along party lines is significant with respect to the issues covered leads to responses which are arguably inaccurate additionally the summary descriptions are so vague that they do not adequately cover any of the issues finally the voter guides do not report on a neutral group of candidates as required by revrul_78_248 the voter guides list the names of a neutral group of candidates but they fully report the positions of only some of the issues while these factors are not explicit endorsements of candidates candidates and the wording and choice of issues to create a in addition the general nature of and approach taken candidate or conversely to portray a candidates and almost all of the positions of the candidates this reporting is so heavily weighted toward the candidates party as to not constitute reporting on a neutral group of in our view the voter guides are heavily weighted in favor of the candidates especially those incumbents endorsed on the congressional scorecards we conclude that these voter guides cannot be considered nonpartisan educational materials within the intent of the law inaccurate and or incomplete information does not constitute education the targeted distribution of the scorecards and voter guides also indicates that these publications are not nonpartisan educational activities these documents were distributed to previously identified and individuals the voter guides would have only limited educational value to anyone wishing to candidates or to compare the positions of know the positions of candidates since such a large percentage of candidates did not have their positions listed in the voter guides in addition the possible distortion of the candidate's position when translating a vote on legislation to a summary description is an additional factor we have considered in determining that the voter guides constitute political intervention based on all the available information we conclude that the voter guides are not nonpartisan and constitute intervention in political campaigns and lobbying_activities lobbying_activities were considered in revrul_68_656 1968_2_cb_216 to not only be an acceptable activity for an organization described in sec_501 of the code but to constitute activities that promote social welfare revrul_68_656 provides that seeking favorable legislation is recognized by the sec_501 regulations as a permissible means of attaining social welfare goals additionally revrul_71_530 1971_2_cb_237 concludes that an organization described in sec_501 may have lobbying as its only activity a facts_and_circumstances_test is to be used in determining whether an organization's activities primarily constitute political intervention or whether those activities constitute lobbying or educational activities after reviewing all of the facts and circumstances presented in the administrative file as discussed above we have concluded that your primary emphasis and primary activities constituted direct and indirect political intervention while you engage in extensive lobbying_activities they are by no means your primary activity your first and primary emphasis is on getting people elected to public_office the administrative record contains a wealth of information regarding your organizational structure and activities relating to candidate recruitment there is only secondarily an emphasis on lobbying and educational activities your organizational thrust is to organize at the neighborhood or precinct level in order to get secondarily is this precinct level organization utilized to influence legislation elected to local offices only accordingly after looking at all of the facts and circumstances we have concluded that your lobbying activity was not your primary activity page conclusion regarding your primary activity the emphasis throughout your materials is on electing to office people in order to impact legislation and policy as insiders the overwhelming majority of the evidence in the administrative record and thus the facts and circumstances in this case denotes an organization that is intent upon intervening in political campaigns the precinct organizational structure allows you to implement your policies as more and more mentioned and we recognize that lobbying_activities are being pursued those activities are not your primary activity an analysis of all of the facts and circumstances contained in the administrative file leads us to the conclusion that your primary activity constitutes political intervention are elected to office while lobbying is usually conclusion based upon the materials submitted in connection with your application we have concluded that your activities primarily constitute direct and indirect participation or intervention in political campaigns on behalf of or in opposition to candidates for public_office therefore you are not primarily engaged in activities that promote social welfare and do not qualify for recognition of exemption under sec_501 of the code you have the right to protest this ruling if you believe it is incorrect to protest you should submit a statement of your views to this office with a full explanation of your reasoning this statement signed by one of your officers must be submitted within days from the date of this letter you also have a right to a conference in this office after your statement is submitted you must request the conference if you want one when you file your protest statement if you are to be represented by someone who is not one of your officers that person will need to file a proper power_of_attorney and otherwise qualify under our conference and practices requirements if we do not hear from you within days this ruling will become final and a copy will be forwarded to the ohio tax exempt and government entities te_ge office thereafter any questions about your federal_income_tax status should be directed to that office either by calling a toll free number or sending correspondence to internal_revenue_service te_ge customer service p o box cincinnati oh when sending additional letters to us with respect to this case you will expedite their receipt by using the following address internal_revenue_service attn t eo ra t room constitution ave nw washington d c if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert c harper jr manager exempt_organizations technical group


t c memo united_states tax_court clifton e stanley and darlene h stanley petitioners v commissioner of internal revenue respondent docket no filed date gary w tidwell for petitioners sara w dalton for respondent memorandum findings_of_fact and opinion pugh judge in a notice_of_deficiency dated date respondent determined the following deficiencies and accuracy-related_penalties with respect to petitioners’ federal_income_tax for and year deficiency sec_6662 penalty dollar_figure dollar_figure big_number big_number after concessions the issues for consideration are whether petitioners understated their taxable_income by dollar_figure and dollar_figure for and respectively rather than properly excluding the proceeds as nontaxable loans whether petitioners are entitled to certain deductions claimed on schedule c profit or loss from business for and whether petitioners are liable for accuracy-related_penalties under sec_6662 for and findings_of_fact some of the facts have been stipulated and are so found petitioners resided in texas when they filed their petition during the years in issue mr stanley owned and operated stanley associates a sole_proprietorship engaged in the insurance_business mr stanley petitioners now concede that they were not entitled to net_operating_loss carryforwards for and respondent concedes that petitioners received nontaxable loan proceeds of dollar_figure and dollar_figure for and respectively unless otherwise indicated all section references are the internal_revenue_code_of_1986 as amended and in effect for the years in issue rule references are to the tax_court rules_of_practice and procedure all dollar amounts are rounded to the nearest dollar worked for stanley associates as an insurance agent selling annuities and providing retirement advice to clients he also invested in real_estate in and mr stanley received what petitioners claim to be loan proceeds from clients and friends and he made periodic_payments to some of those clients and friends and in some cases returned the amounts provided respondent argues that the amounts are income identified through a bank_deposits analysis by respondent we will use the terms loan interest and loan repayment when discussing these amounts and lender when discussing the clients and friends mr stanley believed that lenders made funds available to him because he offered an attractive return on their investment during the years in issue mr stanley was trying to grow his insurance_business he had a general idea that he would repay lenders from his real_estate investment_income and his insurance_business generally mr stanley used the loan proceeds to expand stanley associates to invest in real_estate to cover some personal and business_expenses and occasionally to repay loans that became due he did not link any particular loan proceeds with any particular activities mr stanley issued promissory notes to lenders for loans during the years in issue the promissory notes totaled dollar_figure and dollar_figure for and respectively these amounts include the loans that respondent conceded of dollar_figure and dollar_figure for and respectively respondent also conceded that mr stanley received two nontaxable loans totaling dollar_figure for which do not correspond to any of the promissory notes in the record the promissory notes included the following the amount and date of the loan the lender’s name and address the interest rate the length of the loan period the due_date of interest payments and unpaid principal the signatures of the parties and a covenant that the promissor agrees to remain fully bound until the note shall be paid in full all but one of the promissory notes were unsecured repayment periods ranged from to months and interest rates ranged from to with the exception of one short-term loan of two weeks with an interest rate of mr stanley also created a loan file for the promissory notes corresponding to each lender mr stanley made interest payments on the loans some of the interest payments were made in accordance with the terms of the corresponding promissory note while other interest payments were untimely mr stanley all but two of the notes bore mr stanley’s signatures and the signatures of the lenders the two notes without the lenders’ signatures were conceded to be loans by respondent recorded the amounts of interest_paid on some of the corresponding promissory notes for other_payments the only record was the check itself when the loans became due some were paid in full while others were renewed with respect to the loans that were renewed the repayment period of each loan was extended and interest continued to accrue mr stanley indicated in writing on most but not all of the promissory notes whether the loans were paid in full or were renewed in some cases loans were renewed without any documentation of the renewal the only indication of renewal was that mr stanley paid interest or in some cases made a partial loan repayment in after the petition in this case was filed mr stanley reported interest_paid to various lenders for and on forms 1099-misc miscellaneous income and reported to the internal_revenue_service total interest_paid to those lenders on forms annual summary and transmittal of u s information returns he reported interest of dollar_figure for and dollar_figure for totaling dollar_figure paid_by clifton e stanley dba the lifepay group mr stanley calculated the interest he reported as paid_by reviewing and totaling amounts on his check stubs for each year petitioners’ and federal_income_tax returns were prepared by a paid income_tax_return_preparer the disputed loan proceeds that petitioners received in and were not included in income on their returns petitioners’ federal_income_tax return included a schedule c for stanley associates on which petitioners claimed as relevant deductions for car and truck expenses of dollar_figure home owners association dues hoa dues of dollar_figure and interest on loans of dollar_figure in the notice_of_deficiency respondent increased petitioners’ taxable_income by dollar_figure and dollar_figure for and respectively disallowed deductions for dollar_figure of schedule c business_expenses including dollar_figure of car and truck expenses dollar_figure of hoa dues and the entire amount deducted as interest on loans for and determined accuracy-related_penalties on various grounds including negligence or disregard of rules or regulations and a substantial_understatement_of_income_tax for and petitioners timely petitioned the court for redetermination i burden_of_proof opinion generally the burden_of_proof in cases before the court is on the taxpayer subject_to certain exceptions rule a 290_us_111 respondent’s concessions discussed above of dollar_figure and dollar_figure reduce the income remaining in dispute to dollar_figure and dollar_figure respectively under sec_7491 in certain circumstances the burden may shift to the commissioner petitioners do not argue that the burden should shift nor did they offer sufficient information in the record to permit us to conclude that the burden should shift under sec_7491 accordingly the burden remains on petitioners ii loan proceeds the first and by far the largest issue is whether the amounts mr stanley received were nontaxable loan proceeds sec_61 defines gross_income as all income from whatever source derived it is well settled that loan proceeds are not included in gross_income because of the obligation to repay the loan 461_us_300 whether a particular transaction constitutes a loan is a question of fact to be determined by considering all of the pertinent facts in the case 54_tc_905 in unreported income cases the commissioner generally must make some minimal evidentiary showing to link the taxpayer with the disputed income for the presumption of correctness to attach 596_f2d_358 9th cir rev’g 67_tc_672 92_tc_661 here petitioners do not dispute their link to the amounts in issue rather they argue that the amounts in issue are loan proceeds and not income therefore the presumption remains a bona_fide loan requires both parties to have an actual good-faith intent to establish a debtor-creditor relationship when the funds are advanced id pincite- an intent to establish a debtor-creditor relationship exists if the debtor intends to repay the loan and the creditor intends to enforce the repayment 55_tc_85 fisher v commissioner t c pincite see also 412_f2d_974 5th cir courts consider various factors in determining whether the parties intended a bona_fide loan such as the ability of the borrower to repay the existence or nonexistence of a debt_instrument security_interest a fixed repayment date and a repayment schedule how the parties’ records and conduct reflect the transaction whether the borrower had made repayments whether the lender had demanded repayment the likelihood that the loan was disguised compensation_for services and the testimony of the purported borrower and lender 204_f3d_1228 9th cir aff’g tcmemo_1998_121 925_f2d_180 7th cir aff’g tcmemo_1989_393 see also todd v commissioner tcmemo_2011_ aff’d 486_fedappx_423 5th cir the factors are non-exclusive and provide a general basis upon which courts may analyze a transaction welch v commissioner f 3d pincite courts assess the borrower’s ability to repay by evaluating whether there was a reasonable expectation of repayment in the light of the economic realities of the situation see eg fisher v commissioner t c pincite an expectation at the time the funds were advanced that the borrower would be unable to repay suggests that the parties did not intend a bona_fide loan see eg 321_f2d_598 3d cir aff’g 36_tc_446 security_interest a fixed repayment date and a repayment schedule suggest that the parties intended a bona_fide loan see eg welch v commissioner f 3d pincite1 frierdich v commissioner f 2d pincite a lack of security a low interest rate and an open-ended repayment period suggest otherwise see eg frierdich v commissioner f 2d pincite mr stanley credibly testified that the lenders provided him funds because he offered an attractive return on their investment and that he intended to repay the outstanding loans in full and intended to pay any interest that had accumulated while mr stanley did not have a specific plan for repayment he intended to use the proceeds from his insurance_business and his real_estate investments see kaider v commissioner tcmemo_2011_174 wl at holding that there was a reasonable expectation of repayment even though the taxpayer had no reliable source of future earnings and had other outstanding debt because both the taxpayer and the lender expected the taxpayer to repay the loan from future proceeds of startup enterprises although mr stanley did not offer testimony of any lenders we found his testimony credible as noted above and respondent offered no evidence to contradict his testimony save the fact that certain loans had been renewed mr stanley’s records although not complete generally support loan characterization the record contain sec_22 promissory notes between mr stanley and the lenders for and the promissory notes included the amount and date of the loan the lender’s name and address the interest rate the length of the loan period the due_date of interest payments and the unpaid principal and the signatures of the parties the promissory notes included repayment periods ranging from to months and interest rates ranging from to with the exception of one short-term loan of two weeks with an interest rate of all but one of the promissory notes were unsecured mr stanley’s actions on balance support loan characterization as well he paid the interest for the corresponding promissory notes although he was not always timely he made repayments on some of the loans while other loans were as noted respondent conceded that the proceeds of two loans without promissory notes in the record were nontaxable loans to mr stanley renewed he indicated the loan status on some of the corresponding promissory notes whether paid off or renewed and the amount of interest_paid the record is insufficient however to allow us to find that any lenders demanded repayment and if so whether the demand was honored after carefully reviewing the record and considering the factors we find that dollar_figure and dollar_figure in excess of respondent’s concessions for and respectively were proceeds from bona_fide loans and properly excluded from petitioners’ and income this leaves dollar_figure of the original unreported income of dollar_figure for in dispute although petitioners bear the burden_of_proof they offered none as to this remaining amount that would allow us to conclude it was nontaxable indeed we found no explanation in the record for any amounts beyond dollar_figure and dollar_figure for and respectively without any promissory notes or other explanation for the remaining dollar_figure we cannot conclude that this amount consisted of nontaxable loan proceeds we therefore find that this amount is includible in petitioners’ taxable_income this amount includes both the dollar_figure we find to be proceeds from bona_fide loans and the dollar_figure respondent conceded leaving dollar_figure of the original dollar_figure of unreported income for unaccounted for as noted above iii schedule c deductions deductions are a matter of legislative grace and the taxpayer must prove his entitlement to any deductions rule a 503_us_79 292_us_435 a taxpayer claiming a deduction on a federal_income_tax return must demonstrate that the deduction is allowable pursuant to some statutory provision and must substantiate that the expense to which the deduction relates has been paid_or_incurred sec_6001 65_tc_87 aff’d per curiam 540_f2d_821 5th cir 43_tc_824 sec_1_6001-1 income_tax regs as a general_rule if a taxpayer provides sufficient evidence that the taxpayer has incurred a trade_or_business expense contemplated by sec_162 but is unable adequately to substantiate the amount of the expense then the court may estimate the amount of such expense and allow a deduction to that extent 39_f2d_540 2d cir for the court to estimate the amount of an expense there must be some basis upon which an estimate may be made 85_tc_731 otherwise any deduction allowed would amount to unguided largesse 245_f2d_559 5th cir deductions for expenses attributable to travel entertainment gifts and the use of listed_property including passenger automobiles if otherwise allowable are subject_to stricter rules of substantiation see sec_274 50_tc_823 aff’d per curiam 412_f2d_201 2d cir sec_1_274-5t temporary income_tax regs fed reg date a car and truck expenses and hoa dues of the deductions for car and truck expenses of dollar_figure and hoa dues of dollar_figure claimed on the schedule c for respondent disallowed deductions for car and truck expenses of dollar_figure and for hoa dues of dollar_figure for failure to substantiate petitioners offered no testimony or other evidence to substantiate deductions of the disallowed amounts we therefore sustain respondent’s determination b interest on loans sec_163 generally allows a deduction for any interest_paid or accrued on indebtedness in the taxable_year sec_163 provides an exception to this general_rule of deductibility for personal_interest sec_163 defines personal_interest to mean any interest allowable as a deduction other than as relevant here interest_paid or accrued on indebtedness properly allocable to a trade or business or investment_interest as defined in sec_163 or qualified_residence_interest as defined in sec_163 mr stanley acknowledged that petitioners used some of the loan proceeds to pay personal expenses and petitioners made no attempt to distinguish between those loan proceeds used for personal expenses and those used for other purposes that might permit deduction we likewise have insufficient evidence to make any reasonable allocation between payment of personal expenses and other uses see sec_1_163-8t temporary income_tax regs fed reg date interest_expenses on a debt are allocated in the same manner as the related debt is allocated debt is allocated by tracing the proceeds to specific expenditures as we have no basis to allocate we need not consider whether some uses of the loan proceeds would give rise to deductible_interest accordingly we hold that petitioners are not entitled to the deduction of dollar_figure in interest_expenses claimed on their return iv sec_6662 accuracy-related_penalty sec_6662 and b and imposes an accuracy-related_penalty of of the portion of an underpayment of income_tax that is attributable to the taxpayer’s negligence or other specified grounds negligence includes any failure to make a reasonable attempt to comply with the provisions of the internal revenue code including any failure to keep adequate books_and_records or to substantiate items properly sec_6662 sec_1_6662-3 income_tax regs we have defined negligence as the failure to exercise due care or the failure to do what a reasonable person would do under the circumstances see 92_tc_1 aff’d 925_f2d_348 9th cir 85_tc_934 the burden of production for the sec_6662 accuracy-related_penalty rests with the commissioner see sec_7491 respondent determined that petitioners failed to keep adequate_records substantiating expenses for the schedule c deductions claimed on their return and disallowed in the notice_of_deficiency and petitioners offered no evidence to refute that determination petitioners offered no records such as promissory notes or explanation for the dollar_figure that respondent determined to be unreported income in excess of the amounts we determined above to be nontaxable loan proceeds for see sec_7491 see also 116_tc_438 further the record is silent as to petitioners’ concession for the net_operating_loss carryforward for and see perry funeral home inc v commissioner tcmemo_2003_340 finding that the commissioner met his burden of production under sec_7491 with respect to items the taxpayer conceded when the record was silent as to the taxpayer’s position on those items and there was no evidence that the taxpayer’s errors were other than negligent alternatively to the extent that the rule_155_computations show that the understatement of income_tax for or exceeds the greater of of the tax required to be shown on the return or dollar_figure see sec_6662 respondent has met his burden of producing evidence showing that a sec_6662 penalty for an underpayment_of_tax attributable to a substantial_understatement_of_income_tax is appropriate the accuracy-related_penalty does not apply to any part of an underpayment_of_tax if it is shown that the taxpayer acted with reasonable_cause and in good_faith with respect to that portion sec_6664 the determination of whether a taxpayer acted in good_faith is made on a case-by-case basis taking into account all the pertinent facts and circumstances sec_1_6664-4 income_tax regs petitioners bear the burden of proving that they had reasonable_cause and acted in good_faith with respect to the underpayment see higbee v commissioner t c pincite petitioners who are represented by counsel do not contend let alone demonstrate that they had reasonable_cause and acted in good_faith with respect to that portion of the underpayment_of_tax that remains for each year therefore the portion of the penalty relating to the remaining underpayment_of_tax for each year will be sustained any contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number ------------------------------------- ----------------------------------------- ---------------------- ------------------------------ re ---------------------- legend 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 b04 plr-124354-16 date date ----------------------------- decedent ------------------------------------------------------- spouse administrator date date ------------------ ------------------------ ----------------------- ----------------- dear ------------------- this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code portability election to allow the estate of decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election plr-124354-16 administrator of spouse’s estate acting under sec_20_2010-2 represents that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of decedent’s death including any taxable_gifts made during decedent’s lifetime administrator requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-124354-16 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means 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_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 plr-124354-16 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date spouse represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a form_706 together with a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability the form_706 filed by decedent's_estate within days from the date of this letter will be considered to be timely filed the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-124354-16 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel passthroughs special industries by leslie finlow leslie finlow senior technician reviewer branch office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court mildred i criss et al petitioners v commissioner of internal revenue respondent docket no filed date john m tkacik jr for respondent memorandum opinion chiechi judge these consolidated cases are before us on respondent’s motion to dismiss for lack of prosecution and to impose sanctions under sec_6673 in the case at docket no ‘cases of the following petitioners are consolidated here- with daryl e criss docket no and criss asset management_trust docket no all section references are to the internal_revenue_code continued - respondent’s motion in the case at docket no respondent’s motion to dismiss for lack of prosecution and to impose sanctions under sec_6673 in the case at docket no respondent’s motion in the case at docket no and respondent’s motion to hold petitioner in default in the case at docket no respondent’s motion in the case at docket no we shall refer collectively to those three motions as respondent’s motions at the request of respondent on date the court held a trial in order to enable respondent to present evidence to satisfy the burden of produc-- tion under sec_7491 that respondent maintains respondent has with respect to the accuracy-related_penalty under sec_6662 that respondent determined for each of the taxable years and in the notice_of_deficiency notice issued to mildred i criss ms criss in the case at docket no the accuracy-related_penalty under sec_6662 a for each of the taxable years and that respondent determined in the notice issued to daryl e criss mr criss in the case at docket no and the addition_to_tax under sec_665l1 a for the taxable_year that respondent determined in the notice issued to criss asset management_trust continued code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure criss trust in the case at docket no ’ background the record establishes and or the parties do not dispute the following at the time the respective petitions in these cases were filed ms criss mr criss and criss trust listed in those petitions the same address in massillon ohio ms criss filed form_1040 u s individual_income_tax_return return for each of the taxable years and during respondent’s examination of ms criss’ and returns and thereafter ms criss provided no books records or other information to respondent establishing the income reported and the expense deductions claimed in those returns in the notice issued to ms criss respondent determined inter alia that ms criss is liable for each of the taxable when referring in this opinion to criss asset management_trust and criss trust our use of the word trust and any similar words is for convenience only and is not intended to convey any meaning or have any significance for federal tax purposes in the notice issued to criss trust respondent also deter- mined to impose the accuracy-related_penalty under sec_6662 a for each of the taxable years and at the trial respondent indicated that respondent was abandoning pursuing the determinations in the notice issued to criss trust to impose the penalty under sec_6662 for each of the taxable years and in respondent’s brief filed after the trial respondent makes no reference to the addition_to_tax under sec_6651 a for the taxable_year that respondent determined in the notice issued to criss trust - years and for the accuracy-related_penalty under sec_6662 because of negligence or disregard of rules or regulations under sec_6662 or substantial_understatement_of_income_tax under sec_6662 b prior to and including the tax years and mr criss ms criss’ son operated a trucking business mr criss filed a return for each of the taxable years and according to the respective schedules c profit or loss from business schedule c included with mr criss’ and returns mr criss received income from his trucking business of dollar_figure for and dollar_figure for in each of mr criss’ and schedules c mr criss indicated that his schedule c trucking business income was reported by or assigned to employer identification no ein which was the ein for criss family limited_partnership criss partner- ship during respondent’s examination of mr criss’ and returns and thereafter mr criss provided no books records or other information to respondent establishing the income reported and the expense deductions claimed in those returns in the notice that respondent issued to mr criss respondent deter- when referring in this opinion to criss family limited_partnership and criss partnership our use of the word partner- ship and any similar words is for convenience only and is not intended to convey any meaning for federal tax purposes - - mined inter alia that mr criss is liable for each of the taxable years and for the accuracy-related_penalty under sec_6662 because of negligence or disregard of rules or regulations under sec_6662 or substantial_understatement_of_income_tax under sec_6662 b criss trust filed form_1041 u s income_tax return for estates and trusts trust return for each of the taxable years and in schedule_k-1 beneficiary’s share of income deductions credits etc form_1041 schedule_k-1 that criss trust included with each of its and trust returns criss trust indicated that mr criss was a beneficiary anda fiduciary of criss trust in a separate form_1041 schedule_k-1 that criss trust included with each of its and trust returns criss trust indicated that ms criss was a beneficiary of criss trust in each of its and trust returns criss trust deducted depreciation with respect to ms criss’ personal resi- dence that she had transferred to criss trust at a time that is not disclosed by the record criss trust also deducted other_amounts in its and trust returns for personal expenses of ms criss and or mr criss during respondent’s examination of criss trust’s and trust returns and thereafter no books records or other information was provided to respondent establishing the -- - jurisdiction under the laws of which criss trust was purportedly organized the person who is authorized to act on behalf of criss trust and that criss trust was at all relevant times a_trust cognizable for federal tax purposes nor did criss trust at any time provide any books records or other information to respondent establishing the income reported and the expense deductions claimed in criss trust’s and trust returns in the notice issued to criss trust respondent determined inter alia that criss trust is liable for each of the taxable years and for the accuracy-related_penalty under sec_6662 and for the taxable_year for the addition_to_tax under sec_6651 criss partnership filed form_1065 u s partnership return of income partnership return for each of the taxable years and each of criss partnership’s and part-- nership returns reported that criss partnership’s principal business was a trucking activity in schedule_k-1 partner’s share of income credits deductions etc that criss partner- ship included with each of its and partnership returns criss partnership indicated that mr criss was a 12-percent general_partner and ms criss was an 88-percent limited_partner of criss partnership the income that criss partnership reported in its and partnership returns was generated from assets owned solely by mr criss - during respondent’s examination of criss partnership’s and partnership returns and thereafter no books records or other information was provided to respondent establishing inter alia that criss partnership was a partnership cognizable for federal tax purposes and that ms criss owned a capital interest in criss partnership during and nor did criss partnership at any time provide any books records or other information to respondent establishing the income reported and the expense deductions claimed in those returns and the assets if any that had been transferred to criss partnership james binge mr binge was the return preparer for each of ms criss’ and returns each of mr criss’ and returns each of criss trust’s and trust returns and each of criss partnership’s and partnership re- turns respondent has identified mr binge as an individual involved with purported trusts used for tax_avoidance purposes on date respondent filed separate motions to compel answers to interrogatories and to compel production of documents in each of the cases at docket nos and oo on date the court granted each of those motions neither ms criss nor mr criss answered respondent’s interrogatories or produced the documents requested by respon- dent as ordered by the court on date on date ms criss in the case at docket no - - filed a motion to dismiss that case which the court denied on date on date ms criss in the case at docket no filed a motion for entry of judgment in favor of petitioner in that case which the court denied on date on date ms criss in the case at docket no filed a motion to continue the trial in that case which the court denied on date on date mr criss in the case at docket no filed a motion for entry of judgment in favor of peti- tioner in that case which the court denied on date on date mr criss in the case at docket no filed a motion to continue the trial in that case which the court denied on date on date these cases were called from the court’s trial calendar at the court’s trial session in cleveland ohio cleveland trial session at that calendar call there was no appearance by or on behalf of ms criss mr criss and criss trust at that time respondent orally moved to dismiss each of these cases for failure to prosecute and respondent requested and the court held a trial because according to respondent respondent has the burden of production pursuant to sec_7491 with respect to the respective penalties under sec_6662 for and that respondent determined against ms criss and against mr criss and with respect to the addition to --- - tax under sec_6651 for that respondent determined against criss trust at the trial in these cases on date there was no appearance by or on behalf of ms criss mr criss or criss trust on date respondent filed a written motion to dismiss for lack of prosecution and to impose sanctions under sec_6673 in the case at docket no a written motion to dismiss for lack of prosecution and to impose sanctions under sec_6673 in the case at docket no and a written motion to hold petitioner in default in the case at docket no on date the court sua sponte issued an order date show cause order directing each party in the case at docket no in which criss asset management_trust is named as petitioner to show cause in writing why the court has jurisdiction over this case including the identity of any purported fiduciary of petitioner and a detailed analysis of why such purported fiduciary has the capacity to litigate in the court on behalf of petitioner on date respondent filed a written response to the date show cause order in which respondent con- tended inter alia that ‘however in the brief that respondent filed after the trial respondent makes no mention of respondent’s determination that criss trust is liable for the addition_to_tax under sec_6651 see supra note -- - criss asset management_trust failed to estab- lish that a trustee if authorized acted on its behalf when the purported petition was filed with the court on date criss asset management_trust failed to file a proper petition with this court in that the petition was not brought by and with the full descriptive name of the fiduciary entitled to institute a case on its behalf since the petition in this case was not brought by a party with proper capacity as required by the tax_court rules_of_practice and procedure the court lacks jurisdiction in the above-entitled case at docket no on date criss trust filed a response to the date show cause order criss trust’s response to the date show cause order which was signed by terrence a bentivegna mr bentivegna who identified himself in that response as trustee that response asserted that petitioner does not believe that this court has jurisdiction in support of that position criss trust’s response to the date show cause order set forth statements and contentions that the court finds to be frivolous and or groundless ’ ‘criss trust’s response to the date show cause order stated in pertinent part petitioner petitioned this court after having received false and misleading information from the respondent and attorneys david wise and his asso- ciate carol jackson the respondent has failed to properly assess any taxes in accordance with their required administrative procedures and yet ad- vised the petitioner that the only method of dis- agreeing with the purported tax_liability was to petition this court this courts’ sic order states petitioner purports to be a_trust petitioner is a_trust and the respondent has never been able to prove otherwise nor does the respondent have the right or ability to set_aside a contract petitioner does not want this false tax claim to be litigated in court and has petitioned this court to have this case removed from the docket as having been petitioned in error due to the errone- ous instructions given by the respondent wherefore it is prayed that this court dismiss this case at petitioner’s re- guest as the original petition was issued in error due to false directions given to petitioner by respondent petitioner believes that he has the right to correct his mistake and withdraw the original petition this court and the respondent recognize the peti- tioner as a_trust and cease attempting to set_aside a contract in direct opposition to the con- stitution of the united_states of america this court sanction the respondent for using this continued -- on date petitioner in each of the cases at docket nos and filed a response to respondent’s motion in each such case to dismiss for lack of prosecution and to impose sanctions under sec_6673 on date criss trust filed a response to respondent’s motion to hold petitioner in default in the case of docket no each of those respective responses contained arguments and contentions that the court found in an order dated date date order to be frivolous and or groundless in the date order that the court issued in each of these cases the court reminded each petitioner about sec_6673 the court’s respective date orders in continued court for illegal purposes respondent has no legal tax claim as petitioner has noted to respon- dent and this court on numerous occasions with- out a legal claim respondent fraudulently in- structed petitioner to use this court to legiti- mize his illegal attempt to deprive petitioner of his assets this court instruct the respondent to cease now and forever harassment of petitioner sec_6673 states sec_6673 sanctions and costs awarded by courts a tax_court proceedings ---- procedures instituted primarily for de- continued - - the cases at docket nos and were not the first occasions on which the court reminded ms criss and criss trust about sec_6673 discussion criss trust on date the court sua sponte issued the decem-- ber show cause order regarding the court’s jurisdiction over the case at docket no rule provides in pertinent part a petitioner deficiency or liability continued lay etc ---whenever it appears to the tax_court that-- a proceedings before it have been instituted or maintained by the taxpayer primarily for delay b the taxpayer’s position in such proceeding is frivolous or groundless or c the taxpayer unreasonably failed to pursue available administrative remedies the tax_court in its decision may require the taxpayer to pay to the united_states a penalty not in excess of dollar_figure on date the court issued a separate order in each of the cases at docket nos and with respect to the motion filed by each petitioner to compel answers to interrogatories in each of those two orders dated date the court found that each such motion including attach- ments thereto contained contentions statements and or argu- ments that the court found to be groundless and or frivolous and the court reminded petitioner in each of those cases about sec_6673 actions a case shall be brought by and in the name of the person against whom the commissioner determined the deficiency in the case of a notice_of_deficiency or by and with the full descriptive name of the fiduciary entitled to institute a case on behalf of such person see rule a a case timely brought shall not be dismissed on the ground that it is not properly brought on behalf of a party until a reason- able time has been allowed after objection for ratifi- cation by such party of the bringing of the case and such ratification shall have the same effect as if the case had been properly brought by such party c capacity the capacity of a fiduciary or other representative to litigate in the court shall be determined in accordance with the law of the juris-- diction from which such person’s authority is derived the record does not establish where criss trust was orga- nized the petition in the case at docket no listed an address for criss trust in massillon ohio ’ which is also the service address used by the court in that case assuming arguendo that criss trust were a_trust organized under the laws of the state of ohio the administration of which is subject_to the laws of that state under ohio law see rule c a trustee generally is the proper party authorized to act on behalf of a_trust 976_f2d_279 6th cir saxton v seiberling ohio st n e the ohio address listed in the petition in the case at docket no is the same address listed by petitioners in the respective cases at docket nos and see ohio r civ p a in the case at docket no criss trust has the burden of proving that this court has jurisdiction see 65_tc_346 27_tc_837 by establishing affirmatively all facts giving rise to our jurisdiction see 35_tc_177 15_bta_645 in order to meet that burden criss trust must provide evidence establishing who has the authority to act on its behalf in the proceeding at docket no see natl comm to secure justice in the rosenberg case v commissioner supra pincite 22_bta_686 on the instant record we find that criss trust has failed to establish who has the authority to act on its behalf in the ohio r civ p a provides in pertinent part rule parties plaintiff and defendant capacity a real party in interest every action shall be prosecuted in the name of the real party in interest an executor administrator guardian bailee trustee of an express trust a party with whom or in whose name a contract has been made for the benefit of another or a party authorized by statute may sue in his name as such representative without joining with him the party for whose benefit the action is brought empha- sis added -- - proceeding at docket no we further find on that record that the case at docket no was not brought by and with the full descriptive name of the fiduciary entitled to institute a case on behalf of criss trust as required by rule a on the record before us we conclude that we do not have juris-- diction over the case at docket no accordingly we shall dismiss that case for lack of jurisdiction ’ ms criss and mr criss neither ms criss nor any authorized representative of ms criss appeared at the court’s cleveland trial session on date at the call of these consolidated cases from the court’s trial calendar neither mr criss nor any authorized representative of mr criss appeared at that calendar call at the trial held by the court in the case at docket no neither ms criss nor any authorized representative of ms criss appeared at the trial held by the court in the case at docket no neither mr criss nor any authorized representative of mr criss appeared the respective written responses by ms criss and mr criss to respondent’s respective motions to dismiss for lack of prose- cution and to impose sanctions under sec_6673 in the cases pincitebecause we shall dismiss the case at docket no for lack of jurisdiction we shall deny respondent’s written motion filed on date to hold criss trust in default in that case - docket nos and do not contain any valid reason why those cases should not be dismissed for lack of prosecution those respective responses contained contentions and arguments that the court found in the court’s date order to be frivolous and or groundless sec_7491 provides in pertinent part sec_7491 burden of proof’ c penalties --notwithstanding any other provi- sion of this title the secretary shall have the burden of production in any court_proceeding with respect to the liability of any individual for any penalty sec_6662 imposes an accuracy-related_penalty equal to percent of the underpayment_of_tax resulting from inter alia negligence or disregard of rules or regulations sec_6662 or a substantial_understatement_of_income_tax sec_6662 for purposes of sec_6662 an understatement is equal to the excess of the amount of tax required to be shown in the tax_return over the amount of tax shown in the tax_return sec_6662 d a and is substantial in the case of an individual if it exceeds the greater of percent of the tax required to be shown in the return or dollar_figure sec_6662 a for purposes of sec_6662 the term negligence includes any failure to make a reasonable attempt to comply with the code and the term disregard includes any careless reckless or intentional disregard sec_6662 negligence has also been defined as a lack of due care or failure to do what a reasonable person would -- - do under the circumstances 963_f2d_907 6th cir affg tcmemo_1991_179 91_tc_686 affd 893_f2d_656 4th cir the accuracy-related_penalty under sec_6662 does not apply to any portion of an underpayment if it is shown that there was reasonable_cause for and that the taxpayer acted in good_faith with respect to such portion sec_6664 the determination of whether the taxpayer acted with reasonable_cause and in good_faith depends on the pertinent facts and circum-- stances including the taxpayer’s efforts to assess his or her proper tax_liability the knowledge and experience of the tax- payer and the reliance on the advice of a professional such as an accountant sec_1_6664-4 income_tax regs reliance on the advice of a professional such as an accountant does not necessarily demonstrate reasonable_cause and good_faith unless under all the circumstances such reliance was reasonable and the taxpayer acted in good_faith id in the case of claimed reliance on the accountant who prepared the taxpayer’s tax_return the taxpayer must establish that correct information was provided to the accountant and that the item incorrectly omitted claimed or reported in the return was the result of the accoun- tant’s error 70_tc_158 on the record before us we find that respondent has satis-- fied the burden of production that respondent maintains respon- dent has with respect to the respective accuracy-related penal- ties under sec_6662 that respondent determined to impose on ms criss and on mr criss for the taxable years and dollar_figure based on our examination of the entire record before us we shall grant respondent’s motion in each of the cases at docket nos and in that we shall dismiss each of those cases for failure by petitioner in each such case to prosecute such case and we shall enter a decision in each of those cases sustaining the determinations that respondent made in the notice to which each such case pertains in respondent’s motions in the cases at docket nos and respondent also asks the court to impose a penalty under sec_6673 on petitioner in each of those cases as grounds therefor respondent contends that each of those petitioners instituted proceedings in the court primarily for delay advanced frivolous and groundless positions in such proceedings and unreasonably failed to pursue administrative remedies we are not deciding in the cases at docket nos and whether the commissioner of internal revenue has the burden of production in cases subject_to sec_7491 when a taxpayer fails to appear for trial - - on the record before us we find that ms criss instituted the proceedings in the case at docket no primarily for delay we also find on that record that ms criss’ position in the case at docket no was frivolous and or groundless on the record before us we shall impose a penalty on ms criss pursuant to sec_6673 in the amount of dollar_figure on the record before us we find that mr criss instituted the proceedings in the case at docket no primarily for delay we also find on that record that mr criss’ position in the case at docket no was frivolous and or groundless on the record before us we shall impose a penalty on mr criss pursuant to sec_6673 in the amount of dollar_figure to reflect the foregoing an appropriate order of dis- missal for lack of jurisdiction and denying respondent’s motion will be entered in the case at docket no and an appropriate order granting respondent’s motion and decision will be entered in each of the cases at docket nos and sustaining respondent’s determinations and imposing a pen- alty under sec_6673 in each of those two cases


significant index number tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c l ‘jan tep ra az re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning date this extension applies to the eligible amortization charge bases as identified in your application submission established as of date the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan’s actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the to the and to your authorized representative pursuant to a power ot attorney on file in this office this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact sincerely yours david m ziegler manager ep actuarial group