t c memo united_states tax_court estate of max l van tine deceased ann van tine executor petitioner v commissioner of internal revenue respondent docket no filed date howard l sanger and christopher s manes for petitioner christine v olsen and gordon l gidlund for respondent memorandum findings_of_fact and opinion colvin judge respondent determined a deficiency in petitioner's estate_tax of dollar_figure decedent conveyed joint tenancies in three parcels of real_property to his daughter several years before he died the sole issue for decision is whether decedent's daughter contributed consideration equal to at least one-half of the total consideration that decedent and his spouse paid for the three parcels of real_property if so one-half of the value of the three properties is excluded from decedent's_estate under sec_2040 ann van tine performed valuable services for her father's construction business from to the 1970's but the record does not show how much consideration decedent and his wife paid to buy and improve the three parcels as a result we have no basis to decide what part of the parcels' value that is attributable to ann van tine's services thus on this record we hold for respondent section references are to the internal_revenue_code rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and are so found a the van tines ann van tine was born around she was the only child of decedent and betty van tine ann van tine lived at home with her parents until when she was about her parents owned and operated van tine construction vtc which built homes and commercial buildings they paid for all of her basic personal needs such as food and clothing they bought and insured her vehicle ann van tine never attended college married or had children her hobbies were growing bonsai trees and keeping german shepherd dogs at the time of trial ann van tine had carpal tunnel syndrome1 in both hands and a disc problem in her back caused by construction work b dr patricia ebaugh patricia ebaugh ebaugh moved near the van tines in when ebaugh was and ann van tine wa sec_4 ebaugh became a very close friend of the van tine family they treated her like part of their family ebaugh treated ann van tine like a younger sister ebaugh was a lab technician in los angeles until the mid- 1950's she graduated from the university of southern california in she graduated from medical school in philadelphia and was an anesthesiologist in long beach california from to ebaugh bought a home a few blocks from the van tines' home ebaugh's rancho palos verdes home c van tine construction on date the van tines filed articles of incorporation for m l van tine inc ann van tine was a director of the corporation however the van tines did not activate the corporation and continued to operate vtc as a proprietorship albert andrade andrade was one of vtc's subcontractors he installed driveways at residential homes and parking lots for carpal tunnel syndrome is caused by using one's arms in a repetitive manner over a long period of time decedent and vtc for about years from the late 1950's to the early 1970's andrade sometimes saw ann van tine cleaning houses being built by vtc vtc bought property and developed an office building in vtc developed property in malibu torrance inglewood redondo beach and san pedro california during the 1970's d ann van tine's work for vtc and other activitie sec_1 ann van tine's construction-related activities beginning when ann van tine was in the 5th grade decedent picked her up after school and took her to job sites where they stayed until dinner when she was in high school ann van tine helped her father operate transit levels used to measure the slope of land install foundation forms and do rough plumbing and rough electrical work she did carpentry framing roofing cement work painting and landscaping ann van tine received her driver's license in when she was years old at that time she began to pick up and deliver materials for vtc she was supervising construction by the 1960's and obtaining materials for construction jobs her responsibilities to vtc and abilities grew steadily from the mid-1950's to around ann van tine helped manage eg rent maintain and landscape apartments that vtc had built decedent and betty van tine occasionally discussed giving ann van tine an interest in vtc property in exchange for her work for vtc in decedent and betty van tine told ann van tine that they wanted to give her a 50-percent joint interest in vtc property when they retired and that they hoped that she would continue to work for vtc in decedent and his partner bert e moore jr moore not otherwise identified in the record were building houses on three small tracts moore and decedent each supervised one site ann van tine supervised the completion of the houses on the third tract ann van tine received no salary for her work for vtc she never applied for a contractor's license never was bonded never signed a contract on behalf of vtc and did not have regular hours or duties she did not have signature_authority on the vtc checking account she was not listed as a beneficiary on any insurance_contract for vtc properties she did not do office work for vtc betty van tine managed the vtc office kept the books and answered the phone ann van tine's real_estate license in ann van tine obtained a real_estate agent's license she used it to show vtc properties to prospective buyers to help potential buyers of vtc tract homes sell their present homes to sell homes that vtc had built and to help potential customers find lots for contract homes she also sold property not owned by vtc ann van tine's activities unrelated to vtc during the 1950's and 1960's ann van tine engaged in activities unrelated to vtc including providing landscaping services unrelated to vtc and selling bonsai trees part time she worked for a real_estate broker and received commissions for selling non-vtc properties during the 1950's and 1960's ann van tine typically earned dollar_figure to dollar_figure a year from her activities unrelated to vtc in some years she earned no income ann van tine's work for patricia ebaugh ann van tine began working for ebaugh part time as a medical assistant in in ebaugh moved to palm springs california to begin a family medical practice ann van tine helped ebaugh negotiate the purchases of a home in palm springs and an office in nearby cathedral city ebaugh asked ann van tine to work with a contractor to build partitions for an office a waiting room and examination rooms ann van tine negotiated with the general contractor decorated the office advertised for and located a receptionist and nurse for ebaugh managed the office and ordered supplies most of ann van tine's work in the palm springs area was during weekends ann van tine helped sell ebaugh's rancho palos verdes home in ebaugh transferred her palm springs property to herself and ann van tine as joint_tenants on date ebaugh moved to palm desert california in ann van tine helped ebaugh buy a home in palm desert and sell ebaugh's palm springs home on date ebaugh transferred her palm desert property to herself and ann van tine as joint_tenants in ann van tine helped ebaugh move her office from cathedral city to rancho mirage which is nearer to palm desert she met with contractors and ensured that the office was established and decorated ann van tine moved from the family home pincite diamonte lane to big bear california late in or early in in ann van tine and decedent began to live with ebaugh in palm desert california ann van tine began to work for ebaugh full time in ebaugh paid her a total of more than dollar_figure from to an average of about dollar_figure per year see par j below at the time of trial ann van tine and ebaugh lived together shared a family_trust and commingled their funds ebaugh paid some of petitioner's attorney's_fees in this case garrabrant house in ann van tine oversaw vtc's construction of a home for jean garrabrant garrabrant betty van tine's sister ann van tine scheduled all of the subcontractors and inspected their work when they were finished e betty van tine's death decedent's remarriage later years and death betty van tine died unexpectedly in betty van tine's will was not probated because her property was held in joint_tenancy with decedent decedent married omega van tine in they lived pincite diamonte lane decedent's health began to decline in the early 1980's on date ebaugh wrote decedent has been complaining of numerous medical problems recently from gi to heart to neck pain he appears to be upset no information forthcoming from wife his daughter is going to take a more active role in helping business on date decedent complained to ebaugh that he was having trouble accomplishing everyday tasks on date he complained that he had trouble remembering anything ebaugh wrote however in the effects of the disease were limited primarily to recent memory loss he knew his daughter his friends and was completely capable of conducting the activities_of_daily_living f decedent's income_tax returns on his income_tax returns for and and to decedent reported receiving no income from contracting the record does not show whether decedent reported income continued on the return he deducted payments to someone other than ann van tine for repairs painting and gardening at the sepulveda boulevard property discussed below at paragraph g-2 g the joint_tenancy propertie sec_1 the diamonte lane property in decedent and betty van tine bought land pincite diamonte lane in rancho palos verdes california which they kept in their names in date decedent and his wife used this property as collateral for a dollar_figure loan they used the loan to build homes pincite diamonte lane and on the adjacent lot the van tine home pincite diamonte lane had about big_number square feet three bathrooms and a three-car garage the home had a panoramic view of the pacific ocean ann van tine lived pincite diamonte lane until she moved to big bear california around or decedent lived pincite diamonte lane until he moved to palm desert california around ann van tine continued to have important mail sent to diamonte lane because the u s postal service did not deliver mail to her big bear cabin on date decedent signed a deed which gave ann van tine a joint_tenancy in the property pincite diamonte lane the deed creating ann van tine's interest in the diamonte lane property was recorded on date continued from contracting for to through a realtor decedent leased the diamonte lane property to tenants beginning in date and received all of the rents while he was alive he died on date it was leased until ann van tine sold it in sepulveda boulevard in daryl and beverly stark george and lucy carrick and decedent and betty van tine bought property pincite sepulveda boulevard in the carricks starks and van tines built an office building pincite sepulveda boulevard in decedent and betty van tine bought the starks' and carricks' interest in the property pincite sepulveda boulevard decedent and betty van tine borrowed dollar_figure when they refinanced the sepulveda boulevard property in the sepulveda boulevard property was leased to commercial tenants by decedent and betty van tine in and by decedent in and decedent gave ann van tine a joint_tenancy in the property pincite sepulveda boulevard on date it was recorded on date sepulveda boulevard in decedent and moore bought property pincite sepulveda boulevard decedent and moore used the property pincite sepulveda boulevard as collateral when they bought the property pincite sepulveda boulevard moore conveyed the property pincite sepulveda boulevard to decedent in decedent leased office space pincite sepulveda boulevard to commercial tenants until when the property was sold there was no landscaping on the sepulveda property decedent executed a deed granting a joint_tenancy in the property pincite sepulveda boulevard to ann van tine on date it was recorded on date thereafter he continued to receive all the rent on the sepulveda boulevard property the joint_tenancy deeds h louise van valkenberg van valkenberg ebaugh's and decedent's accountant usually went to ebaugh's office each month to pick up and deliver paperwork in van valkenberg brought the joint_tenancy deeds to ebaugh and asked her to put them in ebaugh's safe deposit box and not record them van valkenberg told ebaugh to write a note on each deed stating that the transfer was for no consideration ebaugh did so in addition ebaugh wrote on the diamonte lane property deed that the transfer was a gift and the grantor received nothing in return van valkenberg died in in decedent sought estate_planning advice from patricia stoddard stoddard an estate_planning attorney because he was beginning to have early symptoms of alzheimer's disease he wanted to arrange his estate while he had capacity stoddard told decedent that he could make nontaxable gifts each year of dollar_figure to ann van tine or he could simply let her inherit his property decedent told stoddard that he believed that ann van tine had earned a joint_tenancy in the diamonte lane property by working for vtc for many years decedent told stoddard that he put the property pincite diamonte lane in joint_tenancy with ann van tine to compensate her for work for vtc ann van tine did not report her receipt of the joint tenancies as income on her individual income_tax returns h the big bear lots decedent betty van tine ann van tine and ebaugh built a small cabin on two small lots in the big bear area ann van tine and betty van tine each owned one of the lots ebaugh and ann van tine bought about small lots around the cabin each lot was about 30-feet wide and 80-feet deep there were about lots to an acre the lots were intended to be used for family camping ann van tine and ebaugh paid a total of about dollar_figure for the lots i decedent's death and estate decedent signed his will on date in it he left any separate_property and any community_property he may have to ann van tine decedent's disease worsened in he died on date his will was not probated because his property was held in joint_tenancy ann van tine was executrix of decedent's_estate she filed an estate_tax_return form_706 for the estate on it she excluded percent of the value of the joint_tenancy properties from decedent's gross_estate on date ann van tine filed an affidavit-death of joint tenant which allowed her to receive title for the diamonte lane sepulveda boulevard and sepulveda boulevard properties in calculating depreciation on her income_tax return ann van tine took a full step-up_in_basis for the diamonte lane and sepulveda boulevard properties and a 50-percent step-up for the sepulveda boulevard property and used the date of death values of the properties to compute her basis the fair market values of the three properties at issue on date decedent's date of death were dollar_figure for the sepulveda boulevard property dollar_figure for the sepulveda boulevard property and dollar_figure for the diamonte lane property for a total of dollar_figure ann van tine sold the sepulveda boulevard property for dollar_figure in and the diamonte lane property for dollar_figure in in reporting gain from the sale of the diamonte lane and sepulveda boulevard properties ann van tine's accountant used the date-of-death value of the properties plus the cost of improvements as her basis decedent did not file a gift_tax_return to report the transfer of the joint_tenancy interest in the diamonte lane sepulveda boulevard or sepulveda boulevard properties j ann van tine's income_tax returns ann van tine reported a total of dollar_figure in income from ebaugh on her income_tax returns from to as follows income from income from year ebaugh year ebaugh dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number dollar_figure big_number big_number big_number big_number big_number big_number big_number missing big_number big_number -0- -0- ann van tine reported that she lived pincite diamonte lane from to and at big bear city from to she used the diamonte lane address after she lived at big bear lake she also reported that she was a medical assistant from to and a business manager or business consultant from to on her and returns ann van tine deducted big_number miles of automobile expenses in connection with her work for ebaugh a background opinion a decedent's_estate includes the date-of-death value of property he or she owns jointly except for any part of the value that the estate shows is attributable to consideration provided by the surviving joint tenant sec_2040 sec_20_2040-1 sec_3 sec_2040 provides in part a general_rule --the value of the gross_estate shall include the value of all property to the extent of the interest therein held as joint_tenants with right_of_survivorship by the decedent and any other person except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate_and_full_consideration in money_or_money's_worth provided that where such property or any part thereof or part of the consideration with which such property was acquired is shown to have been at any time acquired by such other person from the decedent for less than an adequate_and_full_consideration in money_or_money's_worth there shall be excepted only such part of the value of such continued estate_tax regs the amount excluded from the gross_estate i sec_3 continued property as is proportionate to the consideration furnished by such other person sec_20_2040-1 estate_tax regs provides a in general a decedent's gross_estate includes under sec_2040 the value of property held jointly at the time of the decedent's death by the decedent and another person or persons with right_of_survivorship as follows to the extent that the property was acquired by the decedent and the other joint owner or owners by gift devise bequest or inheritance the decedent's fractional share of the property is included in all other cases the entire value of the property is included except such part of the entire value as is attributable to the amount of the consideration in money_or_money's_worth furnished by the other joint owner or owners see sec_20_2043-1 with respect to adequacy of consideration such part of the entire value is that portion of the entire value of the property at the decedent's death or at the alternate_valuation_date described in sec_2032 which the consideration in money_or_money's_worth furnished by the other joint owner or owners bears to the total cost of acquisition and capital additions in determining the consideration furnished by the other joint owner or owners there is taken into account only that portion of such consideration which continued the part of the date-of-death value of the property which the consideration furnished by the survivor bears to the total cost of acquisition and capital additions sec_2040 110_tc_297 sec_20_2040-1 estate_tax regs this can be expressed mathematically mathematical formula as follows value of the property1 consideration furnished on the date of death or alternate_valuation_date x by the survivor total consideration paid to acquire and improve the property amount excluded 1the parties agree that the entire value of the properties at issue on the date of death is dollar_figure estate of young v commissioner supra pincite 70_tc_1077 affd continued is shown not to be attributable to money or other_property acquired by the other joint owner or owners from the decedent for less than a full_and_adequate_consideration_in_money_or_money's_worth the entire value of jointly held property is included in a decedent's gross_estate unless the executor submits facts sufficient to show that property was not acquired entirely with consideration furnished by the decedent or was acquired by the decedent and the other joint owner or owners by gift bequest devise or inheritance without published opinion 673_f2d_1310 4th cir thus to exclude percent of the date-of-death value of the three properties at issue from decedent's_estate petitioner must prove that ann van tine's services to vtc were worth at least percent of the total consideration paid for the acquisition and improvement of three properties under sec_2040 a surviving family_member may give consideration by providing services to a family business 108_f2d_319 3d cir revg and remanding a memorandum opinion of the board_of_tax_appeals 80_f2d_548 d c cir petitioner bears the burden_of_proof rule a see 8_tc_969 affd per curiam 170_f2d_1021 9th cir b whether ann van tine provided substantial services to her parents and vtc parties' contentions the parties dispute whether ann van tine provided substantial services to vtc petitioner contends that ann van tine worked full time for vtc for more than years and that her work was full and adequate_consideration for her one-half interest in the three properties at issue respondent contends that the services that ann van tine performed for vtc were minimal ann van tine's work for vtc ann van tine worked for vtc without pay from around when she graduated from high school until around when she moved to big bear she did some work for vtc in the early 1980's but less than in earlier years she helped her father with all aspects of construction for vtc she supervised construction of houses for vtc in listed and sold houses that vtc built and managed vtc's rental properties she landscaped the homes and some of the office buildings that vtc built she supervised construction of the home that vtc built for garrabrant ann van tine's hobbies and her work for ebaugh before were minimal or generally occurred on weekends and did not interfere with her work for vtc we conclude that ann van tine provided a substantial service to vtc respondent's contentions a biased testimony respondent contends that the testimony of ann van tine and ebaugh was self-serving biased and incredible we decide whether a witness is credible based on objective facts the reasonableness of the testimony the consistency of statements made by the witness and the demeanor of the witness 140_us_417 338_f2d_602 9th cir affg 41_tc_593 we may discount testimony which we find to be unworthy of belief 87_tc_74 but we may not arbitrarily disregard testimony that is competent relevant and uncontradicted 39_f3d_658 6th cir affg in part and remanding 99_tc_370 and tcmemo_1992_616 the testimony of all of petitioner's witnesses ann van tine ebaugh garrabrant and andrade was consistent and plausible there was nothing in the demeanor of petitioner's witnesses or the content of their answers that suggests that they were not being truthful respondent contends that we should not believe ebaugh's testimony because ebaugh and ann van tine lived together at the time of trial they shared a_trust and commingled funds and ebaugh paid some of petitioner's attorney's_fees in this case we disagree we are not convinced that ebaugh altered her testimony to help ann van tine b stoddard's affidavit the parties stipulated that we may treat stoddard's affidavit as if it were her testimony stoddard's affidavit corroborates the testimony of petitioner's witnesses respondent points out that respondent could not cross- examine stoddard this objection however was in effect waived by the stipulation respondent contends that we should disregard stoddard's affidavit because it was written by petitioner's counsel or someone other than stoddard we disagree there is no evidence to suggest anything in the stoddard affidavit is untrue c andrade's and garrabrant's testimony respondent points out that andrade and garrabrant saw ann van tine cleaning up and delivering materials respondent contends that ann van tine's help to her father was only sporadic and menial we disagree we believe ebaugh's and ann van tine's testimony about the nature of ann van tine's services to vtc respondent reserved a relevancy objection to stoddard's affidavit stoddard's affidavit is relevant because it tends to show that decedent intended to transfer a joint_tenancy interest in the diamonte lane property to ann van tine as consideration for her work andrade's and garrabrant's testimony was consistent with that testimony d end of vtc's construction activities respondent contends that ann van tine did not provide services beyond the early 1970's because according to respondent that is when vtc stopped its construction activities decedent was semiretired in but vtc built homes and managed apartments in the early 1980's on date decedent told an irs representative that he had some condominiums that would not be completed until or on date ebaugh wrote a note evaluating decedent's medical_condition in which she said his daughter is going to take a more active role in helping business despite this we believe ann van tine did not provide a significant service to vtc after she moved from diamonte lane to big bear around she began to work full time for ebaugh in there is no evidence that vtc constructed anything after the garrabrant home in e ann van tine's other activities respondent contends that ann van tine could not have provided a significant service to vtc because she had many other activities including growing bonsai trees keeping german shepherd dogs landscaping selling real_estate and working for ebaugh we disagree the time she spent with those activities did not preclude her from working a substantial amount of time for vtc before conclusion we conclude that ann van tine performed a substantial service for vtc over the years however that conclusion is not enough for petitioner to prevail for reasons discussed next c whether petitioner has shown that ann van tine furnished consideration as required by sec_20_2040-1 estate_tax regs whether petitioner has shown how much ann van tine's parents paid to buy and improve the three properties to exclude an amount from decedent's_estate under sec_2040 petitioner must show among other things the total consideration paid to acquire and improve the three properties sec_2040 estate of young v commissioner t c pincite sec_20_2040-1 estate_tax regs ann van tine's parents bought the diamonte lane property in they bought the sepulveda boulevard property in and built an office building on it in decedent and moore bought the sepulveda boulevard property in however the record does not show how much ann van tine's parents paid to buy and improve the three properties petitioner's contentions petitioner contends that it needs to show only that ann van tine's services were more than minimal or part time petitioner contends that we stated this standard in estate of anderson v commissioner tcmemo_1989_643 in which we applied sec_2040 and sec_20_2040-1 estate_tax regs we disagree in that case the decedent gave her son a joint interest in property the decedent and her former husband paid dollar_figure in to buy the property estate of anderson differs from this on her income_tax return ann van tine reported that her basis for purposes of depreciation was dollar_figure for diamonte lane and dollar_figure for each sepulveda blvd property for a total of dollar_figure petitioner does not contend that we can derive decedent's total cost to acquire and improve the properties from this return case because we knew how much decedent had paid for the property dollar_figure we concluded that the value of the decedent's son's services was sufficient to exclude one-half of the fair_market_value of the property from decedent's_estate under sec_2040 here we do not know how much ann van tine's parents paid to buy and improve the property petitioner points out that in 108_f2d_319 3d cir and estate of otte v commissioner tcmemo_1972_76 the estates did not show the dollar values of the surviving joint tenant's work however those cases are distinguishable from this case in berkowitz husband and wife each contributed dollar_figure in to start a grocery store they both worked full time for years to operate and develop their store they put profits from their business in jointly owned property and accounts the court_of_appeals for the third circuit said that if the husband and wife had an agreement to share profits the fact that the husband and wife had each made a small initial contribution to start the store and made a complete joint effort over years established that the wife had contributed at least one-half of the total cost of the jointly held property berkowitz v commissioner supra pincite the court_of_appeals for the third circuit noted that it was likely that the husband and wife had a profit-sharing agreement but remanded the case to the board_of_tax_appeals to decide that issue id pincite this case differs from berkowitz because there is no comparable evidence here that ann van tine and her parents contributed equally to the cost of acquiring and improving the joint_tenancy property or agreed to share profits in estate of otte we knew the cost of the properties that were at issue some of the costs were dollar_figure for acres in dollar_figure for acres in dollar_figure for acres in dollar_figure for acres in dollar_figure for acres in dollar_figure for acres in and dollar_figure for acres in in the decedent his wife and their son paid dollar_figure for acres they partitioned the land decedent and his wife received acres and the rest went to their son the husband and wife worked as a team for years to acquire the property at issue in that case income from their property belonged to both of them under indiana law although we could not trace each transaction we held that the taxpayer qualified under sec_2040 here we do not know how much consideration decedent paid to buy and improve the three properties d conclusion ann van tine provided a substantial service to vtc however she has not shown what part of the value of the three properties at issue is attributable to the amount of consideration that she furnished with those services thus in light of our conclusion we need not decide respondent's contentions that ann van tine's services were not adequate_consideration for the joint_tenancy interests at issue because decedent used the transfers into joint_tenancy to avoid probate ann van tine would have inherited her parents' property under any circumstances ann van tine did not report her receipt of interests in the properties as income on her individual income_tax returns ann van tine took a full step- up in basis for diamonte lane and one of the sepulveda blvd properties the handwritten statements on the joint_tenancy deeds said that ann van tine's father made the conveyances for no consideration and there was no agreement between ann van continued petitioner may not exclude one-half of the value of the three properties at issue to reflect the foregoing decision will be entered for respondent continued tine and her parents that ann van tine would work for vtc without pay until her parents retired in exchange for a joint_tenancy interest in whatever property ann van tine's parents owned at that time we also need not decide respondent's contention that we must subtract the value of the services the van tines provided to ann van tine from the total value of ann van tine's services to vtc to calculate the net value of services that she provided for purposes of sec_2040 the court recently applied 39_f2d_540 2d cir to decide the value of services contributed by a joint tenant see estate of fratini v commissioner tcmemo_1998_308 even if we did that here we could not apply the mathematical formula stated in 110_tc_297 to calculate the amount excluded because we do not know the cost to buy and improve the three properties at issue


internal_revenue_service index no 468a number release date cc dom p si plr-109343-98 date re revised schedule of ruling amounts taxpayer parent plant location commission district fund dear this letter responds to the request of taxpayer dated date and supplemental information submitted by your authorized representative on behalf of taxpayer for a revised schedule of ruling amounts pursuant to sec_1_468a-3 of the income_tax regulations the ruling amounts authorized in the previous ruling letter dated date information was submitted pursuant to sec_1_468a-3 we understand the facts as submitted by taxpayer to be as follows taxpayer is a wholly owned subsidiary of parent which files a consolidated federal_income_tax return with its affiliated companies including taxpayer taxpayer owns a as a tenant in common in the plant which is situated in location taxpayer is subject_to the jurisdiction of the commission taxpayer is under the audit jurisdiction of the district_director of district the operating license of the plant expires on the method for decommissioning the plant is prompt removal dismantling the taxpayer presently is subject_to regulation only by the commission the commission in previously included decommissioning costs in taxpayer’s cost of service in the annual amount of taxpayer was previously authorized ruling amounts only for the tax years as the commission did not take into account the energy policy act of taxpayer now requests permission to in determining the decommissioning costs for the plant the commission used an estimated base cost of this base cost escalated annually at a rate of results in a future decommissioning cost of the funding_period and level_funding limitation period extends from the estimated_useful_life of the plant is and the estimated period for which the fund will be in effect is therefore the qualifying percentage is the assumed after-tax rate of return to be earned on the assets of the fund is at the present time there are no proceedings before the commission that may result in an increase or decrease in the amount of decommissioning costs for the plant to be included in taxpayer’s cost of service for ratemaking purposes sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified decommissioning fund however sec_468a limits the amount_paid into such fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to this fund which is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the total nuclear power plant as the period for which the nuclear decommissioning fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year and is made within months after the close of the tax_year additionally a taxpayer that files for a schedule of ruling amounts and receives such schedule of ruling amounts after the month deadline for making a payment to a nuclear decommissioning fund must make such payment to the fund within days after the date that the taxpayer receives the schedule of ruling amounts for the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in among other things a direct ownership_interest including an interest as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such tax_year if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b the excess is not deductible by the electing taxpayer in addition under sec_1_468a-5 there are rules which provide that the internal_revenue_service may disqualify a nuclear decommissioning fund if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes under sec_1_468a-3 the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer’s proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that in general the ruling_amount for any_tax year in the level_funding limitation period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day on which the nuclear power plant will no longer be included in the taxpayer’s rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer’s share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer’s qualifying interest in the plant under sec_1_468a-3 the qualifying percentage for any nuclear decommissioning fund is equal to a fraction the numerator of which is the number of tax years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of tax years in the estimated_useful_life of the applicable plant sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a tax_year in response to a request for a schedule of ruling amounts that is filed after the deemed deadline date for such tax_year section of the energy policy act of public law act eliminated for tax years beginning after date the investment restrictions contained in sec_468a of the code that section also revised sec_468a by lowering the tax_rate applicable to a nuclear decommissioning fund we have examined the representations and the data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely upon these representations of the facts we reach the following conclusions the taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations the commission has permitted the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations the taxpayer has calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations the taxpayer has determined that is the qualifying percentage as calculated under sec_1_468a-3 of the regulations based on the above determinations we conclude that the taxpayer’s proposed schedule of ruling amounts with regard to the commission satisfies the requirements of sec_468a of the code approved schedule of ruling amounts tax years year each year the approved schedule of ruling amounts for the commission is being limited to a five year period as a result of the statutory changes made by the act the elimination of the investment restrictions and the reduction of the tax_rate applicable to income earned by the fund may result in a greater after-tax rate of return than was estimated prior to the enactment of the act by the commission which based its determinations as to the approved after-tax rate of return on restricted investments and a higher tax_rate this increased after-tax rate of return would over the life of the fund result in a balance in the fund on the last day of the funding_period that would exceed the amount of decommissioning costs allocable to the fund in order to prevent the excess accumulation in the fund this schedule of ruling amounts is limited to a five year period for the commission approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated earlier payments made to such fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it section 6llo j of the code provides it may not be used or cited as precedent pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer’s federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours charles b ramsey chief branch office of assistant chief_counsel passthroughs and special industries


t c memo united_states tax_court peter m schaeffer petitioner v commissioner of internal revenue respondent docket no filed date peter m schaeffer pro_se lisa primavera for respondent memorandum opinion dawson judge this case was assigned to special_trial_judge larry l nameroff pursuant to sec_7443aand rule sec_180 sec_181 and sec_183 the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge nameroff special_trial_judge this case is before us on petitioner’s motion filed date for leave to file a motion to vacate decision out of time the motion for leave on date respondent issued a notice_of_deficiency to petitioner which determined a deficiency and an accuracy- related penalty under sec_6662 in regard to petitioner’s federal_income_tax petitioner resided in palm springs california at the time of filing his petition in this court on date a decision in this case was entered by this court pursuant to the agreement of the parties providing for a deficiency in income_tax in the amount of dollar_figure and a sec_6662 penalty of dollar_figure petitioner was not represented by counsel at that time negotiated the settlement on his own behalf and signed the stipulation portion of the decision document petitioner now seeks leave to vacate that decision because he was allegedly not aware that interest would accrue on all section references are to the internal_revenue_code in effect for the year in issue all rule references are to the tax_court rules_of_practice and procedure when the motion for leave was filed petitioner was represented by howard c kochman mr kochman and petitioner filed a motion to withdraw mr kochman as counsel on date which was granted by the court the deficiency from the due_date of his return until the deficiency is paid summary of facts the notice_of_deficiency dated date inter alia advised petitioner that if he decided not to file a petition with this court he should sign an enclosed waiver form which would permit us to assess the deficiency quickly and limit the accumulation of interest emphasis added the attached waiver form provided in part i consent to the immediate_assessment and collection of the deficiencies increase in tax and penalties shown above plus any interest emphasis added the form also provided if you consent to the assessment of the deficiencies shown in this waiver please sign and return this form to limit the interest charge emphasis added the form entitled income_tax examination changes which lists the adjustments made by respondent reflects a computation of interest to in the amount of dollar_figure schedule of the notice_of_deficiency provides the details of that interest computation petitioner did not sign the waiver form finally the decision document signed by petitioner provides it is further stipulated that effective upon the entry of this decision by the court petitioner waives the restriction contained in sec_6213 prohibiting assessment and collection of the deficiency and additions to tax plus statutory interest until the decision of the tax_court has become final emphasis added notwithstanding the above petitioner maintains that he believed his settlement included a settlement of interest and therefore the decision entered by the court was the result of fraud upon the court after a hearing on this matter the parties were ordered to file briefs seriatim with petitioner filing the initial brief on date and respondent to file an answering brief days thereafter petitioner has not filed his opening brief nor any explanation for such failure although we could deny his motion on the ground that he has abandoned his contentions we will consider his motion on its merits discussion the date of a decision of this court is the date an order specifying the amount of the deficiency is entered in the records of the tax_court which in this case was date a decision of this court becomes final upon expiration of the time to file a notice of appeal if no notice of appeal is filed sec_7481 generally a notice of appeal must be filed within days after the decision is entered by this court sec_7483 fed r app p a a motion to vacate or revise a decision must be filed within days after the decision is entered unless the court shall otherwise permit rule a motion to vacate a decision filed more than days after entry of the decision may be filed only by leave of the court usually by the granting of a motion for leave to file an untimely motion to vacate the granting of such a motion for leave to file a motion to vacate or the granting of a timely motion to vacate lies within the sound discretion of this court 872_f2d_245 8th cir affg tcmemo_1987_1 237_f2d_5 7th cir if a motion to vacate has been timely filed the running of the 90-day period for filing an appeal is stopped and commences again in full after the motion is adjudicated fed r app p a once a decision becomes final this court may vacate it only in narrowly circumscribed situations 293_us_191 the court may vacate a final_decision if that decision is shown to be void or a legal nullity for lack of jurisdiction over the subject matter or a party 868_f2d_1081 9th cir 90_tc_103 71_tc_108 the court may vacate a final_decision if there has been a fraud on the court 859_f2d_115 9th cir affg 86_tc_1319 511_f2d_929 2d cir 464_f2d_368 3d cir the decision in this case was entered pursuant to a stipulated settlement no trial was held no evidence was adduced no stipulations were filed in the record and no factual or legal bases upon which the deficiency was settled were recited in the stipulated decision the compromise and settlement of tax cases is governed by general principles of contract law 52_tc_420 39_tc_602 affd 328_f2d_622 6th cir where a decision is entered pursuant to a stipulated settlement the parties normally are held to their agreement without regard to whether the decision is correct on the merits 90_tc_315 42_tc_110 it is within this framework that petitioner asks for leave to file the motion to vacate petitioner contends that there was not a meeting of the minds because respondent failed to advise him of the continuing accrual of interest and thus a fraud was perpetrated on this court sufficient to justify granting the two motions we defined fraud on the court in 86_tc_1319 affd 859_f2d_115 9th cir as follows fraud on the court is only that species of fraud which does or attempts to defile the court itself or is a fraud perpetrated by officers of the court so that the judicial machinery can not perform in the usual manner its impartial task of adjud g ing cases that are presented for adjudication fraud inter partes without more should not be a fraud upon the court toscano v commissioner f 2d pincite quoting j moore federal practice par dollar_figure 2d ed to prove such fraud the petitioners must show that an intentional plan of deception designed to improperly influence the court in its decision has had such an effect on the court citations omitted in 387_f2d_689 7th cir the court_of_appeals for the seventh circuit stated that the finality of a tax_court decision precludes any subsequent reconsideration by the tax_court at least on such grounds as mistake newly discovered evidence and the like the court_of_appeals also emphasized that the burden_of_proof rests squarely with the party seeking to set_aside the final_decision and stated that this burden could not be met simply by making a broad assertion that the tax_court decision was tainted with fraud rather there is a heavy burden upon the one who seeks to impeach an order or decree of a court who must come forward with specific facts which will pretty plainly impugn the official record id see also 70_tc_623 spielberger v commissioner tcmemo_1989_444 defining the term fraud upon the court in kenner the court stated that the alleged improper conduct must rise to the level of an unconscionable plan or scheme designed to improperly influence the court in its decision before it may be deemed a fraud upon the court kenner v commissioner supra pincite the narrow and limited definition of fraud upon the court reflects the policy of putting an end to litigation and serves the important legal and social interest in preserving the finality of judgments 441_f2d_930 9th cir vacating 52_tc_295 other circuits have also articulated a very narrow definition of fraud upon the court and have underscored the heavy burden faced by a party who seeks to set_aside a final tax_court decision see 51_f3d_618 6th cir 892_f2d_1115 1st cir abatti v commissioner f 2d pincite senate realty corp v commissioner supra stickler v commissioner supra in addition it is also clear that petitioner was required to demonstrate not only that respondent engaged in conduct that was intended to mislead the court but--of paramount importance--that the actual conduct affected the outcome of the case drobny v commissioner aftr 2d 7th cir date in addition to establishing improper conduct a taxpayer who attempts to set_aside a final_decision of the tax_court must also explain how the alleged conduct induced caused or had a material effect upon the decision see also 92_tc_1141 motion to vacate denied because same result would have been reached even in the absence of the alleged fraud upon the court abatti v commissioner t c pincite taxpayer must show that deception designed to improperly influence the court in its decision has had such an effect on the court petitioner has failed to establish that a fraud was perpetrated on this court there were sufficient indications about interest accruals in the various documents petitioner received and in the decision document he signed to put petitioner on his guard if he had any concern in that regard he should have inquired the law is clear that interest accrues on unpaid tax_liabilities from their due_date until paid moreover the record does not reflect any evidence that the outcome of this case would be different if we permitted a trial on the merits in his reply to respondent’s opposition to petitioner’s motion for leave petitioner relies on toscano v commissioner supra to support his claim of fraud on the court josephine toscano also known as josephine zelasko moved to vacate a stipulated decision of this court years after entry on the grounds that she was not and had not been the wife of mr toscano in that case it was alleged that mr toscano was not married when he filed what purported to be a joint_return having either forged the signature of ms zelasko as his spouse or coerced her to sign the joint_return against her will mr toscano allegedly perpetrated three frauds first he defrauded the commissioner by filing a fraudulent joint income_tax return claiming he owed less tax than allowed by the law second he defrauded ms zelasko by purporting to make her liable for his taxes third he carried this fraud to the tax_court when he filed a joint petition with this court for a redetermination of the deficiency the fraud upon this court culminated when the court entered a decision signed on behalf of ms zelasko holding her liable for the tax_deficiency the court_of_appeals for the ninth circuit vacated the tax court’s decision and held that ms zelasko under these circumstances was entitled to a hearing on her allegations the facts in toscano are distinguishable from the instant case here petitioner represented himself and negotiated a settlement with respondent he signed a stipulation of decision which specifically provides for the assessment and collection of statutory interest we do not find any fraud perpetrated upon this court accordingly petitioner's motion for leave to an order will be issued denying file a motion to vacate or revise the decision


internal_revenue_service p o box cincinnati oh number release date department of the treasury employer_identification_number contact person - id number date date contact telephone number legend x organization z educational_institution x amount uil dear ‘we have considered your request for advance approval of your grant-making program under sec_4945 g of the internal_revenue_code dated date our records indicate that x was recognized as exempt from federal_income_tax under sec_501 c of the code and that it is classified as a private_foundation as defined in sec_509 your letter indicates that x will operate a grant-making program the purpose is to provide scholarships to qualifying students at z x expects to award to scholarships annually in the amount of x made payable to z scholarships would be used for tuition and are renewable eligible applicants will be a students at z the scholarship information is available to students at z the scholarship information also will be publicized on x’s website to apply applicants will use the link on x s website to submit their application the applicant will be required to express his or her desire to study quantitative analysis including but not limited to the areas of mathematics physics computer science engineering and operational research by submitting an essay along with the application which demonstrates that they excel or wish to excel in this area of study the selection criteria will include but not be limited to b performance on aptitude tests c participation in non-profit organizations d recommendations from instructors e financial need and g not be a disqualified_person as defined in sec_4946 of the code z will conduct initial screening of applicants based on financial need and x will conduct further screening based on the criteria mentioned above emphasis will be placed on students who demonstrate great financial nced coupled with a strong desire to study in the area of quantitative analysis a prior academic performance scholarships will be awarded by the scholarship selection committee of x composed of the president and chairman of the board_of x once the board decides who will receive scholarships the board will send a letter to the student advising the student that he or she has been awarded a scholarship in order to maintain and renew scholarships x will pay scholarship funds directly to z the applicant must show that he or she is in good standing with z and is pursuing course study in the area of quantitative analysis if the student is no longer registered for courses or is no longer in good standing the scholarship will be withdrawn ftom the current recipient and funds returned to x sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170gi s the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that its grant procedure includes an objective and nondiscriminatory selection gi process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance ili based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiserimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are excludable from the gross_income of the recipients subject_to the limitations provided by sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection commitiee of for a purpose that is inconsistent with the purpose described in sec_170 c b of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code ‘this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ aterially from those deseribed in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be uscd or cited as a precedent ‘you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours robert choi director exempt_organizations rulings and agreements


number release date id office uilc cca_2009090816301264 -------------- 6707a from ------------------ sent tuesday september pm to ------------------------------------------ cc ------------------------ subject re 6707a penalty see notice_2005_11 if a taxpayer actually files a return after without making a disclosure required with the return then the sec_6707a penalty applies even if the return was due prior to this is because the disclosure is not due until the return is actually filed


internal_revenue_service number info release date index number --------------------------- -------------------------- --------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc ita b05 plr-147932-04 date date dear ------------------ federal_income_tax consequences of your sale of a remainder_interest in a single family residential property this is in reference to your request for a private_letter_ruling concerning the section dollar_figure of revproc_2005_1 2005_1_irb_1 provides that in income and gift_tax matters the internal revenue services generally issues a letter_ruling on a proposed transaction or on a completed transaction if the letter_ruling request is submitted before the return is filed for the year in which the transaction was completed the sale described in your letter was reportable on your federal_income_tax return for accordingly we are unable to issue a ruling because an operating division has examination jurisdiction for yo ur federal_income_tax return for section a of revproc_2005_1 provides in part that if the service declines to issue a letter_ruling the associate office generally will notify by memorandum the appropriate service official in the operating division that has examination jurisdiction of the taxpayer’s tax_return the service may also provide its views on the issues presented in the ruling_request to the service official for consideration in any later examination of the taxpayer’s return id pincite in accordance with the cited provisions the operating division that has examination jurisdiction for your tax_return will be notified of the circumstances described in your request for a ruling you must file an amended_return for to report the sale of your interest in the subject property although we are unable to issue a ruling in this case the following general information and example illustrate the manner in which the tax consequences of the sale of a remainder_interest in property are determined for purposes of the following example assume that a man born on date and his wife acquired a single family home in at a cost of dollar_figure they each contributed percent of the cost of the property and took title to the property as plr-147932-04 tenants_by_the_entirety the property was not located in a community_property_state the man woman and their only child a daughter occupied the house as their principal_residence the daughter moved out of the house in the woman the wife and mother died in ------- between ------- and ------ the husband and wife invested dollar_figure--------- in improvements to the property on ---------------- the man transferred the property subject_to a retained_life_estate to his adult daughter on ---------------- in a single transaction the man and his daughter each sold their respective interests in the property to a single purchaser for total consideration of dollar_figure----------- at the time of the wife’s death the fair_market_value of the property was dollar_figure---------- ------------ upon the wife’s death her percent interest in the property passed to her husband by operation of law under sec_1014 of the internal_revenue_code the husband received a dollar_figure----------fair market_value basis in the property interest received from his wife the husband’s total basis in the property after his wife’s death was dollar_figure----- ------------ the sum of the dollar_figure----------basis in the property interest received from his wife plus dollar_figure---------- percent of the sum of the dollar_figure original cost of the property and the dollar_figure----------the husband and wife invested in improvements prior to the time of the wife’s death between the time of his wife’s death in ------- and ---------------- the man invested an additional dollar_figure--------- in improvements to the property the cost of the improvements increased his basis in the property to dollar_figure----------- sec_7520 of the code provides that for purposes of the internal_revenue_code the value of any interest for life or a term of years or any remainder or reversionary_interest shall be determined under tables prescribed by the secretary and by using an interest rate rounded to the nearest 10ths of percent equal to percent of the federal_mid-term_rate in effect under sec_1274 for the month in which the valuation_date falls the factors for determining the value of a life_estate or remainder_interest based on a single life are found in table s single life factors based on life table cm book aleph irs publication the applicable rates for the various months the rate equal to percent of the federal_mid-term_rate in effect for a given month are published in the internal revenue bulletins and the cumulative_bulletins in the example the amount of the basis and sales proceeds allocable to the daughter’s remainder_interest in the property would be determined as follows the applicable_interest_rate for date the month in which the property was sold wa sec_3 percent the interest rate was published in revrul_2003_71 2003_2_cb_1 reference to the factors for a person years of age the father’s age when the property was sold in the table s table for an interest rate of percent indicates a factor of for a remainder_interest multiplication of the dollar_figure------------basis in the property at the time of the sale by the factor of indicates that dollar_figure----------of the basis was allocable to the remainder_interest multiplication of the dollar_figure------------sales price of the property by the factor of indicates that dollar_figure------------of the sales proceeds was plr-147932-04 allocable to the remainder_interest accordingly the daughter would be required to recognize a gain of dollar_figure------------ dollar_figure----------- sales proceeds - dollar_figure--------- basis dollar_figure----------- gain on the sale of her remainder_interest in the property although the dates amounts and other information in the above example differ from your circumstances the example illustrates the method of determining the gain loss from the sale of a remainder_interest in property subject_to a life_estate the example does not address any gift_tax consequences arising from the creation of the remainder_interest its sale or the disposition of the sales proceeds this letter has called your attention to certain general principles of the law it is intended for informational purposes only and does not constitute a ruling see sec_2 of revproc_2005_1 2005_1_irb_1 if you have any additional questions please contact our office at --------------------- this is not a toll-free call we are refunding your user_fee since we are unable to rule in the circumstances described in your letter sincerely -------------- john aramburu-------------------- senior counsel branch income_tax accounting ----------- cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b09 plr-119981-02 date date legend taxpayer spouse trust date year year year a b c year year year year year year year plr-119981-02 date d e f g h i j year year k l m child child child child dear sir this is in response to your letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an allocation of generation-skipping_transfer gst tax exemption this letter responds to your request the facts and representations submitted are summarized as follows taxpayer and spouse created trust on date and funded it with community_property cash article i of the trust instrument provides that trust is irrevocable and that taxpayer and spouse do not have the right or power to amend or revoke trust article iii of trust provides that the trustee is to divide trust into four equal shares one each for the benefit of child child child and child article iii a plr-119981-02 provides the trustee with the discretionary authority to pay or apply for the benefit of each living beneficiary net_income or principal from the beneficiary’s share for the reasonable maintenance of the beneficiary any income not distributed is to be added to principal article iii a provides that upon the death of a named beneficiary any remaining principal not effectively appointed shall be distributed to the issue of the beneficiary living on the date of the beneficiary’s death by right of representation if there are no living issue the share is to be distributed to the then living issue of the trustors’ marriage by right of representation article iii b provides a named beneficiary with the limited power to amend or direct distribution of his trust as of his death to or for the benefit of ancestors siblings or issue of the beneficiary paragraph b of article iii further provides that the named beneficiary shall have the limited power to amend or direct distribution of his trust during his lifetime or as of his death by written instrument delivered to the trustee during his lifetime to or for the benefit of any one or more ancestors siblings or issue of such beneficiary or the issue of his parents this limited power shall not under any circumstances be exercisable in favor of such beneficiary his estate his creditors the creditors of his estate nor for the purpose of discharging any legal_obligation of such beneficiary taxpayer made annual gifts of cash to trust in year through year taxpayer’s accountant prepared and taxpayer timely filed a form_709 united_states gift generation-skipping_transfer_tax return for year year and year taxpayer properly allocated gst_exemption to the gifts in the amounts of dollar_figurea on his year gift_tax_return dollar_figureb on his year gift_tax_return and dollar_figurec on his year gift_tax_return taxpayer’s accountant represents that certain administrative problems in its office caused it to fail to advise taxpayer to file gift_tax returns after year a letter from the taxpayer’s attorney to the accountants indicates a clear intention that gst_exemption be allocated annually to the transfers to trust when the error was discovered taxpayer filed late gift_tax returns for year through year on date no allocations of gst_exemption were made on the gift_tax returns filed for year through year taxpayer reported gifts to trust totaling dollar_figured on his year gift_tax_return dollar_figuree on his year gift_tax_return dollar_figuref on his year gift_tax_return dollar_figureg on his year gift_tax_return dollar_figureh on his year gift_tax_return dollar_figurei on his year gift_tax_return and dollar_figurej on his year gift_tax_return taxpayer timely filed gift_tax returns for year and year however none of taxpayer’s gst_exemption was allocated to taxpayer’s gifts to trust on either return plr-119981-02 taxpayer reported gifts to trust totaling dollar_figurek on his year gift_tax_return and dollar_figurel on his year gift_tax_return you have requested an extension of time to make allocations totaling dollar_figurem with respect to transfers of cash to trust for year year year year year year year year and year sec_2601 of the internal_revenue_code imposes a tax on every generation- skipping transfer a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute plr-119981-02 notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that in general requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 must be made under the rules of sec_301_9100-3 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted plr-119981-02 an extension of time of days from the date of this letter to file supplemental form sec_709 and notices of allocation for year year year year year year year year and year on which taxpayer will allocate taxpayer’s gst_exemption to trust the allocation will be effective as of the date of the individual transfers to trust and the gift_tax value of the transfers to trust will be used in determining the amount of gst_exemption to be allocated to trust a copy of this letter should be attached to the supplemental form_709 and filed with the internal_revenue_service center cincinnati ohio except as expressly provided herein no opinion is expressed or implied concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely william p o’shea william p o’shea acting associate chief_counsel office of associate chief_counsel passthroughs and special industries


t c summary opinion united_states tax_court alvaro n gallego petitioner v commissioner of internal revenue respondent docket no 12958-10s filed date brian c power marissa k rensen and thomas c durham for petitioner erika b cormier for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to 1unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case this proceeding was commenced under sec_6015 for review of respondent’s determination that petitioner is not entitled to relief from joint_and_several_liability with respect to underpayments of federal_income_tax reported on his form_1040 u s individual_income_tax_return filed for and background some of the facts have been stipulated and are so found the stipulation of facts the supplemental stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in massachusetts at the time the petition was filed petitioner was born in colombia and later moved to mexico where he studied and practiced medicine petitioner married xochitl lagunes viveros gallego viveros in mexico in and they had three daughters petitioner and viveros moved to the united_states with their children in petitioner’s medical credentials were not recognized and he was unable to work as a doctor in the united_states 2the parties agree that petitioner’s claim for relief for the taxable_year is no longer in issue petitioner worked at various jobs before starting a business as a sole_proprietorship called norman’s cleaning petitioner was primarily responsible for cleaning clients’ properties and viveros was responsible for maintaining the business’ financial records and office petitioner and viveros provided financial documents to a return preparer each february in order to have their federal_income_tax return prepared in years before petitioner and viveros customarily signed the return at the preparer’s office and viveros wrote a check and mailed the federal_income_tax return and any payment due to the internal_revenue_service irs petitioner and viveros separated sometime after date viveros remained in the marital home with the children and petitioner lived with various family members during the summer of viveros informed petitioner that she had not paid the federal_income_tax liabilities for or and that she had not been paying other personal and business_expenses since the separation at some point petitioner and viveros agreed to sell their house to pay debts on date they received dollar_figure from the sale of the house on the following day they deposited dollar_figure into their joint checking 3on date the irs began collection action against petitioner by issuing a final notice - notice_of_intent_to_levy and notice of your right to a hearing for the and joint liability account at workers’ credit_union between august and date viveros withdrew approximately dollar_figure of the proceeds to pay various expenses including clothing food entertainment travel and lodging on date viveros withdrew dollar_figure from the couple’s joint checking account and moved to mexico with the three children after viveros left with the children petitioner learned that a joint federal_income_tax return had not been filed soon after learning this petitioner took steps to have a return prepared and filed petitioner did not communicate with viveros about the preparation or filing of this return as a joint_return and viveros did not sign the federal_income_tax return viveros’ income was not reported on the return 4petitioner testified that a form_1040 was prepared and executed by both himself and viveros in date the record is unclear regarding whether the return was actually prepared and executed as petitioner suggested petitioner testified that after viveros left for mexico he gathered some of the documents previously used to prepare the return and took them to the same individual who had prepared the couple’s returns in prior years there is no independent or documentary_evidence to support the assertion that a return had been previously prepared and executed if the return had been prepared in date it would seem likely that the preparer would have had a copy of the return or some data related to its preparation 5although viveros worked at norman’s cleaning there is no independent evidence such as a form_w-2 wage and tax statement or form 1099-misc miscellaneous income in the record which reflect that viveros had income for the years in issue petitioner’s counsel asserts that viveros was paid a salary in on or about date petitioner filed the federal_income_tax return reporting a balance due petitioner filed for divorce from viveros in date the divorce was finalized in the court in that proceeding found that viveros withdrew dollar_figure without petitioner’s knowledge and ordered viveros to repay petitioner dollar_figure the judgment of divorce nisi stated that petitioner and viveros share the tax debt equally petitioner claims in his amended petition that he is entitled to a refund of the dollar_figure he has paid toward the liability on date petitioner filed form_8857 request for innocent spouse relief requesting relief from joint_and_several_liability for taxable years and attached to the form_8857 was the complaint for divorce dated date in which petitioner filed suit for divorce against viveros in massachusetts 6petitioner paid this amount in installments beginning on date although petitioner acknowledged that viveros did not sign the return the irs accepted and filed the return as a joint_return executed returns for and are not a part of the record 7the judgment of divorce nisi listed the federal and state tax debt at the time of divorce as dollar_figure 8the parties have agreed that if petitioner is entitled to sec_6015 relief he is entitled to a refund of dollar_figure 9as previously indicated the parties have agreed that taxable_year is not at issue discussion generally married taxpayers may elect to file a joint federal_income_tax return sec_6013 after making the election each spouse is jointly and severally liable for the entire tax due for that year sec_6013 114_tc_276 in certain circumstances however a spouse who has filed a joint_return may seek relief from joint_and_several_liability under procedures set forth in sec_6015 sec_6015 under sec_6015 a spouse may seek relief from joint_and_several_liability under sec_6015 or if eligible may allocate liability according to provisions set forth in sec_6015 if a taxpayer does not qualify for relief under either sec_6015 or c the taxpayer may seek equitable relief under sec_6015 the secretary has discretion to grant equitable relief to a spouse who filed a joint_return with an unpaid tax_liability or a deficiency sec_6015 sec_1_6015-4 income_tax regs except as otherwise provided in sec_6015 the taxpayer bears the burden of proving that he or 10petitioner requested relief under sec_6015 we are satisfied that he is ineligible for relief under sec_6015 or c petitioner does not qualify for relief under sec_6015 because there is no understatement_of_tax for the years in issue see sec_6015 petitioner does not qualify for relief under sec_6015 for because he requested relief more than years from the beginning of irs collection activities see sec_6015 petitioner is also ineligible for relief for for the reasons discussed more fully below she is entitled to sec_6015 relief rule a 119_tc_306 affd 101_fedappx_34 6th cir both the scope and standard of our review in cases requesting equitable relief from joint_and_several income_tax_liability are de novo 132_tc_203 as directed by sec_6015 the commissioner has prescribed procedures for determining whether a spouse qualifies for relief under subsection f the applicable provisions are found in revproc_2003_61 2003_2_cb_296 the revenue_procedure sets forth seven threshold requirements before the commissioner will consider a request for relief under sec_6015 i the requesting spouse filed a joint_return for the taxable_year for which he or she seeks relief ii relief is not available to the requesting spouse under sec_6015 or c iii the requesting spouse applies for relief no later than years after the date of the irs’ first collection activity after date with respect to the requesting spouse iv no assets were transferred between the spouses as part of a fraudulent scheme by the spouses v the nonrequesting spouse did not transfer disqualified assets to the requesting spouse vi the requesting spouse did not file or fail to file the return with fraudulent intent and vii absent enumerated exceptions the income_tax_liability from which the requesting spouse seeks relief is attributable to an item of the individual with whom the requesting spouse filed the joint_return revproc_2003_61 sec_4 c b pincite we employ these factors when reviewing the commissioner’s denial 120_tc_137 see also schultz v commissioner tcmemo_2010_233 respondent asserts that petitioner fails requirements iii and vii above for taxable_year and that petitioner fails requirements i iii and vii above for taxable_year two-year period of limitations respondent initially asserted that the claim for relief under sec_6015 was untimely after trial but before release of this opinion respondent conceded that the 2-year period of limitations under sec_6015 does not apply see notice_2011_70 2011_32_irb_135 in notice_2011_70 supra the irs stated that effective date it would consider requests for equitable relief under sec_6015 if the period of limitations on collection provided by sec_6502 remained open see notice_2011_70 supra see also sec_6015 because respondent conceded that the 2-year limitation no longer applies we need not consider respondent’s argument concerning that threshold requirement income attributable to requesting spouse respondent asserts that petitioner fails threshold requirement vii for taxable years and see revproc_2003_61 sec_4 generally a requesting spouse cannot satisfy this requirement where the income_tax_liability from which the requesting spouse seeks relief is attributable to income earned by the requesting spouse there are exceptions to this general_rule and petitioner asserts that he qualifies for one of the exceptions revproc_2003_61 sec_4 c c b pincite provides an exception to the seventh requirement if the requesting spouse did not know and had no reason to know that funds intended for the payment of tax were misappropriated by the nonrequesting spouse for the nonrequesting spouse’s benefit the service will consider granting equitable relief although the underpayment may be attributable in part or in full to an item of the requesting spouse furthermore the irs will consider relief only to the extent that the funds intended for the payment of tax were taken by the nonrequesting spouse id taxable_year petitioner alleges that viveros misappropriated the funds from the sale of their house and that those funds were intended to pay the tax_liabilities for and and to pay various unpaid personal and business_expenses petitioner and viveros shared a joint checking account at workers’ credit_union a bank account consists of a promise to pay by the bank to the depositors 516_us_16 under massachusetts law shares and deposits may be received and held in the name of a member of the credit_union with one or more persons as joint_tenants and any part or all of the shares or deposits and dividends or interest represented by joint accounts may be withdrawn assigned or transferred by any of the individual parties mass ann laws ch sec_39 lexisnexis misappropriation is the application of another’s property or money dishonestly to one’s own use black’s law dictionary 7th ed since each joint account_holder may withdraw any or all of the funds held in the account we do not conclude that viveros’ withdrawal of the funds from this account constituted a misappropriation the funds from the sale of the house were deposited by petitioner and viveros in their joint account and remained in the account from august to date petitioner had access to the funds in the joint account the record reflects that petitioner did not pay or attempt to pay the tax_liabilities for or even after the funds from the sale of the house were deposited into the joint accountdollar_figure petitioner has also failed to establish that the proceeds from the sale of the house were specifically earmarked for the payment of the and tax_liabilities and not to pay marital debts generally also it is not at all clear that any funds withdrawn by viveros were for her benefit rather than the benefit of the three children petitioner has failed to meet the exception for the seventh threshold requirement and is not eligible for innocent spouse relief with respect to taxable_year since petitioner has failed to satisfy the threshold requirements we need not consider the terms of the divorce decree as a factor weighing for or against relief taxable_year respondent asserts that petitioner fails to satisfy the threshold requirements for taxable_year in that viveros did not file a joint_return petitioner asserts that because he and viveros had initially prepared and signed a joint federal_income_tax return for it was their intent to file jointly although the initially prepared joint federal_income_tax return was not actually filed petitioner has not satisfied the court that the parties intended to file a joint income_tax return for 11as previously indicated petitioner did not learn that the tax_liability had not been paid until after viveros moved to mexico in date in general a joint_return must be signed by both spouses sec_1_6013-1 income_tax regs in circumstances where both spouses intend to file a joint_return the failure of one spouse to sign the return will not preclude its treatment as a joint_return 56_tc_1 whether the nonsigning spouse intended to file a joint_return is a question of fact id 34_tc_740 affd 325_f2d_1 2d cir 27_tc_270 affd 251_f2d_44 8th cir the court may look to whether the taxpayers customarily filed joint returns to determine whether a return was intended to be a joint_return estate of campbell v commissioner supra pincite although not conclusive the inclusion of a spouse’s income on a return is regarded as a factor supporting a conclusion that the return was intended as a joint_return federbush v commissioner supra pincite petitioner conceded that viveros did not sign the federal_income_tax return petitioner and viveros customarily filed joint federal_income_tax returns the record reflects that viveros was generally responsible for the family and business finances assuming that a return was prepared and executed by viveros in date she apparently chose not to file a joint_return when petitioner had the return prepared he was aware that viveros was living in mexico and he could have contacted her via telephone or mail to ask her about filing the return jointlydollar_figure petitioner however did not contact viveros nor is there anything in the record indicating she agreed or consented to file a joint_return for taxable_year and viveros’ income for was not included on the filed return we conclude that petitioner and viveros did not file a joint federal_income_tax return for and thus petitioner is not entitled to relief under sec_6015 see 119_tc_191 even if we were to conclude that the return was a joint_return petitioner would in any event be unsuccessful in his request for innocent spouse relief for taxable_year because the tax he requests relief from is attributable to his income and he does not qualify for an exception as previously discussed with respect to see revproc_2003_61 sec_4 a additionally petitioner does not assert and we do not find that viveros misappropriated funds intended for the payment of the tax_liability 12petitioner had viveros’ address and a family member’s telephone number in mexico that he could have used to communicate with her conclusion petitioner is not entitled to relief from joint_and_several_liability for because he has not shown viveros misappropriated funds intended for the payment of the federal_income_tax liability additionally petitioner is not entitled to relief from joint_and_several_liability for because petitioner did not file a joint federal_income_tax return with viveros to reflect the foregoing decision will be entered for respondent