department of the treasury internal_revenue_service commerce street dallas tx tax_exempt_and_government_entities_division release number release date legend org - organization name xx-date address - address org address certified mail dear date date person to contact badge number contact telephone number contact address employer_identification_number this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter to you dated september 19xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reason s you are not operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you are not and have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 rather your activities further a substantial nonexempt commercial purpose and serve private rather than public interests contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code effective january 20xx you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all the tax years thereafter in accordance with instructions of the return if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition in one of these three courts must be filed before the 91st day after the date that this determination was mailed to you if you wish to seek review of our determination please contact the clerk of the respective court for rules regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note that the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the untied states tax_court at the following address please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll free and ask for the taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely nanette m downing director eo examinations enclosures publication internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examinations s dearborn chicago il date legend org - organization name xx-date address-address org address certified mail - return receipt requested dear department of the treasury taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process if we issue a determination_letter to you based on technical_advice no further you may also request that we refer this matter for technical_advice as explained in publication administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code letter rev catalog number 34809f you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing director eo examinations enclosures publication publication report of examination letter rev catalog number 34809f schedule number or exhibit form 886-a rev date explanations of items name of taxpayer org year period ended december 20xx tax ldentification number ein legend org - organization name state issues xx - date address - address city - city state - whether org incorporated continues to qualify as a tax exempt_organization under internal_revenue_code sec_501 due to inactivity whether org incorporated continues to qualify as a tax exempt_organization under internal_revenue_code sec_501 due to failure to maintain adequate documentation as described under internal_revenue_code sec_6001 and sec_6033 facts org incorporated is a tax exempt_organization under internal_revenue_code sec_501 org was incorporated in the state of state on november 19xx your organization owns and operates a facility located at address city state your facility consists of two buildings and total units which are available for rent it was identified that renting of the units in the facility was the only activity which was conducted by the organization your purpose as stated during the initial interview was to work with underprivileged country children and seniors and provide low cost housing you reported revenues on the forms for the tax years ending december 20xx and december 20xx of dollar_figure and dollar_figure respectively during the examination it was noted that all revenues were generated from rental income received the operation and maintenance of an apartment complex is your only activity and is not a qualifying activity for the furtherance of internal_revenue_code sec_501 purposes you stated that your organization no longer actively conducted charitable activities you were unable to provide financial documentation which would allow the internal_revenue_service to accurately reconcile the income and expenditures which were reported on the form_990 you were unable to provide the internal_revenue_service with documentation related to charitable activities conducted for the furtherance of internal_revenue_code sec_501 purposes law internal_revenue_code sec_501 exempts from federal_income_tax corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals no part of form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items tax identification_number ein name of taxpayer org year period ended december 20xx the net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office sec_1_501_c_3_-1 provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section f an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 states that an organization is organized exclusively for one or more exempt purposes only if its articles of organization a limit the purposes of such organization to one or more exempt purposes and b do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 states that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 states in part that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in while or in part to the benefit of private shareholders or individuals sec_1_501_c_3_-1 provides that an organization may be exempt as an organization described in sec_501 if it is organized and operated exclusively for one or more of the following purposes a religious b charitable c scientific d testing for public safety e literary f educational or g prevention of cruelty to children or animals sec_1_501_c_3_-1 provides that an organization is not organized or operated exclusively for one or more of the purposes specified in subdivision i of this subparagraph unless it serves a public rather than a private interest form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a’ rev date explanations of items name of taxpayer org tax identification_number ein 20xx year period ended december sec_6001 of the code provides that every person liable for any_tax imposed by the code or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 of the code provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6001-1 of the regulations in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 of the code and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 inventories sufficient including are as be kept at sec_1_6001-1 of the regulations states that the books_or_records required by this section all times available for inspection by authorized internal revenue officers or shall in the employees and shall be retained as long as the contents thereof may be material administration of any internal revenue law in accordance with the above cited provisions of the internal_revenue_code and treasury regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax in 326_us_279 the united_states supreme court held that for an organization to qualify for tax exempt status the organization must be exclusively devoted to an exempt_purpose and the presence of a single nonexempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes revrul_59_95 19xx-1 c b concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the file the required information_return or otherwise to service held that the failure or inability to comply with the provisions of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on form 886-a department of the treasury-internal revenue service catalog number 20810w - page_3 publish no irs gov schedule number or exhibit form 886-a’ rev date explanations of items name of taxpayer org year period ended december 20xx tax identification_number ein the grounds that the organization has not established that it for the continuation of exempt status is observing the conditions required in accordance with the above cited provisions of the code and regulations under sec_6001 and organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information_return and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and determine its liability for any unrelated_business_income_tax governments position as stated in sec_1_501_c_3_-1 an organization will be regarded as operated exclusively for one or more exempt purposes only if which accomplish one or more of such exempt purposes specified in sec_501 it engages primarily in activities the organization does not accomplish any exempt purposes and therefore is found not to be operating exclusively exempt purposes further in better business bureau of washington d c inc v united_states the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes in this instance the organization is not accomplishing any exempt_purpose and therefore is not operating exclusively for the furtherance of exempt purposes the sec_501 tax exempt status of org the organization should be revoked because it is not operated exclusively for tax exempt purposes an organization described in sec_501 must establish that no more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 the operation of an apartment complex is not a qualifying tax exempt activity for the furtherance of sec_501 purposes additionally the organization also failed to comply with the recordkeeping requirements which are defined in sec_6001 and sec_6033 your failure to maintain such records did not enable the service to ascertain your sources of income and expenditures and business purposes therefore your tax exemption should be revoked taxpayer’s position tbd conclusion accordingly org status as an organization described under sec_501 should be revoked effective january 20xx because it did not operate exclusively for exempt purposes all of the form 886-a catalog number 20810w page _4 publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items name of taxpayer org year period ended december 20xx tax identification_number ein organizations revenues were generated from unrelated business activities and the organization failed to meet the organization and operational tests contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code further the organization failed to comply with sec_6001 and sec_6033 and has not established that it is observing the conditions required for the continuation of exempt status form_1120 u s corporate_income_tax return should be filed for tax years ending december 20xx through december 20xx note if you are planning to appeal the proposed revocation please refer to publication which is enclosed appeal should contain statement of facts declared true under penalties of perjury please refer to publication page for example of statement signed under penalties of perjury form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service


internal_revenue_service number release date index number - ------------------------------------ ---------------------------------------------- ------------------------------------------ -------------------------- -------------------------------- department of the treasury washington dc person to contact ------------------------------- --------- ------------ --------- telephone number --------------------- refer reply to cc psi - plr-105825-06 date date ------ -------------------------- ---------------------------------------------- legend x --------------------------------------------------- state a ---------------------------------------------------- trust --------------------------------------------------- date year dear --------------- correspondence submitted on behalf of x requesting that the service grant x an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make an election under sec_754 of the internal_revenue_code this letter responds to a letter dated date and subsequent --------------------------------- ---------- ------- the information submitted states that x is a state limited_partnership a owned plr-105825-06 an interest in x though trust a grantor_trust on date of year a died x inadvertently failed to timely file a sec_754 election sec_754 provides that if a partnership files an election in accordance with the regulations prescribed by the secretary the basis of partnership property is adjusted in the case of a transfer of a partnership_interest in the manner provided in sec_743 such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years a transfer of an interest in a partnership on the death of a partner is eligible for the sec_754 election the value of the partnership_interest reported on the estate_tax_return including discounts is the value used to determine the basis of the partnership_interest and the adjustment to basis of partnership property under sec_743 and sec_754 see generally sec_1_1014-3 sec_1_754-1 of the income_tax regulations provides that an election under sec_754 is made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed no later than the time for filing for the taxable_year including extensions sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election under sec_754 effective year with the appropriate service_center a copy of this letter should be attached to the sec_754 election a copy is enclosed for that purpose as a condition for this late election relief x must amend its federal_income_tax returns consistent with x having made a timely sec_754 election effective year plr-105825-06 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x's authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purpose-


department of the treasury internal_revenue_service washington d c nov s tax_exempt_and_government_entities_division uniform issue list tobi ik ier kkk o i otk kkk kek a1 ce s yo legend taxpayer ira x kereekkekrekkkrkie khaki her ereresekrearir reet kkk ik i rekmkhkeekekrrererereerrereakka ikk ii ik amount a whekekerkkkeekkreerieker dear khkkkkkkhkkkk this is in response to your request dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer represents that she received a distribution from ira x totaling amount a taxpayer asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to issues surrounding her kitchen remodeling which impaired her ability to accomplish a timely rollover taxpayer further represents that amount a has not been used for any other purpose taxpayer was remodeling her home and withdrew funds from her ira in anticipation of additional costs from the project when she realized that she did not need the funds and formed the intent to return them into the ira the 60-day period had passed based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount a page sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408i received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code the service has the authority to waive the 60-day rollover requirement for a in essence taxpayer made a short distribution from an ira where the individual failed to compete a rollover to another ira within the 60-day rollover period but was prevented from doing so because of one of the factors enumerated in revproc_2003_16 r b date which include errors committed by a financial_institution death disability hospitalization incarceration and or postal error in this instance taxpayer has not presented any evidence to the service as to how any of the above factors prevented her from timely rolling over amount a into ira x page term_loan when she withdrew amount a from ira x risk that she would not be able to timely replenish amount a in doing so taxpayer assumed the accordingly the service hereby declines to waive the 60-day rollover requirement with respect to the distribution of amount a from ira x this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact d - at - _ please address all correspondence to se t ep ra t2 sincerely yours dove donzell employee_plans technical group te tte whe hn manager enclosures deleted copy of ruling letter notice of intention to disclose


office_of_chief_counsel internal_revenue_service memorandum number release date cc fip b03 postf-112418-06 uilc date date to associate area_counsel dallas group1 large business international from associate chief_counsel financial institutions products third party communication none date of communication not applicable subject energy company- application of sec_475 this chief_counsel_advice responds to your request for assistance as to whether the taxpayer properly applied mark-to-market treatment under sec_475 to certain portions of a certain contractual agreement we are generally in agreement with your conclusions and analysis in the incoming request and as such we are only focusing our analysis on areas where we have some differences or those areas which may require further development this advice may not be used or cited as precedent legend taxpayer -------------------------------------- a --------------------------------------------------------------- b ----------------------------------------------------------- agreement ---------------------------------------------- section a ------------------------------- section b ------------------------------- section c ------------------------------- section d ------------------------------- section e ------------------------------- section f ------------------------------- subsection ------------------------------- subsection -------------------------------------------------- section g ------------------------------- section h --------------------------------- section i --------------------------------- postf-112418-06 contract a ----------------------------------- contract b ------------------------------- x -------- year ------- year ------- year ------- year ------- year ------- date ------------------ date --------------------------- date ------------- date ------------- date -------- date -------- date ----------------------- date -------------------------- date ------------------------- date -------------------------- location ---------------------- lake --------------- unit a ------------------------ unit b -------------------- mine ------------------ station --------------------- fuel source a -------- operation a -------------------------------------- smelter ------------------------ c amount -------------- d amount --------------- e amount ---- f amount ----------- g amount ------------ h amount ------------ i amount ----- j amount ----- k amount ------ l amount ------------- m amount --------------- n amount --------------- o amount ------------------------ p amount ------ q amount -------- r amount ---------------- w months -------------- y years --- postf-112418-06 z ----------- issue sec_1 whether the taxpayer an energy company engaged in electricity generation operations and retail electricity sales is a dealer in commodities for purposes of sec_475 whether the taxpayer’s agreement with x or certain components thereof represents a commodity or evidence of an interest in a commodity for purposes of sec_475 whether the taxpayer’s treatment of the agreement clearly reflects the taxpayer’s income within the meaning of sec_446 whether the taxpayer’s capacity to produce electricity including the power plants fuel coal water workforce in place license etc represents an offsetting_position to the agreement within the meaning of sec_1092 such that taxpayer’s loss on the agreement is limited to the amount of the loss that exceeds the unrecognized_gain on the capacity of unit b conclusion sec_1 we are not yet convinced by your argument that the taxpayer is not a dealer in commodities under sec_475 we do agree that taxpayer is not a dealer in commodities because of its activities under the agreement that seemed to be the basis for your conclusion but that contract is not the only item that should be considered in determining whether taxpayer is a dealer in commodities we think that this issue may need some additional development as to whether taxpayer’s activities with the gas retail contracts make it a dealer we also think determinations should be made as to whether taxpayer regularly sold electricity to customers in the ordinary course of its business outside of its contract with x the agreement provided that it had that ability to do so these activities could also qualify it as a dealer in commodities we agree with your conclusion that the agreement is not a commodity as defined in sec_475 even if taxpayer is considered a dealer in commodities we agree with your conclusion that taxpayer’s mark-to-market treatment of the agreement fails to clearly reflect income we also agree with your conclusion that an argument should be made that taxpayer’s capacity in unit b is an offsetting_position to the agreement and the postf-112418-06 rules under sec_1092 apply limiting loss to amount of loss that exceeds unrecognized_gain facts the taxpayer is an energy company the taxpayer's principal business activities as disclosed on its year and year tax returns the relevant years at issue are electricity generation and retail sales for the tax years at issue taxpayer is a u s partnership for federal_income_tax purposes taxpayer pursuant to the automatic consent provisions of rev_proc elected to be a dealer in commodities starting in year taxpayer attached a statement to its year form 8736-application for automatic_extension filed on date the election statement provided that taxpayer elects under sec_475 to be treated as a commodity dealer with respect to its trading of financial and physical commodities as that termed is defined in sec_475 on date taxpayer filed its form_3115 application_for change in accounting_method requesting permission to change from its accrual_method to the mark-to-market method required for electing dealers under sec_475 automatic consent was granted pursuant to rev_proc in the form_3115 taxpayer represented that it had different trades and businesses and that it was a dealer in commodities that it sold electricity to related and unrelated parties as well as to retail customers in its service territory since date taxpayer its predecessors and successors have pursuant to various written agreements contracted to sell to x and its predecessors electricity that x uses to power its operation a near location to ensure a source of electricity for its smelter x planned to construct a power generating station near its smelter although x was willing to build the plant it did not want to operate the plant itself as a result x and a predecessor to taxpayer a entered into an operating contract in date whereby taxpayer agreed contractually to operate x's fuel source a powered generating station at location this station later became known as the unit a to ensure delivery of electricity to x's smelter x and taxpayer also entered into a power contract in date essentially the power contract required taxpayer to build certain transmission lines and to provide electricity to power x's smelter operations and allowed taxpayer to sell certain excess power over and above the power used for the smelter under the date contracts x also acquired certain fuel source a reserves and mining assets from taxpayer which gave x the right to mine the fuel source a that would fuel the power generating station as a result x developed and owned what came to be known as mine accordingly x owned unit a and mine but the taxpayer and its successors operated both facilities under the date contracts previous arrangements and the current agreement a is the predecessor to taxpayer and b is the successor to the taxpayer the term taxpayer refers to the appropriate entity depending upon the relevant time period postf-112418-06 original agreement date in date x and taxpayer negotiated a contract related to a fourth electric plant to be called unit b the original agreement obligated taxpayer to build own and operate unit b as well as to sell a certain amount of power to x in exchange x became obligated to provide fuel source a or alternative_fuel for unit b and pay the taxpayer for the power x would receive originally x also paid monthly inducement fees of approximately c amount while the taxpayer built the unit b previous agreements as well as the current agreement allow x to express its views regarding the operation of unit b however the agreement also makes clear that x's role is advisory only firm power commitment under previous agreements and the current agreement the taxpayer is obligated to sell x a certain amount of firm power ie a fixed amount of power but it is not required to deliver that power specifically from unit b x's power supply is not unit specific that is the taxpayer is completely obligated to provide power to x whether or not unit b is operating however when unit b is not operating x is obligated to pay the market price according to section g of the contract when unit b is operating x pays the specifically calculated price as defined in sections f and g of the contract in addition x is also required to supply the fuel source and water current amended amendment year in year x and taxpayer amended the agreement the key terms of the year amendment extended taxpayer's firm power obligation by almost y years to year below are some of the relevant provisions contained in the agreement definitions - section a the term the station is used herein to mean the totality consisting of a unit a b unit b c station real_estate d common facilities e fuel source a facilities importantly x owns a and e taxpayer owns b x owns all of c except for the unit b real_estate and x owns all of d except for the unit b common facilities ownership - section b x conveyed land to taxpayer for the construction of unit b taxpayer total inducement fees of approximately d amount were paid during the w month period from date to date this is the period from the date the contract was signed up to the time the unit b was up and operational postf-112418-06 paid x the average cost paid_by x for the property per section of the power contract x has the right and option to buy back the generating unit land and all improvements if the taxpayer decides to sell it the purchase_price would be current fair_market_value but not less than the original cost of unit b all additions thereto and all additions to common facilities less retirements and depreciation at e amount per year this right would terminate upon the earlier of i the later of the termination of this agreement or the occurrence of a smelter closing event or ii the expiration of twenty- one years after the death of the survivor of the children of certain persons named x also has the right and option to purchase the land from the taxpayer upon expiration of the useful_life of unit b as mutually determined by the parties x would pay the same cost as the taxpayer paid for the properties power and energy - section c taxpayer is entitled to the power and energy output of unit b except for the firm power amount as defined in section c during the term of the agreement emphasis added the firm power amount was initially f amount this amount was increased to g amount in the 4th amendment dated date during periods of scheduled and unscheduled outages of unit b taxpayer will use its best efforts to supply power and energy to meet its obligations however if taxpayer fails to supply the power to x x has the right to further reduce the power and energy to be supplied in order to make efficient use of the power and energy which is supplied during such failure notably the taxpayer's obligation to provide power is suspended upon x's failure to provide fuel source a or other acceptable fuel x is prohibited from reselling redelivering assigning or otherwise transferring any of the power and energy that it purchases from the taxpayer under this agreement to any entity other than the taxpayer x may not purchase accept delivery from take an assignment of or otherwise receive power and energy from anyone other than the taxpayer for the existing x facilities at location unless it is consuming all of the power and energy to which it is entitled under the agreement supply of water- section d x shall be responsible for supplying water from the lake and from purchased water for the operation of unit b delivery of such water to taxpayer shall be at lake to the extent x is unable to provide sufficient water for the operation of unit a and unit b the water available shall be supplied to unit a and unit b on a proportional basis with unit b receiving h amount of the available water the cost of such water is included in the operating costs i amount represents the output capacity of unit b and j amount represents the total output capacity of the units a and b postf-112418-06 fuel source a - section e x is required to furnish enough fuel source a or an alternate fuel to the taxpayer at the station to assure a continuous ability to generate power at k amount of annual load factor equal to l amount4 of the capacity of unit b over the term of the agreement taxpayer paid x for this fuel source a based on a formula x must also furnish at no cost to the taxpayer enough fuel source a to generate the power purchased by x and any surplus power if taxpayer fails to furnish the required power x may suspend the furnishing of fuel source a required for the firm power commitment additionally x may purchase m amount of unit b and unit b real_estate from taxpayer at its current fair_market_value which could not be less than m amount of the cost of unit b operation of the station - section f taxpayer shall continue to operate station pursuant to the operating contract except for the modification made in section f subsection x agrees to pay m amount and taxpayer pays l amount of the monthly unit b operating costs the taxpayer pays a monthly common facilities charge per subsection at the end of each calendar_year x pays the taxpayer a supplemental operating fee which is the amount if any by which the minimum fee amount n amount exceeds the sum of i the operating fees for the calendar_year ii the additional operating fees for the calendar_year and one-third of the cost of capital payments that x paid to taxpayer under this agreement for the calendar_year price of power - section g x pays the taxpayer monthly i o amount of the taxpayer's cost of capital p amount in the original agreement q amount at date on original cost of unit b less depreciation and ii o amount depreciation at e amount per year on a straight-line basis the amount to be paid to taxpayer by x shall be reduced on a proportionate basis to the extent that taxpayer does not make available the firm power amount to x x does not pay for any of the firm power amount that is not provided x pays the z charges ie the market price of electricity that the taxpayer incurs directly or indirectly when power is delivered from the market instead of from unit b this represents taxpayer’s portion of the unit b output postf-112418-06 assignment - section h neither party shall assign this agreement nor any right or obligation hereunder without the prior written consent of the other such consent may not be unreasonably withheld or delayed review of agreement- section i at any time after date if the taxpayer determines that the costs of producing energy from unit b exceed the market price for at least the next two years it will notify x the parties will then negotiate if the agreement can be satisfied to the mutual satisfaction of both parties smelting closing event the agreement entitles x to declare a smelter closing event as early as date and consequently shut down the location smelter without losing the right to take firm power under a smelter closing event x could sell the entire amount of firm power less the small amount of power it designated for use after a smelter shutdown and retain r amount of the revenue a smelter closing event is defined as occurring on the first day of the first calendar month after the later of i date ii ninety days after the taxpayer receives written notice from x that it has or will permanently cease smelting on the plant site and iii the date that x does in fact permanently cease smelting on the plant site law and analysis issue taxpayer may be a dealer in commodities sec_475 provides that in the case of a taxpayer who elects to be treated as a dealer in commodities this section applies to commodities held by the dealer in the same manner as the rules apply to a dealer_in_securities therefore a dealer in commodities is a taxpayer who regularly purchases commodities from or sells commodities to customers in the ordinary course of a trade_or_business or who is willing to enter into offset assign or otherwise terminate positions in commodities with customers in the ordinary course of business see sec_475 and b once a taxpayer makes an election under sec_475 it must mark all commodities under sec_475 which have not been specifically identified as held for investment or otherwise exempt from marking a taxpayer can not just pick and chose which commodities it wants to mark unless it falls within exception to marking mentioned in the preceding sentence for example if it is determined that taxpayer is a dealer in commodities because of its activities with sales of electricity outside of the agreement then any other commodities must be marked regardless of whether taxpayer is a postf-112418-06 dealer in that commodity unless such commodity has been properly identified as exempt from marking in your incoming request the position asserted is that taxpayer is not a dealer in commodities this position seems to be based only upon taxpayer’s activities in regards to the agreement and possibly also two other similar agreements contract a and contract b although the incoming request also mentions that taxpayer claims to be a dealer in commodities because of retail gas contracts which it claims are hedges for book purposes the request doesn’t really address that aspect in addition the incoming request asserts that taxpayer does not claim to be a dealer in commodities because of its sales in electricity outside of the agreement or its contracts for fuel source a so the request doesn’t address the impact these activities have on taxpayer’s dealer status although we do not think taxpayer is a dealer in commodities because of its activities under the agreement the fact that it has asserted that is a dealer in retail gas contracts and that it may also sell electricity to other customers beside x may support taxpayer being a dealer in commodities at least these activities should be looked at and considered before asserting whether or not taxpayer is a dealer in commodities we note also that the form_3115 filed by taxpayer regarding its election under sec_475 states that it has several trades_or_businesses including that of being a dealer in commodities although it doesn’t specifically assert natural_gas and that it also generates electricity for sale to related and unrelated parties including retail customers throughout its service territory an election under sec_475 applies on an entity by entity basis an election must be made by or for a specific entity regardless of whether that entity is a member of a consolidated_group the parent of which may have made an election sec_475 will only apply to the specific entity making the election or in the case of a consolidated_group a parent specifically making an election for the different entities to which sec_475 shall apply in this case taxpayer made the election and now we need to determine whether the activity involving the retail gas contracts and the sale of electricity to customers outside of the agreement occurs within one tax entity taxpayer as we noted it appears from what taxpayer represented on its form_3115 that may be the case but you need to confirm that is so retail gas contract sec_5 contract a and contract b are briefly mentioned in this incoming request as contracts similar to the agreement at issue here but involve generating wind capacity and coal taxpayer is marking these contracts under sec_475 at this point in time not enough detail has been presented on these contracts for the national_office to render an opinion on them we agree with your analysis and do not think the agreement or portions of the agreement is a commodity under sec_475 see discussion under issue postf-112418-06 natural_gas is an actively_traded commodity so whether taxpayer is purchasing or selling natural_gas or a forward_contract or some similar type contract in gas it is either a commodity subject_to marking either under sec_475 or c if taxpayer regularly purchases or sells gas contracts to customers in the ordinary course of its trade_or_business it would qualify as a dealer since no facts were presented about the retail gas contracts this is something that should be developed further key components in making the dealer determination are whether the purchases or sales occur regularly and with customers in the ordinary course of taxpayer’s business sales of electricity similarly electricity is most likely a commodity and any regular sales of electricity to customers other than x may qualify taxpayer as a dealer in commodities the agreement does provide that taxpayer may sell excess capacity of electricity in the retail market once it has met it obligation to x taxpayer asserts in its form_3115 that it does sell electricity to retail customers as well as related parties the sales to related parties can be with customers it must also be determined if these sales occurred regularly and with customers other possible commodities we also mention that fuel source a may be a commodity and subject_to marking under sec_475 likewise water is probably a commodity in both cases taxpayer is acquiring fuel source a and water from x as part of its payment for the electricity although there may be hazards to our argument that fuel source a is an actively_traded commodity based upon the cost and ability to transport it we think it is an argument that can and should be made we think before a determination can be made that taxpayer is not a dealer in commodities your office must look beyond taxpayer’s activities under the agreement in making the dealer determination in the incoming request the analysis as to whether the taxpayer is a dealer seemed to focus primarily on the body of dealer trader case law developed over the years rather than the language of the sec_475 a reason asserted for not finding dealer status is the fact that the taxpayer does not purchase and resell electricity or the agreement containing provisions regarding the operations of the electricity plant and sales of the electricity to x the request asserts that the taxpayer did not serve a middleman or merchandising function in either case however we want to point out that the statutory definition of a dealer_in_securities or commodities under sec_475 is broader than the dealer requirements discussed in case law distinguishing between a dealer and a trader that case law was addressing code sections other than section see 16_tc_1026 bielfeldt v commissioner t c memo aff’d 231_f3d_1035 7th cir postf-112418-06 under the case law dealers were required to both buy and sell securities commodities compare that to the statutory requirement under sec_475 a dealer need only buy or sell a dealer under sec_475 can include a taxpayer who regularly only purchases securities or commodities from customers in the ordinary course of business regardless of whether it sells those securities or commodities the case law distinguishing dealer from trader also focused on whether a taxpayer regularly purchased and sold to customers in the ordinary course of business the discussion of whether a taxpayer is a dealer in the case law is very circular in that the purchase and resale requirement is also deeply tied to the determination as to whether the sale was to customers the case law has developed a requirement that a dealer receives remuneration for their labors as a middleman bringing together buyer and seller and acting as a retailer or wholesaler of goods bielfeldt supra pincite kemon supra pincite3 when applying this case law under sec_475 we need to make sure that we do not get caught up on the purchase and resale requirement that is not part of sec_475 we think your analysis may have done so however we do need to use this case law to help in making the customer determination issue the agreement is not a commodity taxpayer is asserting that certain provisions of the agreement specifically sections c and g when severed from the rest of the agreement is a sec_475 commodity - an evidence of an interest in or a derivative instrument in any commodity described in subparagraph a or b including any option forward_contract futures_contract short position and any similar instrument in such a commodity taxpayer asserts that the underlying commodity is electricity the incoming request for advice asserts first that the agreement is not severable and as such the agreement is not a commodity under sec_475 second even if the agreement were severable sections c and g of the agreement are not a commodity under sec_475 we are in agreement with your conclusions and most of the analysis set forth in your incoming request on this issue therefore we will not go through repeating such analysis in this response but we will list our agreement or disagreement or any clarifications or modifications that should be considered we agree that the agreement is not a commodity under sec_475 and that it is a cost of services contract or as you call it a tolling agreement we agree with you analysis that the agreement is not severable under -------- law though we claim no expertise in -------- law and that the year valuation report claim of severability is unrealistic the request goes on to assert that even if the agreement were severable the selected provisions are not a commodity we agree however we do have some clarifications postf-112418-06 on page of your analysis you state that the legislative_history indicates that a commodity for purposes of sec_475 a would include only commodities of the a kind customarily dealt in on an organized commodities exchange although that is legislative_history from the house bill it does not reflect what happened when the bill went to conference the legislative_history for that bill indicates that the conference agreement expanded the definition of a commodity for purposes of the provision to include any commodity that is actively_traded within the meaning of sec_1092 see h_r conf_rep no pincite reprinted in 1997_4_cb_1457 see also joint_committee on taxation the general explanation of the tax legislation enacted in blue_book comm print reprinted in 1997_3_cb_89 under that expansive definition of actively_traded it is likely that electricity is covered by sec_475 however that does not mean that the selected provisions of the agreement are a commodity under sec_475 as asserted in your request these selected provisions are part of a tolling agreement or a cost of services contract if severed these provisions would not be like a forward_contract or futures_contract because these provisions are not based on market rates in fact these provisions are based upon cost of services and the electricity rates are below market rates issue 3-the taxpayer’s treatment of the agreement does not clearly reflect income we agree with the conclusions and the analysis set forth in your incoming request we have no additional comments except those noted below under case development issue taxpayer holds an offsetting_position to its obligations to provide and sell the firm power and energy to x under the agreement we agree with the conclusion and the analysis set forth in the incoming request we have no additional comments except those noted below under hazards case development hazards and other considerations as noted under the discussion for issue to determine whether taxpayer is a dealer in commodities for commodities other than the agreement may require further factual development however even if taxpayer is a dealer in commodities based upon its activities related to the natural_gas contracts or its sales of electricity outside of the agreement that does not impact your conclusion that taxpayer can not mark certain provisions of the agreement because it is not a commodity under sec_475 whether there are hazards to arguing that taxpayer regularly sells electricity to customers we can not opine on that at this point because further factual postf-112418-06 development is needed likewise for the natural_gas contracts depending upon the factual development there may or may not be hazards as to arguing that taxpayer has customers we just don’t know enough about these contracts you should also clarify that these sales of electricity and the trading activity with the natural_gas are all happening in the same entity --------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------- as to issue regarding the clear_reflection_of_income argument we think it is also worth noting that although taxpayer is claiming a huge mark-to-market loss on two provisions of this agreement the taxpayer amended the agreement to be in force for an additional y years if this mark-to-market loss from two provisions were a true reflection of the economics of this agreement taxpayer would not have extended the agreement for the additional years as to issue the offsetting_position argument under sec_1092 although we think that argument should be made ------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------- this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions stephen larson associate chief_counsel financial institutions products by _____________________________ robert b williams senior counsel branch financial institutions products


internal_revenue_service number release date index number ----------------------------------- ------------------------ ------------------ ------------------------------- - department of the treasury washington dc person to contact ------------------------ ---------- - ------------- telephone number --------------------- refer reply to cc psi b02 - plr-167232-03 date date --------------------- -------------------------- -------------------------- -------------------------------- legend x ---------------------------------------------------------------------- y ---------------------------------------------------------------------- z ---------------------------------------------------------------------- date date date country country state dear -------------- correspondence submitted on behalf of x requesting a ruling that x be granted an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes this letter responds to a letter dated date and subsequent ------------------------- ---------------------- ------------- ------------- --------- plr-166881-03 according to the information submitted x was incorporated on date under the laws of country y a corporation formed under the laws of state owned percent of the stock of x y also owns percent of the stock of z a company incorporated under the laws of country on date y implemented a plan_of_reorganization by transferring to z all of its outstanding shares in x solely in exchange for additional shares issued by z as part of the reorganization x intended to make an election to be disregarded as an entity separate from its owner effective date however x inadvertently failed to timely file the proper election classified as a corporation for u s federal_income_tax purposes x also represents that all members of x have limited_liability x represents that it is a foreign eligible_entity that is not required to be sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single owner having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules under ' c sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed under ' c the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term aregulatory election as including an election whose deadline is prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of ' requests for relief under ' will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 plr-166881-03 based on the information submitted and representations made x has established that the requirements of and are satisfied consequently x is granted an extension of days from the date of this letter to make an election under ' to be treated as a disregarded_entity effective date x must file form_8832 within the extension period with the appropriate service_center with a copy of this letter attached except for the specific ruling above we express or imply no opinion concerning the federal_income_tax consequences of the facts of this case under any other provision of the code sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer on whose behalf it was requested according to ' k of the internal_revenue_code this ruling may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x s authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for purposes


internal_revenue_service number release date index numbers ----------------------------------------------- -------------------------------- ------------------------------ ------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------- id no ----------- ---------------- telephone number -------------------- refer reply to cc ita plr-109588-15 date september legend taxpayer --------------------------------------------------------- date --------------------------- date ----------------------- date ------------------- date -------------------- a ------ b --------------------- c ---------------------- dear ----------- this letter_ruling responds to a letter dated date submitted on behalf of taxpayer taxpayer is requesting an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file the original and the signed duplicate copy of such original of the form_3115 application_for change in accounting_method for the taxable_year ending date the a taxable_year facts taxpayer represents the facts are as follows plr-109588-15 taxpayer files a form_1065 u s return of partnership income on a fiscal_year basis that ends on b taxpayer wanted to make a late general_asset_account election under section dollar_figure of the appendix of revproc_2011_14 2011_4_irb_330 designated automatic accounting_method change number dcn for certain depreciable_property beginning with the taxable_year ending date thus in accord with the procedures of revproc_2011_14 taxpayer should have completed the required original of the form_3115 reflecting the desired accounting_method change and attached this original to taxpayer’s timely filed original form_1065 for the taxable_year ending date further in accord with the procedures of revproc_2011_14 taxpayer also should have timely filed a copy of the original form_3115 with an original signature or a photocopy of the original signature with the appropriate office of the internal_revenue_service lastly taxpayer’s form_1065 for the taxable_year ending date should have reflected the accounting_method change made by taxpayer taxpayer engaged c an outside tax consulting firm to prepare its form_1065 for the a taxable_year that return was due on date without extension taxpayer could not file its a federal_income_tax return by date so it intended to request an extension of the date due_date to date c met with taxpayer before date and provided taxpayer with a copy of the form_7004 application_for automatic_extension of time to file certain business income_tax information and other returns for the a taxable_year at that meeting c advised taxpayer that c would file the form_7004 electronically with the service however the form_7004 was not timely filed due to c’s inadvertent error in fact taxpayer never filed its form_7004 for the a taxable_year as a result when taxpayer did file its form_1065 for the a taxable_year on date the return was late taxpayer’s late filing of its return for the a taxable_year made the original and the signed duplicate copy of such original of the form_3115 reflecting the late general_asset_account election dcn which taxpayer also filed on date late ruling requested taxpayer requests an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 to file the original and the signed duplicate copy of such original of the form_3115 that are required by revproc_2011_14 to obtain the consent of the commissioner of internal revenue to make the late general_asset_account election dcn for the taxable_year ending date law and analysis revproc_2011_14 provides the procedures by which a taxpayer may obtain automatic consent to change certain accounting methods a taxpayer complying with all the applicable provisions of this revenue_procedure has obtained the consent of the plr-109588-15 commissioner to change its accounting_method under sec_446 and the income_tax regulations thereunder section a of revproc_2011_14 provides that a taxpayer changing an accounting_method pursuant to revproc_2011_14 must complete and file a form_3115 in duplicate the original must be attached to the taxpayer’s timely filed including any extensions original federal_income_tax return for the year_of_change and a copy with signature of the form_3115 must be filed with the appropriate office of the service no earlier than the first day of the year_of_change and no later than when the original is filed with the federal_income_tax return for the year_of_change generally a general_asset_account election must be made by the due_date including extensions of the federal tax_return for the taxable_year in which the depreciable_property subject_to such election is placed_in_service by the taxpayer and cannot be made by filing a form_3115 see sec_1_168_i_-1 and sec_1_168_i_-1 however because of changes made to the general_asset_account regulations the service treated the making of a late general_asset_account election as a change in method_of_accounting for a limited period of time ie for any taxable_year beginning on or after date and beginning before date sections b and of the appendix of revproc_2011_14 a general_asset_account election made before or after that limited period of time is not a change in method_of_accounting section b of the appendix of revproc_2011_14 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 certain regulatory elections sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government sec_301_9100-3 imposes special rules for accounting_method regulatory elections this section provides in relevant part that the interests of the government are deemed to be prejudiced except in unusual and compelling circumstances when the accounting_method regulatory election for which relief is requested is subject_to the procedure described in sec_1_446-1 or the relief requires an adjustment under sec_481 or would require an adjustment under sec_481 if the taxpayer changed to the plr-109588-15 accounting_method for which relief is requested in a taxable_year subsequent to the taxable_year the election should have been made conclusion based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly taxpayer is granted calendar days from the date of this letter to file the required original of the form_3115 making its late general_asset_account election dcn for the taxable_year ending date with an amended form_1065 and file the duplicate copy with signature of such form_3115 with the appropriate office of the service please attach a copy of this letter_ruling to the amended_return and to the duplicate copy of form_3115 this letter_ruling does not grant any extension of time for the filing of taxpayer’s form_7004 or its form_1065 for the taxable_year ending date except as expressly set forth above we express no opinion concerning the tax consequences of the facts described above under any other provision of the code or regulations specifically no opinion is expressed or implied concerning whether the accounting_method change taxpayer has made is eligible to be made under revproc_2011_14 taxpayer otherwise meets the requirements of revproc_2011_14 to make accounting_method changes using revproc_2011_14 any asset subject_to taxpayer’s late general_asset_account election is eligible to be included in a general_asset_account taxpayer’s grouping of assets in general asset accounts is correct under sec_1_168_i_-1 or taxpayer’s depreciation method recovery_period and convention for any asset are correct the ruling contained in this letter_ruling is based upon facts and representations submitted by taxpayer with accompanying penalty of perjury statements executed by appropriate parties while this office has not verified any of the material submitted in support of this request for an extension of time to file the required form_3115 reflecting the late general_asset_account election dcn all material is subject_to verification on examination this letter_ruling is directed only to taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-109588-15 in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer’s authorized representative we are also sending a copy of this letter to the appropriate operating division director sincerely kathleen reed kathleen reed chief branch office of associate chief_counsel income_tax accounting enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------- --------------------- ----------------------------- ------------------------------------------------ ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------------ telephone number ---------------------- refer reply to cc fip b01 plr-123791-16 date date legend taxpayer ---------------------------------------------------------------------- ----------------------------- subsidiary parent company company company accounting firm hotel properties hotel properties individual individual state a state b date ------------------ --------------------------- --------------------------------------- ------------------------------------- -------------------------------------- ----------------------------------- ------------------------------------------------------------------------ ----------------------------------------- ---------------------------- -------------------- -------------- -------------- ---------------------------- plr-123791-16 date date date date date a b c d ------------------------ --------------------------- ---------------------- ---------------------- ---------------------- ---- ---- -- ---- dear ------------------------ this responds to a letter dated date submitted on behalf of taxpayer taxpayer requests an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make an election under sec_856 of the internal_revenue_code to be treated as a real_estate_investment_trust reit facts taxpayer is a state a limited_liability_company that was formed on date to purchase from company and indirectly own through various single-member limited_liability companies a hotel properties which include b hotel properties and c hotel properties collectively hotel properties hotel properties are located in d states across the united sates taxpayer commenced operations on date taxpayer is owned by parent a joint_venture owned by various entities associated with company and company subsidiary is taxpayer’s corporate subsidiary hotel properties are operated and managed by an affiliate of company through subsidiary taxpayer represents that taxpayer and subsidiary timely filed form_8875 taxable_reit_subsidiary election to elect for subsidiary to be treated as a taxable_reit_subsidiary trs of taxpayer within the meaning of sec_856 taxpayer represents that it always intended that taxpayer would elect to be treated as a reit by filing form 1120-reit u s income_tax return for real_estate_investment_trusts for its initial taxable_year plr-123791-16 taxpayer represents that the limited_liability_company agreement for taxpayer specifically identifies taxpayer as the reit and provides that the reit will elect to be taxed as a real_estate_investment_trust under of the code the limited_liability_company agreement also provides that parent shall use commercially reasonable efforts to cause the reit to qualify for u s federal_income_tax treatment as a real_estate_investment_trust under sec_856 through of the code excerpts from the limited_liability agreement were submitted together with the ruling_request taxpayer has no employees pursuant to the joint_venture agreement for parent taxpayer’s manager a company affiliate is responsible for the day-to-day operations of the joint_venture this includes tax matters associated with taxpayer and other entities that are part of the joint_venture however company does not have an internal tax department company 3’s internal administrative staff members have a general understanding of reits but they are unfamiliar with the tax rules applicable to them company has thus engaged accounting firm to provide it with guidance on tax-related matters and assistance with tax compliance included within the scope of accounting firm’s engagement was the preparation of certain federal and state tax filings including extensions and returns for entities affiliated with the joint_venture company 3’s corporate controller individual was aware of the need to make an election for taxpayer to be treated as a reit individual is also vice president of taxpayer pursuant to its engagement accounting firm prepared forms application_for automatic_extension of time to file certain business income_tax information and other returns for the joint_venture entities with tax years ending on date to be filed electronically by their due_date date however due to an administrative oversight the form_7004 for taxpayer was not filed timely accounting firm believed the extension was timely filed electronically on date on date upon checking to confirm that the extensions had been submitted and accepted accounting firm determined that the extension for taxpayer had not been filed accounting firm then submitted the form_7004 on date and following this submission received confirmation of acceptance from the software however because the form_7004 was submitted after the filing deadline of date the extension request was late and was not accepted by the service shortly after the extension was filed on date it was identified that the election to treat taxpayer as a reit would also be late on date individual a partner in accounting firm's state b office discussed the missed election with accounting firm's national tax practice as well as the availability of relief to make the election after the due_date after learning that such relief was available individual spoke with individual at company during the course of this discussion individual made the determination to proceed with submitting a request for relief to make the late reit election pursuant to the authority of sec_301_9100-1 and sec_301_9100-3 taxpayer plr-123791-16 represents that if the requested relief is not granted by the time taxpayer’s tax_return is filed a form 1120-reit will nevertheless be filed with appropriate disclosure of this request and that therefore an amended_return will not be necessary if the requested relief is granted taxpayer makes the following additional representations to its knowledge taxpayer filed the request for relief before the failure to make the regulatory election was discovered by the service granting the relief will not result in taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than it would have had if the election had been timely made taking into account the time_value_of_money taxpayer does not seek to alter a return position for which an accuracy- related penalty has been or could have been imposed under sec_6662 at the time it requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences taxpayer did not choose to not file the election taxpayer is not using hindsight in requesting relief no specific facts have changed since the due_date for making the election that makes this election advantageous to taxpayer the period of limitations on assessment under sec_6501 has not expired for taxpayer for the taxable_year in which the election should have been filed nor for any taxable_year s that would have been affected by the election had it been timely filed the affidavits required by sec_301_9100-3 were provided with taxpayer’s request law and analysis sec_856 provides that a corporation trust or association shall not be considered a reit for any taxable_year unless it files with its return for the taxable_year an election to be a reit or has made such an election for a previous taxable_year and such election has not been terminated or revoked pursuant to sec_1_856-2 of the income_tax regulations the election shall be made by the trust by computing taxable_income as a reit in its return for the first taxable_year for which it desires the election to apply plr-123791-16 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to mean an election whose due_date is prescribed by a regulation or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v 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 a taxpayer will be deemed to have not acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed of the required election but chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301 c ii provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer's receipt of a ruling granting relief under this section plr-123791-16 conclusion based on the information submitted and the representations made we conclude that taxpayer has satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to be treated as a reit effective as of the first day of the taxable_year that commenced on date and ended on date this ruling is limited to the timeliness of the filing of taxpayer's election under sec_856 this ruling's application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether taxpayer otherwise qualifies as a reit under subchapter_m of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely _______________________________ jason g kurth assistant to the branch chief branch office of associate chief_counsel financial institutions products enclosures copy of this letter copy for sec_6110 purposes cc


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