t c memo united_states tax_court jack a upchurch petitioner v commissioner of internal revenue respondent docket no 19730-04l filed date r mailed a statutory_notice_of_deficiency to p which although it asserted a deficiency and contained figures and adjustments to p’s gift_tax liability for referenced only p did not petition this court for redetermination only in his request for a hearing after r had issued a notice_of_intent_to_levy and notice_of_federal_tax_lien filing did p raise the question of the validity of the notice_of_deficiency after the hearing r’s appeals officer held the notice_of_deficiency to be valid and since p raised no other issue regarding the propriety of the proposed collection actions made the determination that the collection action should proceed held the issuance by r of the notice_of_determination sustaining the lien and levy notices was not an abuse_of_discretion and r may proceed with collection bradley s waterman for petitioner karen lynne baker for respondent memorandum opinion nims judge this case arises from a petition for judicial review filed in response to a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination the issues for decision are whether the notice_of_deficiency petitioner received was valid for gift_tax although it made repeated references to and if so whether there was an abuse_of_discretion in sustaining the proposed collection action unless otherwise indicated all section references are to sections of 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 this matter is before the court on the parties’ cross- motions for summary_judgment pursuant to rule rule a provides that either party may move for summary_judgment upon all or any part of the legal issues in controversy full or partial summary_judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact and a decision may be entered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law background some of the facts have been stipulated and are so found the stipulation of facts and related exhibits are incorporated herein by this reference at the time he filed the petition petitioner resided in maryland during petitioner owned an interest in a partnership known as the upchurch family limited_partnership this partnership was to contribute a parcel of real_estate to another partnership which would then use that parcel and an adjacent parcel for a large scale mixed-use development project on date petitioner made gifts to his daughter jill of a 29-percent interest in the upchurch family limited_partnership and dollar_figure cash on the same date petitioner also made gifts of a 31-percent interest in the upchurch family limited_partnership to his son jack and a 31-percent interest in the upchurch family limited_partnership to his son barc petitioner reported these gifts on a timely filed form_709 united_states gift and generation-skipping_transfer_tax return gift_tax_return this gift_tax_return reflected the total value of the gifts as dollar_figure after application of the annual exclusions and the unified_credit available under the federal gift_tax regime the return showed a gift_tax liability in the amount of dollar_figure which petitioner timely paid respondent reviewed petitioner’s gift_tax_return requesting additional information on the transferred partnership interests petitioner responded with a valuation report indicating that in valuing the transferred interests in the upchurch family limited_partnership petitioner applied a total of percent in discounts percent for lack of control percent for lack of marketability liquidity percent for developmental risks and percent for rights of first refusal respondent’s examiner disagreed with the valuation and on date respondent sent to petitioner a so-called day letter proposing a dollar_figure increase in petitioner’s gift_tax liability for the calendar_year 30-day_letter attached to the 30-day_letter was the examiner’s report showing the corrected total value of the gifts as dollar_figure allowing no cost of sale deduction for partnership assets and applying only a 15-percent discount to the transferred partnership interests after application of the annual exclusions and unified_credit these adjustments resulted in a total proposed gift_tax liability of dollar_figure petitioner filed a written protest to the proposed changes acknowledging that they pertained to his gift_tax liability for because further correspondence failed to yield any agreement between petitioner and respondent on the valuation issues on date respondent mailed to petitioner at his last_known_address a statutory_notice_of_deficiency the deficiency_notice indicated that it was for tax_year ending date and asserted a gift_tax deficiency for in the amount of dollar_figure the same amount stated in the 30-day_letter for that was previously sent to petitioner petitioner received the deficiency_notice on date attached to the cover page of the deficiency_notice was a form 4089-c notice of deficiency--waiver a form 3615-a explanation of tax changes and an additional schedule detailing the revisions to the values of the transferred partnership interests the form 4089-c and the form 3615-a both referred to a tax_year ending date the form 3615-a contained figures corresponding to the gift_tax_return filed by petitioner as well as the examiner’s report for gift_tax the additional schedule contained no reference to the taxable_period but it detailed the gift transactions made by petitioner on date and reported by petitioner on his gift_tax_return as in the examiner’s report this schedule revalued the gifts based on disallowance of the cost of sale deduction for the value of partnership assets and a reduction in the fractional partnership_interest discount from percent to percent even though the deficiency_notice informed petitioner of his entitlement to file a petition for redetermination of the deficiency with this court he did not do so on date respondent assessed the gift_tax deficiency of dollar_figure and interest in the amount of dollar_figure with respect to calendar_year notice_and_demand for payment was sent to petitioner on date respondent sent to petitioner a final notice - notice_of_intent_to_levy and notice of your right to a hearing on date respondent also sent to petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 petitioner timely requested a hearing by submitting a form request for a collection_due_process_hearing in his request petitioner explained in detail his contentions that the deficiency_notice issued on date pertained to that a deficiency_notice was never issued for and that therefore the assessment should be abated a conference was scheduled and petitioner’s representative sent respondent’s appeals officer a written_statement of petitioner’s position before the scheduled conference on date respondent’s appeals officer and petitioner’s representative met for the conference on date respondent sent petitioner a notice_of_determination concerning collection action s under sec_6320 and or the notice_of_determination stated that respondent had determined that the notice_of_deficiency regarding petitioner’s gift_tax_return was valid since the validity of the notice_of_deficiency was the only issue raised at his hearing and petitioner did not suggest any collection alternatives respondent determined that the lien and levy actions balanced the need for the efficient collection action to be no more intrusive than necessary on date petitioner timely filed a petition appealing respondent’s determination in his petition the only issue petitioner raised with respect to the notice_of_determination was that respondent’s appeals officer erred in determining that the notice_of_deficiency was valid for petitioner’s claim is essentially that the proposed collection action was based on an invalid assessment because petitioner was not afforded the requisite notice_of_deficiency in petitioner’s view the notice_of_deficiency he received on date was invalid because it referenced tax_year and not the tax_year for which he had any gift_tax liability respondent on the other hand maintains that the notice_of_deficiency was valid for tax_year despite the error discussion before a levy may be made on any property or right to property a taxpayer is entitled to notice of the commissioner’s intent to levy and notice of the right to a fair hearing before an impartial officer of the internal_revenue_service irs appeals_office sec_6330 and b d sec_6320 provides that after the filing of a federal_tax_lien under sec_6323 the secretary shall furnish written notice this notice must advise the taxpayer of the opportunity for administrative review in the form of a hearing which is generally conducted consistent with the procedures set forth in sec_6330 d and e sec_6320 at the hearing taxpayers may raise challenges to the appropriateness of collection actions and may make offers of collection alternatives which may include the posting of a bond the substitution of other assets an installment_agreement or an offer-in-compromise sec_6330 the appeals officer must consider those issues verify that the requirements of applicable law and administrative procedures have been met and consider whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person involved that any collection action be no more intrusive than necessary sec_6330 after the irs appeals hearing process sec_6330 gives us jurisdiction to review the appeals officer’s determination in an appeal to this court pursuant to sec_6330 a taxpayer may raise in his petition any issues that he raised at the appeals hearing see sec_301_6330-1 q a-f5 proced admin regs where the underlying tax_liability is properly at issue we review de novo the appeals officer’s determination with respect to the existence and amount of tax_liability 114_tc_604 114_tc_176 when the underlying tax_liability is not properly at issue we review the appeals officer’s determination using an abuse_of_discretion standard sego v commissioner supra pincite goza v commissioner supra pincite- the irs is generally prohibited from assessing and proceeding with collection of a deficiency in tax until a notice_of_deficiency is issued and either the period during which the taxpayer may request judicial redetermination of the deficiency expires or if a petition is filed with the tax_court a decision of the tax_court redetermining the deficiency becomes final sec_6213 petitioner is challenging the proposed collection actions because he claims that the notice_of_deficiency and the subsequent assessment were invalid for his gift_tax liability for the case before us presents the unique situation in this court where the taxpayer challenging the validity of the notice_of_deficiency completely disregarded it and waited to break his silence until the irs proceeded with collection action almost years after the date of said notice because of the unusual context the parties have spent a considerable amount of effort arguing which standard of review de novo or abuse_of_discretion applies to the issue of the validity of the notice_of_deficiency we have held that a determination to proceed with collection of an assessment made without following proper deficiency procedures is an error as a matter of law and accordingly an abuse_of_discretion 121_tc_111 see also 125_tc_14 in holding that respondent could not proceed with collection in freije v commissioner supra pincite we said that the appeals officer’s verification that the requirements of applicable law had been met was incorrect we therefore analyze the validity of the notice_of_deficiency within this framework validity of notice_of_deficiency sec_6213 does not specify the form or the content of a notice_of_deficiency t he notice is only to advise the person who is to pay the deficiency that the commissioner means to assess him anything that does this unequivocally is good enough 88_f2d_650 2d cir an error in a notice_of_deficiency does not necessarily invalidate the notice anderten v commissioner tcmemo_1993_2 in cases where the error involves the taxable_year shown on the notice_of_deficiency a deficiency_notice must indicate the taxable_period involved or provide sufficient information such that the taxpayer reasonably could not be misled as to the taxable_period involved 98_f2d_968 7th cir revg and remanding 33_bta_564 peoplefeeders inc subs v commissioner tcmemo_1999_36 fernandez v commissioner tcmemo_1979_476 smith v commissioner tcmemo_1979_16 see also anderten v commissioner supra erickson v commissioner tcmemo_1991_97 in determining whether the notice_of_deficiency is valid despite the error we look at the notice_of_deficiency with attachments as well as the circumstances surrounding its issuance and receipt erickson v commissioner supra smith v commissioner supra so taking the entire document into consideration along with the surrounding circumstances we must decide in this case whether petitioner could have been reasonably confused or misled as to the taxable_year involved the facts and circumstances in this case lead us to conclude that the notice_of_deficiency is valid because it contained enough information such that petitioner could not reasonably be deceived as to the taxable_period involved calendar_year both the explanation of changes and the additional attached schedule contain figures that are directly traceable to petitioner’s gift_tax_return including the value of the gifts as shown on the return and the amount of tax previously paid the additional schedule though it does not indicate any dates for the taxable_period involved details the three gifts that petitioner made in this schedule lists each donee of the gifts the percentage of the upchurch family limited_partnership given to each donee the value of the gifts as reflected on petitioner’s gift_tax_return and the corrected values of each gift which also match the examiner’s report for the cover page of the notice and attachments asserted the exact same amount of deficiency as was proposed in the previously sent 30-day_letter for calendar_year the adjustments and computations in the attached explanation of tax changes are also identical to those in the examiner’s report for calendar_year the circumstances surrounding the issuance of the deficiency_notice lend further support for our conclusion that petitioner could not have been misled as to the taxable_year involved petitioner knew that his gift_tax_return was under examination and participated in its examination petitioner’s representative spent a considerable amount of effort trying to justify the valuation of the gifts petitioner made in that gave rise to the gift_tax deficiency petitioner acknowledged the potential deficiency for gift_tax in his written protest of the 30-day_letter proposing the deficiency and explaining the adjustments petitioner thereafter participated in appeals_office review of the examination officer’s findings petitioner could not reasonably have been misled by the references to the taxable_year when he received the notice_of_deficiency after years of review and correspondence relating to his gift_tax_return and when the notice and attached schedules exclusively contained figures explanations and adjustments corresponding to his gift_tax_return petitioner has not convinced us that any other reasoning should apply to this case petitioner selected the three main cases where this court has held the notices of deficiency invalid these cases that petitioner relies upon are distinguishable 80_tc_529 17_tc_733 and 15_tc_253 involved situations where the commissioner actually determined deficiencies for the wrong taxable years in century data sys inc and atlas oil the commissioner used fiscal years instead of the appropriate calendar years to calculate the deficiency similarly in columbia river orchards the deficiency was calculated and asserted for a short calendar_year because the commissioner had incorrectly believed the corporate taxpayer had liquidated in these cases the deficiency calculations necessarily omitted items of income and deduction of the correct taxable_year and or had included other items which properly belong in another taxable_year century data sys inc v commissioner supra pincite in the case before us respondent made calculations and determined a deficiency for the correct taxable_year calendar_year the distinguishable facts in century data sys inc atlas oil and columbia river orchards do not require us to reach the same result we reached in those cases as petitioner would like we are likewise not persuaded by petitioner’s reliance on comments made in 76_tc_96 affd without published opinion 786_f2d_1151 4th cir and 571_f2d_174 3d cir affg in part 66_tc_743 and 67_tc_176 in both sanderling and burford the commissioner issued a notice_of_deficiency covering an incorrect taxable_period longer than was appropriate in burford the notice covered the calendar_year instead of a calendar_quarter in sanderling the commissioner issued the notice based on a liquidation date that was later than the corporation’s actual liquidation date both courts noted in their analysis that the incorrect taxable_period stated in the notice_of_deficiency fully encompassed the proper period sanderling inc v commissioner supra pincite burford v commissioner supra pincite we decline petitioner’s invitation to hold that the foregoing scenario presents the only situation where a notice_of_deficiency bearing an incorrect year would constitute a valid notice deriving such a meaning from sanderling and burford disregards additional observations by the courts as part of their reasoning both burford and sanderling also look at whether the taxpayer could be misled by the error in the notice sanderling inc v commissioner supra pincite burford v commissioner supra pincite petitioner’s interpretation of sanderling and burford also ignores our most recent caselaw cited above involving typographical errors in notices of deficiency the particular situations confronted in sanderling and burford are merely a subset of situations where a notice_of_deficiency containing error may nonetheless be valid finally contrary to petitioner’s assertion this is not a case where we must look behind the notice_of_deficiency we are not called upon to review respondent’s procedures in order to determine the validity of the notice_of_deficiency cf 79_tc_185 70_tc_15 62_tc_324 since we hold that the notice_of_deficiency was valid for tax_year the resulting assessment of deficiency for petitioner’s gift_tax liability was also valid the appeals officer’s verification that the requirements of applicable law had been met was correct petitioner raised no other issues at his appeals hearing and did not propose any collection alternatives accordingly we hold that issuing the notice_of_determination sustaining the lien and levy notices was not an abuse_of_discretion respondent may proceed with collection an appropriate order and decision will be entered


t c memo united_states tax_court hendy j appleton petitioner v commissioner of internal revenue respondent docket no 7954-08l filed date r mailed a notice_of_determination to petitioner on friday date thirty-three days later on wednesday date p mailed a petition to the court seeking to commence a levy action thereafter r filed a motion to dismiss for lack of jurisdiction held the petition was not timely filed held further tax_court rule a c does not support a contrary conclusion brian g isaacson for petitioner shirley m francis for respondent memorandum opinion armen special_trial_judge this case is before the court on respondent’s motion to dismiss for lack of jurisdiction filed date in his motion respondent contends that this case should be dismissed for lack of jurisdiction on the ground that the petition was not filed within the time prescribed by sec_6330 or sec_7502 on date petitioner filed a notice of objection to respondent’s motion thereafter on date respondent filed a response to petitioner’s objection at the time that the petition was filed petitioner resided in the state of oregon background the facts necessary to a resolution of respondent’s motion are as follows on date respondent sent petitioner a final notice_of_intent_to_levy and notice of your right to a hearing in respect of petitioner’s outstanding liability for see sec_6330 petitioner timely requested an administrative hearing see sec_6330 by filing with respondent a form request for a collection_due_process or equivalent_hearing ultimately all section references are to the internal_revenue_code_of_1986 as amended all rule references are to the tax_court rules_of_practice and procedure respondent’s appeals_office in seattle washington sent petitioner a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination see sec_6330 the notice_of_determination was both dated and mailed date which date was a friday and it was sent to petitioner by certified mail addressed to her at her last_known_address see 122_tc_258 notice_of_determination is sufficient if sent by certified mail to taxpayer at taxpayer’s last_known_address the notice_of_determination sustained the proposed levy petitioner received the notice_of_determination thereafter on thursday date petitioner acting through counsel filed a petition with this court seeking judicial review of respondent’s proposed collection action the petition arrived at the court by private delivery service pds pursuant to priority overnight service see sec_7502 the airbill indicates that the petition had been given to the pds on wednesday date the record suggests that a copy of the notice_of_determination was also mailed on date to petitioner’s authorized representative petitioner’s counsel of record in the instant case petitioner’s mailing and legal address as alleged in paragraph of the petition is the same address as the address to which the notice_of_determination was mailed discussion a jurisdiction general principles the tax_court is a court of limited jurisdiction see sec_7442 accordingly we may exercise jurisdiction only to the extent expressly authorized by statute 66_tc_61 in a collection review action involving a proposed levy this court’s jurisdiction under sec_6330 depends on the issuance of a notice_of_determination by respondent’s office of appeals and the filing by the taxpayer of a timely petition sec_6330 weber v commissioner supra pincite 117_tc_122 116_tc_263 114_tc_492 see rule b see generally rules if respondent’s office of appeals issues a valid notice_of_determination to a taxpayer but the taxpayer fails to file a timely petition then the court will and must dismiss the action for lack of jurisdiction weber v commissioner supra pincite b respondent’s position respondent asserts and petitioner does not dispute that respondent’s seattle appeals_office sent petitioner the notice_of_determination by certified mail on friday date and that the notice_of_determination was addressed to petitioner at her last_known_address respondent then points to sec_6330 which permits a taxpayer to appeal respondent’s determination to this court within days of such determination respondent contends that because the notice_of_determination was mailed on date petitioner was obliged to file her petition with the court no later than monday date because the petition was not filed with the court until thursday date and further because the petition was not given to the pds for mailing to the court until wednesday date see sec_7502 respondent concludes that the instant case must be dismissed for lack of jurisdiction c petitioner’s position petitioner agrees that an untimely-filed petition must be dismissed for lack of jurisdiction however relying generally on rule a and specifically on rule a c petitioner date was the 30th day after the mailing of the notice_of_determination however that date was a sunday accordingly in respondent’s view the petition was not due until the following business_day see sec_7503 regarding the time for performance of acts where the last day otherwise falls on a saturday sunday or legal_holiday contends that the petition was timely filed thus in her notice of objection petitioner argues as follows tax_court rule a computation of time states if service is made by mail then a period of time computed with respect to the service shall begin on the day after the date of mailing in this case the notice_of_deficiency sic was mailed on friday date the period of time would not begin until saturday date tax_court rule a c states if any act is required to be taken or completed no later than or at least a specified number of days before a date certain then the earliest day of the period so specified shall not be included if it is a saturday sunday or a legal_holiday in the district of columbia and the earliest such day shall be the next preceding day which is not a saturday sunday or such a legal_holiday therefore saturday date and sunday date are not included in the time computation therefore the earliest day from which the time period begins is monday date petitioner then observes that days from date is date ergo petitioner concludes the petition was timely mailed and therefore timely filed see sec_7502 d analysis the parties agree as do we that the section that defines our jurisdiction in a case such as the instant one is sec_6330 accordingly we begin with that section sec_6330 provides as follows sec_6330 proceeding after hearing -- judicial review of determination --the person may within days of a determination under this section appeal such determination to the tax_court and the tax_court shall have jurisdiction with respect to such matter in the present case the person in sec_6330 is petitioner and the determination is the notice_of_determination issued by respondent’s seattle appeals_office that determination was made on friday date the date stamped on the notice_of_determination and the date on which it was sent by certified mail to petitioner thus petitioner was obliged to appeal ie file a petition with this court within days of friday date see rule a providing in relevant part that a levy action under sec_6330 shall be commenced by filing a petition with the court the last date within days of friday date was date but because that date was a sunday the last day to file a petition was instead monday date see sec_7503 therefore because the petition was neither filed nor mailed within days of the determination respondent’s motion must be granted and this case must be dismissed for lack of jurisdiction petitioner incorrectly interprets certain provisions of rule a proper application of those provisions yields the same result as that reached in the preceding paragraph ie that respondent’s motion must be granted and this case must be dismissed for lack of jurisdiction rule is concerned with the computation of time rule a sets forth the general_rule and in its entirety provides as follows in computing any period of time prescribed or allowed by these rules or by direction of the court or by any applicable statute which does not provide otherwise the day of the act event or default from which a designated period of time begins to run shall not be included and except as provided in subparagraph the last day of the period so computed shall be included if service is made by mail then a period of time computed with respect to the service shall begin on the day after the date of mailing emphasis added as applicable to the present case rule a would dictate that the within days period prescribed by the applicable statute ie sec_6330 began to run on saturday date ie the day after the mailing of respondent’s notice_of_determination on date see appiah v commissioner tcmemo_1996_170 rule a includes an exception so we must necessarily consult rule a which deals with weekends ie saturdays and sundays and holidays in its entirety rule a provides as follows saturdays sundays and all legal holidays shall be counted except that a if the period prescribed or allowed is less than days then intermediate saturdays sundays and legal holidays in the district of columbia shall be excluded in the computation b if the last day of the period so computed is a saturday sunday or a legal_holiday in the district of columbia then that day shall not be included and the period shall run until the end of the next day which is not a saturday sunday or such a legal_holiday and c if any act is required to be taken or completed no later than or at least a specified number of days before a date certain then the earliest day of the period so specified shall not be included if it is a saturday sunday or a legal_holiday in the district of columbia and the earliest such day shall be the next preceding day which is not a saturday sunday or such a legal_holiday when such a legal_holiday falls on a sunday the next day shall be considered a holiday and when such a legal_holiday falls on a saturday the preceding day shall be considered a holiday emphasis added thus rule a begins with the general_rule that saturdays and sundays as well as legal holidays are counted in computing time see appiah v commissioner supra however rule a sets forth three exceptions to this general_rule the first exception embodied in rule a a is irrelevant to the present case because the applicable statute ie sec_6330 specifies a 30-day period of time to file a petition the exception applies only if the period prescribed or allowed is less than days the second exception embodied in rule a b is relevant but essentially does nothing in the context of the present case other than echo the provisions of sec_7503 which we have already mentioned see bass v commissioner tcmemo_1991_213 affd without published opinion 976_f2d_736 9th cir the third exception embodied in rule a c is the exception that petitioner invokes and upon which her objection to respondent’s motion solely rests the rationale for rule a c appears in the court’s rules committee note to the amendment of rule a in 93_tc_821 the two pertinent paragraphs of that note provide as follows paragraph a of rule is amended in order to clarify the computation of time when the relevant period extends back in time from a given point rather than forward and the earliest day of that period is a saturday sunday or legal_holiday in the district of columbia thus for example rule a generally requires that discovery shall be completed no later than days before the date set for call of the case from a trial calendar similarly rule f generally requires that an expert witness report be furnished to the other party and submitted to the court not later than days before the call of the trial calendar on which the case appears so if a case had been calendared for trial at a session beginning on monday date then rule f requires that any expert witness report should have been served and submitted not later than date however since that date is a saturday rule a requires that the report should have been served and submitted not later than the next preceding business_day or friday date a report served and submitted on monday date would therefore have been untimely emphasis added finally paragraph a is amended by restructuring it into three subparagraphs in order to more clearly reflect its content thus it is readily apparent that rule a c constitutes a look-back provision that is applicable only when an act or event must be completed a certain number of days before a date certain accordingly rule a c does not apply to the present case because the statutory period for filing a petition begins with an appeals_office determination and extends forward in time not back in time e conclusion sec_6330 requires that we compute the 30-day filing period starting with the date determination and that we necessarily compute that period forward in time not back in time rule a specifies that the first day in the 30-day filing period was saturday date ie the day after the mailing of the notice_of_determination on date rule a provides that saturdays and sundays shall be included in computing time however the exception embodied in rule a b echoing the provisions of sec_7503 makes clear that the final sunday being the 30th and otherwise last day should not be counted and that monday date should instead be the last day of the statutory filing period as the petition was both filed and mailed after the expiration of the statutory filing period the petition was not timely filed and this case must be dismissed for lack of jurisdiction weber v commissioner t c pincite to give effect to the foregoing an order of dismissal for lack of jurisdiction will be entered granting respondent’s motion and dismissing this case on the ground that the petition was not timely filed


internal_revenue_service p o box cincinnati oh release number release date date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil b scholarship program c employer name d related_entity names e f individual entity name v dollars amount w dollars amount x dollars amount dear you asked for advance approval of your employer-related scholarship procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding employer-related scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding employer-related scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 description of your request your letter indicates you will operate an employer-related scholarship program called b letter catalog number 58264e the purpose of b is to provide scholarships to current retired and former associates of c and its numerous affiliated entities consisting of d and the spouses children or grandchildren of such individuals who are attending or have been accepted and will be attending within the next calendar_year a college university graduate school or professional school that is qualified under sec_170 recipients will be awarded a scholarship of up to x dollars per academic semester for the payment of tuition fees required for enrollment or attendance books supplies and equipment required for courses of instruction at the educational_institution described in the scholarship application f the founder of c will make an initial contribution of v dollars you anticipate an annual budget in the range of w dollars for b you formed e a limited_liability_company in which you are the sole member to administer b you will advertise b in the associate handbook which will be updated to provide information about b as well as by including advertisements in internal publications and emails circulated among the current and retired associates of c and d approximately six months prior to the start of the next succeeding fall or spring academic semester and each fall and spring semester thereafter these advertisements will contain a description of b a summary of the eligibility criteria and the application-filing deadline as well as the name and contact information of the person from whom additional information can be obtained individuals will have until the application filing deadline to submit an application each application will include a b cc d e f g the applicant's name and contact information the name and contact information of the college university graduate school or professional school that is qualified under sec_170 to be attended by the applicant a written description of the applicant’s proposed or current course of study a personal statement a grade transcript from the applicant’s high school and all other institutions of higher learning previously attended by the applicant one or more letters of recommendation in support of the applicant’s application and a completed financial disclosure form after each filing deadline the members of the e selection committee will review all the applications the e selection committee will be comprised of two to five individuals and will be appointed by a majority of your board_of directors for the sole purpose of reviewing applications in addition the e selection committee will be required to include at least one individual with significant experience in the field of education and training the following classes of individuals and the family members of such individuals will not be allowed to serve on the selection committee letter catalog number 58264e n o r o current associates of c and d and their spouses children or grandchildren current shareholders partners members officers and directors of c and d current members and managers of e your current officers directors and members and any individual who has made an annual contribution to during the current tax_year in excess of dollar_figure if such amount exceed sec_2 of the total contributions received by you in such year after reviewing the applications the selection committee will award scholarships based on each applicant’s n o r p a prior academic performance motivation character ability and potential ability to complete the contemplated course of study financial need and ability to finance the balance of the cost of the education the recipients and amount of each scholarship will be determined in the sole and absolute discretion of the selection committee scholarships will be awarded solely based on the foregoing objectives and non-discriminatory criteria and not on the basis of race color creed gender religion marital status age sex national origin or ancestry the following classes of individual and the family members of such individual are not eligible and may not be awarded scholarships regardless of whether they otherwise meet the qualification criteria current shareholders partners members officers and directors of c and d current members and managers of e your current officers directors and members current members of e selection committee and their spouses children or a b cc d grandchildren and e any individual who has made an annual contribution to you during the current tax_year in excess of dollar_figure if such amount exceed sec_2 of the total contributions received by you in such year the recipients will be required to provide you with account information for their educational institutions and the scholarship will be paid directly to such institutions each recipient will be required to agree to deliver an official academic transcript from the educational_institution to you immediately following completion of the academic semester for which the scholarship is made following completion of the academic semester academic transcripts will be reviewed to ensure that scholarships have been used for the educational_purposes described in each recipient’s scholarship application where a recipient fails to submit an academic transcript or where a recipient submits an academic transcript that suggests that such recipient’s scholarship is not catalog number 58264e letter being used in the manner described in the recipient's scholarship application you will investigate the manner in which the scholarship was utilized during the course of any such investigation no further scholarships or payments of any kind will be made to or for the benefit of such recipient if the results of your investigation indicate that a scholarship was not used in furtherance of the education and training described in the recipient's scholarship application you will take all reasonable and appropriate steps to recover the scholarship this will include recovery_of any unused portion of the scholarship directly from the educational_institution to which such scholarship was paid and recovery_of any portion of improperly diverted grant funds from the recipient directly including legal action if necessary and likely to result in the satisfaction of execution on a judgment regardless of whether funds are ultimately recovered by you any recipient who is found to have used all or a portion of a scholarship in a manner inconsistent with that described in the recipient’s scholarship application will be disqualified from applying for future scholarships under the scholarship program when a recipient submits an academic transcript that indicates that the scholarship has been properly used in the manner described in the scholarship application such recipient will be eligible to apply for a renewal of his or her scholarship in a subsequent academic semester any such recipient will be required to submit a renewal scholarship application in the same form and manner as an initial scholarship application and a recipient may receive a scholarship for no more than eight academic semesters your program will be conducted in accordance with all of the guidelines of sections dollar_figure through dollar_figure of revproc_76_47 you have agreed that your program will generally meet the requirements of either the percent or percent percentage_test of section dollar_figure revproc_76_47 based on the wide availability of the scholarship program you have demonstrated that the recipients will not be drawn from a specific group_of_employees in particular the selection of individual grant recipients will be made by e the grants will not be used as a means of inducement to recruit employees nor will the recipient be restricted in a course of study that would be of particular benefit to c d or to you you agree to maintain certain information about your program in accordance with code sec_4945 including the following e e the information used to evaluate the qualifications of potential grantees identification of the grantees including any relationship of any grantee to you the amount and purpose of each grant all reports and other follow-up data obtained in administering your scholarship program basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a e letter catalog number 58264e grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 revproc_76_47 1976_2_cb_670 provides guidelines to determine whether grants a private_foundation makes under an employer-related program to employees or children of employees are scholarship or fellowship grants subject_to the provisions of code sec_117 if the program satisfies the seven conditions in sections dollar_figure through dollar_figure of revproc_76_47 and meets the applicable_percentage tests described in section dollar_figure of revproc_76_47 we will assume the grants are subject_to the provisions of code sec_117 you represented that your grant program will meet the requirements of either the percent or percent percentage_test in revproc_76_47 these tests require that e e e the number of grants awarded to employees’ children in any year won't exceed percent of the number of employees’ children who were eligible for grants were applicants for grants and were considered by the selection committee for grants or the number of grants awarded to employees’ children in any year won't exceed percent of the number of employees’ children who were eligible for grants whether or not they submitted an application or the number of grants awarded to employees in any year will not exceed percent of the number of employees who were eligible for grants were applicants for grants and were considered by the selection committee for grants you further represented that you will include only children who meet the eligibility standards described in revproc_85_51 1985_2_cb_717 when applying the percent test applicable to employees’ children in determining how many employee children are eligible for a scholarship under the percent test a private_foundation may include only those children who submit a written_statement or who meet the foundation's eligibility requirements they must also satisfy certain enrollment conditions you represented that your procedures for awarding grants under this program will meet the requirements of revproc_76_47 in particular letter catalog number 58264e an independent selection committee whose members are separate from you your creator and the employer will select individual grant recipients you will not use grants to recruit employees nor will you end a grant if the employee leaves the employer you will not limit the recipient to a course of study that would particularly benefit you or the employer other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures do not differ significantly from those described in your original request this determination is in effect as long as your procedures comply with sections dollar_figure through dollar_figure of revproc_76_47 and with either of the percentage tests of sec_4 if you establish another program covering the same individuals that program must also meet the percentage_test this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary letter catalog number 58264e please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely jeffrey cooper director exempt_organizations rulings and agreements letter catalog number 58264e


internal_revenue_service number release date index number ------------------------------------- ------------------------------------------------------------ -------- ------------------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no -------------- telephone number ---------------------- refer reply to cc psi b01 plr-103685-13 date date legend trust --------------------------------------------------------------------- ------------------------------------------------------------ trustee year year x -------------------------- ------- ------- ---------------- dear ----------------- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of trust by trust’s representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an election under sec_642 of the internal_revenue_code code for year facts the information submitted states that trust made a charitable_contribution in year in the amount of dollar_figurex trustee intended to make an election to treat the charitable_contribution as paid in year however trustee failed to make the election law and analysis plr-103685-13 sec_642 provides that in the case of an estate_or_trust other than a_trust meeting the specifications of subpart b of part i of subchapter_j of chapter of the code there shall be allowed as a deduction in computing its taxable_income in lieu of the deduction allowed by sec_170 relating to deduction for charitable etc contributions and gifts any amount of the gross_income without limitation which pursuant to the terms of the governing instrument is during the taxable_year paid for a purpose specified in sec_170 determined without regard to sec_170 if a charitable_contribution is paid after the close of such taxable_year and on or before the last day of the year following the close of such taxable_year then the trustee or administrator may elect to treat such contribution as paid during such taxable_year the election shall be made at such time and in such manner as the secretary prescribes by regulations sec_1_642_c_-1 provides that for purposes of determining the deduction allowed under sec_1_642_c_-1 the fiduciary as defined in sec_7701 of an estate_or_trust may elect under sec_642 to treat as paid during the taxable_year whether or not such year begins before date any amount of gross_income received during such taxable_year or any preceding_taxable_year which is otherwise deductible under sec_642 and which is paid after the close of such taxable_year but on or before the last day of the next succeeding taxable_year of the estate_or_trust the preceding sentence applies only in the case of payments actually made in a taxable_year which is a taxable_year beginning after date no election shall be made however in respect of any amount which was deducted for any previous taxable_year or which is deducted for the taxable_year in which such amount is paid sec_1_642_c_-1 provides that the election under sec_1_642_c_-1 shall be made not later than the time including extensions thereof prescribed by law for filing the income_tax return for the succeeding taxable_year sec_1_642_c_-1 provides that the election shall be made by filing with the income_tax return or an amended_return for the taxable_year in which the contribution is treated as paid a statement which i states the name and address of the fiduciary ii identifies the estate_or_trust for which the fiduciary is acting iii indicates that the fiduciary is making an election under sec_642 in respect of contributions treated as paid during such taxable_year iv gives the name and address of each organization to which any such contribution is paid and v states the amount of each contribution and date of actual payment or if applicable the total amount of contributions paid to each organization during the succeeding taxable_year to be treated as paid in the preceding_taxable_year sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines plr-103685-13 the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based on the information submitted and representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly trust is granted an extension of time of days from the date of this letter to file an election under sec_642 to claim a deduction in the year taxable_year for charitable_contributions made in year this ruling is conditioned on the trust filing amended returns for year and year on which the estate must make the election under sec_642 to claim a deduction on the year amended_return for the distributions made by the close of year and claim a deduction for the year distributions under sec_642 the amended returns must be filed within the 120-day period following the date of this letter with the service_center where the trust files its returns a copy of this letter should be attached to the amended_return except as specifically set forth above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-103685-13 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your taxpayer_representative sincerely faith p colson faith p colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-107390-00 date date in re legend - grantors - trust - trustee partnership - llc - corporation - date - dear this is in reference to your date correspondence and prior submissions requesting a ruling regarding the generation-skipping_transfer_tax consequences of a proposed transfer of trust assets to llc and the amendment of the bylaws of corporation owned by trust the facts submitted are as follows on date grantors created trust an irrevocable_trust primarily for the benefit of their lineal_descendants trustee an independent corporation is the trustee of trust under the terms of trust all trust income is to be distributed pursuant to a complex distribution scheme to the lineal_descendants of the grantors there are currently ten income beneficiaries of trust the trust will terminate at the death of the last to die of three individuals all of whom are currently over age at that time the assets of trust will be distributed to individual members of five different family lines currently there are approximately contingent remainderpersons who will take an interest upon the death of the last to die of the measuring lives assuming they survive the individuals who are the measuring lives the current_assets of trust consist of commercial real_property which is owned outright by the trust and all the stock in corporation a wholly-owned s_corporation that holds only liquid investment_assets corporation which was initially incorporated as a c plr-107390-00 corporation several years prior to the creation of trust recently elected s_corporation status corporation’s current investments primarily consist of common_stock in publicly traded companies government and agency obligations corporate bonds and a money market account in order to avoid condemnation by the local jurisdiction of the commercial real_estate trust entered into negotiations with representatives of the local jurisdiction and other interested parties for the redevelopment of the commercial real_estate the negotiations were subject_to the approval of the appropriate local court having jurisdiction over trust pursuant to the negotiations trust executed a ground lease with partnership for the development and management of the real_estate partnership is a limited_partnership none of the partners have any relationship to trust or any of the current or contingent beneficiaries of trust the ground lease will be in effect for a specified term of years and may be extended for two additional specified periods under the terms of the ground lease partnership may exercise an option to purchase the property at various times during the term of the lease at a price determined under a formula set out in the lease if the real_estate is sold by trust prior to termination of the trust the proceeds will be distributed to the trustee for ultimate distribution to the remainderpersons the appropriate local court having jurisdiction over trust has approved the ground lease as being in the best interest of the trust beneficiaries proposed transaction due to the probability that the trust will terminate before the ground lease trustee has formed llc a limited_liability corporation to facilitate the ultimate distribution of the property upon termination of trust upon receiving a favorable letter from the internal_revenue_service the trust will transfer the commercial real_estate to llc the appropriate local court having jurisdiction over trust has approved the transfer to llc as being in the best interest of the trust beneficiaries trustee will be the only member of the llc and the sole owner and manager of the membership interests trustee with the consent of the beneficiaries will contribute the commercial real_estate to llc prior to termination of trust any income from llc will be distributed to trust and in turn to the trust income beneficiaries upon termination of trust the llc interests will be divided and distributed to the remainder beneficiaries and trustee will resign as manager of trust the beneficiaries will then elect a new manager and llc will continue its operation under the terms of llc a member can freely transfer a membership interest to a family_trust a_trust for the benefit of the members’ wife husband and lineal_descendants of which a member is the trustee further a membership interest can be transferred without restriction if the transfer occurs by reason of the death of a member if a member desires to sell or transfer a membership interest other than to a family_trust the member must give each other llc member the right to purchase the plr-107390-00 proportionate share of the membership interest pursuant to a right_of_first_refusal under this procedure a member who receives a bona_fide offer from a third party to buy his or her entire_interest must first offer to sell the interest to other members under the same terms and for the same price as the offer in the event of the occurrence of certain events such as withdrawal of a member the member will be paid the fair option_price which is defined as that which a willing buyer would pay a willing seller llc will not terminate until the sale or distribution of all llc assets or the affirmative vote of the manager and a majority of the members currently the shares of corporation of which trust is the sole shareholder are not subject_to any restrictions on transfer on termination of trust the shares in corporation will be distributed to the trust remainder beneficiaries trustee proposes to amend the bylaws of corporation to provide the same right_of_first_refusal provision as will be contained in the llc agreement the trustee contends that this right_of_first_refusal provision will facilitate retention of corporation’s s status trustee has represented that no additions have been made to trust after date trustee requests a ruling that the transfer by trust of the commercial real_estate owned by trust to llc whose membership interests will be subject_to the right_of_first_refusal provision and the amendment of the corporation bylaws to include the right_of_first_refusal provision is not a modification of trust that will affect the exempt status of trust for generation-skipping_transfer_tax purposes law and analysis sec_2601 imposes a tax on every generation-skipping_transfer gst made after date a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2612 provides that the term taxable_termination means a termination by death lapse of time release of a power or otherwise of an interest_in_property_held_in_trust where the property passes to a skip_person with respect to the transferor of the property sec_2612 provides that the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip under sec_2612 a direct_skip is a transfer subject_to federal estate or gift_tax made by a transferor to a skip_person under a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the gst tax does not apply to any generation-skipping_transfer under a_trust that was irrevocable on date plr-107390-00 however this exemption does not apply to additions actual or constructive that are made to the trust after date sec_26_2601-1 states that if an addition is made after date to a_trust which was irrevocable on date a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the gst tax provisions if an addition is made the trust is thereafter deemed to consist of two portions a portion not subject_to the gst tax and a portion subject_to the gst tax sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification of a_trust by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause the trust to lose its gst exempt status if the modification does not shift any beneficial_interest in the trust to a lower generation beneficiary and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust under sec_26_2601-1 a modification of an exempt trust will result in a shift in beneficial interests to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust in the present case trust was irrevocable on date trustee has represented that no additions actual or constructive have been made to the trust after that date in this case neither the transfer by trust of the commercial real_estate to llc nor the amendment of the bylaws of corporation to provide for the right_of_first_refusal results in a shift of any beneficial_interest in trust to lower generation beneficiaries and does not extend the time for vesting of any beneficial_interest in trust beyond the period provided for in trust the terms of the right_of_first_refusal with respect to both llc and corporation establish a potential purchase_price based on a bona offer or in the case of a withdrawal from the llc a price based on what a willing buyer would pay a willing seller thus the purchase_price will be an arm’s length price that will reflect fair_market_value we conclude that the transfer by trust of the commercial real_estate to llc with plr-107390-00 the right_of_first_refusal provision and the amendment of the corporation bylaws to include an identical right_of_first_refusal provision will not affect the exempt status of trust for generation-skipping_transfer_tax purposes and will not result in a transfer of property that will subject trust or distributions thereunder to the generation-skipping_transfer_tax imposed under sec_2601 a copy of this letter should be attached to any gift estate or generation-skipping_transfer_tax returns that you may file relating to these matters 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 the 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 except as specifically ruled above no opinion is expressed as to the federal tax consequences of the facts described above under the cited provisions or any other provisions of the code or regulations this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours george masnik branch chief branch associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------------------------ ---------------------------------------------------------- ---------------------------------- ------------------------------------- department of the treasury washington dc person to contact -------------------------- id no ------------- telephone number -------------------- refer reply to cc fip b02 plr-146785-08 date date legend fund -------------------------------------------------- ---------------------------------------------------------- trust state country index ---------------------- ------------- --------------------- ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- --------------------------------------- type a company ------------------------------------ p q r s t u --------- ----------------------- --- -- ------------------ --- plr-146785-08 v w y z dear ------------------- -------- --- --- -------- this responds to the request dated date submitted by your authorized representative on behalf of fund fund requests that the internal_revenue_service rule that income and gain arising from the commodities-linked notes described in this letter will constitute qualifying_income to fund under sec_851 of the internal_revenue_code_of_1986 as amended the code and that income earned from the ownership of a wholly-owned subsidiary that is a controlled_foreign_corporation cfc constitutes qualifying_income to fund under sec_851 facts fund is organized as a series_fund of trust a state business_trust trust is registered under the investment_company act of u s c 80a-1 et seq as amended the act as an open-end management investment_company fund elects to be treated as a regulated_investment_company ric under subchapter_m of the code commodities-linked notes fund invested or intends to invest in commodities-linked notes having the terms and conditions of the following notes the notes the first note note has a par_value of dollar_figurep its payout formula is determined with reference to the index its term is one year and one month note pays a coupon of q quarterly and on the maturity_date fund as holder of note has the right to put note to the issuer at the calculated redemption price at any time prior to maturity based on the closing index level on the date of notification if notification is received by a specified time on a business_day otherwise the next business_day the issuer of note has the right to redeem note in whole but not in part if i the index is no longer published or ii the intraday level of the index during any business_day is equal to or less than r of the initial index level and issuer gives notice on that business_day by a specified time in addition if the closing index level on any business_day is equal to or less than r of the initial index level note will knockout and automatically redeem based on the closing index level of the next business_day the repayment obligation upon early redemption knockout or at maturity equals the face_amount of note plus or minus the following adjustment to calculate the adjustment the face_amount of note is multiplied by a a leverage factor of s and by b the product of i the percentage of the increase or decrease of the final index level compared to the initial index level for the applicable_period and ii a discount factor plr-146785-08 less iii an adjustment factor representing an annual fee the total is then adjusted to account for any accrued coupon payments only upon early redemption or knockout the discount factor is applied to adjust the index related return to its present_value based on the number days remaining to the scheduled maturity for note the discount factor mitigates the effect of a positive or negative percentage change in the index on the redemption amount the discount factor varies with the number of days remaining to maturity and thus has a smaller effect on the redemption amount as note approaches its maturity the adjustment factor which represents a fee based on the number days fund holds note is equal to t multiplied by the percentage of days that note is outstanding throughout the year the second note note has a par_value a par_value of dollar_figurep its payout formula is determined with reference to the index its term is one year and one month note pays a coupon of q monthly and on the maturity_date fund as holder of note has the right to put note to the issuer at the calculated redemption price at any time prior to maturity based on the closing index level on the date of notification if notification is received by a specified time on a business_day otherwise the next business_day the issuer of note has the right to redeem note in whole but not in part if i the index is no longer published or ii the intraday level of the index during any business_day is equal to or less than u of the initial index level and issuer gives notice on that business_day by a specified time in addition if the index closing level on any business_day is equal to or less than u of the initial index level note will knockout and automatically redeem based on the closing index level of the next business_day the repayment obligation upon early redemption knockout or at maturity equals the face_amount of note plus or minus the following adjustment to calculate the adjustment the face_amount of note is multiplied by a a leverage factor of s and by b the product of i the percentage of the increase or decrease of the final index level compared to the initial index level for the applicable_period and ii a discount factor less iii an adjustment factor representing an annual fee the total is then adjusted to account for any accrued coupon payments only upon early redemption or knockout the discount factor is applied to adjust the index related return to its present_value based on the number days remaining to the scheduled maturity for note the discount factor mitigates the effect of a positive or negative percentage change in the index on the redemption amount the discount factor varies with the number of days remaining to maturity and thus has a smaller effect on the redemption amount as note approaches its maturity the adjustment factor which represents a fee based on the number days fund holds note is equal to v times the notional amount if note is mandatorily redeemed within w days of the initial trade_date and then adjusted to reflect the percentage of days note is outstanding throughout the year if note remains outstanding for at least y days the adjustment actor will be equal to z times the notional amount and then adjusted to reflect the percentage of days note is outstanding throughout the year plr-146785-08 fund makes the following representations with respect to these two notes the issuer of the notes will receive payment in full of the purchase_price of the notes substantially contemporaneously with the delivery of the notes fund while holding the notes will not be required to make any payment to the issuer of the notes in addition to the purchase_price paid for the notes whether as margin settlement payment or otherwise during the life of the notes or at maturity the issuer of the notes is not subject by the terms of the instrument to mark- to-market margining requirements of the commodities exchange act u s c as amended cea and the notes are not marketed as a contract of sale of a commodity for future delivery or option on such a contract subject_to the cea controlled_foreign_corporation fund intends to form a wholly-owned subsidiary subsidiary incorporated as a type a company under the laws of country under the laws of country a type a company provides limited_liability for all holders of shares a shareholder’s liability is limited to the amount if any unpaid with respect to the shares acquired by the shareholder subsidiary will file an election on form_8832 to be taxed as a corporation for federal_income_tax purposes fund represents that although subsidiary will not be registered as an investment_company under the act subsidiary will comply with the requirements of section f of the act investment_company act release no and related sec guidance pertaining to asset coverage with respect to investments that would apply if the subsidiary were registered under the act fund will invest a portion of its assets in subsidiary subject_to the limitations set forth in sec_851 of the code subsidiary will invest in one or more of the following types of instruments commodity and financial futures and options contracts and fixed income securities that serve as collateral for such contracts deliverable forward and cash settled non-deliverable forward contracts each of these contracts may be linked to the performance of one or multiple commodities including a commodity index subsidiary may also invest in swaps on commodities or commodities indexes or in commodity-linked structured notes furthermore subsidiary may invest directly in commodities law and analysis plr-146785-08 sec_851 of the code provides that a corporation shall not be considered a ric for any taxable_year unless it meets an income test the qualifying_income requirement under this test at least percent of its gross_income must be derived from certain enumerated sources sec_851 defines qualifying_income in relevant part as- dividends interest payments_with_respect_to_securities_loans as defined in sec_512 and gains from the sale_or_other_disposition of stock_or_securities as defined in sec_2 of the act or foreign_currencies or other income including but not limited to gains from options futures or forward contracts derived with respect to the ric’s business of investing in such stock securities or currencies sec_2 of the act defines the term security as- any note stock treasury_stock security future bond debenture evidence_of_indebtedness certificate of interest or participation in any profit-sharing agreement collateral-trust certificate preorganization certificate or subscription transferable share investment contract voting-trust certificate certificate of deposit for a security fractional undivided_interest in oil gas or other mineral rights any put call straddle option or privilege on any security including a certificate of deposit or on any group or index of securities including any interest therein or based on the value thereof or any put call straddle option or privilege entered into on a national securities exchange relating to foreign_currency or in general any interest or instrument commonly known as a security or any certificate of interest or participation in temporary or interim certificate for receipt for guarantee of or warrant or right to subscribe to or purchase any of the foregoing sec_2 of the cea provides that the cea is not applicable to a hybrid instrument that is predominantly a security sec_2 of the cea provides that a hybrid instrument shall be considered to be predominantly a security if- a the issuer of the hybrid instrument receives payment in full of the purchase_price of the hybrid instrument substantially contemporaneously with the delivery of the hybrid instrument b the purchaser or holder of the hybrid instrument is not required to make any payment to the issuer in addition to the purchase_price paid under subparagraph a whether as margin settlement payment or otherwise during the life of the hybrid instrument or at maturity c the issuer of the hybrid instrument is not subject by the terms of the instrument to mark-to-market margining requirements and plr-146785-08 d the hybrid instrument is not marketed as a contract of sale of a commodity for future delivery or option on such a contract subject_to the cea sec_2 of the cea provides in part that for purposes of sec_2 of the cea mark-to market margining requirements do not include the obligation of an issuer of a secured debt_instrument to increase the amount of collateral held in pledge for the benefit of the purchaser of the secured debt_instrument to secure the repayment obligations of the issuer under the secured debt_instrument in addition sec_851 of the code provides that for purposes of sec_851 there shall be treated as dividends amounts included in gross_income under sec_951 or sec_1293 for the taxable_year to the extent that under sec_959 or sec_1293 as the case may be there is a distribution out of the earnings_and_profits of the taxable_year which are attributable to the amounts so included sec_957 of the code defines a controlled_foreign_corporation cfc as any foreign_corporation in which more than percent of the total combined voting power of all classes of stock entitled to vote or the total value of the stock is owned by united_states_shareholders on any day during the corporation’s taxable_year a united_states_shareholder is defined in sec_951 as a united_states_person who owns percent or more of the total voting power of a foreign_corporation fund represents that it will own percent of the voting power of the stock of subsidiary fund is a united_states_person fund therefore represents that subsidiary will qualify as a cfc under these provisions sec_951 of the code provides that if a foreign_corporation is a cfc for an uninterrupted period of days or more during any taxable_year every person who is a united_states_shareholder of this corporation and who owns stock in this corporation on the last day of the taxable_year in which the corporation is a cfc shall include in gross_income the sum of the shareholder’s pro_rata share of the cfc’s subpart_f_income for the taxable_year sec_952 of the code defines subpart_f_income to include foreign_base_company_income determined under sec_954 under sec_954 foreign_base_company_income includes foreign_personal_holding_company_income determined under sec_954 sec_954 defines foreign_personal_holding_company_income to include dividends interest royalties rents and annuities subsidiary’s investments may generate foreign_personal_holding_company_income under sec_954 which is subpart_f_income fund therefore represents that it will include in income the sum of the pro_rata share of subsidiary’s subpart_f_income for the taxable_year in accordance with sec_951 conclusion plr-146785-08 based on the facts as represented we rule that income and gain arising from the notes constitutes qualifying_income to fund under sec_851 of the code we further rule that subpart_f_income of the subsidiary attributable to the fund is income derived with respect to fund’s business of investing in the stock of subsidiary and thus constitutes qualifying_income under sec_851 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 in particular no opinion is expressed with regard to whether the funds qualify as rics under subchapter_m of the code this ruling is directed only to the taxpayer who requested it and is limited to the facts as represented by the taxpayer sec_6110 provides that this letter may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely susan thompson baker susan thompson baker assistant to the branch chief branch office of associate chief_counsel financial institutions and products


internal_revenue_service number release date index number -------------------------- ------------------------------- ----------------------------- in re 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 intl b02 plr-147183-12 date date legend shareholder -------------------------- taxpayer id ------------------ fc ----------------------------------- accounting firm a ------------------------------------------ accounting firm b ----------------------- country -------------- year ------- year ------- year ------- dear --------------------- this is in response to a letter dated date submitted by your authorized representative that requested the consent of the commissioner of the internal_revenue_service commissioner for shareholder to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code the code and sec_1_1295-3 with respect to shareholder’s investment in fc the ruling contained in this letter is based upon information and representations submitted on behalf of shareholder by its authorized representative 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 this request_for_ruling such material is subject_to verification on examination the information submitted in the request is substantially as set forth below plr-147183-12 facts shareholder is an individual that became a u s resident_alien for u s federal_income_tax purposes in year during year shareholder acquired shares of fc an entity organized under the laws of country that was treated as a corporation for u s federal_income_tax purposes at all relevant times fc was a passive_foreign_investment_company pfic as defined in sec_1297 of the code during year shareholder retained accounting firm a to prepare its year tax_return shareholder did not know or have reason to know that fc was a pfic or that she as owner of the shares of fc was eligible to make an election to treat fc as a qef accounting firm a did not advise shareholder of the availability of electing to treat fc as a pfic subsequently shareholder heard through a friend that shareholder had additional filing responsibilities with respect to her investment in fc shareholder then sought advice from accounting firm b accounting firm b advised shareholder of the option to elect to treat fc as a pfic and shareholder immediately hired accounting firm b to assist shareholder in making the election shareholder has submitted affidavits under penalties of perjury that describe the events that led to her failure to make a qef election with respect to fc by the election due_date including the role of accounting firm a shareholder also submitted an affidavit from accounting firm b which describes accounting firm b’s engagement and responsibilities and the advice concerning the tax treatment of fc that it provided to shareholder shareholder represents that as of the date of this request_for_ruling the pfic status of fc has not been raised by the irs on audit for any of the taxable years at issue ruling requested shareholder requests the consent of the commissioner to make a retroactive qef election with respect to fc for year under sec_1_1295-3 law sec_1295 provides that a pfic will be treated as a qef with respect to a shareholder if an election by the shareholder under sec_1295 applies to the pfic for the taxable_year and the pfic complies with the requirements prescribed by the secretary for purposes of determining the ordinary_earnings and net capital_gains of the company plr-147183-12 under sec_1295 a qef election may be made for a taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for the taxable_year to the extent provided in regulations the election may be made after the due_date if the shareholder failed to make an election by the due_date because the shareholder reasonably believed the company was not a pfic under sec_1_1295-3 a shareholder may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united state sec_3 government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the company for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe the events that led to the failure to make a qef election by the election due_date the discovery of the failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on the professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made with shareholder’s ruling_request we conclude that shareholder has satisfied sec_1_1295-3 accordingly consent is granted to shareholder to make a retroactive qef election with respect to fc for year provided that shareholder complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter plr-147183-12 this private_letter_ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative a copy of this letter_ruling must be attached to any federal_income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely jeffery g mitchell branch chief branch international cc


internal_revenue_service may number info release date cor-119957-01 index number dear i am responding to your date letter on behalf of your constituent who believes current tax laws encourage businesses to purchase luxury sport utility vehicles suvs rather than standard passenger automobiles she says in most instances suvs are not subject_to the luxury_tax imposed on passenger automobiles and also qualify for faster depreciation write-offs than other luxury vehicles the internal_revenue_code the code imposes a luxury_tax on the first_retail_sale of any passenger_vehicle exceeding a sale price of dollar_figure in sec_4001 the code also limits depreciation for certain passenger automobiles this is done in part to discourage taxpayers who purchase passenger vehicles for business use from choosing vehicles more costly than necessary for mere transportation sec_280f establishing annual limitations on the amount of allowable cost_recovery deductions helps establish a baseline reasonable price for a passenger_vehicle the cost_recovery of any amount_paid above this price for the vehicle is deferred until the tax years following the initial 5-year recovery_period or until the taxpayer disposes of the vehicle whether a vehicle comes within the reach of these code sections depends in part on the weight of the vehicle passenger vehicles or passenger automobiles are wheeled vehicles manufactured primarily for use on public streets roads and highways that are rated at big_number pounds or less unloaded gross vehicle weight sec_4001 and sec_280f the code provides a special rule for trucks and vans which uses gross vehicle weight the maximum weight of a loaded vehicle instead of unloaded gross vehicle weight to determine whether the vehicles are classified as passenger automobiles or passenger vehicles sec_4001 and sec_280f our position is the term truck or van includes suvs therefore those suvs that exceed big_number pounds gross vehicle weight are not subject_to the depreciation limits or the luxury_tax even if their unloaded gross vehicle weight is big_number pounds or less many suvs also are not subject_to the gas_guzzler_tax imposed by sec_4064 of the code because this section requires us to use the department of transportation’s definition of automobile which excludes many suvs i hope this information is helpful to you if you have any questions please contact me or sincerely richard a kocak chief branch associate chief_counsel passthroughs and special industries