department of the treasury internal_revenue_service qq wo es exempt and index numbers washington d c division date mar employer_identification_number contact person identification_number contact number teo by ladies and gentlemen this is in response to a letter dated date from your authorized representatives who have requested certain rulings on your behalf this letter addresses issues arising in connection with the merger of n into m including the treatment under sec_501 sec_511 through and other provisions of the internal_revenue_code the code facts our records indicate that m is exempt from federal_income_tax under sec_501 of the code as a fraternal beneficiary society described in sec_501 m’s local and subordinate units are also described in sec_501 m provides its members with fraternal benefits and offers life sick accident or other_benefits to its members in accordance with sec_501 m has a number of wholly owned taxabie subsidiaries our records also indicate that n is exempt from federal_income_tax under sec_501 as a fraternal beneficiary society described in sec_501 n’s local and subordinate units are also described in sec_501 n offers life sick accident or other_benefits to its members in accordance with sec_501 as well as fraternal benefits to its members n also has a number of wholly owned taxable subsidiaries including o m's articles of incorporation provide that its purposes are to bring together individuals who share a common bond and their families with similar individuals and their families to offer membership in a fraternal beneficiary society and to assist members and others m's article sec_2 -g00225038 also refer to its involvement in a number of endeavors including those of a charitable religious and educational nature n’s articles of incorporation provide that its purposes revoive around service to its members and include those of a charitable religious and educational nature n's articles refer to providing life sick or accident benefits to its members as stated in the agreement and plan of merger between m and n and in accordance with the applicable insurance laws n will be merged with and into m and the separate existence of n will cease upon effectiveness of the merger n's contracts and certificates will be converted into corresponding contracts and certificates of m as the surviving corporation each member of n will automatically become a member of m as the surviving corporation m as the survivor of the merger and the successor to n will assume all obligations of n including the obligations under the insurance and annuity_contracts that were issued by n n's policies no formal exchange of insurance and annuity_contracts and certificates will occur due to the merger as of the effectiveness of the merger m will issue endorsements to n’s policies pursuant to which n's policies will be converted into corresponding insurance and annuity_contracts and certificates of m as the surviving corporation as represented the merger and the endorsements to n's policies issued by m will not change the terms of any of n’s policies except as the law requires the articles of incorporation and bylaws of m will become part of n’s policies similarly the substitution of m’s articles of incorporation and bylaws for n’s articles of incorporation and bylaws will not change in any material respect the terms and conditions of n’s policies and the policyholders’ rights and obligations under n’s policies except for the substitution of m's articles and bylaws all of the terms of n's policies including the terms conditions rights and obligations concerning premiums benefits cash surrender values charges annuity options surrender rights interest and mortality assumptions and policy loan provisions will remain the same after the merger and the issuance of the endorsements as represented the merger and the endorsements to n’s policies issued by m will not change the terms of any of n’s policies except as the law requires m’s articles and bylaws will become part of n’s policies similarly the substitution of m's articles and bylaws for n's articles and bylaws will not change in any material respect the terms and conditions of n’s policies except for the substitution of m’s articles and bylaws all of the terms of n’s policies including the terms conditions rights and obligations concerning premiums benefits cash surrender values charges annuity options surrender rights interest and mortality assumptions and policy loan provisions will remain the same after the merger and the issuance of the endorsements the owners of n’s policies will continue to own their insurance and annuity_contracts after the merger the owners of n’s policies will not receive new policy forms other representations relating to the merger include the following _1 following the transaction m will continue the historic fraternal and any other activities of n or use a significant portion of n's historic assets in m’s activities m and n will pay their respective expenses_incurred in connection with the transaction there is no intercorporate corporate indebtedness existing between m and n that was issued acquired or will be settled at a discount the fair_market_value of the assets of n transferred to m will equal or exceed the liabilities assumed by m plus the amount of liabilities to which the transferred assets are subject the total adjusted bases of the assets of n will equal or exceed the sum of the liabilities assumed by m plus the amount of the liabilities to which the transferred assets are subject no fractional membership interests of m will be issued in the merger the aggregate fair_market_value of all membership interests of m is greater than the aggregate fair market vaiue of all membership interests of n and the members of n will not receive as a result of being members of n membership interests of m which represent more than percent of the fair_market_value of the membership interests of m any property previously used by m or n business taxable_income will continue to be so used after the merger in a business that gives rise to unrelated the respective boards of directors of m and n have concluded that the merger of n with and into m as provided in the agreement and plan of merger will enable m and n to best fulfill their common objective of improved and expanded service to the p community they will also increase their financial strength and resources for growth and enhance their potential for expanded delivery of services to existing and new members and other constituencies moreover the merger is expected to achieve substantial cost savings the agreement and plan of merger between m and n contains the following provisions one provision of the agreement refers to employee benefit plans including plans described in sec_401 a of the code a second provision of the agreement refers to plans contracts or arrangements described in sec_401 sec_403 sec_403 and sec_408 of the code a third provision of the agreement refers to employee benefit plans including plans described in sec_401 of the code and a fourth provision of the agreement refers to plans contracts or arrangements described in sec_401 b and’408 of the code oe contemporaneously with the merger of m and n wholly owned subsidiaries of the respective organizations will also merge the taxpayer's authorized representatives assert that these other mergers will have no effect on any contract issued by n or any qualified_plan maintained by n law and discussion - exempt_organizations issues sec_501 of the code provides for the exemption from federal_income_tax of fraternal beneficiary societies orders or associations that operate under the lodge_system or for the exclusive benefit of the members of a fraternity itself operating_under_the_lodge_system and provide for the payment of life sick accident or other_benefits to the members of such society order or association or their dependents sec_1_501_c_8_-1 of the income_tax regulations the regulations provides that a fraternal beneficiary society is exempt from tax only if operated under the ‘lodge system the regulations provide that operating_under_the_lodge_system means carrying on its activities under a form of organization that comprises local branches chartered by a parent organization in order to be exempt it is also and largely self-governing called lodges chapters or the like necessary that the society have an established system for the payment to its members or their dependents of life sick accident or other_benefits sec_1_501_a_-1 of the regulations provides that to establish exemption an organization must fite an appropriate application form a determination that an organization is exempt can be relied upon so long as there are no substantial changes in the organization's character purposes or methods of operation revrul_67_390 1967_2_cb_179 provides that an organization must file a new application_for_exemption_from_federal_income_tax when a change in its structure results in the creation of a new entity sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations exempt from federal_income_tax under sec_501 of the code sec_512 of the code defines the term unrelated_business_taxable_income as gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions that are directly connected with such trade_or_business sec_513 of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of the organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_function sec_514 of the code sets forth rules with respect to unrelated_debt-financed_income sec_1_513-1 of the regulations states that unless one of the specific exceptions of sec_512 or sec_513 is applicable gross_income of an exempt_organization subject_to the tax lod imposed by sec_511 is includible in the computation of unrelated_business_taxable_income if it is income from trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the production of funds to the organization’s performance of its exempt functions sec_1_513-1 of the regulations provides that when an activity does not possess the characteristics of a trade_or_business within the meaning of sec_162 the unrelated_business_income_tax does not apply the term trade_or_business generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services sec_1_513-1 of the regulations provides that in determining whether a trade_or_business is regularly carried on within the meaning of sec_512 regard must be had to the frequency and continuity with which the activities are conducted and the manner in which they are pursued for example specific business activities of an exempt_organization will ordinarily be deemed to be regularly carried on if they manifest a frequency and continuity and are pursued in a manner generally similar to comparable commercial activities of nonexempt organizations neither the exempt_purpose nor the operations of m as a fraternal beneficiary society described in sec_501 of the code will materially change due to the merger of n with and into m as represented m's articles of incorporation and bylaws will be substituted for n's articles of incorporation and bylaws although the purpose provisions in the organizations’ articles are not identical m’s and n's respective purposes are to promote the general weifare of their membership through various programs as well as to support p institutions both m and n are organized for exempt purposes under sec_501 c as fraternal beneficiary societies and thus m's exempt_purpose will not materially change as a result of the merger at the completion of the merger n's separate existence will cease and m will assume all obligations of n as represented the merger will not materially change the terms and conditions of n's policies and the policyholders’ rights and obligations under n's policies also as represented the merger will not change the membership rights or the terms of any contracts or certificates of any member of m following the transaction m will continue the historic fraternal and any other activities of n or use a significant portion of n's historic assets in m's activities the merger will not materially change the nature of the operations underlying m's basis for exemption under sec_501 of the code therefore immediately following the merger m will continue to be exempt from tax under sec_501 of the code as a fraternal beneficiary society generally when the exempt purposes and activities of an organization remain the same after reorganization and no new legal entity is created its tax-exempt status is not adversely affected the merger will also not affect the status of n as an exempt_organization under sec_501 prior to the merger with regard to whether a new application_for recognition of exemption must be filed it appears that m the surviving organization is not a new entity the merger of n with and into m in the manner described does not substantially change m’s exempt_purpose or the nature of its operations and most importantly does not result in the creation of a new organization rid therefore m will not need to file a new exemption application as a result of the merger revrul_67_390 supra is distinguishable as the situations described therein involved the creation of new legal entities that were required to submit new exemption applications with regard to the unrelated_business_income_tax the merger of n with and into m will not result in either organization realizing or recognizing any unrelated_business_taxable_income under sec_511 through of the code the merger is not considered a trade_or_business under sec_1_513-1 of the regulations because it does not constitute an activity carried on for the production_of_income from the sale_of_goods or performance of services also the information submitted indicates that the merger will be a one-time transaction and therefore it will not be regularly carried on as required by sec_1_513-1 c furthermore for purposes of sec_511 through n’s basis and holding_period in assets including shares of o will carry over in the hands of m no gain_or_loss need be recognized on exchanging n's membership interests for m’s membership interests and as a result of the merger no depreciation need be recaptured with respect to any debt-financed asset or other asset that may give rise to unrelated_business_taxable_income law and discussion - employee_plans and insurance issues sec_401 of the code provides requirements for qualification under that section for both defined benefit and defined contribution employee_plans such requirements permit the purchase of annuity_contracts both for investment purposes and for purposes of distributing benefits to participants sec_402 c and e of the code provide the rules applicable to distributions from retirement plans which are qualified under sec_401 sec_72 of the code provides in summary rules governing to what extent distributions under annuities endowment or life_insurance contracts constitute gross_income sec_72 of the code provides in relevant part certain rules applicable to distributions made from a_trust described in sec_401 which is exempt from tax under sec_501 sec_401 of the code provides in short that a profit-sharing or stock_bonus_plan a pre-erisa_money_purchase_plan or a rural_cooperative_plan may include a cash_or_deferred_arrangement coda and retain its sec_401 status sec_401 of the code in relevant part sets forth the distribution rules applicable to sec_401 codas sec_403 of the code provides rules for taxability of a beneficiary of amounts distributed under annuity_contracts that satisfy the requirements of sec_404 sec_404 relates to the purchase of annuity_contracts such as retirement annuities or those that cover both retirement annuities and medical benefits similarly sec_403 provides rules for taxability of amounts distributed under certain annuity_contracts described in that section t purchased by an employer for its employees sec_403 of the code provides in short that as long as the requirements in sec_403 are met amounts paid_by an employer described in paragraph a toa custodial_account which satisfies the requirements of sec_401 shall be treated as amounts contributed by him to a sec_403 annuity_contract sec_403 of the code sets forth certain distribution_requirements applicable to annuities described in sec_403 sec_408 of the code provides requirements that individual retirement annuities iras issued by insurance_companies must satisfy for the tax treatment of sec_408 to apply to distributions from those contracts sec_408a sets forth the rules applicable to roth iras sec_72 of the code imposes a additional income_tax on certain distributions made from qualified_retirement_plans prior to the date on which an employee ira holder annuitant etc attains age sec_3405 of the code provides that the term designated_distribution is defined in part as any distribution or payment from an employer_deferred_compensation_plan an individual_retirement_plan or a commercial_annuity sec_4974 of the code provides that the term qualified_retirement_plan as used in sec_72 includes a plan described in sec_401 which includes a_trust exempt from tax under sec_501 an annuity plan described in sec_403 an annuity described in sec_403 an individual_retirement_account described in sec_408 and an individual_retirement_annuity described in sec_408 sec_4973 of the code provides in relevant part for the imposition of a 6-percent excise_tax on the amount of an excess_contribution to an individual_retirement_annuity within the meaning of sec_408 or toa custodial_account treated as an annuity_contract under sec_403 sec_4979 of the code provides in relevant part for the imposition of a 10-percent excise_tax on the amount of an excess_contribution for a year or excess_aggregate_contribution as defined in sec_401 to a plan described in sec_401 a which includes a_trust exempt under sec_501 an annuity plan described in sec_403 or an annuity_contract described in sec_403 generally speaking annuity_contracts issued by an insurance_company that satisfy the requirements set forth in sec_404 of the code and thus the taxability of whose distributions is subject_to sec_403 or sec_403 or that are permitted to be purchased under the qualification rules of sec_401 or the ira annuity rules of sec_408 or the roth_ira rules of sec_408a do not lose their tax status under sec_403 or ss b with respect to a sec_401 plan or sec_408 ira or sec_408a roth_ira have their qualified status adversely affected merely because the issuing company has changed ownership if the change in ownership has not changed the terms of the annuity_contracts additionally an annuity issuing company’s changing ownership in and of itself without a change in the terms of the annuities issued does not result in a distribution for purposes of sec_402 sec_403 sec_408 sec_4973 or sec_4979 of the code from any of its issued annuity_contracts in this case the taxpayer's authorized representatives have asserted that neither the merger of m and n nor the endorsements issued by m with respect to n’s policies will change the terms of any of n’s policies except as required_by_law and except with respect to the articles and bylaws of m furthermore except for the substitution of m’s articles and bylaws all of the terms of n’s policies including the terms conditions rights and obligations concerning premiums benefits cash surrender values charges annuity options surrender rights interest and mortality assumptions and policy loan provisions will remain the same after the merger and after the issuance of m’s endorsements additionally the owners of n's policies will continue to own their insurance and annuity_contracts after the merger the owners of n's policies will not receive new policy forms the authorized representatives have asserted that the differences between the articles and bylaws of m and n are incidental to the terms and conditions and the policyholders’ rights and obligations under n’s policies the merger will not change the membership rights or the terms of any benefit contracts or certificates of any member of m furthermore the authorized representatives in this case make the following representations the fair_market_value of m's interests received by the members of n in the merger will be approximately equal to the fair_market_value of n’s interests exchanged therefor and the fair_market_value of the assets of n’s assets transferred to m will equal or exceed the liabilities assumed by m plus the amount of liabilities to which the transferred assets are subject also the proposed merger will not result in any designated_distribution under sec_3405 of the code that is subject_to_withholding under sec_3405 or c of the code conclusion based on the above facts and representations we rule as follows immediately following the merger m will continue to be exempt from tax pursuant to sec_501 of the code the merger will not affect the status of n as an exempt_organization pursuant to sec_501 of the code immediately before the merger au m will not need to file a new application_for exemption as a result of the merger the merger will not resuit in either m or n realizing or recognizing any unrelated_business_taxable_income pursuant to sec_51 of the code n’s basis and holding_period in its assets including the shares of o will carry over in the hands of m after the merger n membership interest holders will recognize no gain_or_loss on exchanging n membership interests for m membership interests a the proposed transaction will have no effect on the date each annuity_contract purchased by a_trust described in sec_401 of the code purchased by a plan described in sec_403 described in sec_403 or from an individual_retirement_arrangement within the meaning of either sec_408 or sec_408 of either m or n was issued entered into purchased or came into existence for purposes of sec_72 b the merger will have no effect on the date that any policy including any life_insurance or annuity_contract issued by m or n was or is deemed to have been issued purchased or entered into for purposes of sec_72 sec_72 sec_72 sec_72 sec_72 sec_72 sec_72 u v f a a f 7702a or 7702b of the code will not require retesting or the start of a new test period for any company policy under sec_264 sec_7702 sec_7702 b - e or 7702a and for purposes of sec_72 and sec_72 will not cause annuity_contracts with annuity start dates before the merger to be treated as having starting dates after the merger as a result of the merger no depreciation will be recaptured with respect to any debt- financed asset or other asset that may give rise to unrelated_business_taxable_income the proposed transaction will have no effect on any life_insurance or annuity_contract of either m or n for purposes of sec_72 sec_401 sec_402 sec_403 sec_408 or sec_408a of the code the proposed transaction will not result in distributions for purposes of sec_403 of the code with emphasis on sec_403 additionally the proposed transaction will not result in distributions for purposes of sec_401 with emphasis on sec_401 the proposed transaction will not constitute with respect to policies issued by either morn in effect prior to the effective date of the proposed transaction and which are ‘ qualified within the meaning of sec_401 sec_403 sec_408 or sec_408a of the code a distribution from or a contribution to any of these policies plans or arrangements for eel federal_income_tax purposes and the proposed transaction will not result in any distributions and thus will not result in a any gross_income to the employee or the beneficiary thereof as a distribution from a code sec_401 qualified_plan pursuant to sec_72 unless accompanied by an actual distribution to either the employee or beneficiary thereof b the imposition of the 10-percent additional income_tax imposed under sec_72 of the code on premature distributions from qualified_retirement_plans c the imposition of any excise_tax described in either sec_4973 or sec_4979 of the code or d any designated_distribution under sec_3405 of the code that is subject_to_withholding under sec_3405 or c this ruling is based on the understanding that there will be no material changes in the facts upon which it is based except as specifically ruled upon above no opinion is expressed concerning the federal_income_tax consequences of the transactions described above under any other provision of the code we have not been asked and we express no opinion on whether any property previously used by m or n in a business that gives rise to unrelated_business_taxable_income under sec_511 through of the code will continue to give rise to this tax as a result of the merger this ruling only addresses whether the merger itself results in unrelated_business_taxable_income the rulings that you have requested other than those enumerated above have been forwarded to the office of the associate chief_counsel corporate that office will respond directly to you pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to m’s and n's authorized representatives a copy of this letter should also be kept in m's and n's permanent records this letter is directed only to the organizations that requested it this letter modifies and supersedes the letter issued to the organizations on date sec_6110 of the code provides that it may not be used or cited by others as precedent hy if there are any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely dnewtd y soh gerald v sack manager exempt_organizations technical group


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh number release date date date legend x business y individual dear we have considered your request dated date for advance approval of the changes you have made to your previously approved employer-related grant-making program under sec_4945 of the internal_revenue_code our records indicate you were recognized as exempt from federal_income_tax under sec_501 of the code and are classified as a private_foundation as defined in sec_509 your purpose is to make grants to children of employees of x and its subsidiaries grants will be awarded to facilitate study at any educational_institution which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where its educational activities are regularly carried out you were set up in memory of y and as such require that grants be used primarily for studies in areas of special interest to y - the sciences grants will enable the recipient to obtain an education in their individual capacities solely for their personal benefits there will be no commitments understandings or obligations suggesting that studies undertaken by the recipient are for your benefit or that of x and its subsidiaries no grant will be made for the accomplishment of any purpose of x or its subsidiaries other than enabling grantees to obtain an education solely for their personal benefit grants will not be used by x or its subsidiaries to recruit employees or to induce employees to continue their employment there is no requirement that grantees apply for employment with x or its subsidiaries nor will x or its subsidiaries take any proprietary interest in new knowledge or information produced by the grantee in the course of his or her studies grantees will be encouraged to share all new knowledge thus discovered with the public at large through publications lectures and other media x and its subsidiaries will publish in a timely manner newsletters for circulation among their employees stating that grants are available giving the eligibility requirements and directions for further inquiry individuals eligible for grants are a any child of a person employed for two or more years by x and its subsidiaries except the child of an officer of x and b if the parent is no longer employed by x and its subsidiaries with the exception of those who have retired the child of the parent is no longer eligible for an award including any departures that happen midway through a school year since the grant is made on an annual school year basis the grant remains in effect for both semesters of the school year of the award so long as the academic requirements have been met to be eligible a child must further meet the minimum standards for admission to the educational_institution at which the application_for grant is made applicants apply for grants on a form requiring various items of background biographical information educational and professional goals school grade transcripts and results of standardized test scores letters of reference and an essay your selection committee composed of your directors will choose recipients each of your directors is independent except for participation in this selection committee and separate from x none of the directors is presently or ever has been employed by x in selecting candidates for awards the committee shall consider among other substantial objective criteria the applicants’ acceptance by an educational_institution history of academic superiority potential for continued academic excellence as determined by their teacher's recommendations and interviews with the applicant if deemed necessary desire and commitment to place primary emphasis in the study of the physical biological and applied sciences including engineering mathematics and computer science and ability to attend their chosen educational_institution e e selections are forwarded to x for the sole purpose of verifying the eligibility of the applicant any public announcement of the awards will be made by the selection committee or by you and no other entity in no event will the selection committee award in any year grants in excess of the number obtained by taking twenty-five percent of the number of employees’ children who i were eligible ii were applicants for such grants and iii were considered by the selection committee in selecting the recipient of grants in that year selection of grant recipients occurs through the following process a the fund’s administrator receives all of the material provided by the applicants the application transcripts tests scores reference letters and essay and provides copies to all members of the selection committee which is composed of all directors of the und b the material of all applicants is reviewed by members of the selection committee based upon the objective criteria as listed above c the selection committee meets and discusses the applications and ranks the applicants then based upon the funds to be disbursed and the quality of the applicants award winners are selected the grants are awarded solely in the order recommended by the selection committee the amounts of the grant are fixed by the selection committee the selection committee may adjust the amount of the awards to all applicants for subsequent years based upon the total aroun available the number of grants to be awarded and recognition of the costs of higher education the number of awards granted for a school year remains fixed and no one has the authority to increase or decrease the amount of the awards or the number of awards however there is no fixed number of awards for each year or a fixed amount of the award from year-to-year once the applicants who have been awarded a grant have been identified they each receive a letter telling them the amount of the grant what is required for coursework and grades and what evidence they will be expected to provide about their grades and courses to evidence their pursuit of a degree in the sciences students who have received a grant and who wish to apply for a subsequent grant must complete a student information sheet and submit transcripts of their most current grades this information is provided to the selection committee and reviewed along with the applications of new applicants in determining recipients of awards for the next year you agree to follow the guidelines and adhere to the procedures and instructions on checking and confirming foreign organizations and foreign individuals that are involved in terrorist activities of the ofac list for grants paid directly to the educational_institution in which recipients are enrolled the educational_institution will be asked to agree that the funds will be used to defray the recipients’ expenses or to pay the funds to the recipients only if they are enrolled at the institution and maintain their standing in accordance with the conditions of the scholarship or fellowship all grants paid to educational_institution were directed to and earmarked for specific individuals you may also make payments directly to individuals from time to time in this instance you will arrange to receive a report of the grantee’s courses taken and grades received in each academic period the faculty_member supervising the grantee’s study verified by the educational_institution attended by the grantee will approve such a report this report will be obtained at least once a year a final report will also be obtained you will review all grantee reports and will investigate where there is any indication or evidence that the grant is not being used in furtherance of the purposes of such grant you will withhold further payments to the extent possible if any of the required reports are delinquent and will attempt to recover grant funds if they are found to be diverted from the proper_purpose you agree to maintain records that include the following i ii information used to evaluate the qualification of potential grantees identification of the grantees including any relationship of any grantee to the private_foundation iii the amount and purpose of each grant and iv all grantee reports and other follow-up data obtained in administering the private foundation’s grant program sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i ii its grant procedure includes an objective and nondiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance revproc_76_47 1976_2_cb_670 sets forth guidelines to be used in determining whether a grant made by a private_foundation under an employer-related program to a child of an employee of the particular employer to which the program relates is a scholarship grant that meets the provisions of sec_117 of the code as that section read before the tax_reform_act_of_1986 if a private foundation’s program satisfies the seven conditions set forth in sections dollar_figure through dollar_figure of revproc_76_47 and meets the percentage_test described in sec_4 the service will assume the grants meet the provisions of sec_117 as that section read before the tax_reform_act_of_1986 you have agreed that procedures in awarding grants under your program will be in compliance with sections dollar_figure through dollar_figure of revproc_76_47 without regard to the amendments to sec_117 made by the tax_reform_act_of_1986 in particular the selection of individual grant recipients will be made by a selection committee the members of which are totally independent and separate from the private_foundation the foundation’s creator and the relevant employer the grants will not be used as a means of inducement to recruit employees nor will a grant be terminated if the employee leaves the employer the recipient will not be restricted in a course of study that would be of particular benefit to the relevant employer or to the foundation section dollar_figure of rev_proc provides a percentage_test guideline it states in the case of a program that awards grants to children of employees of a particular employee the program meets the percentage_test if either of the following tests are met the number of grants awarded under that program in any year to such children do not exceed percent of the number of employees’ children who were eligible were applicants for such grants and were considered by the selection committee in selecting the recipients of grants in that year or the number of grants awarded under the program in any year to such children does not exceed percent of the number of employees’ children who can be shown to be eligible for grants whether or not they submitted an application in that year you have agreed that your program will meet the requirements of either the percent or percent percentage_test of section dollar_figure applicable to a program that awards grants to children of employees of a particular employer records should be maintained to show that you meet the applicable_percentage test of section dollar_figure this determination is issued with the understanding that in applying the percent test applicable to employees’ children set forth in revproc_76_47 you will include as eligible only those children who meet the eligibility standards described in revproc_85_51 1985_2_cb_717 this determination will remain in effect as long as the procedures in awarding grants under your program remain in compliance with sections dollar_figure through dollar_figure of rev_proc without regard to the amendments to sec_117 made by the tax_reform_act_of_1986 if you enter into any other program covering the same individuals the percentage_test of revproc_76_47 must be met in the aggregate based on the information submitted and assuming your award programs will be conducted as proposed with a view to providing objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 ode in addition we have determined that awards made under your procedures are ‘scholarship or fellowship’ grants within the meaning of sec_117 of the code and are excludable from the gross_income of the recipients subject_to the limitations provided in sec_117 of the code including to the extent that such grants are used for quaitied tuition and related expenses within the meaning of sec_117 of the this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your employer-related grant-making program is a one-time approval this determination only covers the grant programs described above thus approval shall apply to subsequent grant programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and histories so that any or all grant distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above enclosures notice a copy of the redacted letter lois g lerner director exempt_organizations sincerely yours


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-112407-05 date date ----------------------------------- legend x ------------------------------------ state -------------- y1 d1 ---------------------- dear --------------- ------- this responds to the letter dated date submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts x was incorporated in y1 under the laws of state the shareholders of x intended that x be treated as an s_corporation effective on d1 but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective d1 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under ' b however if an s election is made after the first two and one-half months of plr-112407-05 a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no ' a election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and ' b shall not apply x did not timely file an election to be treated as an s_corporation under ' a x has however established reasonable_cause for not making a timely s election and is entitled to relief under ' b conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 pursuant to the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representative sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc


t c summary opinion united_states tax_court nader ghazitehrani and farzaneh zamanizadeh petitioners v commissioner of internal revenue respondent docket no 12653-05s filed date nader ghazitehrani and farzaneh zamanizadeh pro sese aimee r lobo-berg thomas j travers and anna l rooney specially recognized for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax the issue for decision is whether a distribution from a qualified_retirement_plan is subject_to the 10-percent additional tax under sec_72 background some of the facts have been stipulated and they are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time the petition was filed petitioners resided in vancouver washington unless otherwise indicated all references to petitioner are to mr ghazitehrani beginning in petitioner worked as an engineer for the boeing company boeing boeing maintained a sec_401 retirement_plan to which petitioner contributed in or about petitioner borrowed approximately dollar_figure from the retirement_plan petitioner was terminated from boeing in when he was approximately years old at that time the unpaid balance of the loan from the retirement_plan was dollar_figure petitioners reported that amount as a taxable_distribution on their joint federal_income_tax return but did not report a 10-percent additional tax on the distribution petitioners prepared their tax_return using turbotax a tax preparation software program respondent determined that the dollar_figure distribution was subject_to a 10-percent additional tax under sec_72 respondent issued petitioners a notice_of_deficiency on date petitioners timely petitioned the court for redetermination of the deficiency at some point after the petition was filed petitioners were divorced at trial ms zamanizadeh indicated that she wished to seek relief under sec_6015 which is commonly referred to as innocent spouse relief petitioner stated that he did not object to ms zamanizadeh’s being granted relief the court held the record open to permit ms zamanizadeh to file an administrative claim with respondent in date respondent informed the court that ms zamanizadeh had been granted relief under sec_6015 the court then closed the record discussion in general the commissioner’s determinations set forth in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of showing that the determinations are in error rule a 290_us_111 pursuant to sec_7491 the burden_of_proof as to factual matters shifts to the commissioner under certain circumstances we decide this case without regard to the burden_of_proof accordingly we need not decide whether sec_7491 applies in this case sec_72 imposes an additional tax on an early distribution from a qualified_retirement_plan equal to percent of the portion of the amount which is includable in gross_income a qualified_retirement_plan includes a sec_401 plan see sec_401 k c petitioners do not dispute that the unpaid balance of the loan from the sec_401 plan was an early distribution which was includable in gross_income the 10-percent additional tax does not apply to certain distributions including distributions to an employee age or older on account of the employee’s disability as part of a series of substantially_equal_periodic_payments made for life to an employee after separation_from_service after attainment of age to an employee for medical_care or to an alternate_payee pursuant to a qualified_domestic_relations_order sec_72 petitioners do not argue that they satisfy any of the enumerated exceptions under sec_72 instead petitioners contend that the additional tax should not apply pursuant to sec_7491 the commissioner bears the burden of production with respect to any penalty addition_to_tax or additional_amount even if the dollar_figure additional tax under sec_72 is an additional_amount for which respondent bears the burden of production respondent has met such burden by showing that petitioner received the distribution when he wa sec_53 years old see milner v commissioner tcmemo_2004_111 n because of financial hardship we have held however that general financial hardship is not an exception to the additional tax milner v commissioner tcmemo_2004_111 in the alternative petitioners argue that any errors on their return are attributable to the turbotax program thus petitioners contend they should not be liable for the additional tax we disagree even if the turbotax program was at fault a poorly prepared return is simply no reason to relieve taxpayers of taxes which were legally owing and which would have been paid upon the filing of their return if their return had been correctly calculated see kelly v commissioner tcmemo_1983_156 we sustain respondent’s determination that the dollar_figure distribution from boeing is subject_to the 10-percent additional tax under sec_72 because respondent has granted ms zamanizadeh relief under sec_6015 petitioner shall be solely liable for the deficiency reviewed and adopted as the report of the small_tax_case division to reflect the foregoing an appropriate decision will be entered


department of the treasury internal_revenue_service washington d c o f f ic e o f c h ief c o u n sel date cc intl br3 genin-134201-02 number info release date index number dear this is in reply to your letter dated date in which you requested assistance and advice regarding your ability to claim a foreign_tax_credit for canadian income_tax paid on a gift transfer of a canadian summer cottage to your son your letter contains a number of specific questions regarding whether the canadian tax paid is creditable on your u s income_tax return the national_office of the internal_revenue_service may issue rulings to individuals as to the tax effects on their acts or transactions in circumstances described in revproc_2002_1 2002_1_irb_1 the revenue_procedure which also sets forth the procedural requirements for obtaining a ruling is available on the internet at http www irs gov ind_info bullet html while your letter did not comply with the requirements for obtaining a letter_ruling we offer the following general information sec_901 of the internal_revenue_code permits a taxpayer to elect to credit income taxes paid_or_accrued to a foreign_country against the taxpayer’s u s income_tax_liability subject_to the foreign_tax_credit limitations of sec_904 sec_904 and d generally limit the allowable foreign_tax_credit to the amount of pre-credit u s tax on the taxpayer’s foreign source taxable_income sec_862 of the code provides that gains profits and income from the sale_or_exchange of real_property located without the united_states shall be treated as foreign source gross_income however in general a gift transfer of property by a taxpayer to another individual is not for u s income_tax purposes a taxable_event to the donor instead the donee is assigned the donor’s basis in the property under sec_1015 of the code and the donee rather than the donor will be liable for u s income_tax on the appreciation in the property upon a subsequent sale_or_exchange under sec_904 creditable_foreign_taxes in excess of the pre-credit u s tax_liability on a taxpayer’s foreign source taxable_income may be carried back two years and forward five years but in each year the allowable credit is limited to the u s tax on the taxpayer’s foreign_source_income article xxiv of the united states-canada income_tax convention available on the irs web site at http www irs gov provides that residents of the united_states are genif-119040-02 permitted a credit against u s income_tax for the appropriate amount of income_tax paid_or_accrued to canada paragraph a states that for purposes of article xxiv income or gain shall be deemed to arise in canada ie treated as foreign_source_income to the extent that canada may tax it article xiii of the convention provides that gains derived by a u s resident from the transfer of real_property situated in canada may be taxed by canada article xiii of the convention provides an election that may prevent double_taxation in situations where an individual is subject_to tax on the transfer of real_property in both canada and the u s but where only canada deems that a taxable transfer of property has occurred at a particular time the election under article xiii of the convention permits an individual to be liable to tax in the u s for the year in which the property transfer is deemed to have occurred in canada as if the individual had sold and repurchased the property for an amount equal to its fair_market_value at a time immediately prior to the deemed transfer the effect of the election is that the individual will have a u s tax_liability against which to take a credit for the canadian tax the u s treasury_department technical explanation to the convention specifically indicates that article xiii would apply in the situation of a gift by a u s resident which canada deems to be an income-producing event for its tax purposes but with respect to which the u s defers taxation while assigning the donor’s basis to the donee to make the election provided in article xiii of the convention for purposes of claiming a foreign_tax_credit for canadian tax paid a taxpayer must file in addition to form_1116 foreign_tax_credit for individuals a form_8833 treaty-based return position disclosure under sec_6114 and sec_7701 with the u s income_tax return for the year of the transfer forms and are both available on the irs web site at http www irs treas gov forms_pubs forms html the foregoing is general information provided for your assistance and does not constitute a ruling we hope the information will be helpful to you sincerely barbara a felker badge chief branch office of the associate chief_counsel international


t c no united_states tax_court diana van arsdalen f k a diana murray petitioner v commissioner of internal revenue respondent docket no filed date p filed with the court a petition for determination of relief from joint_and_several_liability on a joint_return r issued to p’s former spouse m a notice of filing petition and right to intervene the notice see rule tax_court rules_of_practice and procedure p filed with the court a motion to strike the notice insofar as the notice stated that m would be permitted to intervene solely to challenge p’s entitlement to relief under sec_6015 i r c m lodged with the court a notice of intervention which stated that m intended to support p’s claim for relief under sec_6015 i r c r opposed p’s motion to strike held neither sec_6015 i r c nor rule tax_court rules_of_practice and procedure precludes a nonelecting spouse from intervening in a proceeding before the court for the purpose of supporting the electing spouse’s claim for relief held further p’s motion to strike will be granted in that the restrictive language in r’s notice is deemed stricken and m’s notice of intervention will be filed jack barry schiffman for petitioner emly b berndt for respondent opinion dawson judge this case was assigned to chief special_trial_judge peter j panuthos pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_183 the court agrees with and adopts the opinion of the chief special_trial_judge which is set forth below opinion of the special_trial_judge panuthos chief special_trial_judge this matter is before the court on petitioner’s motion to strike as explained in detail below we shall grant petitioner’s motion background petitioner filed joint federal_income_tax returns with her then husband stanley david murray mr murray for the taxable years to 1section references are to sections of the internal_revenue_code as amended and rule references are to the tax_court rules_of_practice and procedure on date respondent issued to petitioner a notice_of_determination denying her claim for relief from joint_and_several_liability for the taxable years to the notice stated that petitioner was denied relief under sec_6015 on date respondent issued to petitioner a notice_of_determination denying her claim for relief from joint_and_several_liability for the taxable years to the notice stated that petitioner was denied relief under sec_6015 c and f on date petitioner filed with the court a petition for determination of relief from joint_and_several_liability on a joint_return challenging respondent’s notice_of_determination dated date on date respondent filed with the court a notice of filing petition and right to intervene the notice the notice stated that respondent had informed mr murray of the filing of the petition and of his right to intervene in the case the notice stated in pertinent part under t c rule b stanley d murray has a right to intervene in this matter for the sole purpose of challenging petitioner’s entitlement to relief from joint_and_several_liability on date petitioner filed a motion to strike the notice on the ground that respondent misinterprets and or misconstrues tax_court rule b insofar as the notice stated 2at the time the petition was filed petitioner resided in scottsdale arizona that mr murray would be permitted to intervene in the case for the sole purpose of challenging petitioner’s entitlement to relief from joint_and_several_liability on date mr murray lodged with the court a notice of intervention in the notice of intervention mr murray stated that he seeks to intervene for the sole purpose of offering evidence in support of the petitioner’s right and entitlement to equitable relief under sec_6015 and will not be offering any evidence to challenge petitioner’s right to equitable relief under sec_6015 this matter was called for hearing at the court’s motions session held in washington d c counsel for respondent appeared at the hearing and offered argument in opposition to petitioner’s motion to strike although no appearance was entered by or on behalf of petitioner at the hearing petitioner filed with the court a written_statement pursuant to rule c discussion sec_6013 provides that if a husband and wife file a joint federal_income_tax return the tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint_and_several however sec_6015 provide sec_3on date the court denied petitioner’s motion to strike on date petitioner filed a motion to vacate the court’s order denying her motion to strike by order dated date we granted petitioner’s motion to vacate vacated and set_aside our order denying petitioner’s motion to strike and set petitioner’s motion to strike for hearing that notwithstanding sec_6013 an individual who has made a joint_return may elect to seek relief from joint_and_several_liability arising from that return see 115_tc_183 affd 282_f3d_326 5th cir congress vested the tax_court with jurisdiction to review the commissioner’s denial of a taxpayer’s election to claim relief from joint_and_several_liability on a joint_return under specified circumstances see 115_tc_118 114_tc_354 a taxpayer may seek relief from joint_and_several_liability on a joint_return by raising the matter as an affirmative defense in a petition for redetermination invoking the court’s deficiency jurisdiction under sec_6213 see 114_tc_276 in addition a taxpayer may file a so-called stand-alone petition seeking relief from joint_and_several_liability on a joint_return where the commissioner has issued a final_determination denying the taxpayer’s claim for such relief or the commissioner has failed to rule on the taxpayer’s claim within months of its filing see sec_6015 117_tc_279 114_tc_324 finally a taxpayer may request relief from joint_and_several_liability on a joint_return in a petition for review of a lien or levy action see sec_6320 sec_6330 the petition in this case was filed as a stand-alone petition sec_6015 provides that the nonelecting or other spouse is entitled to notice of a stand-alone proceeding involving a claim for relief under sec_6015 the section provides in pertinent part that the tax_court shall establish rules which provide the individual filing a joint_return but not making the election with adequate notice and an opportunity to become a party to a proceeding before adopting formal rules as directed in sec_6015 we addressed the scope of a nonelecting spouse’s right to intervene in a sec_6015 case in both corson v commissioner supra and king v commissioner supra we will briefly summarize those opinions before proceeding with our analysis in corson the taxpayers filed with the court a joint petition for redetermination challenging a joint notice_of_deficiency for the taxable_year after obtaining separate counsel the electing spouse filed an amendment to the petition asserting her entitlement to relief from joint_and_several_liability under former sec_6013 after both taxpayers entered into separate stipulations with the commissioner conceding a specific tax_deficiency and the application of increased interest under sec_6621 the commissioner entered into a further stipulation with the electing spouse granting her relief from joint_and_several_liability under sec_6015 upon learning of the second stipulation the nonelecting spouse declined to execute a stipulated decision for submission to the court prompting the commissioner to file a motion for entry of decision in denying the commissioner’s motion the court stated sec_6015 is structured so that administrative consideration or failure to rule will precede any court action when innocent spouse status is raised in a stand-alone petition sec_6015 in turn contemplates an opportunity for the nonelecting spouse to participate at the administrative level sec_6015 then speaks of a similar chance for participation should the matter move from an administrative to a judicial forum hence as a general premise we believe that these subsections when read together reveal a concern on the part of the lawmakers with fairness to the nonelecting spouse and with providing him or her an opportunity to be heard on innocent spouse issues presumably the purpose of affording to the nonelecting spouse an opportunity to be heard first in administrative proceedings and then in judicial proceedings is to ensure that innocent spouse relief is granted on the merits after taking into account all relevant evidence after all easing the standards for obtaining relief is not equivalent to giving relief where unwarranted corson v commissioner supra pincite although we did not attempt to determine the precise contours of the rights granted to a nonelecting spouse under sec_6015 our denial of the commissioner’s motion for entry of decision had the effect of allowing the nonelecting spouse his day in court id in king v commissioner supra the court described the circumstances under which a nonelecting spouse would be permitted to intervene in respect of an electing spouse’s claim for relief under sec_6015 in king the commissioner issued separate notices of deficiency to the taxpayers but only the electing spouse filed a petition for redetermination with the court the sole issue raised in the electing spouse’s petition was her claim for relief from joint_and_several_liability under former sec_6013 while the case was pending congress repealed former sec_6013 and enacted sec_6015 thereafter the commissioner filed with the court a report stating that the commissioner concluded that the electing spouse qualified for relief under sec_6015 the report further stated that the nonelecting spouse objected to relief and that the commissioner believed that the nonelecting spouse should be notified of the action and be given an opportunity to participate in the proceeding after the court directed service of a copy of the petition and a copy of the court’s then-interim rule on the nonelecting spouse the nonelecting spouse filed with the court a motion for leave to file notice of intervention embodying notice of intervention the court subsequently granted the nonelecting spouse’s motion stating we hold that whenever in the course of any proceeding before the court a taxpayer raises a claim for relief from joint liability under sec_6015 and the other spouse or former spouse is not a party to the case the commissioner must serve notice of the claim on the other individual who filed the joint_return for the year s in issue the notice shall advise such other individual of his or her opportunity to file a notice of intervention for the sole purpose of challenging the petitioning individual’s entitlement to relief from joint liability pursuant to sec_6015 such notice shall include a copy of interim rule the commissioner shall at the same time file with the court a certification of such notice or in a stand-alone case brought under sec_6015 state in the answer that such notice has been provided see interim rule a any intervention shall be made in accordance with the provisions of interim rule b king v commissioner t c pincite after the filing of the corson and king opinions the court adopted new rule which states rule notice and intervention a notice on or before days from the date of the service of the petition the commissioner shall serve notice of the filing of the petition on the other individual filing the joint_return and shall simultaneously file with the court a copy of the notice with an attached certificate of service the notice shall advise the other individual of the right to intervene by filing a notice of intervention with the court not later than days after the date of service on the other individual b intervention if the other individual filing the joint_return desires to intervene then such individual shall file a notice of intervention with the court not later than days after service of the notice by the commissioner of the filing of the petition unless the court directs otherwise all new matters of claim or defense in a notice of intervention shall be deemed denied fn ref omitted in sum new rule provides that the commissioner shall provide the nonelecting spouse with notice of the filing of a petition claiming relief under sec_6015 and inform the nonelecting 4on date the court adopted amendments to its rules_of_practice and procedure including new rule however like sec_6015 new rule is effective with respect to actions for determination of relief from joint_and_several_liability on a joint_return commenced with respect to any liability for tax arising after date and any liability for tax arising on or before such date but remaining unpaid as of such date see 120_tc_479 n spouse of his or her right to intervene in the case notably new rule does not by its terms impose any substantive restriction on the nonelecting spouse’s right to intervene in support of a claim for relief by an electing spouse as previously discussed petitioner contends that the notice that respondent issued to mr murray should be stricken because it is inconsistent with rule respondent counters that the restrictive language in the disputed notice conforms with the court’s express statement in king v commissioner supra pincite that intervention should be for the sole purpose of challenging the electing spouse’s entitlement to relief the court’s general approach to intervention as articulated in estate of proctor v commissioner tcmemo_1994_208 and the approach under rule of the federal rules of civil procedure 5it is worth noting that sec_6015 formerly sec_6015 directs the secretary to prescribe regulations providing a nonelecting spouse with notice of and an opportunity to participate in any administrative_proceeding with respect to an election made under subsection b or c by the other individual filing the joint_return pursuant to this directive the secretary issued sec_1_6015-6 income_tax regs which states in pertinent part that upon receipt of a claim for relief under sec_6015 the internal_revenue_service must notify the nonelecting spouse and provide the nonrequesting spouse with an opportunity to submit any information that should be considered in determining whether the requesting spouse should be granted relief from joint_and_several_liability 6the note to new rule likewise does not restrict a nonelecting spouse’s right to intervene by stating that such intervention is permitted solely for the purpose of challenging the electing spouse’s entitlement to relief see t c there is no direct support in the plain language of sec_6015 or its legislative_history for the proposition that a nonelecting spouse’s ability to intervene in a sec_6015 case is limited to challenging the electing spouse’s entitlement to relief moreover new rule and the notes thereto are neutral on the point as we stated in 114_tc_354 and 115_tc_118 a nonelecting spouse may intervene in a proceeding before the court for the purpose of opposing the electing spouse’s claim for relief it is clear that in both corson and king the nonelecting spouse opposed the claim for relief accordingly any language suggesting that a right of intervention is limited to challenging a claim for relief must be read in the context of the facts of those cases in any event it is a certainty that congress did not intend for relief to be granted under sec_6015 where otherwise unwarranted corson v commissioner supra pincite on the other hand considering that sec_6015 was enacted to provide taxpayer relief it is equally certain that congress did not intend for relief to be denied where otherwise warranted in this regard we believe that justice requires that the 7the notes of new rule include a citation of 115_tc_118 for the limited proposition that the commissioner is expected to serve a notice of filing petition and right to intervene in a stand-alone deficiency or other proceeding in which a claim for sec_6015 relief has been raised as an affirmative defense see 120_tc_715 nonelecting spouse be permitted to intervene in administrative and judicial proceedings under sec_6015 for the purpose of submitting any information be it favorable or antithetical that is relevant to the determination whether the electing spouse is entitled to relief from joint_and_several_liability contrary to respondent’s position we conclude that permitting a nonelecting spouse to intervene for the purpose of supporting an electing spouse’s claim for relief under sec_6015 is consistent with both our prior practice and principles governing intervention under the federal rules of civil procedure rule a of the federal rules of civil procedure provides rule intervention a intervention of right upon timely application anyone shall be permitted to intervene in an action when a statute of the united_states confers an unconditional right to intervene or when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest unless the applicant’s interest is adequately represented by existing parties thus rule a of the federal rules of civil procedure permits intervention as a matter of right if there is an unconditional statutory right to intervene or if the applicant has a cognizable interest in the property or transaction in dispute and his or her interest is not adequately represented by the existing parties to the action see eg 958_f2d_112 5th cir the answer to respondent’s argument is that sec_6015 confers on a nonelecting spouse an unconditional statutory right to intervene within the meaning of rule a of the federal rules of civil procedure sec_6015 directs the court to establish rules which provide the individual filing a joint_return but not making the election with adequate notice and an opportunity to become a party to a proceeding the statutory language does not authorize the court to impose any significant substantive conditions in respect of the nonelecting spouse’s right to intervene consequently the court prescribed the procedures for intervention within new rule and did so without imposing any substantive conditions on the nonelecting spouse intervenor our holding that sec_6015 confers an unconditional statutory right to intervene within the meaning of rule a of the federal rules of civil procedure is consistent with the holdings of courts reviewing analogous statutes see bhd of r r trainmen v baltimore o r co 331_us_519 holding that u s c sec authorized the representative of railroad employees to intervene as a matter of right in a suit involving an order of the interstate commerce commission u s c sec provided in pertinent part continued o’keefe v n y city bd of electi246_fsupp_978 s d n y holding that u s c sec a authorized the united_states to intervene as a matter of right in an action challenging the constitutionality of the voting rights act of but see united_states v mississippi supra holding that u s c sec did not provide an association with the unconditional right to intervene in a school desegregation case 7c wright miller federal practice procedure sec pincite 2d ed suggesting that sec_7424 does not provide the united_states with an unconditional right to intervene in cases continued representatives of employees of a carrier duly designated as such may intervene and be heard in any proceeding arising under this act affecting such employees u s c sec a provided in pertinent part in any_action suit or proceeding in a court of the united_states to which the united_states or any agency officer_or_employee thereof is not a party wherein the constitutionality of any act of congress affecting the public interest is drawn in question the court shall certify such fact to the attorney_general and shall permit the united_states to intervene for presentation of evidence and for argument on the question of constitutionality u s c sec provided in pertinent part a parent or guardian of a child transported to a public school in accordance with a court order may seek to reopen or intervene in the further implementation of such court order currently in effect if the time or distance of travel is so great as to risk the health of the student or significantly impinge on his or her educational process involving a tax_lien inasmuch as the provision recognizes that the application to intervene may be denied dollar_figure consistent with the preceding discussion we hold that the portion of respondent’s notice which states that mr murray may intervene in this case only for the purpose of opposing petitioner’s claim for relief is incorrect accordingly we shall grant petitioner’s motion to strike in that the restrictive language in respondent’s notice filed date shall be deemed stricken further the court will direct that mr murray’s notice of intervention be filed to reflect the foregoing an order will be issued granting petitioner’s motion to strike and directing that the notice of intervention lodged date be filed sec_7424 provides in pertinent part if the united_states is not a party to a civil_action or suit the united_states may intervene in such action or suit to assert any lien arising under this title on the property which is the subject of such action or suit in any case in which the application of the united_states to intervene is denied the adjudication in such civil_action or suit shall have no effect upon such lien


department of the treasury internal_revenue_service washington d c date jul - contact person id number telephone number uil nos employer_identification_number legend b c x y dear applicant this letter responds to x's request dated date for rulings regarding the tax effects of a private foundation's proposed grant to a public charity for the purchase of an historic mansion facts x is a private_foundation described in sec_501 c and a of the code x makes grants for a variety of exempt purposes y is also described in sec_501 and has an advance public charity ruling under sec_509 and sec_170 y's purposes are to promote education in the fields of b and c x recently received a grant proposal from y requesting funds to allow y to purchase and refurbish a mansion the mansion is listed in the national and state registers of historic places and located within the city's historic_district y plans to amend its artictes of incorporation to add an additional exempt_purpose of historic preservation x made a grant to y to cover the expenses of planning for the possible purchase of the mansion x proposes to grant y the funds needed to purchase the mansion conditional upon y raising from other sources the additional funds necessary to renovate and maintain the mansion y plans to occupy part of the first floor of the mansion for use in its exempt programs to hold conferences and operate a museum and to lease the second floor and remainder of the first floor to a c trade_association connected with the fields of b and c and to for-profit organizations certain first-floor facilities training center and conference room will be used jointly by y and the trade_association the public will have access to the areas of the mansion occupied by y during y's regular business hours and to the other parts of the mansion by appointment at a mutually agreeable time x and y and the directors officers and substantial contributors of x and y have no family or business relationship with each other or with the seller of the mansion y has one common officer with the trade_association and could have overlapping board members none currently given their overlapping 3h spheres of interest but no more than of y's board members will board members or officers of the trade_association all leases of mansion facilities by y will be on arm's length terms the consideration for y's lease to the trade_association will be determined by independent appraisal and any y directors with a conflict of interest will recuse themselves from approving such lease rulings requested x requests the following rulings the grant from x to y will not constitute a taxable_expenditure under sec_4945 of the code the grant from x to y will not adversely affect the exempt status of x the grant will constitute an unusual grant under sec_1_170a-9 and sec_1 a - c of the code the expansion of y's original exempt purposes to include historical preservation of the mansion and acceptance and use of the grant in the manner described above will not adversely affect y's exempt status under sec_501 of the code law sec_170 and sec_501 of the code refer to organizations organized and operated exclusively for charitable educational or other exempt purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_4945 of the code defines a taxable_expenditure by a private_foundation as an amount_paid or incurred-- to attempt to influence legislation to influence a specific public election or carry on a voter registration drive to grant funds to an individual for travel study or similar purposes unless certain requirements are met to grant funds to an organization unless it is described in sec_509 or or d or unless the private_foundation exercises expenditure_responsibility with respect to the grant in accordance with sec_4945 or for a non-170 c b purpose sec_1_170a-9 of the income_tax regulations provides that a contribution may be excluded from the numerator and denominator of the public-support fraction ie treated as an unusual grant if the contribution meets the criteria of sec_1_170a-9 the exclusion is generally intended to apply to substantial contributions or bequests from disinterested parties which contributions or bequests a are attracted by reason of the publicly supported nature of the organization b are unusual or unexpected with respect to the amount thereof and c would by reason of their size adversely affect the status of the organization as normally being publicly supported for the applicable_period in the case of a grant as defined in sec_1_509_a_-3 of the regulations which meets the requirements of this subdivision if the terms of the granting instrument require that the funds be paid to the recipient organization over a period of years the amount received by the organization each year pursuant to the terms of such grant may be excluded for such year however no item of gross_investment_income may be excluded sec_1_170a-9 of the regulations provides that in determining whether a particular contribution may be treated as an unusual grant all pertinent facts and circumstances will be taken into consideration no single factor will necessarily be determinative for some of the factors similar to the factors to be considered see sec_1_509_a_-3 sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for exempt purposes under sec_501 of the code unless it serves a public rather than a private interest thus an organization must establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled by such private interests sec_1_509_a_-3 of the regulations provides that among the factors to be considered are i whether the contribution was made by any person or persons standing in a relationship to such person which is described in sec_4946 through g of the code who created the organization previously contributed a substantia part of its support or endowment or stood in a position of authority such as a foundation_manager within the meaning of sec_4946 with respect to the organization a contribution made by a person other than those persons described in this subdivision will ordinarily be given more favorable consideration than a contribution made by a person described in this subdivision ii whether the contribution was a bequest or an inter_vivos transfer a bequest will ordinarily be given more favorable consideration than an inter_vivos transfer iii whether the contribution was in the form of cash readily marketable_securities or assets which further the exempt purposes of the organization such as a gift of a painting to a museum iv except in the case of a new organization whether prior to the receipt of the particular contribution the organization a has carried on an actual program of public solicitation and exempt_activities and b has been able to attract a significant amount of public support v whether the organization may reasonably be expected to attract a significant amount of public support subsequent to the particular contribution in this connection continued reliance on unusual grants to fund an organization's current operating_expenses as opposed to providing new endowment funds may be evidence that the organization cannot reasonably be expected to attract future support from the general_public vi whether prior to the year in which the particular contribution was received the organization met the one-third support_test without the benefit of any exclusions of unusual grants vii whether neither the contributor nor any person standing in a relationship to such contributor which is described in sec_4946 through g continues directly or indirectly to exercise control_over the organization viii whether the organization has a representative governing body as described in sec_1_509_a_-3 i of the regulations ix whether material restrictions or conditions within the meaning of sec_1_507-2 have been imposed by the transferor upon the transferee in connection with such transfer sec_53_4945-2 of the regulations provides that a grant by a private_foundation to an organization described in sec_509 or of the code does not constitute a taxable_expenditure by the foundation under sec_4945 other than under sec_4945 if the grant by the private_foundation is not earmarked to be used for any activity described in sec_4945 or is not earmarked to be used in a manner which would violate sec_4945 or and there does not exist an agreement oral or written whereby the grantor foundation may cause the grantee to engage in any such prohibited activity or to select the recipient to which the grant is to be devoted for purposes of this paragraph a i a grant by a private_foundation is earmarked if the grant is given pursuant to an agreement oral or written that the grant will be used for specific purposes revrul_75_470 1975_2_cb_207 held educational and charitable under sec_501 of the code an organization that promoted an appreciation of history through acquiring restoring and preserving homes having special historical or architectural significance and opening the structures for viewing by the general_public operations were financed from admission fees and public contributions the service reasoned that the organization operated like a museum revrul_86_49 1986_1_cb_243 held charitable and educational under sec_504 c of the code an organization that preserved the historic or architectural character of a community by purchasing historically or architecturally significant properties placing restrictive covenants on them occasionally restoring them and selling them on arm's length terms the service reasoned that the organization educated the public and prevented community deterioration rationale each of the requested rulings is discussed in turn below ordinarily a grant to a public charity described in sec_509 does not constitute a taxable_expenditure the proposed grant is earmarked for a use that will further the exempt purposes of y as discussed below and does not involve lobbying political campaigning or other non-exempt purposes as discussed below the proposed grant will be used in furtherance of y‘s exempt purposes and therefore will not adversely affect the c status of x under the circumstances the proposed grant will be an unusual grant disregarded for purposes of calculating public support under sec_170 the proposed grant is an unusually large contribution from a disinterested party appears to be made by reason of y's publicly supported nature and would by reason of its size adversely affect y's status as publicly supported for the applicable_period aside from the planning grant which may be regarded as related to the proposed grant x has made no prior contributions to y and holds no influence within y the proposed grant is in the form of cash although x has yet to attract a significant amount of public support x is a new organization and may reasonably be expected to attract a significant amount of public support once it occupies the mansion and its programs become fully operational x exercises no control overy yhasa tepresentative governing body of experts in the fields of b and c itis represented that no material restrictions or conditions within the meaning of sec_1_507-2 of the regulations have been imposed by x upon y in connection with such transfer preservation of historically significant property such as the mansion in question for the education of the public is a recognized exempt_purpose and y's amendment of its organizing documents to include such purpose is permissible under the circumstances y's proposed acquisition and use of the mansion partly in direct furtherance of its exempt purposes and partly for the production_of_income will not adversely affect y' sec_501 status rulings accordingly we rule’as follows the grant from x to y will not constitute a taxable_expenditure under sec_4945 of the code the grant from x to y will not adversely affect the exempt status of x _ the grant will constitute an unusual grant under sec_1_170a-9 and sec_1 a - c of the code the expansion of y's original exempt purposes to include historical preservation of the mansion and acceptance and use of the grant in the manner described above will not adversely affect y's exempt status under sec_501 of the code except as we have ruled above we express no opinion as to the tax consequences of the transaction under the cited provisions of the code or under any other provisions of the code this ruling is directed only to x sec_6110 of the code provides that it may not be used or cited as precedent because this letter could help resolve any future tax questions relating to x's activities x should keep a copy of this ruling in x’s permanent records we are providing our ohio tax exempt government entities office a copy of this ruling sincerely yours signed garland a garte garland a carter manager exempt_organizations technical group


id office uilc cca_2011071110211737 ---------- number release date from ------------------- sent monday date am to ------------------------- cc ------------------------------------------------------ subject re informal advice requested at your convenience your situation is typical an llc can be member-managed or manager-managed in the case of a manager-managed llc all members are deemed member-managers eligible to be designated as tax_matters_partner a tmp designation is a designation of a member to represent the other members in a tefra partnership audit of the members it is not a designation to be a manager of the llc itself which is not even a party to the tefra partnership proceeding see 95_tc_388 tefra proceeding is a group audit of the partners and the partnership entity is not a party to such proceeding thus assuming the person designated was actually a qualified member under the regulations it was eligible to be designated as the representative of the other partners under federal_law for purposes of the tefra_audit sec_6231 acting as such does not make it a manager of the llc contrary to the llc's operating_agreement any arguable violation of the operating_agreement by the tmp might at best create a cause of action by members of against each other but would not limit the tmp's powers under the tefra partnership provisions to represent the partners in the audit but see river city ranches if irs is aware that tmp is acting in violation of his fiduciary duty to other partners irs may not be able to rely on tmp