department of the treasury internal_revenue_service washington d c government entities division number release date date uil contact person identification_number contact number employer_identification_number form required to be filed tax years all dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in intemal revenue code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final because you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file file the returns in accordance with their instructions and do not send them to this offica penalty_failure_to_file the returns timely may result in a the letter we will make this letter and our proposed adverse determination fetter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deietions instructions in notice if you agree with our deletions you do not need te take any further action in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed advarse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you disagree with our proposed deletions follow the ifyou have any questions about this letter please contact the person whose name and telephone number are shown in the heading federal_income_tax status and responsibilities please contact irs customer service pincite-828-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your of this letter sincerely rob choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c government ewtities bivision date legen a original board member1 b original board member2 c original board member3 d trustee e new board membert f new board member2 g volunteer bookkeeper m a state x a y a z city inm foreign_country a foreign organization date of incorporation date that the foreign organization z was formed contact person identification_number contact number fax number employer_identification_number il numbers bot dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under cade sec_501 our conclusian is set forth below the basis for primary issue do you qualify for exemption under sec_601 c of the irc no for the reasons described below subordinate issue sec_1 have you established that the persons receiving or benefiting from your distributions in the foreign_country of y are in fact needy or otherwise deserving objects of charity no for the reasons described below do you use proper control and discretion when distributing your funds in order for contributions to be deductible under of the irc does your inadequate exercise of discretion and control_over foreign conduit-type payments constitute a supporting basis for denial of exemption under sec_501 does your method of allowing an individual in the foreign_country of te cash large checks and distribute the funds with no oversight or recordkeeping procedures create the potential for inurement which would preclude you from qualifying from exemption under sec_504 of the irc alternative issue if upon appeal you were found to qualify for exemption under sec_501 would you be a foreign conduit which while enjoying exemption from income_tax would not be eligible to receive tax deduatible donations under sec_170 yes for the reasons described below facts you were incorporated pursuant to the religious corporation law pursuant te article of the state of m on x your articles indicate that you were formed in part a b toestablish a place of worship to disseminate the study of torah by means of lectures or any other means to raise funds by solicitation or other legal means for the carrying out of the above stated abjectives article il of your bylaws state that you were formed to raise money to provide benefit to aid poor students with living_expenses attending the programs of the foreign organization z for religious education as a part of your application_for recognition of exemption you aubmitted a narrative description of activities which states that the foreign organization did not cause our arganization to be formed itwas formed independently you went on to state that our contributions are not earmarked for a foreign organization they do not receive any funds from us help the poor and needy students sic of the foreign organization z we have no other purpose’ student to be approximately dollar_figure per month per student you stated that you will give more aid to special cases you said that students are given aid on a first come first serve basis and that you said that all students selected are reviewed and you do not bypass any qualified student approved by your organization but that you do not currently have a selection committee rather you said that the students come from an open ended group and are not pre-selected all funds are given to the individual recipients you also indicated that the student body of the foreign organization z in the foreign_country of y is primarily from poor families your eriterion for assistance is that and that the foreign organization z provides all their needs you also indicated that you estimate the monthly living_expenses for the average you said that they and their parents are without financial basis our purpose is to by providing jiving expenses they will not drop aut and continue on through graduation’ the students apply by contacting your organization as you were incorporated on x we asked why you waited until date to apply for exemption time that we were legally formed’ your response was that the application was filed timely within months from the the bylaws that you submitted with your application_for exemption appear to be boiler plate and are not fully complete there are blank spaces throughout the document that were never completed when we asked for you to explain why your bylaws were not fully completed you simply responded that bylaws are not required by the state of irs as a result they are not an organizing document they are just used internally by our organization it appears that the bylaws are not a legitimate governing document of the organization as you initially purported you did not provide a list of board members with your initial application_for exemption however your certificate of incorporation listed three trustees were located in the united_states we then asked for a list of the current members of the governing body and you provided the following all three of these individuals a b a d a b c dis the trustee we asked for you to describe the duties of d as he was referred to as a trustee rather than a member of the governing body we asked if he was placed on the board just to complete the form_1023 you responded that i am the accountant for the organization prepare and file all necessary tax returns and other information needed by various government agencies also advise the board on irs rules and regulations required to operate a not for profit organization you indicated that the foreign organization z was formed on x we asked how you learned of the foreign organization and you responded that on a trip to the foreign_country of y we visited the foreign organization z and were very impressed with the quality of their programs we then decided to form an organization to raise funds to support the students with living_expenses as they live below poverty level we asked what specific process your organization uses to determine to which organizations you make contributions you responded that we only contribute to this one organization’ indicated that funds are distributed via check only and that they are delivered via airmail you also said that none of the members of the governing body of your organization work for serve ‘on the board or attend the foreign organization z you said that there are students that attend the foreign organization z in the foreign_country of y you provided a listing of the students to whom you had made contributions since the inception of your organization that listing included students ‘you said that the foreign organization z notifies the students that funds are available from your organization and they then apply far the funds you said that after the students apply for funds your organization interviews the selected students the selection committee consists of your arganization together with the member of the foreign organization you in date we had asked for a listing of each distribution that you had made in ‘you provided the following information regarding these distributions a b c d january april'06 august ’06 october '06 dollar_figure dollar_figure dollar_figure dollar_figure you said that each of these four distributions were made strictly for the students of this organization’ we asked for you to provide a breakdown of how much maney each individual student has received you said for the year date - date we have distributed dollar_figure to each of the students for a total of dollar_figure for the year as the terms needy and poor’ are subjective we asked for you to provide detailed criteria that you use to make the determination that an individual is eligible to receive assistance you responded that we classify a student as being needy by determining that he lives below the poverty level’ we later asked you what specific pieces of information the students have to provide to you in order to receive a grant and whether or not you require documentation of income rather than respond to my specific questions you said that they provide information as to family income which we verify with the foreign organization z we asked if you provide funds directly to the individuals or to the foreign organization z on behalf of the individuals you said that our person in the foreign_country of y has control and discretion over the funds and then works with the foreign organization z to distribute the funds to the needy student’ you further stated that you make a trip once a year to the foreign_country of to ensure proper use of the funds we then told you that it appeared that it you did not have control and discretion over the use of the funds as your person in the foreign_country of y has controi and discretion over the funds but none of your board members live in the foreign_country of at this point you indicated that the parson in the foreign_country of y contrary to your previous correspondence is one of your directors you indicated that her name is e you further stated that your organization mails checks to her home address in the foreign_country of y which she deposits in your bank account that is maintained in the foreign_country of y she then pays each student by check from this account she does not give any money to the foreign organization z we then asked for you to explain the discrepancy regarding the non-inclusion of listing response received by us on date is the one that said that you had a person in the foreign_country of y presumably e that has control and discretion of the organizations funds we asked for minutes from the meeting where she was elected into her position you responded that we do not have minutes for our board meetings because we have a very small organization we do everything verbally secretary shall keep the minutes of the board_of directors and also the minutes of the members at a later date we asked for you to provide the specific date that e was added te the board you said that she was added to the board on date we asked who specifically voted on the addition of this board member rather than specify you said the members of the board’ we also asked for the address where the meeting took place you provided the e in your board you responded that e was added to the list after date however your article v section of your bylaws state that the address that was listed on the bank statements which you said belonged to a volunteer and not a board member we then also asked what e's position is with the bank in the foreign_country of y you said that she is an officer of the bank for a complete listing of your current board the listing included a b e and f the listing omitted d we later asked about this omission and you said that d is a board member of the organization at this time date we asked we asked what e’s role is with regard to your organization and you responded that she is the representative to supervise the money in the foreign_country of y we asked for you to provide a resume for e you responded by simply saying that e has worked in a bank in the foreign_country of for many years and has amassed much experience in financial matters’ we asked if e is employed by a volunteer for or serves the foreign organization z in the foreign_country of y in any way you indicated that she is not a volunteer nor an employee of the foreign organization z in the foreign_country of y we then asked how the cash is handled as e cashes the checks you said that she uses the cash to distribute it to the needy students af the foreign organization z in the same response that you described e's distribution of the cash emphasis you provided upon our request a copy of a caricelled check the check is written to z not to e or cash we later inquired about a specific check that was written for dollar_figure in date we asked if actually cashed this check and handed out cash to the students you responded yes at this time e was not on your board we further asked if someone from the foreign organization signs the checks over to e before she cashes them as the checks are actually written to the organization you said i'm not familiar with the foreign bank's procedures sa do not know how it works in date you indicated that you maintain a bank account in the foreign_country of y we had previously asked whether or not you have a bank account in the foreign_country of y and you said no we then asked about the discrepancy as to whether or not you have a bank account in the foreign_country of y and you responded that the organization does not have a bank account in the foreign_country of y because e works for a bank as a courtesy to her they allow her to cash our checks there therefore assumed that the organization had a bank account we asked for evidence that the foreign organization is a registered non-profit in the foreign_country of y organization in the foreign_country of ‘when we indicated that it didn't appear that contributions to your organization would be deductible as it appeared that you were operating as a foreign conduit you then stated that your previous response ‘has a typing error’ and that it should read ‘we only contribute to poor students of this organization’ ‘the error you refer to is the statement you had previously made that we only contribute to this one organization’ you said that the foreign organization is not recognized as a non-profit this was an error on my part’ you submitted copies of the organization's bank statements to us and we asked to whom the statements were mailed as the x m address on the bank statements didn’t match any of the addresses of the board members you responded that the bank statements are received by a volunteer who is not a board member of the organization and who handles the mail for us we then asked for you to provide the name of this volunteer you said that g is that person we asked why an individual that is not on the board_of your organization is receiving the bank statements and you responded that g volunteers to be the bookkeeper of the organization’ we asked how you can exercise control and discretion of your funds if an unrelated party receives the bank statements you said that the bookkeeper makes a copy of the bank statements and gives the original statements to the board_of directors’ check that you provided clearly shows that the front of the check was signed by g not one of your officers we also pointed out te you that the surname of this volunteer g is a part of your organization's name we asked for you to indicate g's relationship with the foreign organization you said that g is only a volunteer bookkeeper and has no relationship to the foreign organization it is also noted that the cancelled law if is not such organizations are recognized sec_501 of the intemal revenue code of provides for the exemption from federal_income_tax for organizations described in sec_501 c as exempt if they are organized and operated exclusively for religious charitable and educational_purposes section c -1 a of the income_tax regulations states that in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in such section an organization fails to meet either the organizational_test or the operational_test it exempt sec_1 c -1 c of the income_tax regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities in not in furtherance of an exempt_purpose sec_1 c -1 d of the regulations defines the term charitable as including the relief of the poor and distressed or of the underprivileged and the promotion of social welfare by organizations designed to lessen neighborhood tensions to eliminate prejudice and discrimination or to combat community deterioration the term charitable also includes the lessening of the burdens of government sec_170 of the code provides subject_to certain limitations a deduction for charitable_contributions as defined in sec_170 payment of which is made within the taxable_year sec_170 c of the code defines a charitable_contribution to include a contribution or gift to or for the use cf a corporation trust or community chest fund or foundation which is a created of organized in the united_states or in any possession thereof or under the law of the united_states any state the district of columbia or any possession_of_the_united_states organized and operated exclusively for religious charitable scientific literary or educational_purposes or to foster national or intemational amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals c no part of the net earings of which inures to the benefit of any private_shareholder_or_individual and d which is not disqualified for tax exemption under sec_50 c by reason of attempting to influence legislation and which doas not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office sec_170 of the code further provides that a contribution or gift by a corporation to a_trust chest fund or foundation shall be deductible by reason of paragraph c only if it is to be used within the united_states or any of its possessions exclusively for purposes specified in subparagraph c b sec_6001 of the code states that notice or regulations requiring records statements and special returns provides that every person liable for any_tax imposed by this title title_26 of the united_states_code which is the internal_revenue_code or for the collection thereof shall keep such records render such statements make such returns and comply with such rules and regulations as the secretary may from time to time prescribe whenever in the judgment of the secretary it is necessary he may require any person by notice served upon such parson or by regulations to make such retums render such statements or keep such records as the secretary deems sufficient to show whether or not such person is hable for tax under this title section a of the procedure and administration regulations provides in general that any person subject_to tax under subtitle a of the code or any person required to file an information_return with respect to income shall keep such permanent books of account or records including inventories as are sufficient to establish the amount of gross_income deductions credits or other matters required to be shown by such person in any return of such tax or information sec_1_6001-1 of the regulations provides that for exempt_organizations in addition to such permanent books_and_records required by sec_1_6001-1 with respect to the tax imposed by sec_511 on the unrelated_business_income of certain exempt_organizations every organization exempt from tax under sec_501 a shall keep such permanent books of account or records including inventories as are sufficient to show specifically the items of gross_income receipts and disbursements sec_1_6001-1 of the regulations retention of records provides that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereaf may be material in the administration of any intemal revenue law revrul_56_304 1956_2_cb_306 states that an organization which otherwise meets the requirements far exemption from federal_income_tax are not precluded from making distributions of their funds to individuals provided such distributions are made on a true charitable basis in furtherance of the purposes for which they are organized however organizations of this character which make such distributions should maintain adequate_records and case histories to show the name and address of each recipient of aid the amount distributed to each the purpose for which the aid was given the manner in which the recipient was selected and the relationship if any between the recipient and members officers or trustees of the organization a grantor or substantial_contributor to the organization or a member_of_the_family of either and a corporation controlled by a grantor or substantial_contributor in arder that any or all distributions made to individuals can be substantiated upon request by the internal_revenue_service revrul_63_252 1963_2_cb_101 holds that contributions to certain domestic charitable it can be shown that the git is in fact to or for_the_use_of the organizations are deductible if domestic organization and that the domestic organization is nat serving as an agent for or conduit of a foreign charitable_organization in reaching this conclusion the revenue_ruling states that it seems clear that the requirements of sec_170 a of the code would be ‘ullified if contributions inevitably committed to go to a foreign organization were held to be deductible solely because in the course of transmittal to the foreign organization they came to rest momentarily in a qualifying domestic organization in such cases the domestic organization is only nominally the donee the real donee is the ultimate foreign recipient revrul_86_79 1966_1_cb_48 amplifies rev_rul to provide that contributions to a domestic charity that are solicited for a spesific project of a foreign charitable_organization are deductible under sec_170 of the code if the domestic charity has reviewed and approved the project as being in furtherance of its own exempt purposes and has control and discretion as to the use of the contributions this conclusion is reached because the contributions received by the domestic charity are regarded as for_the_use_of the domestic organization and not the foreign organization receiving the grant from the domestic organization rev_rul c held that an organization will not jeopardize its exemption under sec_50‘ c of the code even though it distributes funds to nonexempt organizations provided it retains contro and discration over use of the funds and maintains records establishing that the funds were used for sec_801 purposes in better business bureau of washington d c inc v united_states 326_us_178 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy a claim for exemption regardless of the number or importance of truly exempt purposes bubbfing well church of universal love inc v commissioner 74_tc_631 in an action for declaratory_judgment pursuant to sec_7428 the tax_court considered an adverse rufing by the irs on an application_for exempt status as a church the applicant had declined to furnish some information and made answers to other inquiries that were vague and uninformative on the basis of the record the court held that the applicant had not shown that no part ofits net_earnings inure to the benefit of the family or that petitioner was not operated for the private benefit new dynamics foundation v united_states fed c was an action for declaratory_judgment that the petitioner brought to challenge the denial of its application_for exempt status the court found that the administrative record supported the service's denial on the basis that the organization operated for the private benefit of its founder who had a history of promoting dubious schemes the organization's petition claimed that the founder had resigned and it had changed however there was little evidence of change other than replacement of the founder with an acquaintance who had no apparent qualifications the court resolved these questions against the petitioner who had the burden of establishing it was qualified for exemption f the petitioner had evidence that contradicted these findings it should have submitted it as part of the administrative process it is well-accepted that in initial qualification cases such as this gaps in the administrative record are resolved against the applicant’ in 82_tc_18 the court denied a petition for declaratory_judgment that the organization qualified for exempt status as a church in addition to evidence of a pattern of tax-avoidance in its operations the court noted that the organization had failed to respond completely and candidly to irs during administrative processing of its application_for exemption an organization may not declare what information or questions are relevant in a determination process it cited a number of declaratory relief actions that upheld adverse rulings by the service because of the failure of the applicants to provide full and completa infarmation on which the service could make an informed decision in united_states v wells fargo bank 486_us_351 108_sct_1179 l ed the supreme court held that an organization must prove unambiguously that it qualifies for a tax exemption in harding hospital organization seeking a ruling as to recognition of its tax exempt status has the burden of proving that it satisfies the requirements of the particular exemption statute whether an organization has satisfied the operational_test is a question of fact inc v united_states 505_f2d_1068 the court held that an 2d petitioner contended as it had during the the failure to develop criteria for grant disbursements or to keep list of grants made during one of the three years in question which included the in 71_tc_102 the court found that the organization's officers received amounts of money in the form of grants these grants carried with them no legal_obligation to repay any interest or principal administrative_proceeding before the irs that the grants were made in furtherance of a charitable purpose to assist the poor who were in need of food clothing shelter and medical attention however petitioner was unable to furnish any documented criteria which would demonstrate the selection process of a deserving recipient the reason for specific amounts given or the purpose of the grant the only documentation contained in the administrative record was a name of the recipient the amount of the grant and the reason for the grant which was specified as either unemployment maving expenses scholarship or medical expense this information was insufficient in determining whether the grants were made in an objective and nondiscriminatory manner and whether the distribution of such grants was made in furtherance ‘of an exempt_purpose adequate_records of each recipient can result in abuse accordingly it was found that the organization failed to establish that their disbursements constituted an activity in furtherance of an exempt_purpose westem catholic church v commissioner of intemal revenue 73_tc_196 the pelitioner’s only activities were some individual counseling and distribution of a few grants to needy individuals while its primary activity was investment of funds the directors borrowed money in its name but used some of it for automobiles and to pay off personal loans the petitioner's failure to keep adequate_records and its manner of operation made it impossible to trace the money completely but the court found it clear that money passed back and forth between petitioner and its director and his for-profit businesses the court held that petitioner had not shown it was operated exclusively for exempt purposes or that no part of its earings inured to the benefit of its officer in rameses school of san antonio texas v commissioner of internal revenue tcmemo_2007_85 wl u s tax ct the court held that irs properly revoked the exempt status under sec_804 of the code of a school on the grounds that its earnings inured to the benefit of its founder who also served as its executive director president and ceo the record showed that the founder issued numerous organization checks to herself and withdrew cash from organization accounts for which the record showed no decumented business_purpose neither did the organization's records show that there was any documented system for either loans to and repayments for foans by the founder and reimbursements from the school u1 application of law sec_6001 of the code requires organizations exempt from tax to retain records sufficient to detail their exempt_function activities to qualify for exempt status an organization must make a convincing case that they qualify for tax exempt status under code sec_501 sec_501 of the irc provides for the exemption from federal_income_tax for organizations described in if they are organized and operated exclusively for religious charitable and educational_purposes an organization that is unable to demonstrate they have now or will have in the future sufficient records to show operations exclusively further exempt purposes will not be found to meet the operational_test under sec_501 of the code in 70_fedclaims_782 the court explains that the burden is on the foundation v applicant to establish that it meets the statutory requirement under sec_501 of the irc an organization is entitted to federal tax exemption only if inter alia it is organized and operated exclusively for religious charitable or educational_purposes no part of the net earings of which inures to the benefit of any private_shareholder_or_individual failure to satisfy any of these requirements results in an organization being disqualified from tax exemption you have provided very litle information regarding how you operate organization z in the foreign_country of y ta make the determination and keep the records as to whether a student is classified as needy you allow a non-board member to control the day te day financial operations of the organization the criterion for your grants and the amounts of the grants were not clear and were without specific basis the procedures that you described for distribution of money to the students also lacked transparency where you claim ignorance are silent or provide vague and general responses when specific detailed answers are required results in a mere theoretical proposition supporting exemption that is insufficient to clearly demonstrate that you meet the requirements for tax exempt status under sec_501 of the irc on several occasions you made an error’ regarding prior responses or just didn’t know’ the details of how you operate you allow ths foreign where you have explained how you operate your programs you describe that you have delegated much of your authority responsibility and operations to other individuals and entities you allow the foreign organization z in the foreign_country of y to make the determination regarding who is eligible for your assistance you allow the foreign organization z in the foreign_country of y to keep the records regarding the students to whom you give stipends you allow non-board members who have no official responsibility or obligation to report or answer to your officers or board to control the day to day finances of your primary program of providing stipend assistance to students you have allowed individuals with no official connection to your organization to write checks for your organization and to cash large checks on behalf of your organization to be exempt under sec_501 c an organization must be both organized and operated for one or more exempt purposes specified in the section although exclusively does not mean solely or without exception the presence of a single nonexempt purpose if substantial will preclude exemption regardless of the number or importance of exempt purposes as indicated in better business bureau easter house supra an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities neither is an organization that accomplish one or more purposes specified in sec_504 c operated exclusively for one or more exempt purposes if its net_earnings inure to the benefit of private shareholders or individuals or its activities further private rather than public interests as stated in new dynamics supra exemption from federal income_taxation is not a right itis a matter of legislative grace that is strictly construed the applicant bears the burden of establishing that it qualifies for exempt status an applicant must prove that it is organized and operated exclusively for exempt purposes and not for the private benefit of its creators designated individuals or organizations controlled by such private interests as in section dollar_figure c -1 d i of the regulations again exclusively does not mean solely but no more than an insubstantial part of an organization's activities may further a non-exempt purpose an applicant for exempt status must provide sufficient information for the irs to make an informed decision as indicated in national association of american churches supra it must respond to questions completely and candidly you did not respond openly and candidly to many of our questions as in basic bible church supra the responses must include details figures and documentation you did not provide adequate details regarding the method of selecting the students that receive stipends the manner in which the money was handled and dispersed or the specific amounts of cash that was given to each of the students bubbiing weil church supra you have given answers te our inquiries that were vague and uninformative accordingly we can nat determine that you are not operated for the private benefit of the individuals in the united_states and the foreign_country of y that you have allowed te control your finances in contrast to the broad generality of the purposes stated in your charter the name of your corporation suggests a purpose to assist a named foreign organization article il section b of your bylaws stated that the purpose of your arganization is to support poor students with living_expenses attending the programs of the foreign organization z you stated that the individuals who organized your corporation had become interested in furthering the work of the named foreign organization by assisting students attending the foreign organization z in the foreign_country of y you purport that you do not give money to the foreign organization but rather you give cash to needy students attending the foreign organization z in the foreign_country of y however the cancelled chack that you submitted was written directly to the foreign organization z not to the students you indicated that you support only needy students while they attend a particular religious foreign organization z in the foreign_country of y however you do not seek applications or specific financial documentation from the students because you require no dacumentation to verify the financial status of the student nor do you require an application you do not meet the operational_test of sec_501 of the code which requires that you operate exclusively for exempt purposes as in the cancelled check that you provided also showed that a non-board member writes the checks for your organization an individual in the foreign_country of y who until we asked about her was an unauthorized individual cashes large checks and hands the cash_out to the students this demonstrates a clear lack of control and discretion to let an outsider of the organization to financially control your organization it is also noteworthy that the individual that you refer to as the volunteer bookkeeper that receives the organization's bank statements writes the checks and holds meetings at their home has the lastname bookkeeper and organization but the name suggests otherwise _ _you indicated that there is not relationship between this rev_rul 1956_2_cb_306 states that if an organization gives money to individuals in need they must keep adequate_records these records must include the name and address of each recipient of aid the amount distributed to each the purpose for which the aid was give the manner in which the recipient was selected and the relationship if any between the recipient and members officers or trustees of the organization a grantor or substantial_contributor to the organization or a member_of_the_family of either and a corporation controlled by a grantor or substantial_contributor in order that any or all distributions made to individuals can be substantiated upon request by the internal_revenue_service you do nat keep adequate_records you allow the foreign organization to select the reciplents and keep the records you allow an individual located in the foreign_country of y to cash large checks and distribute the cash and do not have any method of tracking who received what amount you state that each student receives an equal amount but as large amounts of cash are being handed out by an individual it would seem hard to track where the cash really went rev_rul states that contributions to certain domestic charitable organizations are deductible if it can be shown that the gift is for_the_use_of the domestic organization and the domestic organization is not serving as an agent for the foreign organization your organization appears to have little or no contral over who receives the cash or how much they recsive your organization appears to be a fundraising arm in the united_states whose purpose is to fund individuals attending the foreign organization z in the foreign_country of y your organization does not appear to have control and discretion over the use of the funds as an unrelated individual receives your bank statements and writes checks on behalf of your organization as in harding hospital inc v united_states supra you have the burden of proving that you satisfy the requirements of the code you have failed to provide enough information to prove to us that you are operating in a manner that would allow for you te qualify for exemption under sec_501 of the irc in western catholic church v commissioner supra the court held that because of the petitioner's failure to keep adequate_records and its manner of operation made it impossible to trace the money completely the petitioner had not shown it was operated exclusively for exempt also the court held purposes or that no part of its earnings inured to the benefit of its officer that the irs properly revoked the exempt status in rameses school of san antonio texas v commissioner supra under sec_501 of the code on the grounds that its eamings inured to the benefit of ts founder the record showed that the founder issued numerous organization checks to herself and withdrew cash from organization accounts for which the record showed no documented business_purpose you allow an individual to cash large checks with no substantiating documentation regarding the distributions much like the above cited case we are not able to conclude that the money that you distribute is spent exclusively for ‘exempt purposes or net inuring to the benefit of an insider applicant's position you state that all contributions to your organization are distributed properly in accordance with revrul_63_252 your citation also included revrul_66_79 which states that contributions to a domestic charity described in sec_170 of the code which are solicited for specific projects of a foreign charitable_organization are deductible under sec_170 of the code where the domestic charity has reviewed and approvad the projects as being in furtherance of its own exempt purposes and has control and discretion as to the use of the contributions the third citation that you provided was rav rul which states that an organization will not jeopardize its exemption under sec_504 c of the code even though it distributes funds to nonexempt organization provided it retains control and discretion over the use of funds for sec_801 purposes you further stated that contributions to a foreign organization are disallowed only when sent directly to the organization without any control and discretion by the domestic organization’ service’s response to application position although you say that per revrul_63_252 and you are acting with proper control and discretion the facts tell a different story you allow a non-exempt organization located in the foreign_country of y to determine who is qualified to receive your stipend the foreign organization is also the one responsible for keeping records to verify qualification for the stipend contrary to what you say you do not keep adequate_records as large sums cash are handed out by an individual until our inquiry regarding this individual she was not a member of your governing body another individual in the united_states writes the checks and receives the organizations bank statements at their home your explanation of how the cash is controlled is that our person in the foreign_country of has control and discretion over the funds’ time you made this statement there were no members of your governing body that were located in the foreign_country of y at the primary gonelusion based on the above facts and law we conclude that you do not qualify for exemption under sec_501 of the irc as outlined below conclusion regarding subordinate issue sec_1 you were formed to provide stipends to needy students the foreign organization z located in the foreign_country of y however you do net request an application keep records or verify that the recipients are needy the required records write and distribute large sums of cash to the students you are nat aperating in a manner that would allow for you to qualify for exemption under sec_501 of the sec_2 sec_501 of the irc requires that you have in place a system for proper contral you do not keep adequate_records as and discretion when distributing funds to individuals required by the code regulations revenue rulings and court cases cited above sec_6001 of the code requires organizations exempt from tax to retain records sufficient to detail their exempt_function activities you have failed to provide relevant information you allow a foreign organization ta select the racipients and keep you allow individuals that are not members of your governing body to this is sufficient basis for bath the service and the courts to refuse to recognize the organization as exempt under sec_504 c of the irc you do not exercise adequate discretion and contro over payments to students at the foreign organization z located in the foreign_country of y you allow an individual that is not a member of your governing body to control all of your financial matters therefore you are not exercising adequate discretion and control regarding your disbursements your lack of control and discretion is a basis for denial under sec_501 of the sec_4 you allow an individual located in the foreign_country of y who is now a board member to cash large checks and personally distribute the cash to the students of the foreign organization z like the organizations in the precedent cited above your operations show factors indicative of prohibited inurement and private benefit there is no oversight of the individual in the foreign country-of y or record keeping procedures regarding your cash disbursements therefore you have not established that you are operated exclusively in furtherance af sec_501 c purposes conclusion regarding the alternative issue if you were found to qualify for tax exempt status under sec_501 you would meet the definition of a foreign conduit which while enjoying exemption from income_tax would not be your decisions are not independent eligible to receive tax deductible donations under sec_170 or solely within your jurisdiction with regard to the disposition of the funds donated to you as you let an outsider to your organization control and dispense funds you state that you monitor the use of the funds given to students but as large amounts of cash are distributed it would seem difficult if not impossible to monitor the funds the requirements of sec_170 c a of the code are nullified if contributions inevitably committed to go te a foreign organization or components thereof were held to be deductible solely because in the course of transmittal to the foreign organization they came to rest momentarily in a qualifying domestic organization in such cases the domestic organization is only nominally the donee the real donee is the ultimate foreign recipient as the name of your organization implies you were formed to support a foreign organization you do this through giving stipends to the students attending the foreign organization z you seek contributions in the united_states you momentarily held the contributions but the ultimate purpose is to support the students of the foreign organization you are only nominally the donee do not review and approve the disbursements and because you do nat maintain control and discretion aver the use of the funds you receive you are not considered the recipient of the funds therefore the requirements of sec_170 of the code are nullified and contributions to your organization are not deducibte ‘you have the right to file a protest if you believe this determination is incorrect to protest you must submit a staterient of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office publication exempt_organization appeal procedures for unagreed issues you can find more information about the role of the appeals_office in the real donees are the individual students because you if your an attomey cerlified public accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney farm power of attomey and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power of attomey all forms and publications mentioned in this letter can be found at wwww irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust avallable administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall nat be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization invalved has exhausted all of the administrative remedies available to it within the rs if you do not intend to protest this determination you do not need te take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax retums and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to internal_revenue_service eo determinations group room p o box cincinnati oh deliver to intemal revenue service eo determinations group main street room cincinnati oh ‘you may fax your statement using the fax number shown in the heading of this letter if you fax your statement please call the person identified in the heading of this etter to confirm that he or she received your fax ifyou have any questions please contact the person whose name and telephone number are shown in the heading of this latter sincerely robert choi director exempt_organizations rulings agreements


tcmemo_2010_86 united_states tax_court daawud-el waamiq-ali petitioner v commissioner of internal revenue respondent docket no filed date daawud-el waamiq-ali pro_se james p a caligure for respondent memorandum findings_of_fact and opinion vasquez judge for and respondent determined deficiencies in petitioner’s federal income taxes and additions to tax as follows additions to tax_year deficiency sec_6651 sec_6651 sec_6654 dollar_figure big_number dollar_figure dollar_figure dollar_figure dollar_figure --- dollar_figure all section references are to the internal_revenue_code code and all rule references are to the tax_court rules_of_practice and procedure the issues for decision are whether petitioner is liable for the deficiencies in his federal income taxes liable for the additions to tax under sec_6651 and and a and liable for a penalty pursuant to sec_6673 findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the accompanying exhibits are incorporated by this reference at the time the petition was filed petitioner resided in new york during petitioner worked for barton protective services inc barton and allied-barton security services allied and received wages of dollar_figure and dollar_figure from barton and allied respectively in petitioner worked for allied and received dollar_figure in wages neither barton nor allied withheld any federal_income_tax from petitioner’s wages because he filed a form_w-4 employee’s withholding allowance certificate for both years claiming that he was exempt from federal_income_tax withholding petitioner filed several documents with his employers claiming that his submission of form_w-4 was involuntary he was exempt from withholding and he incurred no federal_income_tax liability petitioner failed to file federal_income_tax returns for and pursuant to sec_6020 respondent filed substitutes for returns sfr for petitioner for and for respondent determined that petitioner’s filing_status was single and that petitioner’s taxable_income was dollar_figure for respondent determined that petitioner’s filing_status was single and that petitioner’s taxable_income was dollar_figure petitioner stipulated that he received wages from barton and allied as determined by respondent however petitioner claims that he is not liable for tax on the amounts included in his gross_income by respondent because employers are liable for federal income taxes on employee wages wages are not taxable_income and respondent does not have the authority to prepare sfrs i deficiencies in federal_income_tax opinion sec_61 defines gross_income as all income from whatever sources derived including compensation_for services as a general_rule the taxpayer bears the burden of proving the commissioner’s deficiency determinations incorrect rule respondent listed petitioner’s wages on the sfr as dollar_figure which is dollar_figure less than the stipulated amount of dollar_figure this discrepancy has no effect on the outcome of this case a 290_us_111 sec_7491 however provides that if the taxpayer introduces credible_evidence and meets certain other prerequisites the commissioner shall bear the burden_of_proof with respect to factual issues relating to the taxpayer’s liability for a tax imposed under subtitle a or b of the code petitioner does not dispute receiving the wages or respondent’s calculation of tax rather petitioner disagrees only with respondent’s legal conclusions ie that petitioner’s wages are taxable that petitioner not his employer is liable for the income_tax and that respondent has the authority to prepare the sfrs since the facts are undisputed and petitioner has failed to introduce credible_evidence sec_7491 does not apply see davenport v commissioner tcmemo_2009_248 in his petition at trial and on brief petitioner advanced shopworn arguments characteristic of tax-protester rhetoric that have been universally rejected by this and other courts see 297_f3d_1378 fed cir 898_f2d_942 3d cir 770_f2d_17 2d cir sawukaytis v commissioner tcmemo_2002_156 affd 102_fedappx_29 6th cir we shall not painstakingly address petitioner’s assertions with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit see 737_f2d_1417 5th cir accordingly we sustain respondent’s deficiency determinations for and ii additions to tax sec_7491 provides that the commissioner has the burden of production with respect to the liability of any individual for additions to tax the commissioner’s burden of production under sec_7491 is to produce evidence that it is appropriate to impose the relevant penalty addition_to_tax or additional_amount 118_tc_358 see also 116_tc_438 once the commissioner satisfies this burden of production the taxpayer must persuade the court that the commissioner’s determination is in error by supplying sufficient evidence of an applicable exception higbee v commissioner supra pincite a sec_6651 sec_6651 imposes an addition_to_tax for failure_to_file a return on the date prescribed determined with regard to any extension of time for filing unless such failure is due to reasonable_cause and not due to willful neglect if the secretary makes a return for the taxpayer under sec_6020 it is disregarded for purposes of determining the amount of the addition_to_tax under sec_6651 but it is treated as a return filed by the taxpayer for purposes of continued petitioner failed to file federal_income_tax returns for and accordingly we find that respondent has met his burden of production with regard to the additions to tax under sec_6651 petitioner has presented no evidence of a reasonable_cause defense therefore petitioner is liable for additions to tax under sec_6651 for and b sec_6651 sec_6651 provides for an addition_to_tax where payment of the amount reported as tax on a return is not timely unless it is shown that such failure is due to reasonable_cause and not due to willful neglect with respect to the sec_6651 addition_to_tax the commissioner must introduce evidence that the tax was shown on a federal_income_tax return to satisfy his burden of production under sec_7491 120_tc_163 when a taxpayer has not filed a return the sec_6651 addition_to_tax may not be imposed unless the secretary has prepared a substitute for return sfr that meets the requirements of sec_6020 127_tc_200 affd 521_f3d_1289 10th cir continued determining the amount of the addition_to_tax under sec_6651 sec_6651 sec_6020 provides sec_6020 execution of return by secretary -- authority of secretary to execute return --if any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor or makes willfully or otherwise a false_or_fraudulent_return the secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise status of returns --any return so made and subscribed by the secretary shall be prima facie good and sufficient for all legal purposes respondent provided the court with copies of the sfrs prepared for petitioner for or the sfrs satisfy the requirements of sec_6020 see nino v commissioner tcmemo_2009_293 carver v commissioner tcmemo_2009_279 hawkins v commissioner tcmemo_2008_168 petitioner did not timely pay his or federal income taxes as shown on the sfrs respondent has produced sufficient evidence that petitioner is liable for the sec_6651 addition_to_tax petitioner provided no evidence of a reasonable_cause defense therefore petitioner is liable for additions to tax under sec_6651 for and c sec_6654 sec_6654 imposes an addition_to_tax in the case of any underpayment of estimated_tax by an individual a taxpayer has an obligation to pay estimated_tax for a particular year only if he has a required_annual_payment for that year sec_6654 a required_annual_payment generally is equal to the lesser_of i percent of the tax_shown_on_the_return for the taxable_year or if no return is filed percent of the tax for the year or ii percent of the tax_shown_on_the_return of the individual for the preceding_taxable_year sec_6654 wheeler v commissioner supra pincite heers v commissioner tcmemo_2007_10 clause ii does not apply however if the individual did not file a return for the preceding year sec_6654 respondent’s burden of production under sec_7491 requires him to produce evidence that petitioner had a required_annual_payment for petitioner failed to file federal_income_tax returns for and accordingly his required_annual_payment wa sec_90 percent of the tax for petitioner did not make any estimated income_tax payments for therefore respondent has produced sufficient evidence that petitioner is liable for the sec_6654 addition_to_tax none of the defenses enumerated in sec_6654 apply therefore petitioner is liable for an addition_to_tax under sec_6654 for iii sec_6673 penalty at the conclusion of the trial respondent filed a motion for sanctions pursuant to sec_6673 sec_6673 authorizes the court to impose a penalty not to exceed dollar_figure if the taxpayer took frivolous or groundless positions in the proceeding or instituted the proceeding primarily for delay a taxpayer’s position is frivolous if it is contrary to established law and unsupported by a reasoned colorable argument for change in the law 791_f2d_68 7th cir in his petition petitioner claimed that his wages were not taxable because he was not engaged in any excise taxable activities during a face-to-face meeting respondent warned petitioner that his argument was frivolous through written correspondence respondent advised petitioner that his argument was frivolous and that he would seek sanctions under sec_6673 if petitioner presented this argument to the court as a final attempt to discourage petitioner from making a frivolous argument at trial respondent provided petitioner with a copy of this court’s decision in sawukaytis v commissioner tcmemo_2002_156 undeterred petitioner in his pretrial memorandum raised various issues including whether subtitle c of the code should be considered in determining petitioner’s tax_liability at trial petitioner argued that under subtitle c employers rather than employees are liable for federal income taxes on employee wages we warned petitioner that his arguments were frivolou sec_3 in sawukaytis v commissioner tcmemo_2002_156 the court imposed a dollar_figure penalty under sec_6673 against the taxpayer for advancing the frivolous argument that the income_tax is an excise_tax and therefore his wages were not taxable_income and have been universally rejected by this and other courts we further advised petitioner that the court has the discretion to impose a penalty of up to dollar_figure if he were to proceed with such arguments despite repeated warnings from respondent and this court petitioner advanced patently frivolous arguments at trial and in his postrial brief in doing so petitioner has wasted the limited time and resources of the court the court_of_appeals for the second circuit the court to which this case would be appealable has characterized petitioner’s subtitle c argument as baseless see 810_f2d_19 2nd cir furthermore the argument that wages are not taxable has been rejected so frequently that the very raising of it justifies the imposition of sanctions connor v commissioner f 2d pincite accordingly we are well within our discretion to impose a penalty under sec_6673 we are convinced however that petitioner’s frivolous arguments were made at the suggestion of a woefully misinformed adviser in response to questions from the court petitioner was unable to articulate certain positions raised in his pretrial memorandum this is the first time petitioner has engaged in conduct sanctionable under sec_6673 therefore we shall not impose a penalty under sec_6673 though we decline to impose a penalty at this time we take this opportunity to warn petitioner that we will impose a sec_6673 penalty if he returns to the court and proceeds in a similar manner in the future see 115_tc_576 in reaching our holdings we have considered all arguments made and to the extent not mentioned we conclude that they are moot irrelevant or without merit to reflect the foregoing an appropriate order will be issued and decision will be entered for respondent


artment of the treasury ‘ ee internal_revenue_service u washington d c tax_exempt_and_government_entities_division dec uniform issue list set ep rat legend bank a amount d amount e amount f ira x ira z dear this is in response to your letter dated date in which you requested a ruling asking for a waiver of the 60-day rollover requirement letters dated date and date supplemented the request you have submitted the following facts and representations crimi amount f was distributed to you from ira x amount f represents amount d the total amount in the ira minus amount e which was withheld for federal_income_tax on invested the money at bank a with the intent of eventually rolling over amount d into an ira at bank a the day period for rolling over the distribution expired on il vo on nc deposited by means of a transfer the funds into ira z page during the period referred to in the above paragraph you were suffering from leukemia and undergoing chemotherapy treatment you developed an infection because of the treatment such infection lasted until the end of furthermore during that period your daughter was pregnant during the last three weeks of your daughter's pregnancy your daughter was suffering from toxemia and gallstones and was in severe pain you and your husband were caring for your daughter at this time and also taking your daughter's month-old child your daughter had her baby on he two days before the 60-day period expired care of thus in short a combination of your illness your daughter's complicated pregnancy your daughter's illness and your having to care for your grandchild resulted in your failing to satisfy the 60-day rollover requirement by a minimal period of time based on the facts and representations you request that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount d because the failure to waive such requirement would be against equity or good conscience sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in section page d a i from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 provides that in determining whether to-grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented by you demonstrates that you were unable to complete the transaction because of serious medical conditions existing in your family therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of the amount from ira x provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such distribution the deposit into ira z made by means of a transfer will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code if any no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations that may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent page if you wish to inquire about this ruling please contact id - weerrekat _ please address all correspondence to se t ep ra t3 sincerely yours oo frances v sjéan manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa apjp kebriscoe filen-144625-06 uilc 6050i date date to program manager bsa policy operations small_business self-employed from stuart d murray senior counsel administrative provisions judicial practice procedure administration subject form_8300 reporting of bank_deposits that are payments on used auto sales this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent issue sec_1 whether a deposit into a used car dealer’s bank account by one of the dealer’s independent contractors as payment on a car sale is reportable by the dealer on form_8300 report of cash payments over dollar_figure received in a trade_or_business when the deposit includes cash meaning currency and a cashier’s check each of which is less than dollar_figure but together total more than dollar_figure whether the conclusion to issue is in any way altered by the reporting requirements pertaining to fincen form_104 currency transaction report formerly treasury form filen-144625-06 conclusion sec_1 the deposit is not reportable on form_8300 because a deposit into the dealer’s bank account is not the receipt of a cash payment for purposes of the sec_6050i reporting requirements the conclusion to issue is not affected by the reporting requirements pertaining to ctrs regardless of whether they apply although they do not appear to apply here facts the two issues addressed herein are based on the following non-taxpayer-specific scenario taxpayer in the general sense of an individual or entity subject_to liability for failure_to_file a required information retrun is a schedule c sole_proprietorship that sells used motor vehicles individual a an independent_contractor of the taxpayer sells taxpayer’s vehicles exclusively individual a receives a commission for every vehicle sold taxpayer purchases most of taxpayer’s inventory of vehicles through auctions individual a buys his inventory at auction as well making the purchases under the taxpayer’s dealer’s license individual a then sells the vehicles to customers at a price in excess of what was paid at auction the taxpayer weekly pays for all the vehicles purchased through the auctions with a business check including all vehicles purchased by individual a taxpayer keeps track of all vehicles individual a buys and sells and also creates a list by month of the amounts owing from individual a for the cars individual a purchased using the taxpayer’s dealer’s license all of individual a’s retail sales in a year are reported on schedule c of the taxpayer’s income_tax return for the year and the taxpayer pays all sales_taxes individual a sells one of the cars purchased at auction to a retail customer for dollar_figure after deducting his commission dollar_figure individual a pays taxpayer dollar_figure by way of payment individual a deposits dollar_figure in cash united_states currency and a dollar_figure cashier's check into taxpayer's business bank account law and analysis issue sec_6050i provides that any person who is engaged in a trade_or_business and who in the course of that trade_or_business receives more than dollar_figure in cash in one transaction or two or more related transactions shall make the return described in presumably the taxpayer is making a profit on the transaction for example the auction price was dollar_figure in which case taxpayer has netted dollar_figure minus any costs related to the transaction filen-144625-06 sec_6050i with respect to the transaction or related transactions at the time the secretary prescribes sec_6050i requires the information_return to be made on whatever form is prescribed for this purpose form_8300 is the designated form a recipient of cash for purposes of sec_6050i reporting means the person receiving the cash sec_1_6050i-1 on prior occasions we have opined that a person’s deposit into someone else’s bank account is not receipt by the accountholder of a payment within sec_6050i while the contexts were somewhat different from the current one and the prior advice is certainly not precedential just as this advice is not precedent or determinative of what we decide now our analysis here does not lead to a different outcome we construe the word receives in sec_6050i to mean actual physical receipt in that sense the taxpayer in your scenario does not receive a dollar_figure payment the taxpayer does not physically in hand receive the money that individual a deposits into the taxpayer’s bank account consequently we conclude that the deposit-even though it exceeds dollar_figure and the transaction on which it is being paid was conducted in the course of the taxpayer’s trade or business-is not a reportable_payment under sec_6050i issue even where a payment falls within sec_6050i sec_6050i sets forth a specific exception to avoid double reporting namely cash received in a transaction that is reported by any financial_institution to treasury under the bank secrecy act’s reporting and recordkeeping requirements in title is excluded from sec_6050i reporting where it would be duplicative of the bsa reporting additionally a bank or other financial_institution is not required to file a form_8300 reporting the receipt of cash exceeding dollar_figure sec_6050i sec_1_6050i-1 sec_5313 of title governs the circumstances under which financial institutions including banks are required to report monetary transactions sec_5313 states that when a domestic financial_institution is involved in a transaction for the payment receipt or transfer of united_states coins or currency or other monetary instruments the secretary_of_the_treasury prescribes in an amount denomination or amount and denomination or under circumstances the secretary prescribes by regulation the given that it is irrelevant and we need not decide whether more than dollar_figure in cash is present ie whether the dollar_figure cashier’s check is cash see sec_1_6050i-1 defining cash as a the coin and currency of the united_states or of any other country if circulated and customarily used and accepted as money in the issuing country and b a cashier’s check bank draft traveler's check or money order having a face_amount of not more than dollar_figure received in a designated reporting transaction or in any transaction in which the recipient knows that the instrument is being used in an attempt to avoid the reporting requirements of sec_6050i please note that we are not deciding here that if individual a made the payment dollar_figure in cash and dollar_figure in a cashier’s check directly to the taxpayer-which unquestionably would be receipt under sec_6050i-the payment would or would not be reportable on form_8300 the answer would depend on whether the payment is received in a designated reporting transaction or one in which the taxpayer knows that the split form of payment is an attempt to avoid form_8300 reporting filen-144625-06 financial_institution must file a report as the secretary directs per the implementing regulations financial institutions other than casinos must generally file a report of each deposit of currency of more than dollar_figure c f_r sec_103 b currency is defined as the coin and paper money of the united_states or of any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issuance and includes u s silver certificates u s notes and federal reserve notes and official foreign bank notes customarily used and accepted as a medium of exchange in a foreign_country c f_r h monetary instruments which are defined separately include not only currency but all negotiable instruments including personal checks business checks official bank checks cashier's checks third-party checks promissory notes under the ucc and money orders c f_r u because a cashier’s check is not currency and individual a’s deposit into the taxpayer’s bank account is of less than dollar_figure in currency then as we read the tile requirements the bank would not be obligated to file a ctr in any event the applicability or inapplicability of these requirements has no effect on our conclusion that a form_8300 is not required from the taxpayer a payment that is otherwise reportable under sec_6050i is excepted from form_8300 reporting if a ctr is required for the transaction but we have determined that the deposit is not reportable under sec_6050i for other reasons this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions