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-121133-14 date date legend x ----------------------------------------- ----------------------------------------- a ------------------------ -------------------------------------------- b -------------------------- -------------------------------------------- c --------------------------------------------- ------------------- trust ------------------------------------------- ------------------------------------------------------------------- date1 -------------------------- date2 -------------------------- date3 --------------------- date4 ----------------- date5 ----------------- year ------ state -------- plr-121133-14 dear ------------------- this responds to a letter dated date and subsequent information submitted on behalf of x by x’s authorized representative requesting relief under sec_1362 of the internal_revenue_code the code a ruling is also requested that each share qualifies as a separate share under sec_663 and each share qualifies as a qsst within the meaning of sec_1362 facts according to the information submitted and representations within x was incorporated on date1 under the laws of state trust a grantor_trust became a shareholder of x on date2 effective date3 x elected to be treated as an s_corporation on date4 a the grantor of trust died on date5 trust became an ineligible shareholder of x causing x’s s election to terminate on date5 under the terms of trust upon a’s death the trustee is to distribute a specific dollar amount of net_income to the children of b_trust further provides that after making any payments to the children of b trust’s property and income shall be divided into two shares the income from one share is required to be paid to b and the income from the other share is required to be paid to c during the life of b and c the income beneficiaries the income and principal from one beneficiary’s share can only be paid to that income_beneficiary neither income_beneficiary has a claim against the income and principal of the other beneficiary’s share neither beneficiary has affirmatively refused to consent to the qsst election to be effective date5 upon the death of both b and c the corpus of trust as well as any undistributed_income shall be paid equally to the children of b as of date5 x represents that trust was intended to be treated as a qualified_subchapter_s_trust qsst however b the current beneficiary of trust did not timely file a qsst election with respect to trust resulting in x’s s_corporation_election terminating effective date5 x represents that the failure to timely file a qsst election was discovered by x‘s tax advisor in year x represents that its s_corporation termination was inadvertent and not motivated by tax_avoidance or retroactive tax planning x also represents that b’s and c’s failure_to_file a timely qsst election was unintentional and was not motivated by tax_avoidance or retroactive tax planning further x represents that x and its shareholders agree to make any adjustments required by the secretary x also represents that all income has been reported on all affected returns of x and all of its shareholders consistent with the treatment of x as an s_corporation and that plr-121133-14 neither x nor any of its shareholders intended to terminate x’s s election in addition x represents that trust has qualified as a qsst under sec_1361 at all times since date5 and other than the inadvertent termination due to an ineligible shareholder x has qualified as a small_business_corporation at all times since its s election on date3 law and analysis sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder sec_1361 provides that a qsst whose beneficiary makes an election under sec_1361 will be treated as a_trust described in sec_1361 and the beneficiary of such trust shall be treated as the owner for purposes of sec_678 of that portion of the qsst which consists of stock in an s_corporation to which the election under sec_1361 applies under sec_1361 a beneficiary of a qsst or his legal_representative may elect to have sec_1361 apply under sec_1361 this election will be effective up to days and two months before the date of the election sec_1361 provides that for purposes of sec_1361 the term qualified_subchapter_s_trust means a_trust a the terms of which require that i during the life of the current income_beneficiary there shall be only income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of such beneficiary’s death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to that beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to individual who is a citizen or resident_of_the_united_states a substantially separate and independent share of a_trust within the meaning of sec_663 shall be treated as a separate trust for purposes of sec_1361 and d plr-121133-14 sec_1362 provides in part that a small_business_corporation may elect to be an s_corporation sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the election was made or the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of such corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination such corporation shall be treated as an s_corporation during the period specified by the secretary sec_1_1361-1 provides that for purposes of sec_1361 and d a substantially separate and independent share of a_trust within the meaning of sec_663 and the regulations thereunder is treated as a separate trust for a separate share which holds s_corporation stock to qualify as a qsst the terms of the trust applicable to that separate share must meet the qsst requirements stated in paragraphs j i and ii of sec_1_1361-1 sec_1_1361-1 of the income_tax regulations provides that the current income_beneficiary of the trust must make the qsst election by signing and filing with the service_center with which the corporation files its income_tax the applicable form or a statement including the information listed in sec_1_1361-1 sec_1_1361-1 provides that if s_corporation stock is transferred to a_trust the qsst election must be made within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust sec_1_1361-1 provides that the income_beneficiary who makes the qsst election and is treated for purposes of sec_678 as the owner of that portion of the trust that consists of s_corporation stock is treated as the shareholder for purposes of sec_1361 sec_1366 sec_1367 and sec_1368 plr-121133-14 sec_663 provides that for the sole purpose of determining the amount of distributable_net_income in the application of sec_661 and sec_662 in the case of a single trust having more than one beneficiary substantially separate and independent shares of different beneficiaries in the trust shall be treated as separate trusts the existence of such substantially separate and independent shares and the manner of treatment as separate trusts including the application of subpart d shall be determined in accordance with regulations prescribed by the secretary sec_1_663_c_-1 provides that if a single trust has more than one beneficiary and if different beneficiaries have substantially separate and independent shares their shares are treated as separate trusts for the sole purpose of determining the amount of distributable_net_income allocable to the respective beneficiaries under sec_661 and sec_662 the separate_share_rule the regulations further provide in sec_1 c -1 c that the separate_share_rule may be applicable even though separate and independent accounts are not maintained and are not required to be maintained for each share on the books of account of the trust and even though no physical segregation of assets is made or required sec_1_663_c_-3 provides that the applicability of the separate_share_rule generally depends on whether trust distributions are to be made in substantially the same manner as if separate trusts had been created in determining whether separate shares exist it is immaterial whether the principal and any accumulated income of each share is ultimately distributable to the beneficiary of such share to the beneficiary’s descendants appointees under a general or special_power_of_appointment or to any other beneficiaries including a charitable_organization designated to receive the beneficiary’s share of the trust and accumulated income upon termination of the beneficiary’s interest in the share thus a separate share may exist if the instrument provides that upon the death of the beneficiary of the share the share will be added to the shares of the other beneficiaries of the trust conclusion based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election terminated on date5 we further conclude that the termination of x’s s election on date5 was inadvertent within the meaning of sec_1362 in addition we conclude that the shares of trust created upon the death of a are substantially separate and independent shares within the meaning of sec_663 and therefore that each share is treated as a separate trust for purposes of sec_1361 we further conclude that provided that all the net_income within the meaning of sec_643 for each share is distributed currently to the applicable income_beneficiary and plr-121133-14 each share is administered as a qsst each share of trust will qualify as a qsst under sec_1361 during the life of the income_beneficiary for that share pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation as of date5 and thereafter provided that b and c each file a qsst election for their respective share with an effective date of date5 with the appropriate service_center within days from the date of this letter and provided that x’s s_corporation_election is not otherwise terminated under sec_1362 a copy of this letter must be attached to the qsst elections except as specifically ruled upon above we express or imply no opinion concerning the tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding x’s eligibility to be an s_corporation or whether trust was otherwise a valid qsst this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representative sincerely joy c spies joy c spies senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


internal_revenue_service number release date index number ----------------------------------------------- --------------------------------------------------- ------------------------------------ ------------------------------------------ legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc ita b04 plr-143928-13 date date assignee ------------------------------------------------------------------- issuer -------------------------------------------- issuer -------------------------------------------- date ----------------------- claimant --------------------------------------------------- state b -------------- x ------------------------------------------------------------------------------ -------------------------------------------------------------------------------- ------------------- y -- dear --------------- this responds to assignee’s request for a private_letter_ruling regarding the applicability of sec_130 of the internal_revenue_code to variable periodic_payments proposed to be made to claimant pursuant to a structured_settlement agreement through an indexed annuity that will be sold by issuer or issuer to assignee assignee also requests a ruling that the possibility of a commutation pursuant to a notice of hardship conversion that assignee will provide to claimant will not cause the assignment of the obligation to assignee and the annuity purchased by assignee to fail to satisfy the requirements of sec_130 and d facts on date claimant was permanently physically injured in an accident in state b you represent that claimant is entitled to damages in the form of periodic_payments directly as a result of this accident claimant is negotiating a possible structured_settlement agreement that would provide for periodic_payments during claimant’s lifetime with plr-143928-13 annuity payments guaranteed for a specific period to be determined and providing for indexed periodic_payments you represent that pursuant to a qualified_assignment and release agreement x will assign to assignee and assignee will assume from x the sole responsibility for making periodic_payments to claimant in addition claimant will accept the assignment and release x from its obligation to make periodic_payments x was a party to the lawsuit as required by sec_130 upon receiving the assignment assignee will purchase a structured_settlement indexed annuity from issuer or issuer that is intended to be a sec_130 qualified_funding_asset that will fund assignee’s obligation to make periodic_payments to claimant the indexed periodic_payments will provide claimant with the possibility of increasing periodic_payments to reflect certain changes in the s p index the s p index will be used to determine any adjustment that is applied to the annuity payments on an annual basis subject_to a y cap the adjustment will not result in a decrease of any periodic_payment the purpose of the structured_settlement indexed annuity is to allow claimant the possibility of increased periodic_payments to account for any diminution in value due to inflation the adjustment will be applied to the annuity_payment and corresponding periodic_payment on each annual annuity_payment anniversary pursuant to a three step formula step determines the index return which equals the ending s p index price minus the starting s p index price divided by the starting s p index price step determines the adjustment which is the lesser_of the index return or the y cap if the index return is less than or equal to zero the adjustment will be zero step determines the annuity_payment amount separate from the qualified_assignment and release agreement assignee will provide claimant with a notice of hardship conversion option the notice of hardship conversion provides that the assignee will consider a request from claimant to convert future guaranteed structured_settlement payments to an immediate lump sum payment in certain qualifying hardship circumstances if the request is approved by a court or applicable administrative authority pursuant to a qualified_order under sec_5891 the qualifying hardship circumstances are financial hardship due to medical_expenses expenses related to a terminal illness home improvement expenses for handicap accessibility job loss loss of home and the same type of expense for the payee’s dependents assignee expressly represents that it reserves the right to decline any hardship conversion request and that it will consider each hardship conversion request on a case-by-case basis in addition assignee represents that it will not allow any hardship conversion in the first year after a qualified_assignment assignee also makes the following representations the annuity_contract will be issued by issuer or issuer to fund the periodic_payments to claimant pursuant to an assignment of a liability to make periodic plr-143928-13 payments as damages on account of personal_injury_or_sickness in a case involving physical injury or physical sickness the amount of the periodic_payments to the claimant and the amount of the payments under the annuity funding the payments will be determined by the s p index as explained above claimant will be unable to accelerate defer increase or decrease the periodic_payments from the direct obligor or assignee without regard to the possibility of the claimant entering a commutation agreement under the notice of hardship conversion the obligation of assignee under the qualified_assignment and release agreement will be no greater than the obligation of x the periodic_payments made under the structured_settlement agreement will be payments for damages received on account of personal physical injuries or physical sickness that are excludable from claimant’s gross_income under sec_104 the periods of the payments under an annuity_contract issued to assignee will be reasonably related to the periodic_payments under the assignment of liability to make periodic_payments of damages to claimant on account of personal physical injuries or physical sickness and the amount of any payment under the annuity_contract will not exceed the periodic_payment to which it relates assignee will purchase the annuity_contract from issuer or issuer not more than days before or after the date of the assignment of liability to make periodic_payments requested rulings assignee requests the following rulings the periodic_payments of damages that claimant will receive are fixed and determinable as to amount and time of payment within the meaning of sec_130 even though they are calculated pursuant to an objective formula based on the performance of the s p index the structured_settlement indexed annuity which assignee will acquire from issuer or issuer will not fail to qualify as a qualified_funding_asset under sec_130 solely by reason of the annuity’s variable payments plr-143928-13 the possibility of a commutation by claimant pursuant to the notice of hardship conversion will not affect whether the structured_settlement assignment satisfies the requirements of a qualified_assignment under sec_130 the annuity issued by issuer or issuer and purchased by assignee will not fail to be a qualified_funding_asset under sec_130 by reason of the fact that assignee may offer claimant the possibility of a future commutation pursuant to the notice of hardship conversion law and analysis sec_104 generally excludes from gross_income the amount of any damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of a personal physical injury or physical sickness under sec_130 the amount an assignee receives for agreeing to a qualified_assignment is not included in gross_income to the extent that such amount does not exceed the aggregate cost of any qualified funding assets sec_130 defines a qualified_assignment as any assignment of liability to make periodic_payments as damages whether by suit or agreement on account of personal_injury_or_sickness in a case involving physical injury or sickness provided among other conditions the periodic_payments are fixed and determinable as to amount and time of payment sec_130 provides the requirements an annuity must meet to qualify as a qualified_funding_asset including the requirements that i the periods of the payments under the annuity_contract are reasonably related to the periodic_payments under the qualified_assignment and ii the amount of any such payment under the contract does not exceed the periodic_payment to which it relates under the facts of this case the s p index provides an objective formula for determining the amount of any increase to the periodic_payments in addition the amount of payments claimant will receive in any year will only increase in relation to an annual percentage further payments to claimant in any year will not decrease from the amount of a prior year’s payments even if the s p index decreases under these conditions the payments are fixed and determinable under sec_130 assignee has the right to decline any hardship conversion request and assignee will not approve any hardship conversion within the first year of the qualified_assignment also the hardship conversion will be a separately negotiated transaction between assignee and claimant under these facts the notice of hardship conversion that assignee will provide to claimant will not affect the assignment from qualifying under sec_130 or the annuity from qualifying as a qualified_funding_asset under sec_130 plr-143928-13 rulings accordingly based strictly on the information submitted and the representations made we conclude the periodic_payments of damages that claimant will receive are fixed and determinable as to amount and time of payment within the meaning of sec_130 even though they are calculated pursuant to an objective formula based on the performance of the s p index the structured_settlement indexed annuity which assignee will acquire from either issuer or issuer will not fail to qualify as a qualified_funding_asset under sec_130 solely by reason of annuity’s variable payments the possibility of a commutation by claimant pursuant to the notice of hardship conversion will not affect whether the structured_settlement assignment satisfies the requirements of a qualified_assignment under sec_130 the annuity purchased by assignee will not fail to be a qualified_funding_asset under sec_130 by reason of the notice of hardship conversion caveats except as expressly provided in ruling sec_1 and above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling the rulings contained in this letter are based upon information and representations submitted by assignee and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-143928-13 in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-139116-01 date date x a d1 year dear this responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 in year a as the president of x represents that x was intended to be an s_corporation beginning year its first taxable_year the bylaws of x evidences this intent however a form_2553 election by a small_business_corporation was not timely filed with the internal_revenue_service sec_1362 provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts plr-139116-01 described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely yours shannon cohen assistant to the branch chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court kelvin trent tucker petitioner v commissioner of internal revenue respondent docket no 15706-12l filed date in response to r’s notice_of_intent_to_levy and notice_of_federal_tax_lien filing p’s request for a collection_due_process cdp hearing under sec_6330 for his income_tax stated that he wanted a collection alternative--ie an offer-in-compromise oic at the cdp hearing before the office of appeals appeals p submitted partially completed financial statements on forms 433-a and an oic concerning his income_tax_liability from september until date p timely made sufficient periodic_payments pursuant to his oic as required by sec_7122 in date r’s centralized oic unit coic determined that p had not provided the required financial information and notified p that it had sent the case back to appeals for a final_decision upon receiving notice that the coic had returned the case to appeals p ceased making periodic_payments to further evaluate p’s oic appeals again requested documentation concerning p’s assets and income p requested and received several extensions of deadlines to provide this additional information but he never fully complied with appeals’ request on the basis of the financial information provided appeals determined p could not fully pay his liability appeals determined to reject p’s oic and proceed with the proposed levy and notice_of_federal_tax_lien to collect p’s unpaid liability p filed a petition in this court p and r jointly moved to submit this case pursuant to rule tax_court rules_of_practice and procedure held appeals did not abuse its discretion in rejecting p’s oic and determining to proceed with the proposed levy and to sustain the notice_of_federal_tax_lien because p failed to produce all the requested documentation about his assets and income held further appeals did not abuse its discretion in rejecting p’s oic for failure to make the required periodic_payments eric william johnson for petitioner christina l cook and john schmittdiel for respondent memorandum opinion gustafson judge this is a collection_due_process cdp appeal pursuant to sec_6330 in which petitioner kelvin trent tucker asks this court to review the determination by the office of appeals appeals of the unless otherwise indicated all section references are to the internal_revenue_code_of_1986 codified in u s c and referred to herein as the code as in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure internal_revenue_service irs to deny mr tucker’s request for a collection alternative and to proceed with levies and with the filing of a notice_of_federal_tax_lien to collect his unpaid federal_income_tax for tax_year the parties jointly moved to submit this case for consideration pursuant to rule reflecting their agreement that the relevant facts could be presented without a trial and we granted that motion the issue is whether appeals abused its discretion in making its determination to sustain the irs’s collections actions and reject mr tucker’s offer-in-compromise oic we hold that appeals did not abuse its discretion the burden_of_proof is generally on the taxpayer see rule a and the submission of a case under rule does not alter that burden see 95_tc_82 aff’d 943_f2d_22 8th cir background at the time he filed his petition herein mr tucker resided in minnesota the stipulated record establishes the following facts which mr tucker does not dispute mr tucker’s liability mr tucker does not dispute his underlying tax_liability on his federal_income_tax return mr tucker reported an income_tax_liability of dollar_figure and tax withheld of dollar_figure with his income_tax return mr tucker included a partial payment of dollar_figure the irs summarily assessed the amount of tax_shown_on_the_return plus statutory interest and a penalty pursuant to sec_6651 for failure to timely pay tax notice_and_demand for payment were sent to mr tucker but he failed to pay in full the assessed amounts the stipulated record consists of the facts alleged in mr tucker’s petition filed with this court on date to the extent they are admitted in respondent’s answer filed date the exhibits attached to respondent’s motion for summary_judgment filed date the administrative record attached to the declaration of christina l cook in support of respondent’s motion for summary_judgment filed date and the exhibits attached to mr tucker’s response to respondent’s motion for summary_judgment filed on date the irs’s proposed levy and notice_of_federal_tax_lien on date the irs issued to mr tucker a final notice_of_intent_to_levy and notice of your right to a hearing mr tucker’s unpaid balance for tax_year with accruals for interest and additions for the late payment of tax was dollar_figure at that time on date the irs issued to mr tucker a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 the amount stated on the notice of lien was dollar_figure cdp hearing mr tucker thereafter timely submitted forms request for a collection_due_process or equivalent_hearing which were also signed by his attorney on those forms mr tucker checked the boxes to indicate a desire for an oic appeals acknowledged mr tucker’s request and in a letter dated date scheduled an appeals hearing and requested certain documentation including a list of all other assets you own including their fair_market_value and verification of any encumbrances by letter dated date mr tucker’s attorney requested a face-to-face hearing in st paul minnesota and mr tucker also checked the box to indicate interest in an installment_agreement ia but he has agreed that an ia is no longer an appropriate collection alternative because of his current employment status and he did not propose an ia we therefore do not consider this issue included with the request a form 433-a collection information statement for wage earners and self-employed individuals the form 433-a reported dollar_figure worth of equity in personal assets described as various on date appeals sent to mr tucker a letter scheduling his cdp hearing for date and stated that in order for appeals to consider alternative collection methods mr tucker needed to provide within days ie by date bank statements from may through date wage and income information from may through date mortgage statements for may june and date and a list of personal assets mr tucker failed to provide all the requested documentation to appeals by the date deadline instead in a letter dated date ie one week before the scheduled cdp hearing mr tucker’s attorney responded that certain financial information was unavailable and stated that he would fax the requested bank statements later that week on date mr tucker provided only the requested bank records to appeals during a telephone call with appeals on date mr tucker’s attorney and appeals agreed to conduct mr tucker’s cdp hearing via telephone and the appeals officer requested the additional financial information for the second time which mr tucker’s attorney agreed to provide by date mr tucker submitted some financial documentation over the course of the next few weeks but did not provide a list of personal assets as requested by appeals in a letter dated date mr tucker’s attorney stated that mr tucker had in his possession an nba championship ring that was not listed on his form a he estimated that the ring may have value of approximately dollar_figure-big_number but stated that it had not been appraised in a letter dated date mr tucker’s attorney notified appeals that he would like to submit an oic as part of his appeal the letter stated the terms of the offer are as follows dollar_figure per month payable each month for six months followed by dollar_figure payable over three years at dollar_figure per month attached to the letter was a form_656 offer_in_compromise a payment of the filing fee and the first payment under the schedule mr tucker proposed in his oic as required by sec_7122 the standard terms by which mr tucker made his offer included the following you must continue to make these monthly payments while the irs is considering the offer failure to make regular monthly payments will cause your offer to be returned once an authorized irs official signs this form my offer is e considered pending as of that signature date and it remains pending until the irs accepts rejects returns or terminates my offer or i withdraw my offer an offer will be considered withdrawn when the irs receives my written notification of withdrawal by personal delivery or certified mail or when i inform the irs of my withdrawal by other means and the irs acknowledges in writing my intent to withdraw the offer when he submitted his oic in late date mr tucker had not yet provided the list of personal assets requested by appeals on date appeals’ consideration of the oic immediately following the receipt of his oic appeals forwarded mr tucker’s oic to the irs’s brookhaven centralized offer_in_compromise unit coic for consideration on date the coic sent mr tucker a letter confirming receipt of his oic in this letter the coic noted that the periodic_payment offer includes your proposed payment schedule you must make the payments on time as shown in your schedule while we evaluate your offer failure to make the payments may result in returning your offer without further consideration emphasis added a copy of that letter was sent to mr tucker’s attorney on the same day the record reflects that for october november and date mr tucker timely submitted the dollar_figure periodic_payments that he had promised on date the coic contacted mr tucker’s attorney via telephone and requested the following financial information updated form 433-a statement regarding current employment status and verification of any income current bank statements and statement regarding source of all deposit sec_4 mortgage balance 401k balance statement regarding disposition of proceeds from distributions proof of payment of life_insurance expenses proof of payment of health insurance expenses proof of payment of child care expenses statement regarding status of business - trent tucker’s hoops club inc the coic gave mr tucker’s attorney a date deadline to submit the requested information and warned mr tucker’s attorney that failure to do so by that date could result in the return of the offer to appeals for further consideration neither mr tucker nor his attorney provided the requested financial information to the coic the coic processed mr tucker’s oic but determined that it could not calculate his reasonable collection potential rcp --which must be determined as a prerequisite to approval of an oic--because mr tucker had not provided the requested financial information as a result on date the coic returned the oic offer to appeals for further consideration by separate letters dated date both mr tucker and his attorney were informed of the recommendation by the coic that mr tucker’s oic should be returned the decision to return your offer is a preliminary decision made by collection personnel due to the fact that you have filed a request for a collection_due_process cdp hearing we are forwarding your case to appeals a final_determination on the oic will be issued by appeals in conjunction with the cdp emphasis added continued interaction with appeals after mr tucker’s oic was returned in date mr tucker’s attorney continued to work with appeals to discuss the oic during a telephone call on date the appeals officer confirmed with mr tucker’s attorney that the oic had been returned but stated that the offer had not yet been officially rejected and would not be rejected until he the appeals officer made the final_decision appeals then made its third request for additional financial information by reiterating that it would need mr tucker to provide to appeals by date the additional information requested by the coic and stating that if the information was not provided appeals would make a decision on the oic on the basis of the information available also during this conversation appeals and mr tucker’s attorney agreed that an ia was no longer a viable option because mr tucker was no longer working in a letter dated in a letter dated date the appeals officer requested that mr tucker provide the additional financial information requested by the coic and gave a deadline of date to provide it date mr tucker’s attorney noted that the nba championship ring was not insured that there was no insurance appraisal of the ring and that mr tucker’s income at the time was approximately dollar_figure per month on date mr tucker’s attorney contacted appeals and requested a face-to-face meeting which appeals scheduled for date mr tucker and his attorney met with appeals but still did not provide the additional financial information requested on date at the face-to-face meeting on date--and for the fourth time overall--the appeals officer renewed his request for the financial information and set a deadline of date for providing that information the appeals officer noted that he would make a determination on the basis of information available to him if no additional information was provided by that deadline some additional information provided in date mr tucker’s attorney provided certain records to appeals the date records including a form 433-a dated date investment account records life_insurance account records and bank statements the irs’s records reflect that it received the date records and we assume in mr tucker’s favor that appeals received them before the date deadline in the date records mr tucker asserted that the mortgage loan for his town home had already been foreclosed upon on his date form 433-a mr tucker again represented that he had equity totaling dollar_figure in property he described as various the form 433-a made no mention of the nba championship ring in mr tucker’s possession nor did it itemize his personal assets as appeals had requested also included in the date records were bank statements for mr tucker’s checking account and retirement accounts showing minimal or no balance on date mr tucker’s attorney spoke with appeals via telephone appeals--for the fifth time--requested information regarding mr tucker’s personal assets including the value of mr tucker’s nba championship ring-- specifically whether the ring was insured and if so for what amount the next day mr tucker’s attorney advised by letter his ring is not insured so there is no insurance appraised value appeals also inquired about an updated employment status for mr tucker and asked who would be making the periodic_payments since mr tucker’s form 433-a reported insufficient income to make those payments finally appeals raised the issue of why the periodic_payments had not been made since date i asked mr tucker’s attorney about tipra payments - why haven’t they been made mr tucker’s attorney was under the impression the oic had been rejected by coic i noted that it was their preliminary decision to return the oic because requested fianancial sic information wasn’t received i explained that i am the one that will make the final_determination on oic and as such tipra payments must be made mr tucker’s attorney said that he would discuss with mr tucker i noted that dollar_figure payments for jan feb and dollar_figure payment for march haven’t been made emphasis added mr tucker does not contend that he made the required periodic_payments after date and we find no evidence in the record that he did instead mr tucker alleges that the entry dated date is inaccurate in stating that appeals notified his attorney of the continued responsibility to make the required periodic_payments after his original oic was returned to appeals from the coic however mr tucker does not point to any evidence that refutes appeals’ assertion that it notified him of the continuing obligation and we can find none in the record the initial and periodic_payments required by sec_7122 are sometimes referred to as tipra payments because it was the tax_increase_prevention_and_reconciliation_act_of_2005 tipra pub_l_no sec_509 sec_120 stat pincite that amended sec_7122 to require that t he submission of any periodic_payment offer-in-compromise shall be accompanied by the payment of the amount of the first proposed installment sec_7122 and to provide that a ny failure to make an installment other than the first installment due under such offer-in-compromise during the period such offer is being evaluated may be treated as a withdrawal of such offer-in-compromise sec_7122 mr tucker asserts that he and an unspecified appeals officer conducting the cdp proceedings agreed that the petitioner would stop making payments under the returned offer however mr tucker offers no evidence of such an agreement moreover the record reflects several instances in which appeals explicitly notified him or his attorney of the opposite that the oic had not been formally rejected that the oic was still under consideration by appeals and that the periodic_payments continued to be due while the oic was under consideration notice_of_determination on date appeals issued to mr tucker a notice_of_determination concerning collection action s under sec_6320 and or which formally rejected his oic and determined to proceed with the proposed levy and the notice_of_federal_tax_lien to collect his unpaid liability for the notice_of_determination was issued eight months after appeals’ first request for additional financial information four months after the coic returned the oic to appeals for insufficient financial information and more than a month after appeals’ latest deadline date for mr tucker to provide additional information about the value of his personal assets in the attachment to the notice_of_determination the appeals officer stated that she had verified that the requirements of any applicable law regulation or administrative procedure with respect to the proposed levy or nftl filing have been met and addressed as follows the issues mr tucker raised issues raised by the taxpayer on form you checked the installment_agreement and offer_in_compromise boxes during the cdp hearing on date poa ie power_of_attorney johnson indicated the taxes may be uncollectible at this time and that an oic may be filed in the future i requested additional financial information be provided to substantiate the claim on date i received a completed oic which was forwarded to our centralized oic unit for consideration per the letter they sent you it was being returned to appeals for consideration because financial information they requested was not provided i worked with you to determine if the oic could be accepted in a conversation with poa johnson on date i requested additional employment and asset information and explained that the oic had not been rejected and therefore tipra payments must be made i provided an opportunity to make those payments up however i have not received any payments nor have any payments been sent in to the irs the last tipra payment was made in date no other issues were raised collection alternatives offered by the taxpayer you filed an offer_in_compromise the oic was forwarded to our centralized offer_in_compromise unit who determined that you did not provide the requested financial information and they forwarded the case back to appeals for a final_decision i reviewed the information and noted that there were no dissipated assets to consider as part of the oic however there were personal assets to consider i also noted that the financial information does not show any ability to make the monthly payment outlined in the agreement however poa johnson indicated that payment assistance would come from your girlfriend you submitted a deferred payment offer which required you to make periodic_payments according to a schedule you proposed when you did not make those payments we reminded you of the requirement but you did not make the payments under the law your offer is withdrawn as noted you did not demonstrate an ability to make monthly payments toward the liability as such an installment_agreement is not appropriate at this time to consider an account uncollectible you must demonstrate an inability to pay the liability you have shown an inability to make monthly payments however as noted in conversation with your poa johnson you are in possession of a nba championship ring that poa johnson vales in the dollar_figure - dollar_figure range this asset was not included on your form 433-a a n account should not be reported as currently not collectible if the taxpayer has income or equity in assets and enforced collection of the income or assets would not cause a hardship as a result i am unable to consider your account uncollectible at this time balancing of need for efficient collection with taxpayer concern that the collection action be no more intrusive than necessary in order for a federal_tax_lien to have priority against competing interests the service must file a nftl pursuant to sec_6323 the filing protects the governments sic right of priority against certain third parties it is my judgment that the nftl balances the efficient collection_of_taxes with your legitimate concern that the collection action be no more intrusive than necessary sec_6330 requires the appeals officer to consider whether the collection action balances the need for efficient collection of the unpaid taxes with the legitimate concern that such action be no more intrusive than necessary pursuant to policy statement enforcement action is a necessary component of a voluntary tax system it is my determination that the levy action although intrusive is now the appropriate action emphasis added proceedings in this court mr tucker timely filed a petition in this court on date challenging the determination by appeals the petition alleges that appeals erred because the coic failed to provide an explanation as to what financial information it lacked when it returned mr tucker’s oic to appeals the appeals officer issued a notice_of_determination sustaining the lien and levy without sufficient notice to mr tucker mr tucker did not receive sufficient procedural opportunity to have an oic considered during his cdp hearing and appeals erred in failing to place mr tucker in currently not collectible status because his nba championship ring’s value is speculative and the ring is an uncollectible personal item on date the parties submitted a joint motion for leave to submit the case under rule which we granted on date the commissioner asserts that appeals did not abuse its discretion by rejecting mr tucker’s oic after determining he had stopped making the required periodic_payments in addition the commissioner maintains that mr tucker did not provide adequate financial information regarding the value of his nba championship ring information which was necessary to compute his rcp when considering his oic as a result the commissioner contends that appeals did not abuse its discretion in rejecting his oic and sustaining the proposed levy and notice_of_federal_tax_lien against mr tucker we uphold these contentions for the reasons explained hereafter discussion i legal principles of collection review procedure a in general if a taxpayer fails to pay any federal_income_tax liability after notice_and_demand sec_6331 authorizes the irs to collect the tax by levy on the taxpayer’s property and sec_6323 authorizes the irs to file a notice_of_federal_tax_lien to protect the government’s interests however congress has added to chapter of the code certain provisions in subchapter_c part i and in subchapter_d part i entitled due process for collections and those provisions must be complied with before the irs can proceed with a levy or sustain the filing of a notice of lien the irs must first issue a final notice_of_intent_to_levy and or a notice_of_federal_tax_lien and notify the taxpayer of the right to an administrative hearing before appeals sec_6330 and b a and b after receiving such a notice the taxpayer may request an administrative hearing before appeals sec_6320 b administrative review is carried out by way of a hearing before appeals pursuant to sec_6330 and c and if the taxpayer is dissatisfied with the outcome there he can appeal that determination to the tax_court under sec_6330 as mr tucker has done b agency-level review at the cdp hearing the appeals officer must determine whether the proposed collection action may proceed in the case of a notice_of_intent_to_levy the procedures for the agency-level cdp hearing before appeals are set forth in sec_6330 the procedures for the agency-level hearing regarding a notice_of_federal_tax_lien are the same as those set forth in sec_6330 for a notice_of_levy sec_6320 the appeals officer is required to take into consideration several things first the appeals officer must verify that the requirements of any applicable law and administrative procedure have been met by irs personnel sec_6330 the attachment to the notice_of_determination set forth the appeals officer’s compliance with these requirements and mr tucker did not challenge the appeals officer’s verification in his petition or in his response to the motion for summary_judgment so verification under sec_6330 is not at issue second the taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy including challenges to the appropriateness of the collection action and offers of collection alternatives sec_6330 some of mr tucker’s contentions pertain to collection alternatives ie an oic and an ia which we will discuss below additionally the taxpayer may contest the existence and amount of the underlying tax_liability but only if he did not receive a notice_of_deficiency or otherwise have a prior opportunity to dispute the tax_liability sec_6330 the tax_liability that the irs proposes to collect is the liability that mr tucker self-reported on his return plus penalties and interest and in his requests for a cdp hearing mr tucker did not contest his underlying tax_liability finally the appeals officer must determine whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary sec_6330 the notice_of_determination issued to mr tucker stated that enforcement action is a necessary component of a voluntary tax system it is my determination that the levy action although intrusive is now the appropriate action c tax_court review when appeals issues its determination the taxpayer may appeal such determination to the tax_court pursuant to sec_6330 as mr tucker has done when as here the underlying liability of the taxpayer is not at issue the court reviews appeals’ determination regarding the appropriateness of the collection action for abuse_of_discretion 114_tc_176 that is we decide whether the determination was arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir here we review appeals’ non-acceptance of an oic sec_7122 authorizes compromise of a taxpayer’s federal_income_tax liability ‘the decision to entertain accept or reject an offer_in_compromise is squarely within the discretion of the appeals officer and the irs in general ’ gregg v commissioner tcmemo_2009_19 quoting 454_f3d_688 7th cir consequently in reviewing this determination we do not substitute our judgment for that of appeals and decide whether in our opinion mr tucker’s oic should have been accepted see 112_tc_19 keller v commissioner tcmemo_2006_166 aff’d in part 568_f3d_710 9th cir instead we review appeals’ determination for abuse_of_discretion ii analysis a the irs’s non-acceptance of mr tucker’s oic mr tucker submitted to the irs an oic by which he proposed to compromise his federal_income_tax liability for tax_year for payments totaling dollar_figure as of date when the irs evaluated mr tucker’s offer his outstanding balance for those years was approximately dollar_figure thus mr tucker offered to pay about of what he owed the basis for mr tucker’s offer was doubt as to collectibility that is he proposed that the irs should accept payment of only of the liability because there was doubt whether the irs would ever be able to collect more for purposes of evaluating an oic doubt as to collectibility exists where the taxpayer’s assets and income are less than the full amount of the liability sec_301_7122-1 proced admin regs appeals ultimately determined to reject that oic for two reasons--ie that mr tucker did not make the required periodic_payments and that mr tucker had failed to provide the necessary financial information for appeals to determine his rcp and consider his oic--and we hold that neither of these determinations constituted an abuse_of_discretion failure to make periodic_payments mr tucker contends that the coic’s letter returning his oic to appeals amounted to a rejection of his oic and that this rejection relieved him of any responsibility to continue making the required periodic_payments because he says appeals agreed with him that he was no longer required to make those payments the evidence does not support this contention rather form_656 had explicitly warned mr tucker you must continue to make these monthly payments while the irs is considering the offer failure to make regular monthly payments will cause your offer to be returned and mr tucker’s oic had explicitly acknowledged that my offer is considered pending as of that signature date and it remains pending until the irs accepts rejects returns or terminates my offer or i withdraw my offer the irs’s letter dated date informed mr tucker that t he decision to return your offer to appeals is a preliminary decision made by collection personnel due to the fact that you have filed a request for a collection_due_process cdp hearing we are forwarding your case to appeals a final_determination on the oic will be issued by appeals in conjunction with the cdp emphasis added under the terms of the oic mr tucker was thus obligated to continue making the payments and under the terms of his oic when he failed to do so the oic was to be returned to mr tucker consequently appeals did not abuse its discretion in declining to accept the oic failure to supply information after being considered by the coic mr tucker’s oic was returned to appeals because the coic had requested substantiation of his financial information and he did not furnish all of the requested information necessary for proper evaluation of his offer he contends that no explanation was given to him as to what financial information was required in order for appeals to consider his oic and that he fully complied with appeals’ information requests--but again the evidence does not support this contention and the facts detailed above show otherwise mr tucker submitted two forms 433-a with some supporting documentation at the cdp hearing after reviewing the financial statements with mr tucker’s attorney the appeals officer on several occasions requested that mr tucker provide additional information related to his income and assets in particular the appeals officer requested more detailed information about real_property mr tucker owned his pensions and retirement accounts his vehicles and his personal property--including the nba championship ring in his possession the irs’s record does show receipt of some financial information however mr tucker does not allege and our record does not show that he ever provided the requested information regarding the value of his nba championship ring rather his counsel’s last statement about that ring was simply that there was no insurance appraised value leaving uncorroborated his previous estimate of dollar_figure to dollar_figure as a result we must conclude that mr tucker failed to provide adequate financial information to enable the appeals officer to determine his financial situation mr tucker contends however that the value of his nba championship ring was speculative that it therefore should not affect his rcp that he is otherwise without substantial assets and that his failure to itemize his assets was therefore immaterial but it was mr tucker’s representative who volunteered that the value of the ring was dollar_figure to dollar_figure and appeals can hardly be criticized for taking his statement at face value property of a delinquent taxpayer is not exempt from levy merely because the property’s value is speculative or unspecified sec_6334 requires that the officer seizing property pursuant to a levy must appraise and set_aside to the owner the amount of such property declared to be exempt taxpayers who disagree with the appraisal of the officer may object at the time of the seizure at which point the irs will enlist three disinterested individuals to make the valuation id nonetheless taxpayers are expected to comply with reasonable requests by appeals to provide all relevant information requested including financial statements for its consideration of the facts and issues involved in the hearing sec_301_6330-1 proced admin regs taxpayers who fail to comply with this requirement and provide the relevant information about their personal assets are not entitled to have such property exempted from levy mr tucker’s petition characterized the ring as a personal item perhaps implying though without providing any legal support for the argument that the ring is a personal effect exempt from levy under sec_6334 sec_6334 establishes a list of categories of property that are exempt from levy by the irs this list is exclusive however and not merely illustrative sec_6334 528_us_49 and we see no category on the list that would include an nba championship ring assuming without deciding that the ring could be among mr tucker’s personal effects the value of the ring--and thus the missing financial information--would still have been essential to appeals’ consideration of mr tucker’s oic sec_6334 exempts from levy personal effects only to the extent that they do not exceed dollar_figure in value mr tucker claimed dollar_figure of equity in personal assets described as various on his date form 433-a if mr tucker’s ring was worth only dollar_figure the low end of his attorney’s estimate and if it could be added to these personal effects he would have had personal effects totaling dollar_figure only dollar_figure of which was exempt leaving dollar_figure of non-exempt property subject_to levy and includible in mr tucker’s rcp if the ring was worth dollar_figure then dollar_figure was non-exempt and includible in rcp thus appeals was reasonable in requiring valuation information about the nba championship ring and mr tucker did not provide such information because mr tucker failed to submit essential requested financial information about the value of his personal assets he failed to provide the appeals officer with all of the financial information necessary to fully evaluate his ability to pay his tax_liability for that reason the appeals officer did not abuse his discretion in refusing to accept any collection alternative based on doubt as to collectibility see eg kansky v commissioner tcmemo_2007_40 criner v commissioner tcmemo_2003_328 effective tax_administration as an alternative to considering his oic on the basis of doubt as to collectibility mr tucker asked appeals to consider his oic on the basis of a claim of effective tax_administration eta regulations adopted pursuant to sec_7122 set forth guidelines for evaluating offers which promote eta under sec_301_7122-1 proced admin regs eta offers may be accepted where collection would cause economic hardship however mr tucker’s failure to provide complete financial information impaired appeals’ ability to effectively evaluate any economic hardship therefore appeals did not abuse its discretion in rejecting mr tucker’s oic on the basis of eta mr tucker’s petition invokes eta in asserting that the ring is a personal item that should not be considered for potential collection under principles of ‘effective tax administration’ this issue substantially overlaps with if it is not the regulation authorizes a compromise when the secretary determines that although collection in full could be achieved collection of the full liability would cause the taxpayer economic hardship sec_301 b i emphasis added however the regulation also authorizes compromise where due to exceptional circumstances collection of the full liability would undermine public confidence that the tax laws are being administered in a fair and equitable manner sec_301 b ii therefore for purposes of this opinion we assume that hardship justifying an eta compromise might be shown where collection could be achieved of the taxpayer’s full rcp--though less than the full liability--but that collection of the full rcp would cause hardship the mere equivalent of the issue already discussed above in part ii a we cannot tell but it is possible that mr tucker also means to argue that for the sake of eta the irs should not levy on items that have personal or sentimental significance--a proposition for which he cites no authority and which we cannot sustain however sincere a claim of sentimental value may be it is by its nature virtually impossible to verify and no expert could opine about nor could any court definitively determine the presence or absence of sentimental value in a ring a piece of furniture a baseball card collection or any other asset if such an argument succeeded it would protect from levy an asset that has fair market value--and that would be subject_to levy if held by another taxpayer--simply because of its emotional significance to its particular owner effective tax_administration does not require the irs to make tax collection contingent on such intangible variables b closing mr tucker’s case in his petition mr tucker asserts that the appeals officer without notice terminated the cdp proceedings through issuance of the notice_of_determination on the basis that no valid offer_in_compromise had been submitted the evidence does not show that the cdp proceedings were terminated without notice rather as detailed above mr tucker failed on multiple occasions across a period of months to provide key financial information necessary for appeals and the coic to consider his oic specifically mr tucker failed to satisfy appeals’ repeated requests for further information regarding the nba championship ring appeals does not abuse its discretion when it rejects an oic because a taxpayer does not provide all of the necessary financial information during the cdp hearing process see eg 414_f3d_144 1st cir 138_tc_228 sullivan v commissioner tcmemo_2012_337 further mr tucker ceased making the required periodic_payments in january and more than a month before his oic was rejected and the notice_of_determination was issued he was reminded that they were due failure to make required periodic_payments during the time the oic is being considered may be treated as a withdrawal of the offer sec_7122 we find no defects in the cdp hearing process or the issuance of the notice_of_determination we can find no issue raised by mr tucker that was not considered and addressed by the appeals officer appeals did not abuse its discretion in closing mr tucker’s cdp hearing and issuing him a notice_of_determination conclusion the irs’s office of appeals did not abuse its discretion in denying mr tucker’s oic and sustaining the notice_of_federal_tax_lien and proposed levy to collect his unpaid income_tax for as a result decision will be entered for respondent


internal_revenue_service department of the treasury index number 468b washington dc number release date person to contact telephone number refer reply to cc dom it a br plr-112041-99 date date legend company state state plan date date date date x y court trust this letter is in response to the letter dated date submitted on behalf of company requesting the following rulings the trust that will be established upon approval of the plan qualifies as a qualified_settlement_fund within the meaning of sec_468b of the internal_revenue_code and the regulations thereunder the trust will be subject_to tax on its modified gross_income as defined in sec_1_468b-2 of the income_tax regulations at a rate equal to the maximum cc dom it a br plr-112041-99 rate in effect for that taxable_year under sec_1 of the internal_revenue_code the transfer of the company stock into the trust and the transfer of cash and other assets into the trust on behalf of the company to resolve the liability that the trust will be created to assume will not constitute gross_income to the trust and the company will be entitled to deduct transfers made to the trust consisting of income of the company less a sufficient amount of capital to maintain business operations facts based upon the facts submitted and the representations made company is a small family-owned company located in state formed in date company is in the business of manufacturing y company uses the accrual_method of accounting for both tax and financial_accounting the company’s fiscal_year ends in august company has been a named party to numerous tort claims resulting from company’s use of x in y the cumulative outcome of all past pending and anticipated future claims stemming from company’s use of x was the declaration of bankruptcy by company on date company filed a petition for bankruptcy under chapter of the u s bankruptcy code taxpayer initially filed an earlier version of a plan_of_reorganization on date but the plan was met with such serious objections that it was determined that confirmation of the plan was not possible therefore company has submitted plan on date for confirmation and approval of court due to issues not related to the portion of the plan that is relevant to this request the company is currently awaiting a formal docketing of the plan in the court in accordance with the plan the trust will be established under state law to settle liability resulting from the production and sale of y made with x while the trust will be established under state law it will remain under the continuing jurisdiction of the court in compliance with the plan’s provisions according to the plan the trust would be funded with a all of the common_stock of company b remaining insurance proceeds relating to bodily injury claims c all of the income of company minus an amount deemed sufficient to maintain successful business operations and d the obligations of company’s liability insurance carrier to pay property damage claims up to the appropriate limits after dividing all creditors and claimants into eight different classes the plan authorizes the assets of the trust to be used for the settlement of claims of members of classes six and seven allowed x bodily injury claims against debtor and allowed x property damage claims against debtor respectively in addition to a plan for funding the trust the proposed plan contains a_trust agreement requiring the appointment of two trustees to administer and oversee the trust in accordance with state law and granting them such necessary and traditional powers as to fulfill such duties finally the plan provides for the termination of the trust upon cc dom it a br plr-112041-99 certain conditions any remaining funds will be transferred to charitable organizations described in sec_501 of the code requested ruling sec_468b of the internal_revenue_code provides in part that nothing in any provision of law shall be construed as providing that an escrow account settlement fund or similar fund is not subject_to current income_tax pursuant to the authority granted to the secretary under sec_468b of the code the secretary has published sec_1_468b-1 through 468b-5 of the income_tax regulations regarding the taxation of qualified settlement funds sec_1_468b-1 of the income_tax regulations provides that a fund account or trust is a qualified_settlement_fund if it meets the following three requirements it is established pursuant to an order of or it is approved by the united_states any state including the district of columbia territory possession or political_subdivision thereof or any agency_or_instrumentality including a court of law of any of the foregoing and is subject_to the continual jurisdiction of that governmental authority it is established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event or related series of events that has occurred and that has given rise to at least one claim asserting liability i under the comprehensive environmental response compensation and liability act of as amended u s c et seq or ii arising out of a tort breach of contract or violation of law or iii designated by the commissioner in a revenue_ruling or revenue_procedure and the fund account or trust is a_trust under applicable state law or its assets are otherwise segregated from other assets of the transferor and related_persons in this case the plan creating the trust will be approved by the court and the court will retain continuing jurisdiction over the trust furthermore the trust will settle liability derived from tort claims that either are or will be filed against company in the future as a result of company’s use of x finally the trust will be formed and administered in accordance with state law requested ruling sec_2 and sec_1_468b-2 provides that a qualified_settlement_fund is a united_states_person and is subject_to tax on its modified gross_income for any taxable_year at a rate equal to cc dom it a br plr-112041-99 the maximum rate in effect for that taxable_year under sec_1 sec_1_468b-2 of the income_tax regulations defines modified gross_income of a qualified_settlement_fund as its gross_income as defined in sec_61 of the code computed with the following modifications- in general amounts transferred to the qualified_settlement_fund by or on behalf of a transferor to resolve or satisfy a liability for which the fund is established are excluded from gross_income however dividends on stock of a transferor or related_person interest on debt of a transferor or a related_person and payments in compensation_for late or delayed transfers are not excluded from gross_income a deduction is allowed for administrative costs and other incidental_expenses incurred in connection with the operation of the qualified_settlement_fund that would be deductible under chapter of the internal_revenue_code in determining the taxable_income of a corporation administrative costs and other incidental_expenses include state and local_taxes legal accounting and other actuarial fees relating to the operation of the qualified_settlement_fund and expenses arising from the notification of claimants and the processing of their claims administrative costs and other incidental_expenses do not include legal fees incurred by or on behalf of claimants a deduction is allowed for losses sustained by the qualified_settlement_fund in connection with the sale exchange or worthlessness of property held by the fund to the extent the losses would be deductible in determining the taxable_income of the corporation under sec_165 or g and sec_1211 and sec_1212 a deduction is allowed for the amount of a net_operating_loss of the qualified_settlement_fund to the extent the loss would be deductible in determining the taxable_income of the corporation under sec_172 for purposes of this paragraph b the net_operating_loss of a qualified_settlement_fund for the a taxable_year is the amount by which the deductions allowed under paragraph b and b of this section exceed the gross_income of the fund computed with the modifications described in paragraph b of this section the trust will be funded by transferring to the trust what are essentially two types of assets securities and cash these assets will be transferred to the trust to satisfy liabilities that the trust was created to assume according to the proposed plan the trust will be set up with common_stock in taxpayer profits if any from the annual operation of the company and the remaining insurance proceeds from both bodily and cc dom it a br plr-112041-99 property claims yet to be paid_by the insurance carrier furthermore there is no transfer of interest on debt of the company nor are there provisions for late payments or dividends from the common_stock requested ruling sec_162 of the code provides in relevant part that there shall be allowed as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business furthermore even though a particular taxpayer may incur an expense only once in the lifetime of its business the expense may qualify as ordinary and necessary if it is appropriate and helpful in carrying on that business is commonly and frequently incurred in the type of business conducted by the taxpayer and is not a capital_expenditure 383_us_687 308_us_488 sec_461 of the code states that the amount of any deduction shall be taken in the taxable_year that is the proper taxable_year under the method_of_accounting used by the taxpayer in computing taxable_income additionally sec_1_461-1 of the income_tax regulations provides that an accrual_method taxpayer may deduct an expense in the taxable_year in which all events have occurred that establish the fact of liability the amount of the liability can be determined with reasonable accuracy and economic_performance has occurred with respect to the liability sec_461 of the code provides that in determining whether an amount has been incurred with respect to any item during any taxable_year the all_events_test shall not be treated as met any earlier than when economic_performance with respect to such item occurs the code goes on in part to further clarify in sec_461 that if the liability of the taxpayer requires a payment to another person and arises out of any tort economic_performance occurs as the payments to such person are made sec_1_468b-3 of the income_tax regulations generally provides that for purposes of sec_461 economic_performance occurs with respect to a liability described in sec_1_468b-1 determined with regard to sec_1_468b-1 and g to the extent the transferor makes a transfer to a qualified_settlement_fund to resolve or satisfy the liability conclusions based solely on the information provided and the representations made and conditioned on the approval of the plan by the court we conclude as follows upon approval of the plan by the court and the creation of the trust the trust will constitute a qualified_settlement_fund under sec_1_468b-1 of the income_tax regulations the trust satisfies the three requirements outlined in the regulations regarding qualifications for a fund to be classified as a qualified_settlement_fund first cc dom it a br plr-112041-99 the proposed plan which contains provisions for the establishment of the trust must be approved by the court and the trust will be subject_to the continuing jurisdiction of the court second the trust will be established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from a related series of events that has occurred ie the sale supply or production of products containing x and has given rise to at least one claim arising out of a tort breach of contract or violation of law third the trust will be formed and administered in accordance with state law the trust will be subject_to tax on its modified gross_income as defined in sec_1_468b-2 of the income_tax regulations at a rate equal to the maximum rate in effect for that taxable_year under sec_1 of the internal_revenue_code the transfer of the company stock into the trust and the transfer of cash and other assets into the trust on behalf of the company to resolve the liability that the trust will be created to assume will not constitute gross_income to the trust however any dividends_paid on the stock will be taxable to the trust sec_1_468b-2 of the income_tax regulations the company will be entitled to deduct transfers to the trust consisting of income of the company less a sufficient amount of capital to maintain business operations except as specifically ruled above no opinion is expressed as to the federal tax treatment of any issue addressed in this ruling under other provisions of the internal_revenue_code and regulations that may be applicable in addition no opinion is expressed or implied as to whether the company is entitled to any deduction for the stock transferred to the trust or regarding the valuation of the stock under sec_1_468b-3 of the income_tax regulations this ruling is directed only to company sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office the original of this letter is being sent to you as the company’s authorized representative sincerely s david b auclair senior technician reviewer branch office of assistant chief_counsel income_tax and accounting enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court rockie d elmore petitioner v commissioner of internal revenue respondent docket no 14374-02l filed date rockie d elmore pro_se scott a hovey for respondent memorandum opinion armen special_trial_judge this matter is before the court on petitioner’s motion to dismiss petitioner contends that the court lacks jurisdiction over the petition on the ground the notice_of_determination concerning collection action s under sec_6320 and or dated date upon which this case is based is invalid because it was not signed by the appeals officer who conducted the administrative hearing as discussed in detail below we shall deny petitioner’s motion to dismiss background the record establishes and or the parties do not dispute the following a final notice_of_intent_to_levy on date respondent sent to rockie d elmore petitioner and leslie j elmore together the elmores a final notice-notice of intent to levy and notice of your right to a hearing under sec_6330 in respect of their outstanding tax_liability for the final notice_of_intent_to_levy was issued by the chief of the automated collection branch in austin texas b the elmores’ request for a hearing on date the elmores filed with respondent form request for a collection_due_process_hearing in respect of their tax_liability for the elmores’ request for a hearing stated that they were challenging the final notice_of_intent_to_levy unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure c the appeals_office hearing on date the elmores attended an administrative hearing conducted by appeals officer concepcion robles whose post of duty was san antonio texas the administrative hearing was held at the irs appeals_office in corpus christi texas the city in which the elmores resided by appeals transmittal and case memo dated date appeals officer robles recommended to his manager that the appeals_office issue a notice_of_determination at that time the appeals officer’s manager was appeals team manager john lacoke of the san antonio appeals_office atm lacoke however atm lacoke was out of the office from april to in his absence atm lacoke designated appeals officer glenn pederson as the acting team manager on date acting atm pederson approved the recommendation of appeals officer robles that the appeals_office issue a notice_of_determination d respondent’s notice_of_determination on date the appeals_office issued to petitioner a notice_of_determination concerning collection action s under an appeals team manager atm is a supervisory appeals officer who is responsible for managing and reviewing appeals officers within the jurisdiction of a particular appeals_office an atm’s duties include inter alia reviewing work for quality and professional standards approving recommendations by appeals officers who lack authority to take the recommended action themselves and supervising the general work performance of appeals officers sec_6320 and or with regard to petitioner’s tax_liability for the notice_of_determination stated in pertinent part enforced collection in the form of the proposed levy action is appropriate in this situation the notice_of_determination was executed on behalf of atm lacoke by john t benton appeals team manager of the appeals_office in austin texas atm benton at that time the austin and san antonio appeals offices shared a records unit which was located in austin the records unit was responsible for mailing all notices of determination for the two offices the agreed upon practice was for atm benton to sign for atm lacoke whenever approval for the issuance of a notice_of_determination was given by an acting atm in the san antonio appeals_office the austin and san antonio appeals offices adopted this practice in order to eliminate any question regarding the validity of a notice_of_determination that was mailed after the acting atm’s authority had expired e the petition on date petitioner filed with the court a petition challenging respondent’s notice_of_determination dated date although leslie j elmore joined in filing the the petition in this case was timely filed under sec_6330 inasmuch as petitioner initially filed a timely complaint challenging the notice_of_determination in federal district_court and petitioner subsequently filed his petition continued petition in this case the court granted respondent’s motion to dismiss as to leslie j elmore on the ground that a notice_of_determination was not issued to her f petitioner’s motion to dismiss as stated petitioner filed a motion to dismiss respondent filed an objection to petitioner’s motion pursuant to notice this matter was called for hearing on two occasions at the court’s motions session in washington d c counsel for respondent appeared at the hearings and offered argument in opposition to petitioner’s motion to dismiss although there was no appearance by or on behalf of petitioner at either hearing petitioner filed with the court a written_statement pursuant to rule c as well as a response to respondent’s objection continued with this court within days of the district court’s order dismissing the action for lack of subject matter jurisdiction see hickey v commissioner tcmemo_2003_76 during the second hearing counsel for respondent informed the court that the office of chief appeals recently issued delegation_order no app 8-a authorizing appeals officers and settlement officers to conduct hearings and make determinations under sec_6320 and sec_6330 and appeals team managers to review and approve such determinations the effective date of this delegation_order is date the delegation_order concludes as follows to the extent that authority previously exercised consistent with this order may require ratification it is hereby affirmed and ratified discussion the tax_court is a court of limited jurisdiction we may exercise jurisdiction only to the extent expressly authorized by statute 66_tc_61 sec_6331 provides that if any person liable to pay any_tax neglects or refuses to pay such tax within days after notice_and_demand for payment the secretary is authorized to collect such tax by levy upon the person’s property sec_6331 provides that at least days prior to proceeding with a levy on a person's property the secretary is obliged to provide the person with a final notice_of_intent_to_levy including notice of the administrative appeals available to the person sec_6330 generally provides that the commissioner cannot proceed with a levy until the taxpayer has been given notice of and the opportunity for an administrative review of the matter in the form of an appeals_office hearing and if dissatisfied the taxpayer may seek judicial review of the administrative determination see 115_tc_35 114_tc_176 sec_6330 provides that if the taxpayer requests an administrative hearing such hearing will be conducted by the internal_revenue_service office of appeals sec_6330 provides that an appeals officer shall investigate the matter and obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met further sec_6330 lists the factors that an appeals officer must consider in making his or her determination when the appeals_office issues a determination_letter to a taxpayer following an administrative hearing regarding a notice_of_intent_to_levy sec_6330 provides that the taxpayer will have days following the issuance of such determination_letter to file a petition for review with the tax_court or federal district_court as appropriate see 114_tc_492 we have held that this court’s jurisdiction under sec_6330 depends upon the issuance of a valid determination_letter and the filing of a timely petition for review see 117_tc_122 116_tc_263 offiler v commissioner supra pincite see also rule b as indicated petitioner challenges the validity of the notice_of_determination on the ground that it was not properly signed in addressing petitioner’s contention we note as an initial matter that sec_6330 does not require that a notice_of_determination be signed cf 50_tc_509 a notice_of_deficiency need not be signed in order to be valid fox v commissioner tcmemo_1993_277 affd without published opinion 69_f3d_543 9th cir holding that sec_6212 does not require that a notice_of_deficiency be signed although the provisions cited above reflect the prominent role that appeals officers are assigned in collection review cases we reject the premise underlying petitioner’s position ie that only the appeals officer who conducted the administrative hearing may sign a notice_of_determination to the extent that the commissioner and or the office of chief appeals has decided that notices of determination under sec_6320 and sec_6330 should be reviewed approved and signed by appeals team managers as was the case here such decision is not in derogation of sec_6330 but rather constitutes an internal agency matter that we are not inclined to question consistent with the preceding discussion we conclude that the notice_of_determination concerning collection action s under sec_6320 and or dated date upon which this case is based is valid accordingly we shall deny petitioner’ sec_5 indeed by interposing a layer of review between the determination by an appeals officer and the issuance of a notice_of_determination the taxpayer protections afforded by sec_6330 are strengthened which is consistent with the enactment of that section by the internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_685 see s rept pincite 1998_3_cb_537 h conf rept pincite 1998_3_cb_755 cf sec_7122 requiring procedures for an independent administrative review of any rejection of a proposed offer-in-compromise or installment_agreement made by a taxpayer before such rejection is communicated to the taxpayer motion to dismiss in order to give effect to the foregoing an order denying petitioner's motion to dismiss will be issued