internal_revenue_service national_office technical_advice_memorandum date number release date third party communication none date of communication not applicable index uil no case-mis no tam-137658-14 director ---------------------- taxpayer’s name taxpayer's address taxpayer’s identification no year s involved ----------------------------------------------------- ------------------------------- --------------------------- ---------------- ------ legend x ----------------------------------------------------- ty ------ ty ------ date -------------------- date -------------------- date --------------------- date ------------------------ amount -------------- amount -------------- amount -------------- amount ------------ issues i under sec_6611 does interest accrue on a general adjustment overassessment when the service has simultaneously determined that there is an increase in tax due to tam-137658-14 adjustments to carrybacks from subsequent years where the net effect of these increases and decreases is an overassessment ii if interest is allowed pursuant to sec_6611 on the general adjustment overassessment to what date does such interest accrual run conclusions i ii yes overpayment interest is allowable on the portion of the overpayment used to satisfy the underpayment amount from the date of said overpayment to the due_date of the loss_year return facts x timely filed a federal_income_tax return for ty1 and paid the liability prior to the due_date of the return which was date on or before date x filed a tentative_refund_claim for ty1 based on the carryback of a net_operating_loss nol from ty2 on date the service issued a tentative refund of amount to x for ty1 as the amount requested was paid within days of x’s request for a tentative refund no overpayment interest was paid in accordance with sec_6611 in subsequent examinations the service disallowed most of the nol_carryback and assessed on date an underpayment of amount on the same day the service made a general adjustment to x’s ty1 return that decreased the tax due on x’s original ty1 return and resulted in an overpayment of amount the amount of the overpayment resulting from the general adjustment decrease was amount more than the underpayment resulting from the disallowed nol_carryback the service allowed interest on amount of the full amount overpayment from date the filing and payment due_date for ty1 to date the due_date for the loss_year return the service allowed overpayment interest on the remaining amount amount from date to date the date of the tentative refund x’s position is that overpayment interest on amount is allowable to date the date on which the service issued the tentative refund the issue of the correct ending date for computation of overpayment interest is currently before appeals appeals requested technical_advice on the issue law and analysis an overpayment is any payment in excess of that which is properly due see 332_us_524 sec_6611 provides that i nterest it is unclear why interest on amount stopped on date tam-137658-14 shall be allowed and paid upon any overpayment in respect of any internal revenue tax at the overpayment rate established under sec_6621 sec_6611 provides the period for interest on overpayments in the case of a credit sec_6611 provides that interest runs from the date of the overpayment to the due_date of the amount against which the credit is taken the due_date of the amount against which the credit is taken is defined as the last day fixed by law or regulations for the payment of tax without regard to any extensions sec_301_6611-1 the service has the authority to credit any overpayment against any liability and refund the remainder if any sec_6402 in the case of refunds sec_6611 provides that interest runs from the date of the overpayment to a date to be determined by the secretary preceding the date of the refund check by not more than days whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer the acceptance of such check shall be without prejudice to any right of the taxpayer to claim any additional overpayment and interest thereon the service has administratively established an end date of less than days see eg i r m sec_6611 does not specifically define the terms credit or refund it does not contain a cross-reference to any other code section that defines those terms however by using the term check four times in sec_6611 congress viewed a refund as meaning an amount tendered by check under 467_us_837 we look to treasury regulations to resolve any silence or ambiguity but the regulations under sec_6611 do not define the terms credit or refund because the terms are not clearly defined a subjective analysis is required see id the statute’s legislative_history does not provide clear guidance on the issue sec_6611 as it reads today was enacted in the technical amendments act of p l and is similar in relevant part to sec_1019 of the internal revenue act of 43_stat_253 providing that interest shall be paid on an overpayment to the date of the allowance of the refund or in the case of a credit to the due_date of the amount against which the credit is taken the legislative_history does not address the definitions of the terms credit or refund and does not address the specific situation at issue while the legislative_history does explain that sec_6611 was amended in to remove certain distinctions among different types of credits it does not address the definition of a credit or refund see s rep no 85th cong 2d sess reprinted in 1958_3_cb_922 case law is similarly unavailing as to clear definitions of the terms as no court has specifically defined the term for sec_6611 purposes tam-137658-14 the dictionary defines credit in part as a deduction from an amount otherwise due see webster’s new collegiate dictionary 11th ed here x had an overpayment of amount and an underpayment of amount the service deducted amount from x’s overpayment of amount to satisfy x’s underpayment of amount and refunded the remaining amount with interest to x thus with respect to amount the transaction fits within webster’s definition of credit the dictionary defines refund in part as to return money in restitution repayment or balancing of accounts see id pincite in this case the amount overpayment on which x is seeking additional overpayment interest was not returned to x when the amount overpayment was determined on date the service did not tender a refund check to x for that amount nor did it tender a check in the amount of amount instead amount of the amount overpayment was used to satisfy an outstanding liability of x specifically the amount underpayment that arose as a result of the recaptured nol_carryback thus with respect to amount the transaction does not fit within webster’s definition of refund further as a practical matter it would be strange to conclude that the amount overpayment was refunded and that interest should run to the check date of the amount overpayment as interest cannot run to the date of a non-existent check because the overpayment was not refunded sec_6611 does not apply sec_6611 provides only two situations in which interest is allowable on an overpayment and it is clear that the amount overpayment was not refunded thus in order for x to receive any overpayment interest at all on amount amount would have to have been credited x argues that the service cannot make a credit where both the adjustments that decrease taxable_income and increase taxable_income occur within the same tax_year to support this point x relies on cases that present different facts and are thus distinguishable from the present case in particular none of the cases involved carrybacks x argues that 368_f2d_281 ct_cl stands for the proposition that the crediting principle only applies as between different kinds of tax for a single tax_year or against taxes of different years in kingston the court was attempting to determine if a taxpayer’s claim was timely the taxpayer attempted to use a downward adjustment as a payment thus evoking the two-year_rule for a timely claim under then-section current sec_6511 and b the court determined that the downward adjustment could not be considered a payment for purposes of section the court in no way determined that the downward adjustment had any meaning for interest purposes any mention of sec_6402 in that case was dicta and was meant as an explanation of what type of credit could be considered a payment for purposes of a timely-filed claim 613_f2d_518 5th cir which cites kingston products is similarly distinguishable further the rationale of the cases appears to be that a taxpayer cannot have a credit if a taxpayer is not actually overpaid that is a taxpayer cannot have an tam-137658-14 overpayment and an underpayment at the same time because tax cannot be determined until after all upward and downward adjustments are considered this rationale makes sense unless a taxpayer has carrybacks from another tax_year in that situation as is here a taxpayer can have an overpayment and an underpayment in the same tax_year if that were not the case x could receive no interest at all on amount rather than interest from date to date if the service treated the entire ty1 as a whole x would have an overpayment of only amount and would receive interest on only that amount as stated above sec_6611 provides that overpayment interest runs from the date of the overpayment to the due_date of the amount against which the credit is taken to the extent the x argues that the due_date is the date the tentative refund was issued because that is the date x’s liability became unpaid the same argument was rejected for purposes of sec_6611 in 302_f3d_1369 fed cir and at t subsidiaries v united st62_fedclaims_490 the due_date is the unextended due_date of the return on which the tax is required to be reported sec_6151 sec_1_6151-1 not the date on which a taxpayer becomes unpaid see also sec_301 h i while x may argue that under sec_6611 the due_date for the amount against which the credit is taken is the due_date for the ty1 return and thus interest should run only to the due_date for that tax_year rather than to the ty2 return revproc_60_17 sec_4 b specifies that a ny part of a general adjustment overpayment which is extinguished by a deficiency due to an excessive tentative carryback allowance shall be paid interest from the date of the overpayment to the last day of the applicable loss_year applying these rules to the overpayment at issue where the overpayment was extinguished by an underpayment due to an excessive tentative carryback allowance interest is allowable on the overpayment from the date the overpayment arose date to the due_date of the loss_year return date finally x argues that tam201123029 applies to its facts and that it should be followed as a preliminary matter the tam has no precedential value sec_6110 see also 94_fedclaims_413 n further we disagree with its analysis namely that an overpayment that is not in fact refunded to a taxpayer can be considered to be refunded this technical_advice addresses only the precise situation described herein revproc_60_17 reflects the prior version of sec_6611 sec_6611 was amended to allow interest to the filing_date of the taxable_year in which the nol arose sec_6611 tam-137658-14 caveat s a copy of this technical_advice_memorandum is to be given to the taxpayer s sec_6110 of the code provides that it may not be used or cited as precedent


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom fi p 1-plr-113271-99 date date legend trust op llc corporation a a b c d e corporation c_corporation d country a f g h i airport plr-113271-99 town llc parking company year this is in reply to a letter dated date and subsequent submission requesting rulings on behalf of trust specifically the following rulings are requested the activities of llc1 and corporation c will not cause trust’s share of rents received by op from op tenants that are clients of llc1 to be considered as other than rents_from_real_property under sec_856 of the internal_revenue_code the concession agreement between town and op represents an interest_in_real_property for purposes of sec_856 and therefore qualifies as a real_estate asset for purposes of sec_856 and payments received by op from parking company under the subconcession agreement qualify as rents_from_real_property under sec_856 facts trust a publicly traded real_estate_investment_trust reit owns all of its assets and conducts all of its operations through op a domestic limited_partnership trust is the managing general_partner of op and owns directly and indirectly approximately a percent of op’s outstanding partnership interests op owns and has interests in commercial office properties and stand-alone parking facilities located throughout the united_states_corporation a a newly formed domestic_corporation has two classes of common_stock voting_stock representing b percent of the equity in the corporation and non-voting stock representing c percent of the equity in the corporation op owns all of the nonvoting common_stock of corporation a corporation b owns all of the voting_stock of corporation a op will loan d dollars approximately e percent of the total capitalization of corporation a to corporation a corporation a and corporation b have the same officers and directors the shareholders of corporation b are b individuals one of whom is a trustee of trust and all of whom are officers of trust the president and another officer of corporation b are also employees of trust llc1 plr-113271-99 llc1 is a domestic limited_liability_company formed in by corporation a and corporation c an indirect wholly-owned subsidiary of corporation d corporation a and corporation c each own a percent membership interest in llc1 corporation a and corporation c intend that llc1 be treated as a partnership for federal_income_tax purposes llc1 is managed on a day-to-day basis by corporation c_corporation a and corporation c each intend to contribute capital of b million dollars to llc1 llc1 leases space from op in h of op’s i commercial office buildings and expects to lease space in h additional op office buildings by date trust represents that it will treat its share of any rent received by op from llc1 as related_party rent under sec_856 and thus as nonqualifying income for purposes of sec_856 and because trust owns by attribution through corporation a and op more than percent of llc1 llc1 was formed to own and operate business centers in office building space that it will lease from op corporation c together with corporation d and its subsidiaries hereafter the group is one of the largest operators of business centers in the world like the group llc1 will furnish ready-to-use office space to clients on a short-term basis and will provide clients with office furnishings office equipment and office personnel support typical amenities in connection with a sublease or license will include a furnished private office furnished reception room with receptionist telephone greeting voice mail office supplies conference room with audio-visual facilities utilities and maintenance janitorial services and parking facilities clients of llc1 may also be tenants of op either in that building or at another property regardless of any overlapping relationships between op tenants and llc1 clients all leases and other arrangements between a tenant and op or the tenant and llc1 will be negotiated separately in an arm’s length manner and will be on commercially reasonable terms in no instance will the arrangement between a client and llc1 depend on any arrangement between that client and op similarly any arrangement between op and any tenant that is a client of corporation a or the group will be independent from the arrangement between that tenant and corporation a or the group notwithstanding their overlapping clientele op and llc1 will operate as separate and independent businesses none of the officers directors or employees of the group are officers directors or employees of trust op or their affiliates excluding llc1 llc1 will not have its own employees the officers and directors of corporation a and corporation b are different from the officers and directors of trust and the officers of the group excluding llc1 corporation c is the day-to-day manager of llc1 all personnel necessary for the operation of llc1 business centers will be employees of corporation c services plr-113271-99 provided to llc1 clients will be provided by employees of the group llc1 will bear all direct costs of the business centers including out-of-pocket costs and expenses of hiring and compensating on-site personnel employed by corporation c and will also bear a portion of the indirect and overhead costs of corporation c and corporation d attributable to the operation of the llc1 business centers op and llc1 entered into a master agreement to lease agreement under the agreement both op and llc1 have the right to request that the other party enter into a new business center lease for a particular op office building however neither party is obligated to accept the request of the other party a lease will permit llc1 to establish and operate a business center in the leased space including the right to license or sublease the temporary use of all or a portion of the space to third parties for general office use corporation a on the one hand and corporation c and corporation d jointly and severally on the other hand will be required to individually guarantee the payment of percent of the payment obligations of llc1 to op under the lease the group currently sells various services to the general_public including tenants in a building where its business center is located even if those tenants are not otherwise group clients under the agreement and after the receipt of this private_letter_ruling llc1 will have the same practice at its centers in op buildings any op tenants that use llc1’s services will be charged by llc1 market rates and will not have preferential access to those services over the general_public llc1 will not offer any services or amenities at it business centers to op tenants that are not offered to the general_public additionally although op may refer tenants to llc1 or engage in joint marketing efforts with llc1 op will not promote the presence of a llc1 business center in a particular op building as a service to its tenants in that building trust represents that no more than g percent of llc1’s gross revenues from a business center are expected to be from tenants in that building the agreement does not limit op’s marketing or leasing activities with respect to space in its buildings including leasing space to others for the operation of business centers op can freely negotiate rental fees with llc1 and any other tenant whether or not the tenant operates a business center op is not required to confer any benefits or privileges to llc1 that it offers to other tenants under the agreement op is required to use good_faith efforts to make available to llc1 the benefit of any volume discounts or rebates that op may have with third-party service providers although llc1 must bear the cost of its expenses under the agreement op will receive a referral fee for new business center customers that are specifically referred by op the referral fees will be paid for any client entering into a license at a llc1 business center if that client was specifically plr-113271-99 referred by op to that business center unless otherwise agreed by op and llc1 a referral fee will equal g percent of the total fee payable by the client under the license until the earliest of a the expiration of the license b the first date upon which the license would have terminated had the client exercised an available break option or otherwise failed to extend or renew the term of the license or c one year from commencement of the license trust represents that it will treat its share of any referral fees that it receives from llc1 for referring customers to business centers operated in op buildings as impermissible_tenant_service_income for purposes of sec_856 trust and llc1 anticipate engaging in certain joint marketing efforts these efforts may include local regional and national advertising in newspapers business journals and real_estate trade magazines use of the news and other media to publicize the llc1 business centers and joint presentations at real_estate organization conferences the business centers may be promoted at trust buildings through property newsletters and other printed materials including general letters to tenants advertising on signs in the building lobby and electronic billboards operated by a third party in the building elevators at the national level trust may include the business centers in its corporate brochures advertising campaign and website to promote the worldwide availability of the business centers to potential trust tenants trust represents that it will take into account any expenditures it makes promoting those business centers in determining its impermissible_tenant_service_income for those buildings trust represents that commencing date all business centers that fall within the scope of this ruling will be operated by a corporation that qualifies as a taxable_reit_subsidiary trs under sec_856 as it will become effective on date or by a partnership limited_liability_company or joint_venture in which trust only owns an interest through a trs parking facilities op owns many stand-alone parking facilities throughout the united_states op typically owns fee simple title to the parking facility and land or leases the parking facility from the owner under a long-term ground lease in either case op does not operate the parking facility itself instead op generally leases or subleases the parking facility to an unrelated parking operating company op has acquired a long-term interest in the parking facilities at airport through its wholly-owned subsidiary llc2 town is the owner of airport and the parking facilities because of perceived legal obstacles to entering into a long-term_lease town requires that the arrangement with op be denominated a concession agreement concession agreement under the concession agreement town grants op the exclusive right concession and privilege to operate all the parking facilities at airport for years so plr-113271-99 long as op performs its obligations the concession agreement provides op with peaceable and quiet enjoyment of the premises during the term without any interruption by town its successors or assigns or any person or company claiming by or through it under the concession agreement op pays town an annual concession fee fee based solely on a specified percentage of the gross_receipts collected from public parkers at the parking facilities gross_receipts are generally defined to mean the total revenues received from public parkers or for the storage of motor vehicles including late fees and business interruption insurance proceeds gross_receipts does not include amounts payable to any governmental authority on account of parking taxes sales or use taxes personal_property_taxes and service taxes or similar charges imposed relative to the use and operation of the premises op bears the costs of the operation of the parking facilities except for lawn maintenance security throughout the airport outside the parking premises repair and maintenance of signs outside the parking premises and light ballasts op pays the fee in monthly installments the fee is payable regardless of whether op earns a profit from the operation of the parking facilities op therefore benefits from any cost savings or economies realized in operating the parking facilities although initial parking rates are set forth in the concession agreement op has the right to periodically propose adjustments in the parking rates subject_to town approval trust represents that the fee is analogous to ground rent the concession agreement also requires op to expand the parking facilities by at least big_number spaces op is obligated to pay up to b million dollars to complete this project town will repay the cost of the project over a 30-year period with interest op will be paid from the fees otherwise payable to town under the concession agreement in addition op has the right_of_first_refusal to provide capital for any future expansion of the parking facilities except in cases in which town does not have to bear the cost of capital provided by another governmental authority or a third party op through llc2 has entered into a 30-year subconcession agreement with parking company a nationally recognized parking operating company parking company will operate the parking facilities on a day-to-day basis paying op a subconcession fee based on one or more fixed percentages of the gross revenues from the parking facilities parking company bears the costs of operating the parking facility except for all non-routine repairs and replacements including the replacement of parking and revenue control equipment and garage vehicles law sec_856 provides that at least percent of a reit's gross_income must be derived from among other sources rents_from_real_property plr-113271-99 sec_856 provides that at least percent of a reit’s gross_income must be derived from among other sources rents_from_real_property under sec_1_856-3 of the income_tax regulations a reit that is a partner in a partnership is deemed to own its proportionate share of each of the assets of the partnership and to be entitled to the income of the partnership attributable to that share for purposes of sec_856 the interest of a partner in the partnership's assets is determined in accordance with the partner's capital interest in the partnership the character of the various assets in the hands of the partnership and items of gross_income of the partnership retain the same character in the hands of the partners for all purposes of sec_856 sec_856 provides that rents_from_real_property include subject_to exclusions provided in sec_856 a rents from interests_in_real_property b charges for services customarily furnished or rendered in connection with the rental of real_property whether or not such charges are separately_stated and c rent attributable to personal_property leased under or in connection with a lease of real_property but only if the rent attributable to the personal_property for the taxable_year does not exceed percent of the total rent for the tax_year attributable to both the real and personal_property leased under or in connection with the lease sec_1_856-4 provides that for purposes of sec_856 and c the term rents_from_real_property includes charges for services customarily furnished or rendered in connection with the rental of real_property whether or not the charges are separately_stated services rendered to tenants of a particular building will be considered customary if in the geographic market in which the building is located tenants in buildings of a similar class are customarily provided with the service in particular geographic areas where it is customary to furnish electricity or other utilities to tenants in buildings of a particular class the submetering of those utilities to tenants in the buildings will be considered a customary service sec_1_856-4 of the regulations provides that the trustees or directors of a reit are not required to delegate or contract out their fiduciary duty to manage the trust itself as distinguished from rendering or furnishing services to the tenants of its property or managing or operating the property thus the trustees or directors may do all those things necessary in their fiduciary capacities to manage and conduct the affairs of the trust itself sec_856 provides that any impermissible_tenant_service_income is excluded from the definition of rents_from_real_property sec_856 defines impermissible_tenant_service_income to mean with respect to any real or personal_property any amount received or accrued directly or indirectly by the reit for services furnished or rendered by the reit to tenants at the property or for managing or operating the property plr-113271-99 sec_856 provides that if the amount of impermissible_tenant_service_income exceeds one percent of all amounts received or accrued during the tax_year directly or indirectly by the reit with respect to the property the impermissible_tenant_service_income of the reit will include all of the amounts received or accrued with respect to the property sec_856 provides that the amounts treated as received by a reit for any impermissible tenant service shall not be less than percent of the direct_cost of the reit in furnishing or rendering the service sec_856 provides certain exclusions from impermissible_tenant_service_income sec_856 provides that for purposes of sec_856 services furnished or rendered or management or operation provided through an independent_contractor from whom the reit does not derive or receive any income shall not be treated as furnished rendered or provided by the reit and there shall not be taken into account any amount which would be excluded from unrelated_business_taxable_income under sec_512 if received by an organization described in sec_511 sec_512 provides in part that there shall be excluded from the computation of unrelated_business_taxable_income all rents_from_real_property and all rents from personal_property leased with such real_property if the rents attributable to such personal_property are an incidental amount of the total rents received or accrued under the lease determined at the time the personal_property is placed_in_service sec_1_512_b_-1 provides that payments for the use or occupancy of rooms and other space where services are also rendered to the occupant such as for the use or occupancy of rooms or other quarters in hotels boarding houses or apartment houses furnishing hotel services or in tourist camps or tourist homes motor courts or motels or for the use or occupancy of space in parking lots warehouses or storage garages do not constitute rent from real_property generally services are considered rendered to the occupant if they are primarily for his convenience and are other than those usually or customarily rendered in connection with the rental of rooms or other space for occupancy only the supplying of maid service for example constitutes such service whereas the furnishing of heat and light the cleaning of public entrances exits stairways and lobbies and the collection of trash are not considered as services rendered to the occupant sec_856 provides that at the close of each quarter of its tax_year at least percent of the value of a reit's total assets must be represented by real_estate_assets cash and cash items including receivables and government securities sec_856 defines the term real_estate_assets in part to mean real_property including interests_in_real_property and interests in mortgages on real_property and shares or transferable certificates of beneficial_interest in other reits sec_856 provides that the term interests_in_real_property includes fee ownership and co-ownership of land or improvements thereon leaseholds of land or improvements thereon options to acquire land or improvements thereon and options to plr-113271-99 acquire leaseholds of land or improvements thereon but does not include mineral oil or gas royalty interests sec_1_856-3 provides that the term real_estate_assets means real_property interests in mortgages on real_property including interests in mortgages on leaseholds of land or other improvements thereon and shares in other qualified reits sec_1_856-3 provides that the term interests_in_real_property includes fee ownership and co-ownership of land or improvements thereon leaseholds of land or improvements thereon options to acquire land or improvements thereon and options to acquire leaseholds of land or improvements thereon the regulation further provides that the term includes timeshare interests that represent an undivided fractional fee interest or undivided leasehold interest_in_real_property and that entitle the holders of the interests to the use and enjoyment of the property for a specified period of time each year the term does not include mineral oil or gas royalty interests such as a retained economic_interest in coal_or_iron_ore with respect to which the special provisions of sec_631 apply sec_1_856-3 provides that the term real_property means land or improvements thereon such as buildings or other inherently permanent structures thereon including items that are structural_components of those buildings or structures in addition real_property includes interests_in_real_property local law definitions do not control for purposes of determining the meaning of the term real_property as used in sec_856 and the regulations thereunder the term includes for example the wiring of a building plumbing systems central heating or central air- conditioning machinery pipes or ducts elevators or escalators installed in the building or other items that are structural_components of a building or other permanent structure the term does not include assets accessory to the operation of a business such as machinery printing press transportation equipment that is not a structural_component of the building office equipment refrigerators individual air-conditioning units grocery counters furnishings or a motel hotel or office building etc even though those items may be termed fixtures under local law analysis llc1 llc1 through attribution is partly owned by and is a tenant of op consequently trust through op derives income from llc1 and llc1 does not qualify as an independent_contractor for purposes of sec_856 the issue then is whether op is providing a service to tenants of properties in which llc1 business centers are located so that trust’s share of rents received from those tenants will be treated as other than rents_from_real_property under sec_856 plr-113271-99 the llc1 business center is a separate business operation independent of and unrelated to the office leasing business of trust and op the group including corporation c has been operating its business centers on an independent basis since year despite overlapping clientele op llc1 and corporation c will be run as separate and independent businesses llc1 and corporation c provide business centers at op properties that may be used by both tenants and non-tenants of those properties the llc1 business centers are operated by employees of corporation c none of the officers or directors of the group are officers or directors of trust or op llc1 will not give op tenants preferential treatment over clients that are not tenants of op llc1 clients that are op tenants negotiate at arm’s length on commercially reasonable terms with llc1 a client’s relationship with llc1 is not premised in any manner upon the rental of office space from op additionally no more than g percent of llc1's gross revenues from a business center are expected to come from tenants of the building accordingly subject_to the restrictions of sec_856 the activities described above conducted by llc1 and corporation c as manager of llc1 will not cause trust’s share of rents received from tenants at properties in which an llc1 business center is located to be considered other than rents_from_real_property under sec_856 also the use by an op tenant of an llc1 business center at a location other than the op property in which the tenant leases space will not cause trust’s share of rents received from the tenant to be treated as other than rents_from_real_property under sec_856 concession agreement the second issue is whether the concession agreement is an interest_in_real_property for purposes of sec_856 and is thus a real_estate asset for purposes of sec_856 the tax consequence of the concession agreement depends on its substance and not on its form 324_us_331 c b the concession agreement grants op through llc2 a 30-year right to occupy and operate the parking facilities at airport this right is exclusive and cannot be abrogated unless llc2 fails to perform under the agreement in exchange op is required to make periodic_payments to town the periodic_payments like rents described in sec_856 are not based on or contingent upon op's profits or losses from the operation of the parking facilities also similar to many commercial leases op bears all of the expenses related to the operation of the parking facilities based upon the information provided we conclude that the concession agreement is analogous to a lease and thus is an interest_in_real_property for purposes of sec_856 and qualifies as a real_estate asset for purposes of sec_856 similarly we conclude that the subconcession agreement between llc2 and parking plr-113271-99 company is analogous to a lease consequently the income derived by op from the subconcession fee will qualify as rents_from_real_property under sec_856 other information except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of the transaction discussed in this letter no opinion is expressed concerning whether trust qualifies as a reit under sec_856 or concerning the tax status of any other entity described herein furthermore no opinion is expressed or inferred concerning the effect of any services provided by op to llc1 as a tenant in an op building additionally no opinion is expressed whether trust meets the percent voting_securities requirement of sec_856 with respect to corporation a as a result of trust’s interest in operating partnership this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel financial institutions products by jonathan zelnik assistant to the chief branch enclosure copy of this letter copy for purposes


internal_revenue_service director exempt_organizations department of the treasury p o box - room cincinnati ohio employer_identification_number person to contact - id contact telephone numbers phone fax uil dollar_figure release number release date date legend c s t dear by letter dated december in the amount of requirements of sec_4942 qualifying_distribution under sec_4942 dollar_figures for the taxable_year ending date meets the you requested a ruling that a set-aside b i and accordingly constitutes a facts you are a corporation formed under the laws of the state of c exempt from federal_income_tax under sec_501l c private non-operating foundation under sec_509 of the code and classified as a a matching grant pledged to you wish to set_aside dollar_figures for the purpose of to stimulate public contributions for d’s project e project e will build a complex of rubberized artificial turf baseball softball fields where physically and developmentally handicapped children can participate in the sports programs of f under sec_501 constructed on land leased from the municipality of g is opening in d and f are publicly supported organizations exempt the fields will be dollar_figuret and construction is expected to begin after date with the complex of the internal_revenue_code the estimated cost d no additions to the set-aside for this project are contemplated h b law sec_4942 of the code defines qualifying_distribution as amount_paid to accomplish one or more purposes described in sec_170 b other than any contribution to by the foundation or one or more disqualified persons or foundation which is not an operating_foundation except as otherwise provided out one or more purposes described in sec_170 b ii b any amount_paid to acquire an asset used directly in carrying an organization controlled a private a any a of the code provides that sec_4942 beginning on or after january project within one or more purposes of sec_170 b may be treated as sec_4942 g b a qualifying_distribution if the amount meets the requirements of an amount set_aside for a specific for all taxable years b i of the code provides that an amount set_aside for sec_4942 a specific project may be treated as time of the set-aside the foundation establishes to the satisfaction of the secretary the amount set_aside will be paid for the specific project within five years and the specific project is one that can better be accomplished by the set-aside of income rather than by the immediate payment of funds a qualifying_distribution if the suitability test at the sec_53 a -3 a amount set_aside within the meaning of paragraph b iii defines as a qualifying_distribution any of sec_3 in which such amounts are set_aside of the code may be treated as qualifying distributions for the but not in the tax_year in sec_53_4942_a_-3 of the foundation and similar excise_tax regulations provides that the amounts of income set_aside for a specific project for one or more of the purposes in sec_170 c b tax_year s which actually paid paragraph b are satisfied the requirements of paragraph b if the foundation establishes to the satisfaction of the commissioner the amount set_aside will be paid for the specific project within months after it suitability test of sec_53_4942_a_-3 or satisfies the cash distribution test if the requirements of sec_4942 the set-aside otherwise meets the is set_aside and the foundation are satisfied and ii i or sec_53_4942_a_-3 of the regulations provides that the suitability test for a set-aside is met if the foundation establishes the specific project is one in which relatively long-term grants or expenditures must be made in order to assure the continuity of particular charitable projects or program-related investments or where grants are made as part of matching-grant program a sec_53 a -3 b i provides that a private_foundation must obtain internal_revenue_service approval of its set-aside of income under the suitability test by applying before the end of the tax_year in which the amount is set_aside in revrul_77_7 1977_1_cb_354 defined in sec_53_4942_a_-3 of the excise_tax regulations was held to include a building project to be undertaken by a public charity unrelated to the foundation making the set-aside the term specific project as analysis you have sought timely approval of your set-aside of income in accordance with sec_53 a -3 b i of the regulations your proposed set-aside will be used to as required by sec_4942 a b accomplish purposes described in sec_170 b for the construction of an a specialized sport facility for the use physically and developmentally handicapped children of the code and sec_53 a - of the code namely the funds set_aside will be disbursed to project which i sec_53 a -3 b namely a building project undertaken by a public charity revrul_77_7 holds that a building project undertaken by a public charity is a specific project within the meaning of section a public charity earmarked for a a specific project you have credibly represented that the amount set-aside for this specific project will be paid out within months from the set-aside as required by sec_4942 b i of the code and sec_53_4942_a_-3 of the regulations your project is one that can better be accomplished by the set-aside of income rather than by the immediate payment of funds in the language used by sec_53_4942_a_-3 of the regulations your specific project is one in which relatively long-term grants or expenditures must be made where grants are made as part of aside will allow you to retain control_over the matching funds in order to ensure funding is received from other sources construction progresses as planned and that the funds disbursed are used solely for project purposes a matching-grant program the set- your project therefore satisfies the suitability test as set forth in sec_4942 regulations b i of the code and sec_53 a -3 b of the ruling based on the foregoing the set-aside of december accordingly constitutes a qualifying_distribution under sec_4942 meets the requirements of sec_4942 dollar_figures for the taxable_year ending b i and we direct your attention to sec_53_4942_a_-3 of the regulations entitled evidence of set-aside this section provides that any set-aside approved by the internal_revenue_service shall be evidenced by the entry of a dollar amount in the books_and_records of a private_foundation as pledge or obligation to be paid at amount of the set-aside must be taken into account in determining the foundation’s minimum_investment_return see sec_53 a - c of the regulations and any income attributable to a set-aside must be taken into account in computing adjusted_net_income see sec_53 a -2 d of the regulations a future date or dates further the a this ruling is based on the understanding there will be no material changes in the facts upon which it on your tax status should be reported to the internal_revenue_service this ruling does not address the applicability of any section of code or regulations to the facts submitted other than with respect to the sections described any changes that may have a bearing is based this ruling letter is directed only to the organizations that requested them sec_6110 cited as precedent of the code provides that they may not be used or please keep a copy of this ruling letter in your permanent records if you have any questions about this ruling please contact the persons whose name and telephone number are shown above in the heading of this letter sincerely yours robert choi director exempt_organizations rulings and agreements


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division nov uniform issue list ’ t e a ‘t3 xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx legend taxpayer a xxxxxxxxxxxxxxxxx ira x company m company n financial_institution o asset d date date date date date year xxxxxxxxxaxxxxxaxxx xxxxxxxxxxxxxxxxx xxxxxxxxxxxxxaxxxx xxxxxxaxxxxxxxxx xxxxxxxxxxxxxxx xxxxxxxxxxxxxxx xxxxxxxxxaxxxxxx xxxxxxxxxxxxaxxx xxxxxxxxxxxaxxxx xxxxxxxxxxxxxxx xxxxxaxxxxaxxxaxxx xxxxxxxxxaxxxxxx xxxx xxxxxxxxxxxxxx page dear xxxxxxxxxxxxx this is in response to your request dated date as supplemented by your correspondence dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that on date she owned ira x with respect to which company m was the custodian on date taxpayer a received a letter from company m informing her that company m was resigning as the custodian of ira x ira x held asset d an ownership_interest in a limited_liability_company the letter from company m further stated that asset d would be distributed to taxpayer a personally and that the total value of the distribution would be reported on internal_revenue_service form 1099-r for year taxpayer a asserts that her failure to accomplish a rollover of asset d within the 60-day period required under sec_408 was due to an error made by company n the letter from company m instructed taxpayer a that in order to effect a change_of_ownership of asset d taxpayer a had to complete an assignment form enclosed with the letter and forward the completed assignment form to company n along with the re-registration fee if applicable on date taxpayer a faxed the letter she received from company m along with the assignment form to company n company n prepared the documents required to rollover asset d into an ira held by financial_institution o on date taxpayer a received from company n what she believed to be all of the documentation necessary to complete the rollover of asset d from ira x to an ira held by financial_institution o taxpayer a immediately transmitted such materials to financial_institution o in order to complete the transaction however taxpayer a did not realize that company n had failed to submit the necessary assignment form provided by company m to financial_institution o taxpayer a did not become aware of this error until the expiration of the applicable 60-day rollover period on date a final_decision was made by financial_institution o to not accept the rollover of asset d into an ira held by financial_institution o based on the fact that the assignment form had not been received by financial_institution o within the applicable 60-day rollover period thereafter in a letter dated date company n admitted that it failed to provide the assignment form xxxxxxxxxxxxxx page to financial_institution o thereby preventing the rollover of asset d to be completed within the applicable 60-day rollover period based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of asset d 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 sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the xxxxxxxxxxxxxx page 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 date 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 and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover of asset d was due to an error committed by company n therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of asset d from ira x taxpayer a is granted a period of days from the issuance of this ruling letter to contribute asset d into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code 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 ravogoncacnoe if you wish to inquire about this ruling please contact xxxxxxxxxxx id xxxxxxxxxxx at xxx xxx-xxxx please address all correspondence to se t ep ra t sincerely yours laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


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 b03 plr-125729-17 date date legend x y a ------------------------------------------------------------------------------------------------- ----------------------------------------------- ------------------------------------------------------------------------------------------------- --------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------------------ state -------------- date --------------------------- year ------- dear ----------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_754 of the internal_revenue_code code the information submitted states that x was organized on date as a limited_partnership under state law x is treated as a partnership for federal tax purposes facts plr-125729-17 during year y sold its interest in x to a but an election under sec_754 to adjust basis of partnership property was inadvertently not filed with the return x represents that it has acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government law sec_754 provides that a partnership may elect to adjust the basis of partnership property when there is a distribution_of_property or a transfer of a partnership_interest an election under sec_754 applies with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership must be made in a signed written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions for filing the return for such taxable_year under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government plr-125729-17 conclusion based solely upon the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make a sec_754 election for year the election should be made in a signed written_statement filed with the appropriate service_center for association with x’s year tax_return a copy of this letter should be attached to the statement filed except as specifically ruled upon above we express or imply no opinion concerning the tax consequences of any facts discussed or referenced in this letter specifically we express no opinion as to whether or not x is a partnership for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination in accordance with the power_of_attorney on file with this office we are sending a copy of this letter_ruling to your authorized representatives sincerely associate chief_counsel passthroughs and special industries by ________________________________ caroline e hay assistant to the branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 4-plr-141024-03 date october re legend decedent spouse child date dollar_figurea dear this is in response to your date letter requesting a ruling that a qualified_terminable_interest_property qtip_election made on decedent’s federal estate_tax_return be considered null and void and that the property subject_to the qtip_election will not be includible in the gross_estate of spouse under sec_2044 of the internal_revenue_code the facts and representations are summarized as follows decedent died on date spouse and child survived decedent under articles first and second of decedent‘s will decedent bequeathed specific personal and real_property to spouse article third of decedent’s will provides for a life_estate to spouse in all remaining real_property with the remainder of the property to child article third also provides that spouse shall have the absolute right to enjoy and use the income from the property during her lifetime a united_states estate and generation-skipping_transfer_tax return form_706 was timely filed by the executor of decedent’s estate the property which plr-141024-03 constituted spouse’s life_estate was included on part of schedule m of form_706 because the property bequeathed to spouse pursuant to article third meets the requirements of qualified_terminable_interest_property under sec_2056 and ii and the value of the property is listed on schedule m decedent’s estate was deemed to have made an election to have such property treated as qualified_terminable_interest_property under sec_2056 spouse requests a ruling that pursuant to revproc_2001_38 2001_24_irb_1335 the qtip_election made on decedent’s form_706 is null and void and that the property subject_to the qtip_election will not be includible in the gross_estate of spouse under sec_2044 law and analysis sec_2056 provides that the value of a decedent's taxable_estate shall be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides that a deduction is not allowed for terminable interests that pass to the spouse an interest is a terminable_interest if the interest passing to the surviving_spouse will terminate or fail on the lapse of time or on the occurrence of an event or contingency or on the failure of an event or contingency to occur and on termination an interest in the property passes to someone other than the surviving_spouse sec_2056 provides that qualified_terminable_interest_property shall be treated as passing to the surviving_spouse and no part of such property shall be treated as passing to any person other than the surviving_spouse thus the value of such property is deductible from the value of the gross_estate under sec_2056 and is not treated as a terminable_interest under sec_2056 qualified_terminable_interest_property is property that passes from the decedent in which the surviving_spouse has a qualifying_income_interest_for_life and to which an election under sec_2056 applies sec_2056 provides that an election under sec_2056 with respect to any property shall be made by the executor on the return of tax imposed by sec_2001 such an election once made shall be irrevocable a qtip_election has transfer_tax consequences for the surviving_spouse sec_2044 and b provide generally that the value of the gross_estate includes the value of any property in which the decedent has a qualifying_income_interest_for_life and with respect to which a deduction was allowed for the transfer of the property to the decedent under sec_2056 under sec_2519 and b any disposition of all or part of plr-141024-03 a qualifying_income_interest_for_life in any property with respect to which a deduction was allowed under sec_2056 is treated as a transfer of all interests in the property other than the qualifying_income interest further the surviving_spouse will in the absence of a reverse_qtip_election under sec_2652 be treated as the transferor of the property for generation-skipping_transfer_tax purposes under sec_2652 in the case of a qtip_election to which revproc_2001_38 2001_24_irb_1335 applies the service will disregard a qtip_election made under sec_2056 and treat it as null and void for purposes of sec_2044 sec_2056 sec_2519 and sec_2652 revproc_2001_38 applies to qtip elections under sec_2056 where the election was not necessary to reduce the estate_tax liability to zero based on values as finally determined for federal estate_tax purposes for example in some cases a qtip_election was made when the taxable_estate before allowance of the marital_deduction was less than the applicable_exclusion_amount under sec_2010 the qtip_election was not necessary because no estate_tax would have been imposed whether or not the qtip_election was made revproc_2001_38 does not apply in situations where a partial_qtip_election was required with respect to a_trust to reduce the estate_tax liability and the executor made the election with respect to more trust property than was necessary to reduce the estate_tax liability to zero nor does it apply to elections that are stated in terms of a formula designed to reduce the estate_tax to zero in this case the election under sec_2056 to treat property as qualified_terminable_interest_property was not necessary to reduce the estate_tax to zero because no estate_tax would have been imposed whether or not the election was made the outright bequests to spouse pursuant to articles first and second of decedent's will qualify for the marital_deduction under sec_2056 it is represented that the value of the remaining real_property in the gross_estate which includes the property bequeathed to spouse pursuant to article third equals dollar_figurea date of death value after applying the unified_credit amount under sec_2010 the estate's federal estate_tax liability is reduced to zero based solely on the facts and representations submitted we conclude that because the qtip_election in this case was not necessary to reduce the estate_tax liability to zero revproc_2001_38 applies and the service will disregard the qtip_election and treat it as null and void for purposes of sec_2044 sec_2056 sec_2519 and sec_2652 accordingly the property for which the election is disregarded will not be includible in the spouse's gross_estate under sec_2044 a supplemental form_706 should be filed with the internal_revenue_service center cincinnati oh listing on schedule m only those assets that passed outright to spouse pursuant to articles first and second of decedent's will a copy of this letter should be attached to the supplemental return a copy is enclosed for this purpose in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer plr-141024-03 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely yours _________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosure copy of letter for sec_6110 purposes


fj irs department of the treasury internal_revenue_service p o box cincinnati oh number release date uil dear date date employer number contact person number contact telephone number form you must file tax years this letter is our final_determination that you don't qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn't receive a protest within the required days the proposed determination is now final because you don't qualify as a tax-exempt_organization under sec_501 ofthe code donors can't deduct contributions to you under sec_170 of the code you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top ofthis letter within days of this letter unless you request an extension of time to file we'll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code 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 deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don't need to take any further action we'll also notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed determination_letter under sec_6104 ofthe code you should contact your state officials if you have questions about how this determination will affect your state responsibilities and requirements letter4038 rev catalog number if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 sincerely jeffrey i cooper director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 c redacted letter final adverse determination under sec_501 c -no protest letter4038 rev catalog number ill irs department of the treasury internal_revenue_service p o box cincinnati oh legend b date c state d date e program f program h individual p dollars amount q dollars amount dear date date employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don't qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issues do you fail to qualify for exemption under sec_501 of the code yes for the reasons described below facts you were formed as a corporation on date b in the state of c your articles oflncorporation indicated you were a nonprofit corporation whose purpose is helping wrongfully convicted people you amended your articles of incorporation on d the amended purposes indicate you shall be operated exclusively for educational and charitable purposes within the meaning of sec_501 of the internal_revenue_code_of_1986 or the corresponding section of any future federal tax code the articles also state your purpose is to address social issues educate and help create bridging opportunities for inmates and their families in addition they indicate you will assist children and family of incarcerated individuals to cope with the absence of their loved ones while encouraging them to become productive members of society and social agents of change that they desire to see within their communities furthermore the articles state you will help raise legal funds and advocate for wrongly convicted inmates you were formed to raise funds to pay the legal fees of h who is the brother of your treasurer you have to date raised p dollars for h's appeal in addition you have an informational website which primarily focuses on h' s_case and the circumstances leading to his conviction your corporate name and h' s name are also very similar you explained that you were formed out of a desire to help those wrongly convicted inmates such as h because it was discovered there are several others like him who were wrongly convicted but do not have the resources to pay legal fees your program of e subsequently evolved whose goal is to raise funds that will go towards legal fees for those wrongly convicted as part ofe you want to ensure every person has the opportunity to pursue justice gather community support around those wrongly convicted inmates financially contribute to the legal needs of those wrongly convicted act as an advocate for the voiceless in addition to h's sister you have three other board members and each has either a friend or family_member who was wrongly convicted you explained that your selection process for choosing recipients consists of an attorney or paralegal who will be members of your board conducting research to determine if the individual has been wrongly convicted the findings will be presented to your board which will approve one recipient for services then you will create a campaign around the particular individual case the campaign will include making the community aware of the individual case and fundraising for the inmate's legal defense you will only conduct fundraising events for one selected individual at a time you later said that you will not contribute any more than q dollars for legal fees per approved inmate your second program is f whose goal is to encourage and assist children under the age of this involves assisting inmates and their families in building healthy relationships by organizing group visits to state and federal prisons facilitating and encouraging group discussions among families of incarcerated individuals to this end you will organize group visits to state and federal prisons conduct group discussions to encourage the youth to see different options and opportunities they have available besides crime violence and juvenile recidivism and family events you will meet once per month for two hours to participate in workshops or take trips to state or federal prisons develop personal individualized relationships with young people who are children of incarcerated parents hold monthly group discussions so that youth can learn they have a support system of educators community members and other youth who understand the issues that arise by having an incarcerated parent have writing workshops to encourage literacy and regular communications with inmates develop relationships with the community community leaders as well as any other organization that is also looking to bring peace to the city provide transportation to state and federal prisons every six weeks so that families can visit with each other and create opportunities for youth who have overcome life obstacles to become role models for higher risk peers you state that f represent sec_50 of your time and effort grants dues and proceeds from fundraising events will be your sources of financial support you estimate over of your program and fee expenses will be for the program e law sec_501 of the code provides in relevant part exemption from federal_income_tax for corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific literary or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 of the income_tax regulations explains 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 c an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the income_tax regulations states that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests revrul_67_367 1967_2_cb_188 states a nonprofit organization whose sole activity is the operation of a scholarship fund plan for making payments to pre-selected specifically named individuals designated by subscribers does not qualify for exemption because it is serving private interests rather than public charitable and educational interests under sec_501 ofthe code in 326_us_279 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 in 505_f2d_1068 6th cir the court held that an 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 in wendy l parker rehabilitation foundation inc v c i r tcmemo_1986_348 the tax_court upheld the service's position that a foundation formed to aid coma victims including a family_member of the founders was not entitled to recognition of exemption approximately of the organization's net_income was expected to be distributed to aid the family coma victim the court found that the family coma victim was a substantial beneficiary of the foundation's funds it also noted that such distributions relieved the family of the economic burden of providing medical and rehabilitation care for their family_member application of law you are not described in sec_501 ofthe code because you fail the operational_test as per sec_1 c -l a l ofthe regulations you do not meet the provisions in sec_1 c -l c l ofthe regulations because you were formed and are operated to raise funds to pay for h's legal expenses although you plan to help other people in the future your primary purpose is to raise funds to pay for the legal expenses of h this is evidenced by the fact you were created by h' s sister and named after h these facts show you were formed to further private purposes not public you are not described in sec_1 c -l d l ii ofthe regulations you are operating for private interests ofh and his family rather than public interests for example your website is focused on the circumstances that led to h's conviction your corporate name and h's name are very similar h is the first and only beneficiary of your fundraising program you are like the organization described in revrul_67_367 to date his the only beneficiary ofyour fundraising campaign the details concerning h' s_case and his conviction are the primary focus of your website you are also named after h these facts illustrate you were formed to benefit a preselected designated individual which shows you are serving private interests precluding exemption under sec_501 you are like the organization in better business bureau v commissioner although you may have some charitable and educational_purposes the presence of non-exempt private purposes of paying a pre-selected individual's legal expenses and fundraising on his behalf precludes exemption under sec_501 similar to the organization in harding hospital inc v united_states you have the burden of proving that you satisfy the requirements for tax exemption you have failed to prove that you are not operating for substantial non-exempt purposes you are similar to the organization described in the court case wendy l parker rehabilitation foundation because you were formed to pay the legal expenses for a preselected individual like this organization you are serving the private benefit of an individual and family by paying these expenses and relieving him and his family of their financial obligation conclusion you do not qualify for tax-exemption tinder sec_501 because you are operating to raise funds for the benefit of a designated individual you therefore are serving substantial private rather than public or charitable interests ifyou don't agree you have a right to file a protest if you don't agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include your name address employer_identification_number ein and a daytime phone number a copy of this letter highlighting the findings you disagree with an explanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative one of the following declarations for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn't already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we'll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we'll continue to process your case considering the information you provided if you haven't provided a basis for reconsideration we'll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how _to appeal an irs decision on tax exempt status if you don't file a protest within days you can't seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top ofthis letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it ifyou agree if you agree with our proposed adverse determination you don't need to do anything if we don't hear from you within days we'll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter sincerely jeffrey i cooper director exempt_organizations rulings and agreements enclosure publication