department of the treasury internal_revenue_service washington d c ol oct se t ep ka t4 uniform issue list xxxxx xxxxx xxxxx legend taxpayer a xxxxx ira x xxxxx account y xxxxx financial_institution d xxxxx financial_institution e xxxxx amount n xxxxx amount o xxxxx date xxxxx date xxxxx dear xxxxx this is in response to your submission dated date as supplemented by correspondence dated july and in which you request a letter_ruling waiving the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code page the following facts and representations are made under penalties of perjury in support of your ruling_request taxpayer a age represents that she received distribution of amount n from ira x on date from financial_institution d and that she intended to roll over a portion of amount n amount into an ira to be established at financial_institution e taxpayer a asserts that due to an error by financial_institution e amount o was not rolled over timely into another ira taxpayer a further asserts that amount o has not been used for any purpose and remains deposited with financial_institution e in response to taxpayer a’s request for the distribution of ira x financial_institution d on date issued to taxpayer a six checks the sum of the checks constituted amount n the balance of the various subaccounts of ira x taxpayer a represents that she took the checks on date which was within days of the distribution of ira x to financial_institution e where she informed an employee of financial_institution e that she wanted to open an ira and have amount o deposited into a money market account taxpayer a further represents that the employee informed her on date that the employee would take care of the matter documentation shows that account y a non-ira money market account was established at financial_institution e on date and that amount o was deposited into such account on that date it is represented that taxpayer a relied on financial_institution e to establish an ira on date to receive the rollover of amount o from ira x taxpayer a did not become aware that account y was not an ira until she received a notice from the internal_revenue_service two years after the distribution of ira x from financial_institution d based on the facts and representations presented in this letter you request that the service waive the 60-day rollover requirement with respect to the distribution of amount o from ira x 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 xxxxx page sec_408 of the code provides that sec_408 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 ii 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 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 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including 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 errors committed by a financial_institution inability to complete the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover of the distribution of amount o from ira x was due to error by a financial_institution therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount o from ira x taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount o 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 amount o 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 which may be applicable thereto this ruling assumes that ira x satisfied the qualification requirements of sec_408 of the code at all times relevant to this transaction 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 if you wish to inquire about this ruling please contact xxxxx d xxxxx by telephone at xxxxx please address all correspondence to se t ep ra t4 sincerely yours oka laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


department of the treasury internal_revenue_service washington d c date cc dom fs fi p uilc number release date internal_revenue_service national_office field_service_advice memorandum for from subject joel e helke chief cc dom fs fi p internal_revenue_service national_office field_service_advice this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend bank year year year year year date date date issue whether under a valid conformity_election loans classified as substandard or doubtful for bank regulatory purposes and charged to a specific allowance qualify as deductible bad_debts conclusion no only loans that are classified as loss assets for regulatory purposes qualify as deductible bad_debts under a valid conformity_election see sec_1_166-2 facts bank is a thrift regulated by the office of thrift supervision ots bank made a valid conformity_election pursuant to sec_1_166-2 for year on date the ots issued to bank an express_determination_letter for purposes of satisfying reg sec_1_166-2 and sec_1_166-2 in that letter the ots concludes that as of the date of the last regulatory examination on date bank maintained and applied loan loss classification standards that were consistent with regulatory standards regarding loan charge-offs for regulatory purposes bank classifies its loans as substandard doubtful or loss according to the examining agent bank has established a specific allowance for loans classified as either substandard doubtful or loss for tax purposes for year and year bank claimed bad_debt deductions for all loans charged to this reserve as a result bank claimed bad_debt deductions not only with respect to loss loans but also loans classified as either substandard or doubtful on date the ots issued to bank a confirmation letter concerning charge- offs taken for year through year the ots confirmed that certain charge-offs and specific reserves would have been required by the ots had bank not already recognized the deduction from income in the letter the ots added that it considers a specific reserve to be the equivalent of a charge-off bank received no such letter for year or year law and analysis in general if a bank makes a valid conformity_election a debt is conclusively presumed to be worthless in whole or in part during that year if the debt is charged off in whole or in part for regulatory purposes pursuant to a specific order of the bank’s supervisory authority see sec_1_166-2 alternatively a debt is conclusively presumed to be worthless in whole or in part during that year if the charge-off corresponds to the bank’s classification of the debt in whole or in part as a loss asset id here there is no evidence that the ots specifically ordered bank to charge off loans for year or year therefore the first prong of the above test is not satisfied accordingly to qualify for the conclusive_presumption bank must show that a loan was classified as a loss asset to the extent of the charge-off a loss asset is defined to mean a debt that is assigned to a class that corresponds to a loss asset classification under standards set forth by the appropriate regulatory authority see reg sec_1_166-2 in drafting the conformity_election regulations the drafters clearly rejected the request to extend the conclusive_presumption to debts that were classified as either substandard or doubtful see t d 1992_1_cb_95 and t d 1993_2_cb_73 in the case of thrifts the term charge-off includes the establishment of a specific allowance for loan losses in the amount of percent of the portion of a debt classified as a loss reg sec_1_166-2 this provision of the regulations was added to clarify that the term charge off as it pertains to banks regulated by the ots includes the establishment of specific allowances for loan losses although the establishment of a specific allowance will satisfy the charge-off requirements of reg sec_1_166-2 the loans charged to a specific allowance must meet the standards of a loss asset under reg sec_1_166-2 to qualify for a conclusive_presumption of worthlessness a loan classified as substandard or doubtful and charged to a specific allowance will not meet the standards of a loss asset and thus is not deductible in the instant case bank claimed a bad_debt deduction for all loans charged to a specific allowance these included loans classified as substandard doubtful or loss assets the fact that bank charged loans classified as substandard and doubtful to a specific allowance does not cause these loans to be reclassified as loss loans accordingly to the extent that bank claimed bad_debt deductions for loans classified as substandard or doubtful regardless of the fact that these loans were charged to a specific allowance the deductions should be denied case development hazards and other considerations the examining agents should confirm that bank established only a single reserve to which it charged substandard doubtful and loss loans it would be helpful to know whether bank had ever established a practice of charging substandard loans to a substandard allowance or doubtful loans to a doubtful allowance in addition the examining agents should verify that the ots had not issued a specific order to bank to charge off any portion of the loans classified as substandard or doubtful for the years in issue if you have any further questions please call


internal_revenue_service significant index no department of the treasury washington dc persnn ta cantact- telephone number refer reply to op e ep a date nov in re this letter is in response to your request dated date for a ruling on behalf of the fund specifically you are requesting a ruling that the iu by lending dollar_figure a month or an approximate amount thereof to the fund’s contributing employers for the purpose of making additional contributions to the fund will not cause the fund to lose its qualified status under sec_401 of the internal_revenue_code code the fund constitutes a qualified multiple-employer defined benefit pension_plan trust under sec_401 and sec_501 of the code and has been determined to be qualified under sec_401 most recently in a determination_letter dated date the fund was established in as the trust for the defined_benefit_plan plan for employees of the affiliated organizations of the iu and has been funded solely by contributions from the participating local unions locals the fund’s contributing employers are locals that are tax-exempt labor organizations under sec_501 of the code under the plan document and trust agreement these locals have the sole responsibility for making the contributions necessary to provide the benefits under the plan furthermore the plan document specifically prohibits any participant contributions from being made the fund presently receives contributions from locals in states and has approximately big_number participants the iu is a tax-exempt labor_organization under sec_501 of the code and has a membership of approximately big_number workers in the who are represented by locals in states and territories the iu started the fund in order to provide retirement benefits to the officers and employees of its affiliated locals the general president of the iu appoints the fund’s trustees with the approval of the general executive board_of the iu the trustees have the fiduciary responsibility for the fund’s administration however the iu is responsible for establishing the fund’s funding method and investment policy and the trustees may amend_or_terminate the fund only with the consent of the general executive board_of the iu contributions by locals are determined pursuant to the funding method established by the iu the iu also charters all locals although it does not exercise direct control_over the activities of any local pursuant to the terms of the iu’s constitution it has the power_to_revoke the charter of or put into trusteeship any local the iu also receives a capitated portion of all local union dues based on information submitted with the request the fund is presently faced with an unfunded vested actuarial liability uvl of approximately dollar_figure while the iu has no legal responsibility to address this problem it has determined that it is appropriate to assist its members and locals with this issue as a consequence and to avoid the possibility of a reduction in future benefit accruals the iu has resolved to provide additional funding for the fund tn order to accomplish this task the iu intends to make monthly loans of dollar_figure to the participating locals to be allocated among them in proportion to the share of the uvl for which each local is liable the loan proceeds are to be used by the locals solely for the purpose of reducing the uvl of the fund and the loans will continue until the full amount of the uvl is retired the iu intends to forgive each loan as long as the affiliated local continues to participate in the fund because the monies to be used to retire the uvl will be transferred from the iu to the locals as foans and then from the locals to the fund as additional employer contributions there will be no direct payments to the fund by the iu sec_401 of the code states in part that a_trust forming part of a stock bonus pension or profit-sharing_plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified_trust under this section- if contributions are made to the trust by such employer or employees or both or by another employer who is entitled to deduct his contributions under sec_404 revrul_63_46 1963_1_cb_85 provides that a pension_plan established for the benefit of employees but funded by the transfer to the plan of the corpus of a_trust fund established by a third party rather than by the employer or employees or both may constitute a qualified_plan under sec_401 if it satisfies all other requirements of that section rev_rul 1968_1_cb_154 provides that the transfer of funds from a non-exempt employees’ welfare fund to a_trust forming part of a pension_plan will not of itself disqualify the plan and trust under the provisions of sec_401 a nor affect the exempt status of the trust under sec_501 neha ane anne erent vara eterna the revenue rulings cited above indicate that sec_401 does not require that contributions be made only by employers and employees and that in instances where outside sources do make contributions a trust’s qualified status will continue as long as all other requirements are met although the revenue rulings cited above refer to sec_401 of the code of subsequent amendments to this section have not touched on the issue of the source of contributions to a qualified_trust moreover all contributions to the fund under the loan arrangement described above will be made solely by the contributing employers of the fund in conclusion the loan arrangement described above in and of itself will not affect the fund’s status as a qualified_trust under sec_401 this ruling is directed only to the organization that requested it sec_61 k of the code provides that it may not be used or cited by others as precedent if you have any additional questions concerning this ruling please contact number listed above at the sincerely yours maclin qd lippens martin l pippins chief actuarial branch


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date number info release date conex-144763-09 uil the honorable charles e grassley united_states senator 1st avenue ne suite cedar rapids ia dear senator grassley i am responding to your inquiry dated date on behalf of your constituent ---------------------- ------------sustained casualty losses due to flood damage on his farm in ------------asks whether he may carry those losses forward to subsequent tax years a taxpayer generally can carry back a net_operating_loss or overall loss for the year attributable to casualty three years prior to the year in which the casualty occurred and then forward years i am enclosing irs publication casualties disasters and thefts which has additional information on casualty losses in addition congress lengthened the carryback period to five years for the portion of any net_operating_loss attributable to losses from the destruction of business property by the midwest storms and floods heartland disaster tax relief act of -------------- property may qualify for the act’s longer carryback period additional information is in irs publication b information for affected taxpayers in the midwestern disaster areas enclosed i hope this information is helpful please call me ---------------------------------------------------- ----------------------- at -------------------- if you have any questions enclosures george j blaine associate chief_counsel income_tax and accounting sincerely


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-120848-06 date date -------------------- x ----------------------------------------- state d1 dear ------------------ ----------------- --------------- this letter responds to a letter dated date and subsequent correspondence written on behalf of x requesting a ruling under ' and of the procedure and administration regulations that x be granted an extension of time to file an election to be classified as an association_taxable_as_a_corporation for federal tax purposes under ' facts according to the information submitted x was formed on d1 as a limited_liability_company under the laws of state x intended to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d1 however x did not timely file a form_8832 entity classification election law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes as provided in ' sec_301_7701-3 provides that except as provided in ' b unless the entity elects otherwise a domestic eligible_entity is a partnership if it has plr-120848-06 two or more members or disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in ' b by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_9100-1 provides that the commissioner has discretion to grant a ' c i will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 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 a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register making certain elections determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-2 provides the rules governing automatic extensions of time for sec_301_9100-3 sets forth the standards the commissioner will use to conclusion based on the facts submitted and the representations made we conclude that the requirements of and have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the transaction described above under any plr-120848-06 other provision of the code specifically no opinion is expressed or implied as to whether x is otherwise eligible to make the election 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 in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x s authorized representative sincerely s william p o'shea associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


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 ita b04 plr-114443-07 date date ty ty legend taxpayers ----------------------------------------- residence ---------------------------- residence ---------------------------- date -------------------------- date ---------------------- date ------------------- dear this letter responds to your request for a ruling under sec_121 of the internal_revenue_code specifically you have requested that the gain on the sale of residence may be excluded under the reduced maximum exclusion in sec_121 taxpayers were married and had one child when they purchased residence on date residence had three small bedrooms and one and one-half baths husband and wife used one of the small bedrooms as an office after the purchase of residence wife became pregnant and gave birth to another child taxpayers’ first child was age at the time taxpayers tried but failed to make reasonable accommodations for the additional child in residence on date taxpayers purchased residence which ha sec_3 bedrooms full baths and additional space used as their office law and analysis sec_121 provides that gain from the sale_or_exchange of property is not included in gross_income if during the 5-year period ending on the date of the sale_or_exchange plr-114443-07 the taxpayer has owned and used the property as the taxpayer’s principal_residence for periods aggregating two years or more sec_121 provides the general_rule for the maximum exclusion_of_gain sec_121 provides that subsection a shall not apply to any sale if during the 2-year period ending on the date of the sale there was any other sale_or_exchange by the taxpayer to which subsection a applied sec_121 provides for a reduced maximum exclusion when a taxpayer fails to satisfy the ownership and use requirements of subsection a if the primary reason for the sale is the occurrence of unforeseen circumstances the reduced maximum exclusion is computed by multiplying the applicable maximum exclusion by a fraction the numerator of the fraction is the shortest of the following periods the period of time that the taxpayer owned the property during the 5-year period ending on the date of the sale the period of time that the taxpayer used the property as the taxpayer’s principal_residence during the 5-year period ending on the date of the sale or the period of time between the date of a prior sale_or_exchange of property for which the taxpayer excluded gain under sec_121 and the date of the current sale the numerator of the fraction may be expressed in days or months the denominator of the fraction is days or months depending on the measure of time used in the numerator sec_1_121-3 of the income_tax regulations provides that all the facts and circumstances of a sale will determine whether the primary reason for the sale is the occurrence of unforeseen circumstances factors that may be relevant in determining the primary reason for a sale include the following the suitability of the property as the taxpayer’s residence materially changes the circumstances giving rise to the sale are not reasonably foreseeable when the taxpayer begins using the property as the taxpayer’s principal_residence and the circumstances giving rise to the sale occur during the period of the taxpayer’s ownership and use of the property as the taxpayer’s principal_residence sec_1_121-3 provides that a sale is by reason of unforeseen circumstances if the primary reason for the sale is the occurrence of an event that the taxpayer could not reasonably have anticipated before purchasing and occupying the residence sec_1_121-3 states that the commissioner may issue rulings addressed to specific taxpayers identifying events or situations as unforeseen circumstances with regard to those taxpayers in the present case based on the facts representations and the relevant law we conclude that the occurrence of unforeseen circumstances was the primary reason for the sale and that the suitability of residence as the taxpayers’ principal_residence materially changed accordingly the gain on the sale of residence which taxpayers plr-114443-07 owned and used as a principal_residence for less than two of the preceding five years may be excluded under the reduced maximum exclusion_of_gain in sec_121 caveats except as expressly provided we express no opinion 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 taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling must be attached to any income_tax return to which it is relevant alternatively if taxpayers file a return electronically taxpayers may attach a statement to the return that provides the date and control number of the letter_ruling the ruling contained in this letter is based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by the taxpayers while this office has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination sincerely donna welsh senior technician reviewer branch income_tax accounting


ramona l mitchell petitioner v commissioner of internal revenue respondent docket no filed date in p contributed a conservation_easement over acres of unimproved land to a qualified_organization the pur- chase of the unimproved land was seller financed after a downpayment p executed a promissory note for the remaining payments secured_by a deed_of_trust on the unim- proved land p failed to have the mortgagee subordinate the deed_of_trust to the conservation_easement deed until two years later in p claimed a charitable_contribution_deduction on her federal_income_tax return sec_170 allows a deduction for a qualified conservation contribu- tion a qualified_conservation_contribution must be made exclusively for conservation purposes sec_170 a contribution shall not be treated as exclusively for conserva- tion purposes unless the conservation_purpose is protected in perpetuity sec_170 pursuant to sec_1 170a- g income_tax regs no deduction is permitted for an verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila mitchell v commissioner interest in property which is subject_to a mortgage unless the mortgagee subordinates its rights in the property to the right of the qualified_organization to enforce the conservation pur- poses of the gift in perpetuity p argues she has met the requirements of sec_1_170a-14 income_tax regs and is eligible for a charitable_contribution_deduction under sec_170 r argues that p failed to have the mortgagee subordinate his deed_of_trust to the conservation_easement deed and therefore failed to meet the requirements of sec_1_170a-14 income_tax regs and sec_170 as part of p’s argument that she has met the requirements of sec_1_170a-14 income_tax regs p raises an issue of first impression whether we must consider the so-remote-as- to-be-negligible standard of sec_1_170a-14 income_tax regs in determining whether p satisfied the requirements of sec_1_170a-14 income_tax regs held the so-remote- as-to-be-negligible standard of sec_1_170a-14 income_tax regs does not apply to determine whether p satisfied the requirements of sec_1_170a-14 income_tax regs held further p has not met the requirements of sec_1 170a- g income_tax regs and is not eligible for the chari- table contribution deduction under sec_170 for held further p is not liable for the accuracy-related_penalty under sec_6662 larry d harvey for petitioner miles b fuller steven i josephy and joseph a peters for respondent haines judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax and an accuracy- related penalty under sec_6662 and d of dollar_figure for the issues for decision after concessions are whether petitioner is entitled to a charitable_contribution_deduction with respect to the conservation_easement she granted to montezuma land conservancy conservancy if petitioner is entitled to a charitable_contribution_deduction the amount of the deduction and whether petitioner is liable for the accuracy-related_penalty under sec_6662 and d or alternatively if we determine petitioner is entitled to a charitable_contribution_deduction whether she is liable unless otherwise indicated all section references are to the internal_revenue_code as amended and in effect for the year at issue and all rule references are to the tax_court rules_of_practice and procedure amounts are rounded to the nearest dollar respondent first asserted that petitioner is liable for the accuracy-related_penalty in his an- swer should we find in favor of petitioner on the first issue below respondent claims she is liable for a gross_valuation_misstatement penalty under sec_6662 of dollar_figure for verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila united_states tax_court reports for the gross_valuation_misstatement penalty under sec_6662 and h findings_of_fact some of the facts have been stipulated and are so found at the time petitioner filed her petition she lived in colo- rado charles mitchell his wife ramona l mitchell and their son blake mitchell mitchells resided in mancos colorado a ranching community established in mancos is between cortez colorado miles to the west and durango colorado miles to the east highway at the base of the san juan mountains and known as the san juan skyway connects the three towns the towns are in the southwest corner of colorado in the four corners area where the boundaries of colorado new mexico arizona and utah meet the town of mancos is in the northern part of mancos valley charles had owned a business in the town which began as a manufacturer of matches but eventually evolved into a manufacturer of erosion and flood control products charles had tried to buy acres of ranchland in the southern part of the mancos valley from clyde sheek for over years the ranchland was approximately eight miles by road south of the town of mancos in sheek finally agreed to sell the northerly 105-acre parcel to the mitchells for dollar_figure the parcel was unim- proved ie it had no buildings only partial fencing no utili- ties and no domestic water access was from a two-lane gravel road maintained by the county the land had been used by sheek to graze cattle and was not in good condition when the mitchells purchased it the property also was used by wildlife for habitat the mitchells installed a two-inch water line from the northern boundary of the 105-acre parcel in with elec- trical lines added in the mancos river channel running through the property was protected from further erosion and fields were improved blake and his wife melody built a home on the 105-acre parcel in subse- montezuma county assessors records describe the parcel as acres the land records de- scribe it a sec_105 acres we will use acres for purposes of the opinion verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila mitchell v commissioner quently a by 100-foot shop and a 900-square-foot guest- house were built on the parcel in charles sold his business he again approached sheek to buy the remaining acres bordering the south boundary of the 105-acre parcel bought in sheek agreed to sell the 351-acre parcel in for dollar_figure he did not want all cash he wanted retirement income con- sequently after a downpayment of dollar_figure the balance of dollar_figure was to be paid in installments of dollar_figure per year plus interest a promissory note was signed and secured_by a deed_of_trust recorded in the records of montezuma county colorado in date as a result of the two purchases the mitchells owned acres of ranchland in the southern portion of the mancos valley lone canyon ranch the south and west sides of the lone canyon ranch are bordered by the mesa verde national park park where the anasazi people the cliffdwellers had their communities a portion of the ranch is actually within the park to the south also is ute indian land and to the east is bureau of land management land and a privately owned ranch charles and petitioner built their own home at lone canyon ranch in and charles began having health problems in date the mitchells formed c l mitchell properties l l l p a family limited_partnership partnership lone canyon ranch was transferred to the partnership subject_to the deed_of_trust as were other investments including a rental prop- erty and cash and securities although charles was named the general_partner it soon became evident that he could not carry out his management duties consequently blake took over the management duties charles eventually died of his illness in on date the partnership granted a con- servation easement on the south acres of unimproved land to conservancy the parties executed a deed of con- servation easement in gross at the time the easement was granted the deed_of_trust securing the debt to sheek was not subordinated to the conservation_easement held by conser- vancy from to the partnership had the money to the name of the limited_partnership was changed at a later date to lone canyon ranch limited_liability limited_partnership verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila united_states tax_court reports pay off the promissory note which the deed_of_trust secured at any time there were no lawsuits potential or otherwise all bills were paid payments on the promissory note to sheek were current and casualty insurance was in place two years after the conservation_easement was granted sheek agreed to subordinate his deed_of_trust to the con- servation easement but received no consideration for the subordination on date sheek signed the subordination to deed of conservation_easement in gross subordination agreement in the mitchells hired william b love appraisals inc love to appraise the conservation_easement granted to conservancy as of date love determined that the conservation_easement had a market_value of dollar_figure love issued an appraisal report for the partnership on feb- ruary love appraisal the partnership claimed a dollar_figure charitable_contribution_deduction which flowed through to its two partners charles and petitioner equally charles and petitioner claimed a dollar_figure charitable con- tribution deduction on their joint federal_income_tax return dated date return charles and peti- tioner attached form_8283 noncash charitable contribu- tions to their return along with a copy of the love appraisal a notice_of_deficiency was mailed to petitioner on date disallowing her charitable_contribution deduc- tion respondent determined that petitioner had not met the requirements of sec_170 alternatively respondent deter- mined that if petitioner had met the requirements of sec_170 the amount of the charitable_contribution_deduction was dollar_figure petitioner timely filed a petition with this court on date opinion the issues before this court are whether petitioner made a qualified_conservation_contribution to conservancy and if so whether she substantiated the reported charitable con- tribution deduction in the manner required by sec_5 because of limitations on itemized_deductions claimed on schedule a itemized_deductions only dollar_figure of the charitable_contribution_deduction could be claimed on the return respondent in his pretrial memorandum concedes that if a charitable_contribution_deduction is allowed the amount of the deduction is dollar_figure verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila mitchell v commissioner f if we find that petitioner made a qualified con- servation contribution and that she substantiated it we then must determine its value finally we must determine whether petitioner is liable for certain penalties under sec_6662 i qualified_conservation_contribution a taxpayer is generally allowed a deduction for any chari- table contribution made during the taxable_year sec_170 a charitable_contribution is a gift of property to a charitable_organization made with charitable intent and without the receipt or expectation of receipt of adequate_consideration see 490_us_680 477_us_105 see also sec_1_170a-1 and income_tax regs while a taxpayer is generally not allowed a charitable_contribution_deduction for a gift of property con- sisting of less than an entire_interest in that property an exception is made for a qualified_conservation_contribution see sec_170 b iii a qualified_conservation_contribution is a contribution of a qualified_real_property_interest to a qualified_organization which is made exclusively for conservation purposes sec_170 see also sec_1_170a-14 income_tax regs respondent concedes that there was a contribution of a qualified_real_property_interest and that at the time of the contribution the conservancy was a qualified organiza- tion under sec_170 therefore we focus on the third requirement ie whether petitioner’s contribution of the conservation_easement to conservancy was exclusively for conservation purposes a contribution is made exclusively for conservation pur- poses only if it meets the requirements of sec_170 124_tc_258 aff ’d 471_f3d_698 6th cir sec_170 provides that a contribution shall not be treated as exclusively for con- servation purposes unless the conservation_purpose is pro- tected in perpetuity sec_1_170a-14 income_tax regs elaborates on the enforceability-in-perpetuity require- ment paragraph g provides generally that in order for a conservation_easement to be enforceable in perpetuity the verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila united_states tax_court reports interest in the property retained by the donor must be subject_to legally enforceable restrictions that will prevent uses of the retained_interest inconsistent with the conservation purposes of the donation the various subpara- graphs of paragraph g set forth many of these legally enforceable restrictions paragraph g addresses mortgages and in pertinent part provides that no deduction will be permitted for an interest in property which is subject_to a mortgage unless the mortgagee subordinates its rights in the property to the right of the donee organization to enforce the con- servation purposes of the gift in perpetuity paragraph g is entitled remote future event and addresses events that may defeat the property interest that has passed to the donee organization it provides that a deduction will not be disallowed merely because on the date of the gift there is the possibility that the interest will be defeated so long as on that date the possibility of defeat is so remote as to be negligible paragraph g is entitled extinguishment and recog- nizes that after the donee organization’s receipt of an interest in property an unexpected change in the conditions surrounding the property can make impossible or impractical the continued use of the property for conservation purposes subdivision i of paragraph g provides that those pur- poses will nonetheless be treated as protected in perpetuity if the restrictions limiting use of the property for conserva- tion purposes are extinguished by judicial proceeding and all of the donee’s proceeds from a subsequent sale_or_exchange of the property are used by the donee organization in a manner consistent with the conservation purposes of the original contribution subdivision ii of paragraph g is entitled proceeds and in pertinent part provides for a deduction to be allowed under this section at the time of the gift the donor must agree that the donation of the perpetual conservation restric- tion gives rise to a property right immediately vested in the donee organization with a fair_market_value that is at least equal to the propor- tionate value that the perpetual conservation restriction at the time of the gift bears to the value of the property as a whole at that time for purposes of this paragraph g ii that proportionate value of the donee’s property rights shall remain constant accordingly when a change in verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila mitchell v commissioner conditions gives rise to the extinguishment of a perpetual conservation restriction under paragraph g i of this section the donee organization on a subsequent sale exchange or involuntary_conversion of the subject property must be entitled to a portion of the proceeds at least equal to that proportionate value of the perpetual conservation restriction respondent argues that petitioner’s conservation_easement was not protected in perpetuity and thus it is not a qualified_conservation_contribution specifically respondent argues that petitioner failed to satisfy the requirements of sec_1_170a-14 income_tax regs subordination regula- tion and sec_1_170a-14 income_tax regs pro- ceeds regulation we will address each of these arguments in turn a whether petitioner satisfied the requirements of the subordination regulation respondent argues that the conservation_purpose of the donated property is not protected in perpetuity because peti- tioner failed to meet the requirements of the subordination regulation which required sheek to subordinate his deed_of_trust to the deed of conservation_easement petitioner argues that sheek entered into a subordination agreement in which complies with the requirements of the subordination regulation petitioner also argues that in determining whether the requirements of the subordination regulation are met this court must consider the so-remote-as-to-be-neg- ligible standard in sec_1_170a-14 income_tax regs finally petitioner argues that she entered into an oral agree- ment with sheek with respect to the use of lone canyon ranch and that the oral agreement provides the necessary protection required by sec_170 whether petitioner’s obtaining a subordination agree- ment in satisfies the requirements of the sub- ordination regulation petitioner claims her grant of a conservation_easement to conservancy satisfies the requirements of the subordination regulation because sheek subordinated his deed_of_trust to conservancy’s deed of conservation_easement in peti- tioner argues that it is irrelevant that the subordination agreement was signed almost two years after the grant of the verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila united_states tax_court reports conservation_easement because the subordination regulation has no requirement as to when the mortgagee must subordi- nate its claim to that of the donee organization respondent argues that in order to comply with the requirements of the subordination regulation the mortgagee’s rights in the prop- erty must be subordinate to the conservation_easement on the date the conservation_easement is granted we agree with respondent though the subordination regulation is silent as to when a taxpayer must subordinate a preexisting mortgage on donated property we find that the regulation requires that a subordination agreement be in place at the time of the gift in order to be eligible for the charitable_contribution deduc- tion for petitioner had to meet all the requirements of sec_170 and the underlying regulations including the requirement that the sheek deed_of_trust be subordinate to the conservation_easement deed_of_trust see sec_1 170a- g income_tax regs sheek did not subordinate his deed_of_trust to the conservation_easement deed_of_trust until date had petitioner defaulted on the promis- sory note before that date sheek could have instituted fore- closure proceedings and eliminated the conservation ease- ment the conservation_easement was therefore not protected in perpetuity at the time of the gift as a result petitioner failed to meet the requirements of sec_170 and the underlying regulations for petitioner argues that notwithstanding the fact that sheek’s deed_of_trust took priority over the conservation_easement until date the conservation ease- ment was still protected in perpetuity because the probability of petitioner’s defaulting on her promissory note was so remote as to be negligible whether this court must consider the so-remote-as-to- be-negligible standard when determining whether petitioner satisfied the requirements of the subordi- nation regulation petitioner argues that we must read the subordination regulation in tandem with the so-remote-as-to-be-negligible standard of sec_1_170a-14 income_tax regs she argues that the probability of her defaulting on the sheek verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila mitchell v commissioner promissory note on date was so remote as to be negligible thus petitioner argues that possibility should be disregarded under so-remote-as-to-be-negligible standard in determining whether the conservation_easement is enforceable in perpetuity respondent argues that the so- remote-as-to-be-negligible standard irrelevant to our inquiry we agree with respondent the is a prior caselaw this court has previously considered on a number of occa- sions taxpayer arguments about the applicability of sec_1_170a-14 income_tax regs to the rest of para- graph g 136_tc_294 kaufman ii 134_tc_182 kaufman i carpenter v commissioner tcmemo_2012_1 simmons v commissioner tcmemo_2009_208 aff ’d 646_f3d_6 d c cir in kaufman ii the taxpayers contributed to a donee organization a facade easement on a single-family rowhouse which they owned in a historic preservation district in boston at the time of contribution the property was subject_to a mortgage which entitled the mortgagee to a prior claim to all proceeds of condemnation and to all insurance proceeds resulting from any casualty of the property the taxpayers claimed a charitable_contribution_deduction equal to the value they assigned to the facade easement the commis- sioner disallowed the deduction because the taxpayers had failed to meet the requirement of sec_1_170a-14 income_tax regs that the charity receive a proportionate share of proceeds following judicial extinguishment of the facade easement and a subsequent sale of the property the taxpayers argued that sec_1_170a-14 income_tax regs should be read in tandem with sec_1 170a- g income_tax regs the taxpayers hypothesized a very low probability of occurrence of a set of events that would deprive the charity of its proportional share of pro- ceeds following judicial extinguishment of the facade ease- ment and subsequent sale of the property they concluded that the possibility of such deprivation was so remote as to be negligible and thus had to be disregarded under the so- verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila united_states tax_court reports remote-as-to-be-negligible standard in determining whether the facade easement was enforceable in perpetuity this court found that the so-remote-as-to-be-negligible standard does not modify sec_1_170a-14 income_tax regs specifically we held that i t is not a question as to the degree of improbability of the changed condi- tions that would justify judicial extinguishment of the restrictions nor is it a question of the probability that in the case of judicial extinguishment following an unexpected change in conditions the proceeds of a condemna- tion or other sale would be adequate to pay both the bank and the charity as we said in kaufman i t c pincite the require- ment in sec_1_170a-14 income_tax regs that the charity be entitled to its proportionate share of the proceeds is not condi- tional petitioners cannot avoid the strict requirement in sec_1 170a- g ii income_tax regs simply by showing that they would most likely be able to satisfy both their mortgage and their obligation to the charity kaufman ii t c pincite in carpenter the taxpayers contributed to a donee organization a conservation_easement on open land in colo- rado the conservation_easement deed allowed the parties to extinguish the conservation_easement by mutual written_agreement if circumstances arose in the future that would render the purpose of the conservation_easement impossible to accomplish the taxpayers claimed a charitable contribu- tion deduction equal to the value they assigned to the con- servation easement the commissioner disallowed the deduc- tion because the taxpayers had failed to meet the require- ment of sec_1_170a-14 income_tax regs that the conservation_easement be extinguished by a judicial pro- ceeding the taxpayers argued that sec_1_170a-14 income_tax regs should be read in tandem with sec_1_170a-14 income_tax regs they claimed that the conditions necessary for extinguishment of the conservation_easement were not possible or the possibility was so remote as to be negligible thus the taxpayers argued that the possibility of extinguishment by mutual agreement of the parties had to be disregarded under the so-remote-as-to-be- negligible standard in determining whether the conservation_easement was enforceable in perpetuity this court relying on its previous holding in kaufman ii found that the so- verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila mitchell v commissioner remote-as-to-be-negligible standard does not modify sec_1_170a-14 income_tax regs at least one court has applied the so-remote-as-to-be-neg- ligible standard to find that a gift of a facade easement was protected in perpetuity in simmons the taxpayer contrib- uted to a donee organization a facade easement on two rowhouses which the taxpayer owned in washington d c at the time of contribution the properties were subject_to a mortgage the conservation_easement deed provided that the mortgagees subordinate their rights in the properties to the right of the donee and its successors or assigns to enforce the conservation purposes of the easements in perpetuity the deed also provided that nothing contained in the deed should be construed to limit the donee’s right to give its consent to changes in the facade or to abandon some or all of its rights under the deed the taxpayers claimed a charitable contribu- tion deduction equal to the value they assigned to the facade easements and the commissioner disallowed that deduction first the commissioner argued that the taxpayer had failed to meet the conservation_purpose described in sec_170 because the donee organization had the right not to exercise its obligations under the easement second the commissioner argued that the requirements of sec_1_170a-14 income_tax regs had not been met because the restrictions on the easement allowed the donee organiza- tion to consent to changes in the facades finally the commissioner argued that the taxpayer was not entitled to the charitable_contribution_deduction because she failed to subordinate the mortgage on the property as required by the subordination regulation we held that the easements granted to the donee organiza- tion were valid conservation easements the donee’s right to consent to changes in the facades was subject_to local state and federal_law sec_1_170a-14 income_tax regs specifically allows a donation to satisfy the conservation pur- pose test even if future development is allowed as long as that future development is subject_to local state and fed- eral laws and regulations further we held that the taxpayer had satisfied the requirements of the subordination regula- tion because the mortgagees had agreed to subordinate their interest in the property within the conservation_easement deed we however did not address the commissioner’s argu- verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila united_states tax_court reports ment that the taxpayer failed to meet the conservation pur- pose because the donee organization had the right to not exercise its obligations under the easements the commissioner appealed arguing once again that the conservation_easement was not protected in perpetuity because the donee organization was free to abandon its right to enforce the restrictions set out in the deed 646_f3d_6 the court_of_appeals for the district of columbia circuit found that the commissioner had not shown the possibility that the donee would actually abandon its rights the court_of_appeals noted that the donee had been monitoring easements since yet the commissioner had failed to point to a single instance where the donee had abandoned its right to enforce those easements relying on the so-remote-as-to-be-negligible standard the court_of_appeals rejected the commissioner’s argument that the con- tribution failed the perpetuity requirement because it had concluded that the possibility the donee would abandon the conservation_easement was so remote as to be negligible id pincite b our case as discussed above this court has previously decided that the so-remote-as-to-be-negligible standard should not be applied when determining whether a taxpayer has met the requirement of sec_1_170a-14 and ii income_tax regs see 136_tc_294 carpenter v commis- sioner tcmemo_2012_1 however the so-remote-as-to-be- negligible standard has been used to determine whether a conservation deed which allows a donee organization to abandon its rights under the deed is a gift in perpetuity see 646_f3d_6 we are now pre- sented with an issue of first impression whether we must consider the so-remote-as-to-be-negligible standard in deter- mining whether petitioner satisfied the subordination regula- tion we briefly discussed the promulgation of sec_1 170a- income_tax regs in kaufman ii we found that t he drafters of sec_1_170a-14 income_tax regs undoubtedly understood the difficulties if not impossibility under state common or statutory law of making a conservation restriction perpetual they verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila mitchell v commissioner required legally enforceable restrictions preventing inconsistent use by the donor and his successors in interest see sec_1_170a-14 income_tax regs they defused the risk presented by potentially defeasing events of remote and negligible possibility see sec_1_170a-14 income_tax regs they did not however consider the risk of mortgage fore- closure per se to be remote and negligible and required subordination to protect from defeasance see sec_1_170a-14 income_tax regs kaufman ii t c pincite emphasis added the drafters of sec_1_170a-14 income_tax regs saw taxpayers defaulting on their mortgages as more than a remote possibility therefore they drafted a specific provision which would absolutely prevent a default from destroying a conservation easement’s grant in perpetuity similarly the drafters included sec_1_170a-14 and ii income_tax regs to address similar albeit different concerns we refused to apply the so-remote-as-to-be-neg- ligible standard in both carpenter and kaufman ii both were cases where the taxpayer attempted to use the so- remote-as-to-be-negligible standard to avoid a specific requirement of the regulations ie the judicial proceeding requirement of sec_1_170a-14 income_tax regs and the proceeds requirement of sec_1_170a-14 income_tax regs though the court_of_appeals for the district of columbia circuit applied the so-remote-as-to-be-negligible standard in simmons that case is distinguishable from our case the court_of_appeals applied the so-remote-as-to-be-negligible standard to defeat a general argument made by the commis- sioner as to the conservation easement’s grant in perpetuity the standard was not used to defeat a specific subparagraph of sec_1_170a-14 income_tax regs as petitioner argues in our case given our prior rulings in this area we find that the subordination regulation should not be read in tandem with the so-remote-as-to-be-negligible standard in other words petitioner cannot avoid meeting the strict requirement of the subordination regulation with respect to the sheek deed_of_trust by making a showing that the possibility of foreclosure on that deed_of_trust is so remote as to be negligible the requirements of the subordination regulation are strict requirements that may not be avoided by use of the so- remote-as-to-be-negligible standard verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila united_states tax_court reports petitioner argues that kaufman ii is distinguishable from this case and instead we should follow this court’s ruling in simmons petitioner argues that simmons stands for the proposition that the subordination regulation must be read in tandem with the so-remote-as-to-be negligible standard as we have explained above simmons stands for no such thing the court_of_appeals never addressed the subordination regulation arguments raised in this court because this court in simmons held that the mortgage holder had subordinated its mortgage to the conservation_easement deed whether petitioner’s oral agreement with sheek pro- vided the necessary protection required by sec_170 petitioner finally argues that in an oral agreement with sheek the mitchells agreed that they would not subdivide or develop lone canyon ranch petitioner argues that these were the same rights relinquished under the conservation_easement deed_of_trust and thus the oral agreement protects the conservation_easement purpose in perpetuity as required by sec_170 and we disagree the oral agree- ment had no effect on sheek’s ability to foreclose on the prop- erty and extinguish the conservation agreement had peti- tioner defaulted on her promissory note thus the oral agreement fails to comply with the requirements of sec_1_170a-14 income_tax regs b whether petitioner satisfied the requirements of the proceeds regulation having found that petitioner failed to meet the require- ments of the subordination regulation we need not further determine whether petitioner satisfied the requirements of the proceeds regulation to make our decision having found that petitioner failed to comply with the requirements of the subordination regulation we find that petitioner did not make a qualified_conservation_contribution and thus is not eligible for a charitable_contribution_deduction for verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila mitchell v commissioner ii substantiation requirement and value of charitable con- tribution deduction having found that petitioner failed to comply with the requirements of the subordination regulation and thus is not eligible for a charitable_contribution_deduction under sec_170 we need not address respondent’s argument that peti- tioner failed to meet the substantiation requirements of sec_170 or inquire into the value of petitioner’s claimed charitable_contribution iii accuracy-related_penalty respondent determined that petitioner is liable for the accuracy-related_penalty under sec_6662 for sec- tion a and b imposes a accuracy-related pen- alty upon any underpayment_of_tax resulting from a substan- tial understatement of income_tax an understatement is substantial if it exceeds the greater of of the tax required to be shown on the return or dollar_figure sec_6662 generally a taxpayer bears the burden of proving the commissioner’s determinations incorrect rule a 290_us_111 however the commissioner bears the burden_of_proof with respect to any new_matter raised in the answer rule a because he first raised the issue in his answer respondent bears the burden_of_proof with respect to petitioner’s liability for the accuracy-related_penalty and must therefore prove that it is appropriate to impose that penalty respondent calculated that petitioner understated her income_tax by dollar_figure peti- tioner had reported tax of dollar_figure on her return the amount of the understatement was substantial because it exceeded the greater of of the tax required to be shown on the return for the taxable_year or dollar_figure the accuracy-related_penalty is not imposed however with respect to any portion of the underpayment if the taxpayer can establish that she acted with reasonable_cause and in good_faith sec_6664 the decision as to whether the taxpayer acted with reasonable_cause and in good_faith depends upon all the pertinent facts and circumstances sec_1_6664-4 income_tax regs circumstances indicating that a taxpayer acted with reasonable_cause and in good verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila united_states tax_court reports faith include an honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances including the experience knowledge and education of the taxpayer id we found all of petitioner’s witnesses to be credible and truthful petitioner attempted to comply with the require- ments for making a charitable_contribution of a conservation_easement petitioner hired an accountant and an appraiser however she inadvertently failed to obtain a subordination agreement from sheek that said upon being made aware of the need for a subordination agreement she promptly obtained one given the circumstances we find that peti- tioner acted with reasonable_cause and in good_faith there- fore we hold that petitioner is not liable for the accuracy- related penalty under sec_6662 for in reaching our holdings herein we have considered all arguments made and to the extent not mentioned above we conclude they are moot irrelevant or without merit to reflect the foregoing decision will be entered under rule f verdate 0ct jun jkt po frm fmt sfmt v files mitchell sheila


department of the treasury internal_revenue_service te_ge eo examination fulton street room brooklyn ny uil ta xpayer identifica e ntification number tax_exempt_and_government_entities_division release number release date date date person to contact identification_number contact telephone number last date for filing a pleading with the tax_court the claims_court or the united_states district_court for the district of columbia dear this is a final_determination regarding your exempt status under sec_501 of the internal_revenue_code irc recognition of your exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 is retroactively revoked to bec euecnes exempt_purpose because it is determined that you are not operated exclusively for an we have determined that you are not operating exclusively for charitable or educational_purposes our examination reveals that you are not conducting charitable or educational activities pursuant sec_501 and sec_1_501_c_3_-1 and that you sec_501 exempts from taxation organizations which are organized and operated exclusively for charitable or educational_purposes no part of the net_earnings of which inure to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation and which do not participate in or intervene in any political campaign on behalf of or in opposition to any candidate for public_office failed to meet the operational_test under sec_1_501_c_3_-1 we are revoking your exemption from federal_income_tax as an organization described in sec_501 of the internal_revenue_code effective contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for all years beginning -- dollar_figure processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must file a pleading seeking a declaratory_judgment in the united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia before the day after the date this final_determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing pleadings for declaratory judgments and refer to the enclosed publication you may write to these courts at the following addresses united_states tax_court second street nw washington d c united_states court of federal claims madison place nw washington d c united_states district_court for the district of columbia constitution avenue nw washington d c at internal_revenue_service cece we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call too-free and ask for taxpayer_advocate assistance if you prefer you may contact your eee teeter eee teens local taxpayer_advocate if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours enclosure publication form_886 a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service a b legend a name of the organization b year period ended c the president treasurer secretary and director d date form_1023 was filed e office of the organization f director g director h irs agent i state incorporated facts c filed a form_1023 on d requesting that the a a be formed for the purpose of making contributions to organizations qualified for exemption from federal income_taxation under sec_501 the active contributions by the foundation were to commence in the fourth quarter of the activity was to be conducted by the board_of directors of the foundation from the office of the foundation located at e which was to open after the application_for recognition of exemption was approved the members of the board were c president treasurer secretary and director f director and g director the members of the board were not compensated the organization budgeted dollar_figure state in in gifts grants and contributions it had a good standing with the secretary of a was part of a compliance check held by the internal_revenue_service internal revenue_agent h called mr g a director of a and the representative on the form_1023 application on and discussed the filing requirement and obtained information on the intentions of the organization a has not filed a form_990-pf since its exemption was granted per phone conversation with the organization a was formed for tax planning purposes and has yet to conduct any activities the director was unsure on when the organization would begin activities the organization was not aware of the requirement to file a 990pf mr g general counsel and member and trustee of the a submitted a letter dated date which confirmed that a has not yet engaged in any business activities charitable or otherwise no is any such activity currently contemplated the letter confirmed a’s desire to voluntarily withdraw its tax-exempt status effective immediately and will be filing the necessary paperwork with the i attorney general’s office law sec_1_501_c_3_-1 states that an organization 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 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose revproc_90_27 1990_1_cb_514 date section - revocation or modification of rulings or determination letters recognizing exemption states that a ruling or determination_letter recognizing exemption may be revoked or modified by a notice to the taxpayer to whom the ruling or determination_letter originally was issued enactment of legislation or ratification of a tax_treaty a decision of the united_states supreme court issuance of temporary or final regulations or issuance of a revenue_ruling revenue_procedure or other statement published in the internal_revenue_bulletin the revocation or modification may be retroactive if the organization form 886-aev department of the treasury - internal_revenue_service page -1- form_8 a name of taxpayer explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service a b omitted or misstated a material fact operated in a manner materially different from that originally represented or in the case of organizations to which sec_503 applies engaged in a prohibited_transaction with the purpose of diverting corpus or income of the organization from its exempt_purpose and such transaction involved a substantial part of the corpus or income of such organization where there is a material_change inconsistent with exemption in the character the purpose or the method of operation of an organization revocation or modification will ordinarily take effect as of the date of such material_change in cases where a ruling or determination_letter was issued in error or is no longer in accord with the holding of the service when sec_7805 relief is granted see sec_15 and of rev_proc retroactivity of the revocation or modification ordinarily will be limited to a date not earlier than that on which the original ruling or determination_letter is modified or revoked taxpayer’s position a was formed for the purpose of making contributions to organizations qualified for exemption from federal income_taxation under sec_501 the active contributions by the foundation were to commence in the fourth quarter of foundation located at e which was to open after the application_for recognition of exemption was approved the members of the board were c president treasurer secretary and director f director and g director the members of the board were not to be compensated the activity was to be conducted by the board_of directors of the foundation from the office of the the organization budgeted dollar_figure of state in report so they did not file a 990pf a is inactive and hasn’t made any plans to become active the directors did not have anything to in gifts grants and contributions it received a good standing with the secretary mr c was the sole contributor to this fund mr c was anxious to establish the organization but presently decided he did not want to put time energy or money in the a mr g general counsel and member and trustee of the a submitted a letter dated stating that a has not yet engaged in any business activities charitable or otherwise no is any such activity currently contemplated the letter confirmed a’s desire to voluntarily withdraw its tax-exempt status effective immediately and stated that they will be filing the necessary paperwork with the i attorney general’s office government’s position sec_1_501_c_3_-1 states that an organization 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 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose the a received its exempt status and never became active it is not operating exclusively for the exempt_purpose specified in its filing - the purpose of making contributions to organizations qualified for exemption from federal income_taxation under sec_501 nor does it have any plans on operating according to its exempt_purpose revproc_90_27 1990_1_cb_514 date section - revocation or modification of rulings or determination letters recognizing exemption states that a ruling or determination_letter recognizing exemption may be revoked or modified where there is a material_change inconsistent with exemption in the character the purpose or the method of operation of an organization no plans on operating according to its exempt_purpose are a material_change inconsistent with exemption in the character the purpose or the method of operation of the organization form 886-a cev department of the treasury - internal_revenue_service page -2- form_886 a department of the treasury - internal_revenue_service name of taxpayer explanation of items a schedule no or exhibit year period ended b according to revproc_90_27 1990_1_cb_514 date revocation or modification will ordinarily take effect as of the date of such material_change a should be revoked to its exemption granted date conclusion an organization should be revoked if there is a material_change inconsistent with exemption in the character the purpose or the method of operation of an organization a was formed for the purpose of making contributions to organizations qualified for exemption from federal income_taxation under sec_501 a has never performed its purpose and has no plans to perform its exempt_purpose a has not fulfilled its exempt_purpose and should be revoked form 886-a rev department of the treasury - internal_revenue_service page -3- tax_exempt_and_government_entities_division department of the treasury internal_revenue_service south dearborn room mc 4929chi chicago il f e b taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe an adjustment of your organization's exempt status is necessary if you do not agree with our position you may appeal your case the enclosed publication the examination process explains how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process for your convenience an envelope is if you request a conference we will forward your written_statement of protest to the appeals_office and they will contact you enclosed if you and appeals do not agree on some or all of the issues after your appeals_conference or if you do not request an appeals_conference you may file suit in united_states tax_court the united_states court of federal claims or united_states district_court after satisfying procedural and jurisdictional requirements as described in publication letter catalog number 34801v you may also request that we refer this matter for technical_advice as explained in publication exempt_organization appeal procedures for unagreed issues ifa determination_letter is issued to you based on technical_advice no further administrative appeal is available to you within the irs on the issue that was the subject of the technical_advice if we do not hear from you within days from the date of this letter we f you accept our findings please sign and return the enclosed form_6018 consent to proposed adverse action we will then send you a final letter modifying or revoking exempt status will process your case on the basis of the recommendations shown in the report of examination and this letter will become final in that event you will be required to file federal_income_tax returns for the tax period s shown above file these returns with the ogden service_center within days from the date of this letter unless a request for an extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and letter catalog number 34801v thank you for your cooperation sincerely enclosures publication publication form_6018 report of examination envelope letter catalog number 34801v


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi br - plr-113963-00 date date legend x state d1 this responds to your representative’s letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x began doing business under state law on d1 the shareholders of x intended that x elect to be treated as an s_corporation effective d1 however the election to be treated as an s_corporation was not timely filed law and analysis sec_1362 provides that a small_business_corporation can elect to be treated as an s_corporation sec_1362 provides when an s election becomes effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election was made if an election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year however sec_1362 provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an plr-113963-00 election and the secretary determines reasonable_cause existed for the failure to timely make the election then the secretary can treat such an election as timely made for that taxable_year and effective as of the first day of that taxable_year in the present case x failed to timely elect s_corporation treatment effective d1 however x has established reasonable_cause for not making a timely election and is thus entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center 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 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s dianna k miosi dianna k miosi chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes