internal_revenue_service number release date index number ------------------------ -------------------------- ----------------------------------------------- ----------------------------------- in re ------------------------- --------------------------- ----------------------------------------- department of the treasury washington dc person to contact ---------------------- telephone number --------------------- refer reply to cc tege eb qp2 - plr-153253-04 date date legend taxpayer company esop x shares y dollars dear --------- ----------------------------------------------------- -------------------------------------------------- -------------------------------------------------- -------------------------------------------- -------------------------------------------- --------------- this responds to your letter on behalf of the above-named taxpayer requesting a ruling to treat the gain on the sale of company stock to the esop as nonrecognized under sec_1042 of the internal_revenue_code_of_1986 as amended code under the facts described below taxpayer is an employee and shareholder of the company the company is a domestic c_corporation that has only one class of stock outstanding common_stock none of the sock of company has ever been readily_tradable on an established_securities_market company maintains an employee_stock_ownership_plan esop as described in sec_4975 the service has issued a determination_letter stating that the esop satisfies the qualification requirements under sec_401 and meets the requirements of sec_4975 plr-153253-04 on ------------------------- taxpayer sold x shares of common_stock of the on ------------------- and again on ---------------- taxpayer purchased securities taxpayer represents that he completed a statement of purchase with respect to company to the esop for y dollars pursuant to a stock purchase agreement taxpayer states that at all times before and after the sale of company stock to the esop taxpayer intended to utilize sec_1042 to defer recognition of gain realized on the sale to the esop that intent was memorialized in the stock purchase agreement which states that the transaction was structured so as to allow taxpayer to benefit by making an election under sec_1042 thus taxpayer represents that the transaction was designed to permit the taxpayer to make an election under sec_1042 after the sale the esop held ------ of the company’s stock taxpayer states that he held the stock for more than years and did not receive the stock in a distribution from a plan described in sec_401 or in a transfer pursuant to an option or other right to acquire stock to which sec_83 sec_422 sec_422a sec_423 or sec_424 applied which he represents were qualified_replacement_property within the meaning of sec_1042 with the proceeds of his sale of stock to the esop taxpayer purchased the replacement_property during the qualified replacement_period defined in sec_1042 which began months before the date of the sale ---------------------- and ended twelve months after the date of the sale --------------------------- the purchase of such qualified_replacement_property on ------------------ describing the qualified_replacement_property the date of purchase and the cost of the property taxpayer represents that these statements of purchase also included a declaration that the property described in each statement was qualified_replacement_property with respect to the sale of qualified_securities taxpayer’s statements of purchase were notarized on ------------------ within days after taxpayer’s purchase of the qualified_replacement_property form_1040 u s individual_income_tax_return this professional preparer was aware of the esop transaction and of the taxpayer’s intent to elect non-recognition of gain under sec_1042 with respect to that transaction taxpayer was not aware of the various statements required to be filed to complete an election under sec_1042 nor was he advised of those requirements by his tax preparer taxpayer relied on his professional tax preparer to file the statements required for an election under sec_1042 a timely manner on ----------------------- taxpayer having been granted an extension the taxable_income reported on the return did not include gain from the sale of the company stock to the esop the return was filed as if the sec_1042 election had been made but did not contain the necessary statements to complete the election under sec_1042 ie the tax_return_preparer did not attach a statement of election with respect to the sale of company stock by the taxpayer to the esop and did not attach a taxpayer’s return preparer filed taxpayer’ sec_2002 individual_income_tax_return in taxpayer instructed his professional tax preparer to prepare and file hi sec_2002 plr-153253-04 verified written_statement from the company consenting to the application of sec_4978 and sec_4979a taxpayer’s tax_return_preparer informed taxpayer of the omission of the required statements on ------------------ you have requested a ruling that based on the specific facts of this case the taxpayer has substantially complied with the requirements of sec_1_1042-1t of the temporary income_tax regulations in connection with the treatment of the gain realized from the sale of stock to the esop under sec_1042 sec_1042 of the code provides that a taxpayer or executor may elect in certain cases not to recognize long-term_capital_gain on the sale of qualified_securities to an esop as defined in sec_4975 or eligible worker owned cooperative if the taxpayer purchases qualified_replacement_property as defined in sec_1042 within the replacement_period of sec_1042 and the requirements of sec_1042 and sec_1_1042-1t of the temporary income_tax regulations are satisfied a sale of qualified_securities meets the requirements of sec_1042 if the qualified_securities are sold to an esop as defined in sec_4975 or an eligible worker owned cooperative the plan or cooperative owns after application of sec_318 immediately after the sale at least percent of - a each class of outstanding_stock of the corporation other than stock described in sec_1504 which issued the securities or b the total value of all outstanding_stock of the corporation other than stock described in sec_1504 the taxpayer files with the secretary a verified written_statement of the employer whose employees are covered by the esop or an authorized officer of the cooperative consenting to the application of sec_4978 and sec_4979a with respect to such employer or cooperative and the taxpayer's holding_period with respect to the qualified_securities is at least years determined as of the time of the sale sec_1042 provides that the term qualified_securities means employer_securities as defined in sec_409 which are issued by a domestic c_corporation that has no stock outstanding that is readily_tradable on an established_securities_market and were not received by the taxpayer in a distribution from a plan described in sec_401 or in a transfer pursuant to an option or other right to acquire stock to which sec_83 sec_422 or sec_423 applied the taxpayer must purchase qualified_replacement_property within the replacement_period which is defined in sec_1042 as the period which begin sec_3 months before the date on which the sale of qualified_securities occurs and end sec_12 months after the date of such sale sec_1042 defines qualified_replacement_property qrp as any security issued by a domestic operating_corporation which did not for the taxable_year preceding the taxable_year in which such security was purchased have passive plr-153253-04 investment_income as defined in sec_1362 in excess of percent of the gross_receipts of such corporation for such preceding_taxable_year and is not the corporation which issued the qualified_securities which such security is replacing or a member of the same controlled_group_of_corporations within the meaning of sec_1563 as such corporation sec_1042 provides that an election under sec_1042 must be filed not later than the last day prescribed by law including extensions thereof for filing the return of tax imposed by this chapter for the taxable_year in which the sale to the esop occurs sec_1_1042-1t q a-3 of the temporary income_tax regulations further provides that the election shall be made in a statement of election attached to the taxpayer's income_tax return filed on or before the due_date including extensions of time for the taxable_year in which the sale occurs sec_1_1042-1t q a-3 of the temporary income_tax regulations states that the statement of election shall provide that the taxpayer elects to treat the sale of securities as a sale of qualified_securities under sec_1042 and shall contain the following information a description of the qualified_securities sold including the type and number of shares the date of the sale of the qualified_securities the adjusted_basis of the qualified_securities the amount_realized upon the sale of the qualified_securities the identity of the esop or worker-owned cooperative to which the qualified_securities were sold if the sale was part of a single interrelated transaction under a prearranged agreement between taxpayers involving other sales of qualified_securities the names and taxpayer identification numbers of the other taxpayers under the agreement and the number of shares sold by the other taxpayers sec_1_1042-1t q a-3 of the temporary income_tax regulations further provides that if the taxpayer has purchased qualified_replacement_property at the time of the election the taxpayer must attach as part of the statement of election a statement of purchase describing the qualified_replacement_property the date of the purchase and the cost of the property and declaring such property to be qualified replacement sec_301_9100-1 sec_301_9100-2 and sec_301_9100-3 of the procedure and plr-153253-04 property with respect to the sale of qualified_securities the statement of purchase must be notarized no later than days after the purchase sec_1042 requires that an election in the form prescribed by the secretary be made by the due_date including extensions of the return for the year of the sale of securities to the esop administration regulations provide standards pursuant to which the commissioner may grant a reasonable extension of the time to make a regulatory election a regulatory election means an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin a statutory election is an election whose due_date is prescribed by statute date of a return excluding extensions for a taxpayer to make a regulatory or statutory election whose due_date is the due_date of the return or the due_date of the return including extensions provided the taxpayer timely files its return for the year the election should have been made and the taxpayer takes corrective action described in paragraph c of that section within the months extension period sec_301_9100-2 provides an automatic_extension of months from the due with respect to the present ruling_request taxpayer’s election to defer the election to defer gain under sec_1042 is a statutory election the time recognition of the gain realized on the sale of company stock to the esop was required to be made on the taxpayer’ sec_2002 income_tax return under sec_1042 and sec_1_1042-1t of the income_tax regulations the taxpayer’ sec_2002 income_tax return did not show the sale of company stock to the esop on schedule d of form_1040 the return did not include a statement of election as required by sec_1 1t q a-3 or a statement of consent required by sec_1042 and q a-3 of sec_1_1042-1t of the income_tax regulations for making the election is prescribed in sec_1042 of the code except for the automatic 6_month extension under sec_301_9100-2 the provisions of sec_301 are not applicable to the election under sec_1042 accordingly since the period for taking corrective action under sec_301_9100-2 has long since expired in this case we conclude that no relief can be granted to taxpayer under these provisions for the failure to make an election to defer recognition of gain from the sale of stock to the esop on hi sec_2002 income_tax return nor can the taxpayer be considered to have substantially complied with the provisions of the regulations therefore based on the specific facts of this case we conclude that taxpayer did not make a valid election to defer recognition of gain under sec_1042 with respect to gain realized on the taxpayer’ sec_2002 sale of company stock to the esop plr-153253-04 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 the code provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 of in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer the rulings contained in this letter are based upon information and representations submitted by the taxpayers 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 sincerely yours robert d patchell chief qualified_plans branch division counsel associate chief_counsel tax exempt and government entities enclosure copy for 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 psi b01 plr-111859-15 date date legend x -------------------------------------------------- -------------- y -------------------------------------------------- ----------------------------------------------------- country date --------------------- ----------------------- dear ------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes effective date facts according to the information submitted x was formed under the laws of country on date since date x is a wholly owned subsidiary of y a passive_foreign_investment_company under sec_1297 of the internal_revenue_code x intended to elect to be treated as a disregarded_entity for federal tax purposes effective date for federal tax purposes x has been treated consistent with such classification since date however x inadvertently failed to timely file form_8832 entity classification election x represents that it acted in good_faith and reasonably further x represents that it is not using hindsight in requesting the relief sought lastly x represents that the plr-111859-15 interests of the government will not be prejudiced for all taxable years affected by the election by granting the relief sought law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise sec_301_7701-3 provides that an entity classification election or change in entity classification must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_7701-3 states in part if an eligible_entity makes an election to change its classification the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election an election by a newly formed eligible_entity that is effective on the date of formation is not considered a change for purposes of this paragraph c iv sec_301_7701-3 provides that such an election must be signed by either a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organization documents to make the election and who represents to having such authorization under penalties of perjury sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the plr-111859-15 commissioner will use to 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 conclusion based solely on the information submitted and the representations made we conclude that the requirements of 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 file a form_8832 entity classification election with the appropriate service_center to elect to be treated as a disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed as to whether y qualifies as a passive_foreign_investment_company under sec_1297 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely associate chief_counsel passthroughs special industries laura c fields by laura c fields senior technician review branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


internal_revenue_service index no number release date cc dom psi 8-plr-119682-98 in re legend taxpayers dear this responds to your request for a ruling on behalf of taxpayers that amounts paid to taxpayers by a foreign wireless telephone service provider for roaming services as described below are not subject_to the communications excise_tax imposed by sec_4251 of the internal_revenue_code taxpayers provide domestic wireless telephone service taxpayers have entered into a roaming agreement with a foreign wireless telephone service provider fsp fsp operates exclusively outside of the united_states the roaming agreement allows fsp's customers to initiate calls while they are located in taxpayers' domestic_service areas using taxpayers' networks roaming services taxpayers charge fsp for the roaming services based upon the duration and location of each call taxpayers provide fsp with the call detail necessary for fsp to charge its customers for the calls fsp's customers pay the charges for the calls directly to fsp taxpayers have no service_contract or contact in any way with fsp's customers applicable law sec_4251 imposes a tax on amounts paid for three communications_services local_telephone_service as defined in sec_4252 toll_telephone_service as defined in sec_4252 and teletypewriter_exchange_service as defined in sec_4252 plr-119682-98 sec_4251 provides that the communications tax shall be paid_by the person paying for the service sec_4291 provides in part that every person receiving any payment for facilities and services on which tax is imposed upon the payor thereof shall collect the amount of the tax from the person making such payment revrul_74_570 1974_2_cb_363 holds that the tax imposed by sec_4251 does not apply to amounts paid_by one communications company to a second communications company for services provided to the subscriber of the first company and billed by the first company to the subscriber since the subscriber is billed for such services the subscriber is the person paying for the services accordingly the tax imposed by sec_4251 applies to the amounts paid_by the subscriber further since the first company is the person receiving payments for the services from the payor the subscriber within the meaning of sec_4291 that company is liable for collecting and remitting the tax ordinarily the communications tax applies to amounts paid_by the user of the service the ultimate consumer to its service provider thus as provided by revrul_74_570 in a situation where communications_services are sold by one communications company to a second communications company and then resold to a subscriber it is the subscriber that is the person paying for the communications_services accordingly it is the payment made by the ultimate subscribers here fsp's customers to which the tax on communications_services applies and amounts paid to taxpayers by fsp for roaming services as described above are not subject_to the communications excise_tax imposed by sec_4251 this ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent sincerely assistant chief_counsel passthroughs special industries by richard a kocak chief branch


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp br4 plr-102499-99 date date distributing controlled a b c d a dear this letter responds to your date request for rulings on certain federal_income_tax consequences of a proposed transaction the information submitted in that request and in later correspondence is summarized below plr-102499-99 facts distributing wholly owns and files a consolidated_return with controlled the distributing stock is owned a percent by a and b jointly family and the rest by c and d jointly family financial documentation has been submitted indicating that distributing and controlled each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years family wishes to concentrate on the business conducted by controlled while family wishes to concentrate on the business conducted by distributing proposed transaction to allow each family to go its separate way distributing proposes to distribute the controlled stock to a and b in exchange for their distributing stock the distribution representations the taxpayer has made the following representations concerning the proposed transaction a the fair_market_value of the controlled stock received by family will approximately equal the fair_market_value of the distributing stock surrendered by family in the distribution b no part of the consideration distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation c the five years of financial information submitted on behalf of distributing and controlled represents the present operations of each corporation and there have been no substantial changes in these operations since the date of the last submitted financial statements d following the proposed transaction distributing and controlled each will continue the active_conduct of its business independently and with its own employees e the distribution will allow family to concentrate on the business conducted by controlled and family to concentrate on the business conducted by distributing the distribution is motivated in whole or substantial part by this and other corporate business purposes plr-102499-99 f there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in distributing or controlled after the proposed transaction g there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the proposed transaction h there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the proposed transaction except in the ordinary course of business i distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the proposed transaction j no income items including accounts_receivable or any other item resulting from a sale exchange or disposition of property that would have resulted in income to distributing and no items of expense will be transferred to controlled if distributing has earned the right to receive the income or could claim a deduction for the expense under the accrual or similar method_of_accounting k no intercorporate debt will exist between distributing and controlled at the time of or after the distribution l there will be no continuing transactions between distributing and controlled after the proposed transaction m no two parties to the proposed transaction are investment companies as defined in sec_368 and iv of the internal_revenue_code n immediately before the distribution items of income gain loss deduction or credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d distributing does not have an excess_loss_account in its controlled stock o distributing is not an s_corporation within the meaning of sec_1361 and there is no plan or intention by either distributing or controlled to make an s_corporation_election under sec_1362 after the proposed transaction based solely on the information submitted and representations set forth above rulings plr-102499-99 we rule as follows on the proposed transaction no gain_or_loss will be recognized by and no amount will otherwise be included in the income of family on the receipt of controlled stock in the distribution sec_355 the basis of the controlled stock received by family will equal the basis of the distributing stock surrendered by family in the distribution sec_358 the holding_period of the controlled stock received by family will include the holding_period of the distributing stock surrendered by family in the distribution provided the distributing stock is held as a capital_asset on the date of the distribution sec_1223 no gain_or_loss will be recognized by distributing on the distribution sec_355 as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 of the income_tax regulations caveat we express no opinion about the tax treatment of the proposed transaction under any other section of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered in the above rulings procedural matters this ruling letter is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the proposed transaction is consummated plr-102499-99 under a power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer and to the taxpayer’s second-named representative sincerely assistant chief_counsel corporate by _________________________ wayne t murray senior technician reviewer branch


t c memo united_states tax_court donna m orsino petitioner and paul r orsino intervenor v commissioner of internal revenue respondent docket no filed date donna m orsino pro_se lorianne d masano for respondent memorandum findings_of_fact and opinion foley judge by notice dated date respondent determined a dollar_figure deficiency relating to petitioner and her former spouse’s tax_year the issue for decision is whether petitioner is entitled to relief from joint_and_several_liability pursuant to sec_6015 c or f findings_of_fact petitioner a legal secretary and high school graduate and mr orsino who has a degree in bioengineering married on date during their marriage petitioner was responsible for balancing their joint checking account and paying the monthly bills and mr orsino was responsible for filing all of their federal tax returns mr orsino worked for betz dearborne as a water treatment specialist for several years prior to and during he quit his job at betz dearborne in april or date but continued as a consultant for weeks mr orsino also performed water treatment services for national engineering repair corp national engineering in may and june of and deposited compensation received from both companies in the joint checking account petitioner was aware that mr orsino performed services for both betz dearborne and national engineering petitioner and mr orsino separated sometime in july of shortly before their separation mr orsino’s mother provided mr orsino with a dollar_figure savings bond which mr orsino unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure redeemed and used the proceeds therefrom to purchase a truck petitioner knew that mr orsino received funds from his mother but did not know that mr orsino’s mother gave him a savings bond or that he held title to the bond petitioner did not benefit from the proceeds of the savings bond shortly after their separation mr orsino told petitioner that he withdrew all of hi sec_401 retirement_funds he did not deposit any amounts withdrawn from hi sec_401 accounts into the joint checking account mr orsino had not yet reached 59-½ years of age and was not disabled on date mr orsino delivered to petitioner for her signature their joint_return relating to mr orsino placed all attachments ie forms w-2 wage and tax statement and forms 1099-misc miscellaneous income to their joint_return in a sealed envelope which he instructed her not to open the funds withdrawn from the k accounts were reported on the joint_return petitioner asked whether the correct amount of taxes relating to the k withdrawal were withheld and mr orsino assured her that they were petitioner did not open the sealed envelope containing the attachments signed the joint_return and mailed the return to respondent petitioner and mr orsino divorced on date their marital settlement agreement states in the event there are other debts or obligations that can be deemed to be joint obligations which have not been addressed that party who incurred the debt or obligation shall be responsible for payment thereof the agreement required that mr orsino pay petitioner dollar_figure monthly until she recovers the portion of the k accounts to which she was entitled respondent determined that petitioner and mr orsino were subject_to a dollar_figure penalty relating to early withdrawal of funds from mr orsino’ sec_401 accounts and failed to report dollar_figure of savings bond interest and dollar_figure of nonemployee compensation on date respondent notified mr orsino of petitioner’s claim for sec_6015 relief on date this court filed mr orsino’s notice of intervention in which he contends that petitioner was fully aware of their joint income benefited from such income freely signed their joint returns and benefited from the tax refunds they received on date the court denied a motion by petitioner to dismiss mr orsino’s notice of intervention petitioner resided in sarasota florida when her petition was filed opinion respondent contends that petitioner is not entitled to sec_6015 relief because she had actual knowledge of each item that gave rise to the deficiency ie compensation k withdrawal and savings bond interest and it would not be inequitable to hold her liable for the tax in limited situations taxpayers filing joint federal_income_tax returns may be relieved of joint liability pursuant to sec_6015 petitioner is not entitled to relief under sec_6015 if she had reason to know of the items of income sec_6015 similarly petitioner is not entitled to relief under sec_6015 if she had actual knowledge of the item giving rise to the omitted income sec_6015 115_tc_183 affd 282_f3d_326 5th cir we agree with respondent that petitioner had actual knowledge of mr orsino’s compensation relating to betz dearborne and national engineering and hi sec_401 withdrawal accordingly with respect to mr orsino’s compensation and k withdrawal petitioner is not entitled to relief pursuant to sec_6015 or c petitioner however did not have clear awareness of the interest_income relating to the savings bond cf cheshire v commissioner supra pincite holding that knowledge of her husband’s pension withdrawal disqualified the taxpayer from sec_6015 relief even though the taxpayer did not know the tax consequences of the transaction petitioner was led to believe that mr orsino received a cash gift from his mother she did not know mr orsino received from his mother a bond to which he held title petitioner had no awareness of the bond’s existence and thus could not have actual knowledge of interest from the bond petitioner’s contention that she did not have clear awareness of the item_of_income relies not on ignorance of the law but on ignorance of a material fact see id accordingly pursuant to sec_6015 petitioner is relieved of liability for the tax_deficiency attributable to interest from the savings bond pursuant to sec_6015 respondent is granted discretion to award relief from joint_and_several_liability if the facts and circumstances indicate that it would be inequitable to hold the spouse seeking relief liable for the deficiency we conclude that it would not be inequitable to hold petitioner liable for the deficiency attributable to mr orsino’s compensation and k withdrawal petitioner knew of the omitted income and k withdrawal did not establish economic hardship and benefited significantly from the omitted compensation ie funds were deposited into a joint account and k withdrawal ie petitioner is currently receiving dollar_figure monthly payments as her share of the k withdrawal see revproc_2000_15 2000_1_cb_447 in addition both mr orsino and petitioner incurred the tax debt therefore the marital settlement agreement does not shift all of the liability to mr orsino accordingly respondent’s denial of relief pursuant to sec_6015 was not an abuse_of_discretion see 114_tc_276 contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing decision will be entered under rule


tam-107632-99 internal_revenue_service national_office technical_advice_memorandum date tam-107632-99 cc dom p si b1 index uil number case mis number number release date taxpayer’s name taxpayer’s address taxpayer’s identification no years involved date of conference legend pr sec_1 pr sec_2 pr sec_3 pr sec_4 pr sec_5 a b c d trustl trust2 upreit x reit statel state2 tam-107632-99 datel date2 date3 date4 dollar_figurea dollar_figureb dollar_figurec dollar_figured dollar_figuree issue is the contribution of properties to upreit by pr sec_1 in exchange for upreit interests the immediate distribution by pr sec_1 of the upreit interests to the partners in pr sec_1 and the refinancing of debt securing the contributed properties a single transaction for purposes of sec_1_752-1 conclusion yes therefore the contributions and distributions to and from upreit as a result of the transaction will be netted for purposes of determining whether there is a net contribution by the partners to upreit or a net distribution by upreit to the partners facts pr sec_1 was formed on date1 a b and c the partners all hold both general and limited_partnership interests in pr sec_1 reit is a statel real_estate_investment_trust on date2 the trustees of reit approved the initial_public_offering ipo of its shares the formation and capitalization of upreit a state2 limited_partnership and the obtaining of a dollar_figurea credit facility line of credit guaranteed by reit for the upreit's use pursuant to a contribution agreement agreement dated date3 pr sec_1 agreed to transfer the majority of its assets the audit properties and liabilities to upreit in exchange for tam-107632-99 upreit interests pr sec_1 planned to distribute the interests pro_rata to the partners under section of the agreement the parties’ obligations were conditioned upon among other things the consummation of the ipo by reit the borrowing by upreit or an affiliate or subsidiary of at least dollar_figureb the availability of a working_capital line of credit of at least dollar_figurea and the sale or contribution by pr sec_1 or its affiliates and other third parties to upreit or one of its subsidiaries or affiliates of certain specified properties on date4 pr sec_1 transferred the audit properties subject_to their attached mortgages and accrued liabilities to upreit in exchange for upreit interests pr sec_1 distributed the upreit interests to the partners the same day the upreit interests are redeemable for either cash or an equal number of common shares of the reit following the contribution of pr sec_1’s assets described above the owners of upreit included reit a b c d trustl trust2 and x as the sole general_partner concurrent with the contribution of the audit properties to upreit the following events occurred upreit contributed certain properties other than the audit properties to pr sec_2 in exchange for a limited_partnership_interest pr sec_2 obtained a nonrecourse loan for dollar_figureb secured_by its properties including the properties contributed by upreit pr sec_3 a partnership in which upreit held a interest acquired new properties subject_to dollar_figurec in existing nonrecourse mortgage indebtedness pr sec_4 a partnership in which upreit held a interest acquired a shopping mall subject_to an existing dollar_figured nonrecourse loan pr sec_5 a partnership in which upreit held a interest acquired a mall subject_to an outstanding nonrecourse mortgage of dollar_figuree upreit retired the existing mortgage indebtedness on the audit properties with proceeds raised by reit in the ipo and subsequently contributed to upreit or from upreit’s line of credit the pr sec_2 pr sec_3 and pr sec_4 mortgage loans were cross-collateralized and cross-defaulted with each other the pr sec_5 loan was not cross-collateralized with the other loans the line of credit was guaranteed by reit accordingly concurrent with the contributions of property by pr sec_1 to upreit upreit was a partner in pr sec_2 pr sec_3 pr sec_4 and pr sec_5 subsidiary partnerships the subsidiary partnerships own properties subject_to nonrecourse mortgage indebtedness a portion of which under the rules of sec_752 is allocated to the partners thereby increasing the partners' bases in their upreit interests tam-107632-99 law and analysis sec_704 provides that under regulations prescribed by the secretary income gain loss and deduction with respect to property contributed to the partnership by a partner shall be shared so as to take account of the variation between the basis of the property to the partnership and its fair_market_value at the time of contribution sec_705 provides that the adjusted_basis of a partner’s interest in a partnership is generally the basis of that interest determined under sec_722 relating to contributions to a partnership or sec_742 relating to transfers_of_partnership_interests increased by the sum of the partner's share for that taxable_year and prior taxable years of a taxable_income of the partnership as determined under sec_703 and b income of the partnership exempt from tax under title_26 similarly the partner's basis is decreased by distributions from the partnership as provided in sec_733 and the sum of the partner's_distributive_share for that taxable_year and prior taxable years of a losses of the partnership and b expenditures of the partnership not deductible in computing its taxable_income and not properly chargeable to capital_account sec_721 provides that no gain_or_loss is recognized by a partnership or to any of its partners in the case of a contribution of property to a partnership in exchange for an interest in the partnership however if the property is encumbered and the encumbrance becomes a liability of the partnership then under sec_752 the contributing_partner is deemed to receive a distribution of money from the partnership in an amount equal to the reduction in the share of the liability sec_722 provides that the basis of an interest in a partnership acquired by a contribution of property including money to the partnership is the amount of the money and the adjusted_basis of the property to the contributing_partner at the time of the contribution increased by the amount if any of gain recognized under sec_721 by the contributing_partner at the time of contribution sec_731 provides that in the case of a distribution by a partnership to a partner gain is generally not recognized to the partner except to the extent that any money distributed exceeds the adjusted_basis of the partner's_interest_in_the_partnership immediately before the distribution under sec_731 no gain_or_loss is recognized by a partnership on a distribution to a partner of property including money sec_752 provides that any increase in a partner's share of the liabilities of a partnership or any increase in a partner's individual liabilities by reason of the assumption by that partner of partnership liabilities is considered a contribution of money by the partner to the partnership similarly under sec_752 any decrease in a partner's share of liabilities of a partnership or any decrease in a partner's individual liabilities by reason of the assumption by the partnership of the individual liabilities is considered a distribution of money to the partner by the partnership sec_752 provides that for purposes of sec_752 a liability to which property is subject is to the extent of the fair_market_value of the property considered a liability of the tam-107632-99 owner of the property sec_1_752-2 sec_1_752-3 and sec_1_752-4 of the income_tax regulations contain the rules for determining a partner’s share of recourse and nonrecourse liabilities of a partnership sec_1_752-3 provides that a partner’s share of nonrecourse liabilities of a partnership equals the sum of the partner’s share of partnership_minimum_gain determined in accordance with the rules of sec_704 and the regulations thereunder the amount of any taxable gain that would be allocated to the partner under sec_704 or in the same manner as sec_704 in connection with a revaluation of partnership property if the partnership disposed of in a taxable transaction all partnership property subject_to one or more nonrecourse liabilities of the partnership in full satisfaction of the liabilities and for no other consideration and the partner’s share of excess nonrecourse liabilities those not allocated under paragraphs a and a of this section of the partner’s share of partnership profits the allocation of partnership liabilities among the partners serves to equalize the partnership's basis in its assets inside_basis with the partners' bases in their partnership interests outside_basis providing additional basis to a partner for the partner's partnership_interest permits the partner to receive distributions of the proceeds of partnership liabilities without recognizing gain under sec_731 and to take deductions attributable to partnership liabilities without limitation under sec_704 which limits the losses that a partner may claim to the basis of the partner's_interest_in_the_partnership by equalizing inside and outside_basis sec_752 simulates the tax consequences that the partners would realize if they owned undivided interests in the partnership's assets thereby treating the partnership as an aggregate of its partners sec_1_752-1 provides a rule for a netting of increases and decreases of liabilities resulting from the same transaction under that rule if as the result of a single transaction a partner incurs both an increase and a decrease in the partner's share of the partnership liabilities or the partner's individual liabilities only the resulting net decrease is treated as a distribution from the partnership and only the resulting net increase is treated as a contribution of money to the partnership generally the contribution to or distribution from a partnership of property subject_to a liability will require that increases and decreases in liabilities associated with the transaction be netted to determine whether a partner will be deemed to have made a contribution or received a distribution as a result of the transaction sec_1_752-4 provides that an upper-tier partnership's share of the liabilities of a lower-tier partnership other than any liability of the lower-tier partnership that is owed to the upper-tier partnership is treated as a liability of the upper-tier partnership for purposes of applying sec_752 and the regulations thereunder to the partners of the upper-tier partnership revrul_79_205 1979_2_cb_255 considers increases and decreases in partners' individual liabilities resulting from a transaction involving nonliquidating distributions of encumbered partnership properties the facts of that ruling indicate that a partnership distributed two of its properties one to each of its partners both properties were subject_to liabilities at the tam-107632-99 time of the distribution the ruling states the general_rule that partnership_distributions are taxable under sec_731 only to the extent that the amount of money distributed exceeds the distributee partner's basis in his partnership_interest this rule reflects congressional intent to limit the circumstances under which gain_or_loss is recognized to facilitate the movement of property into and out of partnerships as business reasons dictate see s rep no 83d cong 2d sess relying on this general_rule the ruling concludes that because the partners' shares of the liabilities are both increasing and decreasing in the same transaction offsetting the increases and decreases tends to limit recognition of gain and thereby gives effect to congressional intent accordingly the ruling holds that in a distribution of encumbered property by a partnership the resulting liability adjustments will be treated as occurring simultaneously rather than in a particular order revrul_87_120 1987_2_cb_161 amplified revrul_79_205 by extending its holding to terminating distributions by a partnership of encumbered property as part of a single transaction and within the same taxable_year the issue in this technical_advice_memorandum is similar to those discussed in revrul_79_205 and revrul_87_120 pr sec_1's contribution of property to upreit and the payment of the liabilities related to the audit properties results in a decrease in liabilities and a deemed_distribution of money to the partners on the same day however the partners' shares of upreit liabilities increased due to the subsidiary partnerships' liabilities this increase results in a deemed contribution of money to upreit by the partners under the agreement the transactions were related in the sense that one could not occur without the others accordingly we conclude that the deemed contribution and the deemed_distribution should be treated as parts of a single transaction for purposes of sec_1_752-1 therefore the increases and decreases in the partners' bases in their upreit interests occurring as a result of the liability shifts will be netted for purposes of determining the ultimate result of the transactions under sec_731 and sec_752 caveat s except as specifically discussed above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provisions of the code in particular we express no opinion concerning the actual amount of the partners' respective bases in their upreit interests following the transactions discussed above 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 number release date washington dc person to contact telephone number refer reply to cc dom corp - plr-102443-00 date date distributing controlled subsidiary subsidiary 1-a subsidiary subsidiary a b c d e business f business g business h a b c d e f state i state j this letter responds to your date request for rulings regarding certain federal_income_tax consequences of a proposed transaction summary of facts distributing is a holding_company that owns all of the stock of controlled over percent of the stock of subsidiary and all the stock of subsidiarie sec_2 and subsidiary owns all the stock of subsidiary 1-a distributing files a consolidated_return with its subsidiaries controlled and subsidiary conduct business f subsidiarie sec_1 and 1-a conduct business g and subsidiary conducts business h the distributing common_stock is owned a percent by a b percent by b c percent by c d percent by d and e percent by e a b and d are immediate_family members c is a relative of such family e is a step-parent of c we have received financial information indicating that each of businesses f g and h has had gross_income and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years c who primarily manages controlled has had disagreements on business policy with other distributing shareholders in addition controlled’s headquarters are located in state j a great distance from distributing’s headquarters in state i in order to resolve the shareholder disputes and to save the significant cost of travel between the two headquarters as well as travel to neutral meeting sites it is proposed that distributing be separated from controlled as follows i in anticipation of the distribution as defined below distributing transferred cash to controlled the contribution the purpose of the contribution was to equalize the value of the controlled stock to be distributed in the distribution as defined below and the distributing stock to be exchanged therefor part of the cash transferred in the contribution was used immediately by controlled to repay an intercompany debt from controlled to distributing ii distributing will distribute all of the stock of controlled to c in exchange for all of c’s stock in distributing the distribution representations the taxpayers have made the following representations in connection with the proposed transaction a no indebtedness of controlled to distributing after the distribution of controlled stock will constitute stock_or_securities b c d e f g h i j the fair_market_value of the controlled stock received by c will be equal to the fair_market_value of the distributing stock surrendered by c in the exchange no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of a corporation the years of financial information submitted on behalf of distributing is representative of the corporation’s present operations there has been no substantial operating changes since the date of the last financial statement submitted immediately after the distribution at least percent of the fair_market_value of the gross assets of distributing will consist of the stock of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in b following the distribution distributing and controlled will each continue the active_conduct of its business independently and with separate employees the distribution is being carried out to resolve management disagreements between the shareholders who manage distributing and controlled and to achieve significant cost savings by eliminating the need for managers and supervisors to travel between distributing’s and controlled’s geographically distant headquarters or to attend a meeting at a neutral site distributing is not an s_corporation within the meaning of sec_1361 and there is no plan or intention by distributing or controlled to make an s_corporation_election within the meaning of sec_1362 there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in distributing or controlled except that the remaining shareholders of distributing after the distribution will annually offer to sell to other distributing shareholders stock representing less than f percent of the total distributing stock outstanding there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the distribution other than stock purchases meeting the requirements of sec_4 b of revproc_96_30 k l m n o p there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the distribution except in the ordinary course of business no intercompany debt will exist between distributing and controlled at the time of or subsequent to the distribution of controlled stock except for intercompany accounts that will result from administrative charges from distributing for the month immediately preceding the distribution immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations in effect distributing has no excess_loss_account as described in sec_1_1502-19 of the income_tax regulations with respect to controlled stock immediately before the distribution payments made in connection with all continuing transactions between distributing and controlled will be for fair_market_value based on the terms and conditions arrived at by the parties bargaining at arms length neither distributing nor controlled is an investment_company as defined in sec_368 iii and iv the distribution is not part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of the stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of distributing or controlled stock within the meaning of sec_355 rulings based solely on the information submitted and the representations set forth above we rule as follows the contribution followed by the distribution will be a reorganization under sec_368 distributing and controlled each will be a_party_to_a_reorganization under sec_368 no gain_or_loss will be recognized by distributing on the distribution sec_361 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of c on c’s receipt of controlled stock in the distribution sec_355 the basis of the controlled stock in the hands of c will equal the basis of the distributing stock surrendered in exchange therefor sec_358 the holding_period of the controlled stock received by c will include the holding_period of the distributing stock exchanged therefor provided the distributing stock is held as a capital_asset on the date of the distribution sec_1223 as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 of the income_tax regulations caveats we express no opinion on the federal_income_tax treatment of the proposed transaction under other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings procedural statements this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in the transaction must attach a copy of this letter to the taxpayer's federal_income_tax return for the taxable_year in which the transaction is completed in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer sincerely assistant chief_counsel corporate by stephen p fattman assistant to the chief branch


internal_revenue_service p o box cincinnati oh number release date date date legend b number x city dear department of the treasury employer_identification_number contact person - id number contact telephone number uil you asked for advance approval of your scholarship grant procedures under sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 b description of your request you will operate a scholarship program to provide financial support to needy students in the x metropolitan area who demonstrate the potential to excel in postsecondary undergraduate or graduate educational opportunities you currently plan to award up to b grants annually at the discretion of your board_of directors the amount of each award will depend upon the grantee's financial need as described by the grantee in his or her application materials you will accept recommendations and applications on a rolling basis the courses of study for scholarship grant recipients will not be limited letter catalog number 58263t scholarship grants may be used for tuition at four-year postsecondary or graduate educational institutions that normally maintain a regular faculty and curriculum as described in sec_170 and for fees books supplies and equipment required for courses at such institutions scholarships may also be used for other expenses related to matriculation at a qualifying postsecondary or graduate institution such as housing and other living_expenses the pool of grantees eligible for scholarship grants consists of needy students who are residents in the x metropolitan area as of the date of application and who are enrolled or intend to enroll in an institution_of_higher_education described in sec_170 b a ii of the code potential grantees must submit applications including a written_statement of financial need a short biographical record a narrative of the course of study or goals describing what the applicant expects the grant to help him her achieve and information to ensure that the potential grantee meets the eligibility requirements and is not a disqualified_person potential grantees must also submit letters of support and at least two additional references grantees will be selected by your board_of directors from among those applications on the basis of selection criteria including financial need prior performance in academic coursework and the evaluation by your board_of directors of the applicant's motivation ability character achievement and potential as demonstrated in a written_statement or personal interview provided by each potential grantee your board_of directors will select grant recipients from among eligible recipients without discriminating on the basis of race gender sexual orientation ethnicity nationality or religion disqualified persons within the meaning of sec_4946 including your directors and officers and their family members are not eligible to receive any awards you will provide each recipient with an award letter notifying him or her of the grant the letter will specify that all amounts must be used in accordance with the grant requirements for tuition at four-year post-secondary educational institutions that normally maintain a regular faculty and curriculum as well as for fees books supplies and equipment required for courses at such institutions or other expenses related to matriculation at such educational institutions such as housing and other living_expenses the award letter will describe the reporting requirements and will specify the date by which the recipient must comply with the reporting requirements you will require the scholarship recipient to sign and return a copy of the award letter indicating his her acceptance of the scholarship and its terms before you will disburse any scholarship funds you will pay awards directly to the qualified educational_institution in the event that an educational_institution returns the residual balance of a scholarship award to a grantee the grantee must certify that the money will be used for tuition fees books supplies letter catalog number 58263t and or equipment required for his or her courses of instruction at a qualified educational_institution you will investigate if any grant recipient fails to provide the documentation required under the grant procedures within a reasonable amount of time and withhold further grant funds until such documentation has been submitted consistent with the duty_of a private_foundation to investigate jeopardized grants under the treasury regulations if you determine that any grants have been used for improper purposes you shall take all reasonable and appropriate steps up to and including legal action unless such action in all probability would not result in satisfaction of execution of a judgment to recover improperly expended funds and to ensure that any funds held by the recipient will be used exclusively for the purposes of the grant award you will keep the following records with respect to each grantee all information that you secure to evaluate the qualification of potential grantees the identity of each grantee including any information on relationships that would cause the recipient to be a disqualified_person the amount and purposes of each grant a copy of the award letter notifying the recipient of the grant any follow-up information obtained as described above and any measures taken to investigate the misuse of grant funds or to enforce grant terms basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 b a ii other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent letter catalog number 58263t you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely jeffrey i cooper director exempt_organizations rulings and agreements letter catalog number 58263t


internal_revenue_service number release date index number ---------------------- ------------------------------------------ ------------------- --------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-132960-12 date date legend x ------------------------------------------- ----------------------------------- a ---------------------- b -------------------------------------------- ------------------- trust ------------------------------------------- -------------------------------- date ---------------------- date -------------------------- date ------------------ date ------------------ state ----------------- dear --------------- this responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code plr-132960-12 facts according to the information submitted x was incorporated under the laws of state effective date x elected to be taxed as an s_corporation on date a a shareholder of x died pursuant to a’s will a’s x shares were transferred to trust on date trust was an eligible shareholder of x until date as of date trust was intended to be treated as a qualified_subchapter_s_trust qsst however b the beneficiary of trust did not file a timely election to treat trust as a qsst therefore causing x’s s_corporation_election to terminate as of date x represents that trust qualified as a qsst under sec_1361 as of date and thereafter x further represents that the circumstances resulting in the failure_to_file a qsst election for trust was inadvertent and was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary law and analysis sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder sec_1361 provides that in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 the trust is treated as a_trust described in sec_1361 and for purposes of sec_678 the beneficiary of the trust is treated as the owner of that portion of the trust which consists of stock in a s_corporation with respect to which the election under sec_1361 is made sec_1361 provides that a_trust with respect to stock transferred to it pursuant to a will but only for the 2-year period beginning on the day on which such is plr-132960-12 transferred to it sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was terminated under sec_1362 or or sec_1361 the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of such corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election terminated on date as a result of the failure to make a timely qsst election for trust we further conclude that the termination of x’s s election on date was inadvertent within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation as of date and thereafter provided that b files a qsst election for trust with an effective date of date with the appropriate service_center within days from the date of this letter and x’s s_corporation_election is not otherwise terminated under sec_1362 a copy of this letter must be attached to the qsst election accordingly x’s shareholders in determining their respective income_tax liabilities must include their pro_rata share of the separately and non-separately computed items of x as provided in sec_1366 make any adjustments to stock basis as provided in sec_1367 and take into account distributions made by x as of provided by sec_1368 except as specifically ruled upon above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding x’s eligibility to be an s_corporation further no opinion is expressed or implied concerning whether trust meets the requirements of a qsst under sec_1361 this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent plr-132960-12 pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely faith colson faith colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c tax exempt and government entities noy legend taxpayer a decedent b ira x custodian t state c dear wn py tep kat j eee this letter is in response to your ruling_request dated date as supplemented by your letters of date date date and date regarding distributions from decedent b’s ira x to taxpayer a specifically the rulings requested are whether taxpayer a is permitted to use his life expectancy to determine the required minimum distributions from ira x and whether such distributions commenced timely decedent b died on date in state c prior to decedent b’s death she had established ira x with custodian t on date decedent b designated her three children as beneficiaries in equal shares of ira x taxpayer a is one of decedent b’s three children decedent b had not attained her required_beginning_date as of her date of death date decedent b therefore had not begun receiving minimum required distributions from ira x prior to date ira x was subdivided in separate_accounts for each of decedent b’s beneficiaries under ira x each account was titled in the name of decedent b for the benefit of the respective child the account has been maintained as a separate_account since the date of division as a result all gains losses_and_expenses of each of the separate_accounts have been determined without regard to the investment experience of the other separate_accounts prior to date taxpayer a commenced taking distributions from his separate_account under ira x based on the foregoing facts and representations you request that the distributions to taxpayer a commenced within the time required by sec_401 of the internal_revenue_code the code and the proposed regulation promulgated thereunder and taxpayer a as a designated_beneficiary of decedent b is permitted to use his life expectancy to determine the required_minimum_distribution from ira x sec_408 of the code defines an individual_retirement_account as a_trust which meets the requirements of sec_408 through a sec_408 of the code states that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the ira trust is maintained sec_401 of the code sets forth the general rules applicable to required minimum distributions from qualified_plans sec_401 of the code provides that a_trust shall not constitute a qualified_trust under this subsection unless the plan provides that the entire_interest of each employee will be distributed beginning not later than the required_beginning_date in accordance with regulations over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary under sec_401 if an employee dies before distribution has begun in accordance with sec_401 the entire_interest of the employee must be distributed within five years after the death of the employee sec_401 provides an exception to the five-year rule if any portion of an employee's interest is payable to a designated_beneficiary over the life of such designated_beneficiary or over a period not extending beyond the life expectancy of such beneficiary and such distributions begin not later than one year after the date of the employee's death sec_1_401_a_9_-1 of the proposed income_tax regulations proposed_regulations question and answer c-3 provides that the exception provided in sec_401 of the code will be satisfied if the distributions to a non-spouse beneficiary begin on or before december of the calendar_year immediately following the year in which the employee dies in this case benefits were payable to taxpayer a as a designated_beneficiary of ira x at the date of decedent b's death and he began to receive distributions from ira x on or before date accordingly with respect to the first ruling_request it is concluded that distributions to taxpayer a will qualify for the exception to the five-year rule under sec_401 of the code sec_1_401_a_9_-1 of the proposed_regulations q a-e-5 a provides generally that if more than one individual is designated as a beneficiary with respect to an employee as of the applicable_date for determining the designated_beneficiary the designated_beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the distribution period q a-h-2 b of proposed_regulations sec_1_401_a_9_-1 provides with respect to distributions under sec_401 of the code that if as of an employee's death the beneficiaries of a separate_account in an individual_account differ from the beneficiaries of other separate_accounts in the individual_account of the employee such separate_account need not be aggregated with other separate_accounts in order to determine whether the distributions from such separate_account satisfy sec_401 instead the rules in sec_401 may separately apply to such separate_account thus if the employee designated a different beneficiary for each separate_account each separate_account may be distributed over the life or life expectancy of the designated_beneficiary for that separate_account q a-2 b of the revised proposed_regulations sec_1_401_a_9_-8 provides with respect to distributions under sec_401 a b iii of the code that if as of the end of the year following the year containing the employee's date of death the beneficiaries with respect to a separate_account under the plan differ from the beneficiaries with respect to the other separate_accounts of the employee under the plan such separate_account under the plan need not be aggregated with other separate_accounts under the plan in order to determine whether the distributions from such separate_account under the plan satisfy sec_401 instead the rules in sec_401 may separately apply to such separate_account under the plan in this regard q a-h-2 b of proposed_regulations sec_1_401_a_9_-1 and q a-2 b of revised proposed_regulations sec_1_401_a_9_-8 provide that if the beneficiaries of a separate_account under the plan differ from the beneficiaries of other separate_accounts under the plan the rules of sec_401 may separately apply to such separate_account under the plan with respect to request two it is concluded that decedent b's beneficiary designation naming her children in equal discernable shares created separate_accounts as that term is defined under sec_1_401_a_9_-1 q a h-2a and therefore taxpayer a may use his own life expectancy in calculating required minimum distributions for such beneficiary's respective account pursuant to sec_1 a -l q a h-2 b with further regard to this ruling_request final income_tax regulations under code sec_401 and sec_408 were published in the federal_register on date see also 2002_19_irb_852 date the preamble to the final regulations indicates in relevant part that the regulations apply for purposes of determining required minimum distributions for calendar years beginning on or after date sec_1_401_a_9_-8 of the final regulations q a-2 governs the creation of separate_accounts for purposes of code sec_401 in relevant part q a- a provides with respect to defined contribution plans that a separate_account need not be aggregated with other separate_accounts for purposes of determining minimum required distributions with respect to calendar years subsequent to the calendar_year in which the separate_accounts are established furthermore q a-2 a provides that in the case of a distribution described in sec_401 separate_accounts must be established no later that the last day of the year following the year of the plan participant’s ira holder’s death as noted above decedent b died during calendar_year and her ira x was subdivided into three separate_accounts during calendar_year this ruling letter assumes that decedent b's ira x has met the requirements of code sec_408 at all times relevant thereto this ruling is directed solely to the taxpayer that requested it sec_61 k of the code provides that it may not be used or cited by others as precedent this letter_ruling was written by of this group who can be reached at sincerely alan pipkin manager employee_plans technical group enclosures deleted copy of letter_ruling form_437


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 b06 plr-131126-08 date date legend taxpayer ----------------------------------------- --------------------------------------------------- preparer ---------------------------------------- ------------------------------- date --------------------- date -------------------------- date ---------------------- date ---------------- dear ------------- this letter relates to a private_letter_ruling request filed on behalf of taxpayer requesting an extension of time under sec_301_9100-1 of the procedure and administration regulations to file a copy of a form_3115 application_for change in accounting_method for the year beginning date and ending on date with the national_office as required by dollar_figure of revproc_2002_9 2002_1_cb_327 this request was made in accordance with sec_301_9100-3 on date taxpayer timely filed its federal_income_tax return for the taxable_year ending date along with the original of the form_3115 filed under revproc_2002_9 to change taxpayer’s method_of_accounting from the cash receipts and disbursements plr-131126-08 method to an overall accrual_method however taxpayer did not file a copy of form_3115 with the national_office as required by revproc_2002_9 because preparer taxpayer’s accountant did not inform taxpayer either orally or in writing of the requirement to do so taxpayer was unaware of this requirement until date when taxpayer’s outside counsel engaged in an unrelated matter notified taxpayer that it could find no proof of taxpayer’s having sent a copy to the national_office revproc_2002_9 provides the procedures by which a taxpayer may obtain automatic consent to change certain methods_of_accounting a taxpayer satisfying all applicable_requirements of this revenue_procedure is deemed to have obtained the consent of the commissioner to change its method_of_accounting under sec_446 of the internal_revenue_code and the income_tax regulations thereunder section a of revproc_2002_9 provides that a taxpayer changing a method_of_accounting pursuant to revproc_2002_9 must complete and file form_3115 to two separate locations the original must be attached to the taxpayer's timely filed including extensions original federal_income_tax return for the year_of_change and a signed copy must be filed with the national_office no earlier than the first day of the year_of_change and no later than the date the original is filed with the federal_income_tax return sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make certain regulatory elections sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when a taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly we hereby grant an extension of time for taxpayer to file the necessary copy of the form_3115 with the national_office this extension shall be for a period of days from the date of this ruling please attach a copy of this ruling to the form_3115 plr-131126-08 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 such material 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 requesting it sec_6110 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 taxpayer’s authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching to their returns a statement providing the date and control number of the letter_ruling sincerely roy hirschhorn senior technician reviewer branch office of associate chief_counsel income_tax accounting