tax_exempt_and_government_entities_division number release date date date department of the treasury internal_revenue_service washington d c contact person identification_number contact number employer_identification_number form required to be filed tax years uil dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final you must file federal_income_tax returns on the form and for the years listed above within file the returns in accordance days of this letter unless you request an extension of time to file with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you agree with our deletions you do not need to take any further action if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your or the irs customer service number for businesses irs customer service number for people with hearing impairments is the sincerely lois g lerner director exempt_organizations enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date contact person identification_number contact number fax number employer_identification_number we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 based on the information provided we have concluded that you do not qualify for exemption under that section the basis for our conclusion is set forth below facts you are a state nonprofit public benefit corporation formed on date your articles of incorporation provide that you are organized for charitable religious educational and scientific purposes within the meaning of sec_501 and specifically to dispense cannabis also known as marijuana intended to be used for medicinal purposes your articles state that you are organized for public purposes your bylaws require the issuance of certificates of capital stock and provide that the certificates represent the interests of the shareholders the bylaws further state that shareholders may be entitled to receive dividend payments your shareholders elect your board_of directors annually in your form_1023 application you state that your formation followed the passage of state legislation that allows for the cultivation and use of cannabis by seriously ill individuals upon a physician’s recommendation you explain that under state attorney_general guidelines issued for this legislation you are required to operate in the business form known as a public benefit corporation you further describe yourself as a clinic devoted to the care and nurturing of persons in medical distress for various reasons you state that you are dedicated to educating eligible individuals about their rights when using cannabis as a medical therapy and to provide them safe legal access to cannabis you indicate that only your members may purchase or receive a donation of cannabis because the only recognized entities under the state attorney_general guidelines are cooperatives and collectives that allow members and caregivers to associate you do not charge a membership fee to become a member a person must be at least years old have a written referral from a qualified doctor and provide a picture identification card you keep copies of the doctor's referral and the member's identification for your records noting the expiration date of the referral after determining the member's eligibility you review your policies and procedures with the member you represent that you run your clinic in a manner similar to a doctor's office members must make an appointment to receive services and obtain the cannabis you treat members in a private area and allow only the member and caregiver into the dispensary during the consultation the consultation determines which variety and form of cannabis is appropriate for each member you distribute the cannabis only in amounts permitted by state law in addition you provide information to members regarding how to ingest and use topicals which varieties are more effective recipes that include cannabis and instructions to grow your own cannabis you provide grading services for homegrown cannabis you also discuss with your members current legislation and laws regarding the legal use of cannabis in state and provide information and literature on a variety of subjects related to alternative medicine and different treatment options you charge your members a suggested donation price per visit to cover the farmer’s costs of growing and providing the cannabis members may make the donation in cash or homegrown cannabis in exchange for using the dispensary and obtaining information and periodicals related to alternative medicine you state that you will provide cannabis free of charge to members in need of financial aid you sell to your members cannabis provided by your members to raise funds for this purpose your staff determines financial hardship besides the ingestible form you also sell cannabis raw and in other forms as indicated on your form_1023 application your primary source of funds will be member donations and some public donations you plan to conduct quarterly cannabis raffles in addition to selling cannabis you will sell items such as t-shirts organic pipes topicals butter and edibles and pharmacy front-counter items such as lighters applicable law sec_501 of the code provides for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable or educational_purposes provided no part of the net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more exempt purposes if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 of the regulations provides that an organization is organized exclusively for one or more exempt purposes only if its articles of organization limit its purposes to one or more exempt purposes and do not expressly empower it to engage otherwise than as an insubstantial part in activities which in themselves are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 of the regulations provides that in no case shall an organization be considered to be organized exclusively for one or more exempt purposes if by the terms of its articles the purposes for which it is created are broader than the purposes specified in sec_501 the fact that the actual operations of such organization have been exclusively in furtherance of one or more exempt purposes shall not be sufficient to permit the organization to meet the organizational_test sec_1_501_c_3_-1 of the regulations provides that an organization operates exclusively for exempt purposes only if specified in sec_501 of the code an organization will not be operated exclusively for exempt purposes if more than an insubstantial part of its activities are not in furtherance of an exempt_purpose it engages primarily in activities that accomplish exempt purposes sec_1_501_c_3_-1 of the regulations provides that an organization is not operated exclusively for exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals the words private_shareholder_or_individual refer to persons that have a personal or private interest in the activities of the organization see sec_1_501_a_-1 sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus the organization must establish that it is not organized or operated for the benefit of private interests such as designated individuals or shareholders of the organization sec_1_501_c_3_-1 of the regulations provides that the term charitable is used in sec_501 of the code in its generally accepted legal sense the promotion of health has long been recognized as a charitable purpose see restatement second of trusts sec_368 sec_372 4a scott and fratcher the law of trusts sec_368 sec_372 4th ed however a_trust is invalid if its purpose is illegal restatement second of trusts sec_1_501_c_3_-1 of the regulations provides in part that the term educational as used in sec_501 of the code relates to the instruction of the public on subjects useful to the individual and beneficial to the community u s c defines marijuana as all parts of the plant cannabis sativa l whether growing or not the seeds thereof the resin extracted from any part of such plant and every compound manufacture salt derivative mixture or preparation of such plant its seeds or resin u s c sec_812 sch i c lists marijuana as a hallucinogenic substance and includes it on schedule i of the schedules of controlled substances a schedule i substance is a substance that has a high potential for abuse has no currently accepted medical use in treatment in the united_states and there is a lack of accepted safety for use of the drug under medical supervision u s c sec_841 known as the controlled substances act states that it is illegal for anyone to knowingly or intentionally manufacture distribute or dispense or possess with intent to manufacture distribute or dispense a controlled substance 532_us_483 reiterates that there is only one exception from the act for cannabis government-approved research projects it is clear from the text of the act that congress has made a determination that marijuana has no medical benefits worthy of an exception d pincite in 326_us_279 the supreme court held that the presence of a single nonexempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly purposes exempt in 95_us_303 the court noted that a charitable use where neither law nor public policy forbids may be applied to almost any thing that tends to promote the well-doing and well-being of social man in mysteryboy inc v commissioner t c memo the tax_court held that the organization failed the operational_test partly because the organization proposed to promote illegal activities in 461_us_574 the supreme court held that racially discriminatory education is contrary to public policy and the university therefore could not be viewed as providing public benefit within the charitable concept in 505_f2d_1068 6th cir the court held that an organization has the burden of proving that it satisfies the requirements of the particular exemption statute the court noted that whether an organization has satisfied the operational_test is a question of fact in 72_tc_687 aff'd 625_f2d_804 8th cir the tax_court held that while selling prescription pharmaceuticals to elderly persons at a discount promotes health this does not entitle it to an automatic tax exemption under sec_501 of the code in 70_tc_352 the court held that a consulting organization whose sole service was to find individual researchers for their clients only some of which were exempt did not qualify for exemption under sec_501 of the code the court found that b s w group’s primary activity constitutes the conduct of a consulting business that is ordinarily carried on by commercial ventures organized for profit revrul_61_170 1961_2_cb_112 holds that a nurses’ association which maintains an employment register primarily for the employment of its members is not entitled to exemption under sec_501 the organization is primarily engaged in the performance of personal services by operating an employment service principally for the benefit of its members public participation in the management and support of the organization is negligible it draws its support primarily from members and a board_of trustees composed of professional nurses controls the organization without public participation of any kind therefore the organization is not free from substantial private benefit considerations in the operation of the nurses’ register revrul_69_175 1969_1_cb_149 holds that a nonprofit organization formed by parents of pupils attending a private school that provides school_bus transportation for its members’ children serves a private rather than a public interest the organization’s income approximately equals the expenses involved in its operations revrul_73_349 1873_2_cb_179 holds that an organization formed to purchase groceries for its membership at the lowest possible prices on a cooperative basis is not exempt as a social_welfare_organization described in sec_501 of the code the organization was a private cooperative enterprise for the economic benefit or convenience of its members any benefit to the community was incidental to the benefit received by the members revrul_75_384 1975_2_cb_204 holds that a nonprofit organization whose purpose was to promote world peace disarmament and nonviolent direct action did not qualify for exemption under sec_501 or c the organization’s primary activity was to sponsor antiwar protest demonstrations in which demonstrators were urged to violate local ordinances and commit acts of civil disobedience citing the law of trusts the ruling stated that all charitable organizations are subject_to the requirement that their purposes cannot be illegal or contrary to public policy analysis based on the information you provided in your application and supporting documentation we conclude that you are not organized and operated exclusively for exempt purposes under sec_501 of the code an organization can be recognized as exempt under sec_501 only if it shows that it is both organized and operated exclusively for charitable educational or other exempt purposes if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 you do not satisfy the operational_test of sec_1_501_c_3_-1 of the regulations whether an organization operates exclusively in furtherance of an exempt_purpose is a question of fact an organization seeking tax-exempt status under sec_501 carries the burden of proving that it satisfies the requirements of the statute see harding hospital f 2d pincite only an insubstantial portion of the activity of an exempt_organization may further a nonexempt purpose as the supreme court held in better business bureau of washington d c inc v united_states u s pincite the presence of a single nonexempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes the common_law of trusts specifies that a charitable_trust cannot be created for an illegal purpose see restatement second of trusts similarly the supreme court noted in ould v washington hospital for foundlings u s pincite that a charitable use where neither law nor public policy forbids may be applied to almost any thing that tends to promote the well-doing and well-being of social man like a_trust a sec_501 organization cannot be created for a purpose that is illegal see revrul_75_384 supra mysteryboy inc v comm’r t c memo organization that encouraged sexual activity with minors with the goal to repeal child pornography and rape laws was not exempt from federal income_taxation activities of the organization violated public policy as reflected in federal and state laws your primary activity the distribution of cannabis is illegal federal_law does not recognize any health benefits of cannabis and classifies it as a controlled substance u s c sec_812 federal_law prohibits the manufacture distribution possession or dispensing of a controlled substance u s c sec_841 congress has made a determination that marijuana has no medical benefits worthy of an exception to the general_rule that the manufacture and distribution of cannabis is illegal oakland cannabis buyers’ coop u s pincite current federal_law prohibits the use of cannabis except in limited circumstances those limited circumstances do not include the use of cannabis for medicinal purposes see d the fact that state legalized distribution of cannabis to a limited extent is not determinative because under federal_law distribution of cannabis is illegal because you advocate and engage in activities that contravene federal_law you serve a substantial nonexempt purpose you also operate for private purposes rather than the public interest an organization that operates primarily for the benefit of its members serves the interests of a select group of individuals rather than the community's or the public's interest a business or other activity that assists the community incidentally and only provides benefits to a limited number of members of the community more than incidentally is not charitable see eg revrul_61_170 supra revrul_69_175 supra and revrul_73_349 supra your form_1023 application and supporting material indicate that you are a cooperative organization and only distribute cannabis to your members in state a cooperative must conduct itself primarily for the mutual benefit of its members as patrons of the organization the organization uses its earnings for the general welfare of its members or it equitably distributes its earnings or services to its members you state that you sell or give cannabis to members based on their financial need the tax_court in federation pharmacy services inc v comm’r t c pincite stated that selling health items at a discount is not of itself a charitable deed many profitmaking organizations sell at a discount nor does the fact that federation pharmacy seeks to sell its drugs at cost alter the result so does an old-fashioned cooperative yet it is not entitled to classification as charitable id citations excluded as a cooperative your activities benefit private interests more than incidentally which precludes exemption under sec_501 sec_1_501_c_3_-1 to satisfy the organizational_test an organization’s articles of incorporation must limit its purposes to those listed in sec_501 additionally the articles must not expressly empower the organization to engage more than insubstantially in activities that are not in furtherance of those exempt purposes you do not satisfy the organizational_test described in sec_1_501_c_3_-1 your specific purpose is to dispense medicinal cannabis distributing cannabis does not further any exempt_purpose your articles of incorporation therefore do not limit your purposes to one or more exempt purposes under sec_501 instead your articles empower you to engage other than as an insubstantial part of your activities in activities not themselves in furtherance of an exempt_purpose you also fail the organizational_test because your bylaws allow for the issuance of capital stock to shareholders who vote on the members of the board_of directors the bylaws state that shareholders may be entitled to receive dividend payments thus your bylaws allow your net_earnings to inure to the benefit of private shareholders or individuals contrary to sec_1_501_c_3_-1 conclusion based on the facts and information submitted you are not organized and operated exclusively for exempt purposes your primary purpose of distributing cannabis not only violates federal_law but also furthers a substantial nonexempt purpose you also operate for private purposes rather than the public interest an organization that operates primarily for the benefit of its members serves the interests of a select group of individuals rather than the community's or the public’s interest a business or other activity that assists the community incidentally and only provides benefits to a limited number of members of the community more than incidentally is not charitable in addition your bylaws state that shareholders may be entitled to receive dividend payments thus your bylaws allow your net_earnings to inure to the benefit of private shareholders or individuals therefore you are not described in sec_501 of the code accordingly you do not qualify for exemption as an organization described in sec_501 of the code and you must file federal_income_tax returns contributions to you are not deductible under sec_170 of the code you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications for more information about representation see publication practice_before_the_irs if you if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to protest as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if if you do not intend to protest this determination you do not need to take any further action we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service se t eo ra t constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois g lerner director exempt_organizations


id office uilc cca_2008123013312250 ---------------- number release date from ----------------------- sent tuesday date pm to ---------------- cc ------------------ subject fw how do i assess penalties on an sfr the failure to pay addition_to_tax under sec_6651 applies to unpaid amounts showing due on the return as originally filed accordingly a sec_6651 addition_to_tax is calculated from the payment due_date which is generally the same as the due_date for filing the return without regard to extensions of time for filing see sec_6151 please note that the sec_6020 returns need to be prepared in accordance with temp sec_301_6020-1t and chief_counsel notice_2007_005 which is linked below for your convenience we would be happy to take a look at a sample gift_tax_return that you prepare in order to make sure it is correctly completed thanks attachment cc notice_2007_005


internal_revenue_service number release date index number --------------------------------------------------- ------------------------------------------------------- ------------------------- ---------------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------- id no ------------- telephone number -------------------- refer reply to cc ita plr-105228-07 date date re request for extension of time to make the election not to deduct the additional re request for extension of time to make the election not to deduct the additional first year depreciation p sec_1 sec_2 date1 date2 lmsb official ---------------------- dear ------------ --------------------------------------------------------- --------------------------------------------------------- ----------------------------------------- ------------------- ------------------- this letter responds to a letter dated date and subsequent correspondence submitted by p on behalf of itself and sec_1 and sec_2 hereinafter p sec_1 and sec_2 will be collectively referred to as taxpayer requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election not to deduct the additional first year depreciation under sec_168 of the internal_revenue_code for all classes of qualifying property placed_in_service in the taxable years ended date1 and date2 facts taxpayer represents that the facts are as follows taxpayer is an affiliated_group_of_corporations that is headed by p and that files consolidated federal_income_tax returns taxpayer is primarily engaged in the business of providing air medical emergency transport services and systems throughout the united_states taxpayer reported a consolidated net_loss on its timely filed consolidated federal_income_tax returns for the taxable years ended date1 and date2 for both taxable years taxpayer had net_operating_loss carryovers that were expiring also on these plr-105228-07 returns taxpayer deducted the 30-percent additional first year depreciation for all qualified_property and the 50-percent additional first year depreciation for all 50-percent bonus_depreciation property placed_in_service by taxpayer during those taxable years taxpayer does not have an internal tax department as a result taxpayer relied on a qualified_tax professional to prepare its consolidated federal_income_tax returns for the taxable years ended date1 and date2 taxpayer was not told nor did taxpayer know independently that taxpayer could elect not to deduct the additional first year depreciation for eligible_property placed_in_service by taxpayer during the taxable years ended date1 and date2 if the officers of p had been aware of this election p would have made the election not to deduct the additional first year depreciation for all eligible_property placed_in_service by taxpayer during the taxable years ended date1 and date2 ruling requested taxpayer requests an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election not to deduct the additional first year depreciation under sec_168 for all qualified_property and all percent bonus_depreciation property placed_in_service by taxpayer in the taxable years ended date1 and date2 law and analysis deduction for the taxable_year in which qualified_property is placed_in_service by a taxpayer sec_168 provides a 50-percent additional first year depreciation deduction for the taxable_year in which 50-percent bonus_depreciation property is placed_in_service by a taxpayer sec_168 provides a 30-percent additional first year depreciation sec_168 provides that a taxpayer may elect not to deduct the percent additional first year depreciation for any class of property placed_in_service during the taxable_year the term class of property is defined in sec_1_168_k_-1 of the income_tax regulations as meaning in general each class of property described in sec_168 for example 5-year_property sec_168 provides that a taxpayer may elect to deduct 30-percent instead of 50-percent additional first year depreciation for any class of property that is 50-percent bonus_depreciation property placed_in_service during the taxable_year if this election is made sec_1_168_k_-1 provides that the allowable additional first year depreciation deduction is determined as though the class of property is qualified_property under sec_168 sec_1_168_k_-1 further provides that a taxpayer may elect not to deduct both 30-percent and 50-percent additional first year plr-105228-07 depreciation for any class of property that is 50-percent bonus_depreciation property placed_in_service during the taxable_year sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made by the due_date including extensions of the federal tax_return for the taxable_year in which the property is placed_in_service by the taxpayer sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made in the manner prescribed on form_4562 depreciation and amortization and its instructions the instructions to form_4562 for the taxable years ended date1 and date2 provided that the election not to deduct the additional first year depreciation is made by attaching a statement to the taxpayer’s timely filed tax_return indicating that the taxpayer is electing not to deduct the additional first year depreciation and the class of property for which the taxpayer is making the election under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in and to make a regulatory election sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of ' sec_301_9100-3 provides that requests for relief under ' 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 the grant of relief will not prejudice the interests of the government conclusions based solely on the facts and representations submitted we conclude that the requirements of and have been satisfied accordingly taxpayer is granted calendar days from the date of this letter to make the election not to deduct the additional first year depreciation under sec_168 for all classes of property placed_in_service by taxpayer during the taxable years ended date1 and date2 that qualify for the additional first year depreciation this election must be made by p filing an amended consolidated federal tax_return for each of these taxable years with a statement indicating that taxpayer is electing not to deduct the additional first year depreciation for all classes of property placed_in_service by taxpayer during that taxable_year plr-105228-07 except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provisions of the code specifically no opinion is expressed or implied on whether any item of depreciable_property placed_in_service by taxpayer during the taxable years ended date1 and date2 is eligible for the additional first year depreciation deduction or on whether taxpayer’s classification of each item of depreciable_property placed_in_service by taxpayer during the taxable years ended date1 and date2 is proper under sec_168 in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer’s authorized representative we are also sending a copy of this letter to the appropriate lmsb official this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely kathleen reed branch chief branch office of associate chief_counsel income_tax and accounting 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 tege eb qp1 plr-131151-16 date march ------------------------------------------------------------------------ plan statute ------ state ---------------------- dear ----------------- this is in response to your request dated date in which you request a private_letter_ruling regarding whether an election proposed to be offered to certain participants in the plan would be a cash_or_deferred_arrangement under sec_1 k - a of the income_tax regulations if so whether the cash_or_deferred_arrangement would affect the plan’s qualified status and if so the federal tax consequences of the loss of qualified_plan status the following facts and representations have been submitted under penalty of perjury in support of the ruling requested the plan is a governmental defined benefit pension_plan under sec_414 of the internal_revenue_code established effective ---------------------- the plan covers the employees of every department and agency of the state including its public hospitals the plan’s most recent favorable determination_letter is dated date in anticipation of the state privatizing or closing its public hospitals the state legislature enacted statute both houses of the state legislature initially passed the legislation but the state’s governor vetoed the legislation however the state legislature overrode the veto and enacted statute due to a legal challenge statute is not currently effective pending the outcome of the legal challenge statute provides that employees of the state’s public hospitals whose positions are being abolished or who are directly affected by a reduction-in-force or workforce restructuring plan including privatization could in lieu of exercising their reduction-in-force rights under state law elect one of the following plr-131151-16 voluntary severance benefit - a one-time lump-sum cash payment of a percentage of base salary per year_of_service worked not to exceed a certain amount or special retirement benefit - a subsidized early_retirement_benefit under the plan that would permit the employee to retire with an unreduced retirement benefit at an earlier age or with less service than previously permitted under the plan based on the facts and representations stated above the plan requests three rulings first the plan requests a ruling whether if statute becomes effective the election created by statute would constitute a cash_or_deferred_arrangement under sec_1_401_k_-1 second if the election created by statute would constitute a cash_or_deferred_arrangement under sec_1_401_k_-1 the plan requests a ruling whether that cash_or_deferred_arrangement would cause the plan to fail the qualification requirements for retirement plans under sec_401 third if the existence of the cash_or_deferred_arrangement would cause the plan to fail the qualification requirements of sec_401 the plan requests a ruling on the federal tax consequences of the disqualification to the plan and its members and beneficiaries with respect to your first ruling_request sec_1_401_k_-1 defines a cash_or_deferred_arrangement as except as otherwise provided an arrangement under which an eligible_employee may make a cash or deferred election with respect to contributions to or accruals or other_benefits under a plan that is intended to satisfy the requirements of sec_401 sec_1_401_k_-1 provides that a cash or deferred election is any direct or indirect election or modification of an earlier election by an employee to have the employer either provide an amount to the employee in the form of cash or some other taxable benefit that is not currently available or contribute an amount to a_trust or provide an accrual or other benefit under a plan deferring the receipt of compensation the election permitted by statute allows an employee who is already a participant in the plan to choose either a the voluntary severance benefit or b a subsidized early_retirement_benefit the voluntary severance benefit provides an amount of cash or other taxable benefit that is not currently available the early_retirement_benefit provides an accrual or other benefit under a plan deferring the receipt of compensation_for this purpose the term other benefit in sec_1_401_k_-1 covers a wide variety of potential benefits and includes a subsidized early_retirement_benefit that is paid under a pension_plan and that an employee would otherwise not be eligible to receive accordingly if statute becomes effective the election granted to the state employees under statute with respect to the benefit they receive upon separation_from_service would constitute a cash or deferred election within the meaning of sec_1_401_k_-1 because it is an election between an amount in the form of cash or some other taxable plr-131151-16 benefit that is not currently available and an accrual or other benefit under a plan deferring the receipt of compensation because the election would constitute a cash or deferred election it creates a cash_or_deferred_arrangement within the meaning of sec_1_401_k_-1 with respect to your second ruling_request sec_401 provides that a profit- sharing or stock_bonus_plan a pre-erisa_money_purchase_plan or a rural_cooperative_plan shall not be considered as not satisfying the requirements of sec_401 merely because the plan includes a qualified_cash_or_deferred_arrangement sec_1_401_k_-1 provides that a plan other than a profit-sharing stock bonus pre-erisa money purchase pension or rural_cooperative_plan does not satisfy the requirements of sec_401 if the plan includes a cash_or_deferred_arrangement for this purpose a cash_or_deferred_arrangement is part of a plan if any contributions to the plan or accruals or other_benefits under the plan are made or provided pursuant to the cash_or_deferred_arrangement in accordance with our conclusion above that statute if it becomes effective would create a cash_or_deferred_arrangement the plan which is a defined_benefit_plan and not a profit-sharing stock bonus pre-erisa money purchase pension or rural_cooperative_plan would not satisfy the qualification requirements of sec_401 because it would include a cash_or_deferred_arrangement with respect to your third ruling_request in accordance with revproc_2017_1 2017_1_irb_1 dollar_figure and we decline to rule on the federal tax consequences to the plan and its members and beneficiaries of disqualification of the plan because such a ruling would involve facts pertaining to taxpayers other than the plan and would be hypothetical given that statute is not currently effective and may never become effective the plan has not been reviewed in addressing this ruling_request and this letter is not a determination as to the whether the plan or any provision of the plan not expressly discussed satisfies the qualification requirements of sec_401 for more information about the process for obtaining a determination_letter if available from the internal_revenue_service tax_exempt_and_government_entities_division employee_plans see revproc_2016_4 2017_1_irb_146 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 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 as specified in revproc_2017_1 b this office has not verified any of the material submitted in support of the request_for_ruling and such material is subject_to verification on examination the associate office will revoke plr-131151-16 or modify a letter_ruling and apply the revocation retroactively if there has been a misstatement or omission of controlling facts the facts at the time of the transaction are materially different from the controlling facts on which the ruling was based or in the case of a transaction involving a continuing action or series of actions the controlling facts change during the course of the transaction see revproc_2017_1 sec_11 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely laura b warshawsky senior technician reviewer qualified_plans branch tax exempt government entities office of the associate chief_counsel


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh number release date date date legend x name y organization b dollars amount c dollars amount d dollars amount e dollars amount f dollars amount dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request your letter indicates that you will operate an educational grant program called x the purpose of x is to provide educational grants to graduating seniors from y high schools who are enrolled in accredited post-secondary educational institutions described in sec_170 of the code to fund items not covered from traditional scholarships including computers living_expenses equipment and other miscellaneous items y is a nonprofit network of college-preparatory public charter schools educating early childhood elementary middle and high school students in underserved communities throughout the country your grant recipients will likely receive financial assistance from a variety of sources including the schools to assist with their tuition however these students often struggle accessing financial resources for education- related costs x will address these financial gaps that low-income college students face you will publicize x through high schools participating in y through y’s website teachers counselors alumni and the entire network specifically you and y will ensure that teachers counselors and alumni across the entire y network are aware of x as well as be available to help candidates apply for the scholarships the number and amount of the grants will be determined by your budgets as approved by your board_of directors currently you plan to award at least fifteen grants a year for b dollars the grants will usually be comprised of the following components a one-time technology stipend for c dollars for a new computer a grant for d dollars dispersed quarterly for four years for living_expenses an annual stipend for e dollars for three years for expenses_incurred during summers an annual stipend for f dollars dispersed twice per year for miscellaneous expenses such as books and clothing e in addition you will provide mentorship and networking programs to the award recipients mentors will be leaders in their fields across different sectors and will be assigned to each award recipient based on the student's interest the mentors will help students through touching base by monthly phone calls they will also help them establish goals and will monitor their progress and serve as the point person to help recipients access the networking program which will help recipients make career connections in their fields of interest furthermore the networking program will assist with matching recipients to internships and jobs the selection process for x is administered by a selection committee collaboratively with y to determine the size criteria for membership and process for appointing or replacing members of the committee it will include members of your staff y’s executives as well as regional leaders and y’s alumni who have strived and graduated the selection committee will select recipients based on the following key criteria the desire to lead demonstrated by evidence of leadership skills perseverance in the face of challenges strong personal character self-confidence in developing a point of view academic achievement all members of your selection committee will review and rank each student's submitted application package which includes a resume and academic records letters of recommendation from a y teacher or guidance counselor and a letter of interest the letter of interest will include a description of their college and career aspirations examples of demonstrated leadership resilience character independent thinking and entrepreneurial spirit as well as a description of leadership strengths and areas for letter catalog number 58222y improvement in-person interviews will also be conducted the selection committee will then select recipients you will retain ultimate approval authority of grant recipients you may disburse part of the scholarship to the schools directly if practical which will then disburse the funds for_the_use_of the recipients who are in good standing generally you will make payments directly to the award recipients subject_to verification with the educational_institution where the award recipient is enrolled and in good standing you will also require the recipient to provide an annual report that includes a narrative of how the funds were expended if you are not satisfied with the annual report you may withhold additional funding from the recipient in addition you will monitor use of funds through regular communication with grant recipients through the mentorship program retention of the grant is based on grade point average payments will be suspended if a recipient takes a temporary leave of absence from the school and will resume once the student is re-enrolled if you learn of any misuse of funds you will withhold additional payments and you will take all reasonable steps to recover funds and or ensure restoration of the diverted funds for the purposes of the grant you will maintain complete records regarding grants awarded including information to evaluate the qualifications of recipients their identification purpose and amount of grants terms of payment of each grant and any additional information secured as part of the grant administration process finally your collaboration with y is not an exclusive arrangement you may expand x to other schools with characteristics or purposes similar to y 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 e e e 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 - - - ascholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or a prize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show letter catalog number 58222y the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination this determination covers only 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 precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot make 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 must 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 we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records letter catalog number 58222y lf you have any questions please contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements letter catalog number 58222y


internal_revenue_service number release date index numbers ---------------------------------- --------------------------- --------------------------------- ------------------- -------------------- ------------------------------------------------------ --------------------------- 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-100914-10 date date company ------------------------------------------------------------------------------------------------- ------------------------- date ------------------------- country ---------------------- dear ----------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of company by company’s authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a disregarded_entity for federal tax purposes facts company was formed under country law on date company represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes company intended that it be classified as a disregarded_entity effective date however due to inadvertence a valid form_8832 entity classification election to treat company as a disregarded_entity effective date was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can plr-100914-10 elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 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 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a 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 sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the 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 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government 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 company is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a disregarded plr-100914-10 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 this ruling is contingent on the owner of company filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief being effective date to the extent appropriate these returns must include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code 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 company’s authorized representative sincerely associate chief_counsel passthroughs special industries by s ________________________________ james a quinn senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c date number release date cc dom fs p si uilc internal_revenue_service national_office field_service_advice memorandum for special trial attorney midstates region cc msr from deborah a butler assistant chief_counsel field service cc dom fs subject qualified liabilities and tracing_rules 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 a b c d e f g h i j k date date date date date date date dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure state country country issue sec_1 was section vi of notice_89_35 1989_1_cb_675 which modified the single account and 15-day rules of temp sec_1_163-8t still in effect during under the any account of the taxpayer rule set out in notice_89_35 can the taxpayer’s loan be allocated to the subsidiary’s expenditure and must that subsidiary be members of taxpayer’s consolidated_group do the any account and 30-day rules of notice_89_35 apply to debt refinancing as defined at sec_1_163-8t is an intercompany loan an investment_expenditure properly chargeable to capital_account for purposes of the debt allocation rules of sec_1_163-8t in a disguised sale of a partner’s stock in a subsidiary do intercompany loans to a subsidiary constitute capital expenditures with respect to the property transferred under sec_1_707-5 in a disguised sale of a partner’s stock in a subsidiary do capital expenditures of the subsidiary incurred and paid_by the subsidiary constitute capital expenditures with respect to the property transferred under sec_1_707-5 whether the commercial paper liabilities assumed by a are qualified liabilities under sec_1_707-5 conclusion sec_1 yes under section vi of notice_89_35 it would not be appropriate to treat the account of a subsidiary even if the member of the same consolidated_group as an account of the taxpayer for purposes of the same account rule the any account and day rule would apply to debt refinancing proceeds only to the extent that the proceeds are not allocable to the repayment of the preexisting debt sec_1_163-8t applies in a very narrow context and does not provide any authority for a broad treatment of intercompany loans no however the partners in this disguised sale are f c and b and it is not apparent that they loaned money to their lower-tier subsidiaries the origin of the funds with k does not change this analysis yes if the capital_expenditure can be traced to a contribution by the subsidiary’s parent if the expenditure has no relation and cannot be traced to the liability of the parent which is assumed then it is not a qualified_liability if taxpayer can show that for f and c the proceeds of the debt were contributed to the lower-tier subsidiaries which in turn used the money on capital expenditures then the taxpayer may be able to establish that these are qualified liabilities if the taxpayer can show that for b the proceeds of the debt were used for the acquisition of e then the taxpayer may be able to establish that it was a qualified_liability facts a is a limited_liability_company taxable as a partnership and subject_to tefra procedures a was formed on or about date by b as percent partner and d as percent partner b and d contributed their interests in e to a on or about date on or about date f transferred stock in g a state corporation which owned a power plant in country to a for a partnership_interest on that same date c transferred the stock of h a country company which in turn owned the stock of i and j both country companies operating power plants in the country to a for a partnership_interest all partners are affiliated with k and may or may not join in the k consolidated_return b f and c will be referred to as intermediate subsidiaries it is not clear that f and c were the historic owners of the lower-tier subsidiaries b in particular acquired its lower-tier subsidiary recently from k it appears that c and f subsequently contributed their respective interests in a to b b was then owned in the following percentages percent k percent c percent f and percent d a assumed dollar_figure of b’s liabilities it is our understanding that the intermediate subsidiaries assumed the liabilities in connection with either their acquisition or their development of the lower-tier subsidiaries these liabilities originally were assumed by f c and b from k the assumption agreements provide as follows the assumption_agreement dated date1 between k a and b provides that whereas k assigned to b and b in turn assigned to a shares of e and k issued dollar_figure of commercial paper allocated to those shares that b assumed the liability in connection with the transfer of shares to a and a then assumed the liability for the indebtedness the assumption_agreement dated date between f and a provides that whereas f assumed dollar_figure in indebtedness of commercial paper issued by k and f has transferred to a shares of g that a assumed the liability for the dollar_figure million indebtedness the refinancing of the existing debt the assumption_agreement dated date between k c and a provides that whereas c assumed dollar_figure of indebtedness of commercial paper issued by k and c has transferred to a shares of h that a assumed the liability for the dollar_figure million indebtedness the refinancing of the existing debt at all times however k remained the sole obligor of the commercial paper obligations a and b participated in an initial_public_offering ipo of approximately percent of a’s partnership interests on or about date5 the ipo was structured so that b was offering shares that it currently held and a was offering shares in itself b apparently received dollar_figure for the shares that it sold and a received dollar_figure for the shares that it offered a used dollar_figure of the proceeds to retire the commercial paper liabilities that it had assumed and used the remainder of the proceeds to redeem d’s partnership_interest a authorized a distribution of dollar_figure to b on or about date the commissioner issued an fpaa to a on date attacking the transaction under a disguised sale theory the primary theory was that certain liabilities of k did not constitute qualified liabilities within the meaning of sec_1_707-5 the taxpayer concedes that it was a disguised sale but disputes that the liabilities were not qualified liabilities a’s tax_matters_partner b filed a petition for redetermination on date in the tax_court law and analysis issue sec_1_707-5 indicates that for purposes of the disguised sale analysis a liability that is assumed_or_taken_subject_to by a partnership in connection with a transfer of property to the partnership is a qualified_liability if the liability is allocable under the rules of sec_1_163-8t to capital expenditures with respect to the contributed_property a qualified_liability has preferential tax treatment to an ordinary liability under the facts of the present case the intermediate subsidiaries have contributed stock in corporate subsidiaries to a taxpayer has raised the argument that the liability represented by the commercial paper is allocable to capital expenditures within the lower-tier subsidiaries contributed to a sec_1_163-8t of the temporary regulations provides rules for determining the character of interest_expense for purposes of sec_163 sec_163 and sec_469 sec_1_163-8t provides that debt is allocated to expenditures in accordance with the use of the debt proceeds sec_1_163-8t provides among other things that a taxpayer may treat any expenditure made from an account within days after debt proceeds are deposited in such account as made from such proceeds sec_1_163-8t provides a similar rule with respect to debt proceeds received in cash section vi of notice_89_35 1989_1_cb_675 which expands the guidance contained in notice_88_20 1988_1_cb_487 and notice_88_37 c b modified the single account and 15-day rules to provide that in the case of debt proceeds deposited in an account taxpayers may treat any expenditure made from any account of the taxpayer or from cash within days before or days after debt proceeds are deposited in any account of the taxpayer as made from such proceeds to the extent thereof section iii of notice_89_35 provides that taxpayers may rely on the guidance with respect to debt proceeds received in cash or deposited in an account after date and on or before the date on which further guidance is published to date no further guidance under sec_1_163-8t has been published therefore section vi of notice_89_35 was still in effect during issue it does not appear to be appropriate to allocate a liability of a taxpayer to a subsidiary’s expenditure under the any account of the taxpayer rule specifically the debt of the corporate parent should not be allocated to expenditures paid out of a subsidiary’s bank account section vi of notice_89_35 provides considerable freedom to taxpayers in determining the proper tracing of debt proceeds in particular notice_89_35 modifies the general_rule of temp sec_1 8t c ii b to provide that the debt proceeds may be allocated to an expenditure out of any account of the taxpayer made within days before or after the proceeds are deposited in an account of the taxpayer however this freedom does not extend to permit the loan proceeds of one taxpayer k to be allocated to the expenditures of other taxpayers the intermediate subsidiaries the taxpayer has apparently represented that the proceeds of the commercial paper were either lent or contributed to the intermediate subsidiaries by k therefore the only expenditure that the proceeds of the commercial paper may be traced to under sec_1_163-8t and notice_89_35 would be the use that k made of the proceeds that is the proceeds of the loans may be traced to either intra-company loans or capital contributions to intermediate subsidiaries to the extent that k lent the proceeds to the intermediate subsidiaries the intermediate subsidiaries would have obtained debt proceeds that could conceivably be traced to capital contributions to the lower-tier subsidiaries in such a case the intermediate subsidiaries could presumably refinance their obligation to k by assuming k’s obligation under the original commercial paper if a then assumed the intermediate subsidiaries’ obligations under the commercial paper when it received the contributions of the interests in the lower-tier subsidiaries then it is theoretically possible that the assumed liability under the commercial paper could be traced to capital expenditures with respect to the contributed_property assuming the intermediate subsidiaries did not contribute the original loan proceeds to the lower-tier subsidiaries but rather loaned the money to the subsidiaries such intercompany loans would not be considered capital expenditures issue district_counsel essentially asks whether a new debt can be traced to the repayment of an old debt so that the refinancing rules apply the any account and 30-day rules of notice_89_35 apply to debt refinancing as defined in sec_1_163-8t in a limited manner sec_1_163-8t specifically indicates that to the extent proceeds of any debt the replacement debt are used to repay any portion of a debt the replacement debt is allocated to the expenditures to which the repaid debt was allocated the amount of replacement debt allocated to any such expenditure is equal to the amount of debt allocated to such expenditures that was repaid with proceeds of the replacement debt to the extent proceeds of the replacement debt are used for expenditures other than repayment of a debt the replacement debt is allocated to expenditures in accordance with the rules of this section these provisions indicate that a taxpayer only has flexibility to allocate the amount of the replacement debt that is not used to repay the original debt sec_1 8t e does not permit any flexibility in the allocation of the portion of the replacement debt that is used to repay the original debt that portion must be allocated to the expenditures that the original debt was allocated to an additional issue has arisen as to whether a debt incurred within days of the repayment of a preexisting debt may be treated as a refinancing within the meaning of sec_1_163-8t of the original debt assuming the proper tracing can be shown it appears appropriate to treat the new debt as a refinancing of the original debt there is no indication in sec_1_163-8t that a refinancing for tracing purposes must be a formal refinancing that is an arrangement where proceeds of a replacement debt are conveyed directly to retire a pre-existing debt sec_1_163-8t merely states that to the extent proceeds of any debt the replacement debt are used to repay any portion of a debt the replacement debt is allocated to the expenditures to which the repaid debt was allocated this general statement only requires that the taxpayer be able to trace the proceeds of the replacement debt to an expenditure to repay the original debt in the absence of any indication to the contrary it should be presumed that the normal rules of sec_1_163-8t as augmented by notice would be used to determine whether the proceeds of the replacement debt can be traced to a repayment of the original debt therefore a taxpayer could treat replacement debt as a refinancing of an original debt if the proceeds of the replacement debt could be traced to a repayment within days out of any account of the original debt issue sec_4 and advice has been requested on the proper interpretation of sec_1 8t j iii that section indicates in part that a n expenditure to make a loan is treated as an expenditure properly chargeable to capital_account with respect to an asset and for purposes of paragraph j i a of this section any repayment of the loan is treated as a disposition of the asset because sec_1_707-5 refers to a liability that is allocable to capital expenditures the theory has been advanced that sec_1 8t j iii mandates that intercompany loans be treated as capital expenditures this does not appear to be the proper interpretation of sec_1 8t j iii sec_1_163-8t addresses the reallocation of debt when the debt had been allocated to a capital_expenditure in particular when an asset is sold any debt that had been allocated to that asset must be reallocated when the proceeds of the disposition are used for another expenditure the language of sec_1_163-8t must be viewed in this context that is debt proceeds that are in turn used to make a loan must be reallocated when the loan is repaid sec_1_163-8t cannot be relied upon for any broader authority as to the nature of intercompany loans intercompany loans to a subsidiary should not constitute capital expenditures with respect to the property transferred under sec_1_707-5 however the partners in this disguised sale are f c and b and it is not apparent that they loaned money to their lower-tier subsidiaries the origin of the funds with k does not change this analysis capital expenditures of the subsidiary incurred and paid_by the subsidiary constitute capital expenditures with respect to the property transferred under sec_1_707-5 but only if the capital_expenditure can be traced to a contribution by the subsidiary’s parent if the expenditure has no relation and cannot be traced to the liability of the parent which is assumed then the liability is not a qualified_liability issue the question of whether these liabilities constituted qualified liabilities necessarily turns upon the determinations outlined above if the intermediate subsidiaries contributed rather than lent money to their lower-tier subsidiaries then the assumed liability could be traced to capital expenditures with respect to the contributed_property however if the intermediate subsidiaries loaned money to their lower-tier subsidiaries then this type of intercompany loan would not be a capital_expenditure and taxpayer would not have satisfied the tracing_rules of sec_1_163-8t moreover even if the intermediate subsidiaries can show that the money was contributed to the lower-tier subsidiaries b must also trace the proceeds of the replacement debt albeit within the confines of the day rule it is b’s burden to show how the intermediate subsidiaries used the proceeds of the loans alternatively we believe this transaction may be viewed in ways that reach results more in accord with the substance of the transaction such as the transfer of the percent interest to the public partners we look forward to working further with you to develop this substance over form approach case development hazards and other considerations please call if you have any further questions by patrick putzi special counsel natural_resources passthroughs special industries branch field service division


internal_revenue_service number release date index number ------------------------------- ----------------------------------------------- ------------------------- ----------------------------------- department of the treasury washington dc person to contact ----------------------------------------------------- -------- telephone number --------------------- refer reply to cc psi b02 plr-110048-07 date date ----------------------------------------------- --------------------------------------------- legend llc --------------------------------------------------- a --------------------------------------------------- b ----------------------- --------------------------------------------------- c --------------------------------------------------- d --------------------------------------------------- e --------------------------------------------------- f --------------------------------------------------- g --------------------------------------------------- d1 -------------------------- --------------------------- ------------------------------- ----------------------------------- ------------------------------- ------------------------------------ ------- this responds to a letter dated date and subsequent sec_754 provides that a partnership may elect to adjust the basis of the information submitted states that llc is a limited_liability_company that is plr-110048-07 year dear ---------------- correspondence submitted on behalf of llc requesting that the service grant llc an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make an election under sec_754 of the internal_revenue_code treated as a partnership for federal tax purposes on d1 llc made liquidating distributions to members a b c d e and f llc intended to make a sec_754 election for the year taxable_year llc’s accountants prepared a timely sec_754 election but it was inadvertently not filed with llc’s timely filed year income_tax return partnership property in the case of a transfer of a partnership_interest the election applies with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which such election is filed and all subsequent taxable years under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions thereof for filing the return for that taxable_year 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 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register will use to determine whether to grant an extension of time to make the election making certain elections sec_301_9100-2 provides the rules governing automatic extensions of time for sec_301_9100-1 provides that the commissioner may grant a reasonable sec_301_9100-2 and sec_301_9100-3 provide the standards the commissioner sec_1_754-1 of the income_tax regulations provides that an election sec_301_9100-3 provides the standards the commissioner will use to based solely on the information submitted and the representations made we except as specifically set forth above no opinion is expressed concerning the plr-110048-07 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 that granting relief will not prejudice the interests of the government conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result llc is granted an extension of time for making the sec_754 election until days following the date of this letter the election should be made in a written_statement filed with the appropriate service_center for association with llc’s tax_return for the year taxable_year a copy of this letter should be attached to the sec_754 election a copy is enclosed for that purpose federal tax consequences of the facts described above under any other provision of the code provides that it may not be used or cited as precedent being sent to llc’s authorized representative enclosures william p o’shea associate chief_counsel passthroughs and special industries this ruling is directed only to the taxpayer s requesting it sec_6110 pursuant to a power_of_attorney on file with this office a copy of this letter is copy of this letter copy for sec_6110 purposes sincerely


internal_revenue_service number release date index number -------------------------- ---------------------------------------------------------- -------------------------------------- ------------------------------- in re ------------------------ ------------------------- ----------------- -------------------------- x department of the treasury washington dc person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 - plr-147758-03 date dec ------------------------------------------------------------ ----------------------- ----------------------------------------------------------------------- -------- ---------------- a -------------------------------------------------- country date dear -------------------- this letter responds to a letter dated date written on behalf of x and a requesting a ruling under sec_301_9100-3 of the procedure and administration regulations that a be granted an extension of time to elect to be treated as a disregarded_entity under sec_301_7701-3 facts according to the information submitted x acquired a a country limited_liability_company x and a represent that as of date a was eligible to make an election under sec_301_7701-3 to be disregarded as an entity separate from its owner for federal tax purposes however the form_8832 entity classification election inadvertently was not timely filed 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 as provided in this section an eligible_entity with a single owner can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a disregarded_entity sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the service_center designated on the form sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic_extension 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 the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusions based solely on the facts submitted and the representations made we conclude that a has satisfied the requirements of sec_301_9100-3 as a result a is granted an extension of time of sixty days from the date of this letter to file a properly executed form_8832 with the appropriate service_center effective date that purpose a copy of this letter should be attached to the election a copy is enclosed for except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer and second listed authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service v u i q washington d c government entities division jan uniform issue list se- t-e7 ta ot legend taxpayer a ira c financial_institution d account e financial_institution f amount g dear this letter is in response to a request for a letter_ruling dated date as supplemented by additional information dated date date and date in which you have applied for a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age represents that she received a distribution from ira c totaling amount g taxpayer a asserts that her failure to accomplish a rollover within the day period prescribed by sec_408 was due to misinformation provided by financial_institution d taxpayer a maintained ira c an individual_retirement_account ira under code sec_408 with financial_institution d prior to taking a distribution taxpayer a represents that she telephoned and spoke with a representative of financial_institution d concerning the 60-day rollover period taxpayer a worried she would not be able to roll over the distribution back into ira c within the days the representative for financial_institution d informed taxpayer a that she could receive an extension of the 60-day period from financial_institution d if she was not able to settle on the sale of her home within the 60-day period relying on this information taxpayer a received a distribution from ira c amount g on told the representative she was on believing she would not be able to meet the 60-day period taxpayer a telephoned financial_institution d to request an extension another representative of financial_institution d informed taxpayer a that they did not have the authority to extend the 60-day period the funds became available to taxpayer a for redeposit into ira c on acknowledging that taxpayer a was given erroneous advice concerning a possible extension of the day rollover period financial_institution d submitted a statement based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in code sec_408 with respect to the distribution of amount g sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408g from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a and financial_institution d is consistent with her assertion that her failure to accomplish a timely rollover was caused by misinformation provided by financial_institution d the administrator of ira c therefore pursuant to code sec_408 the service hereby waives the 60-day rollover requirement with respect to the distribution of amount g from ira c taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount g into ira c or another rollover ira provided all other requirements of sec_408 except the 60-day requirement are met with respect to such contribution amount g will be considered a rollover_contribution within the meaning of sec_408 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 letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact se t ep ra ti1 id at sincerely yours cotte a wethus carlton a watkins manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice