internal_revenue_service number release date index number 468a ------------------------ ------------------------------------ ---------------------------------------------------------- ---------------------------- ---------------------------------------- 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 b6 plr-155471-09 date date re --------------------------------------- ------------------------------------------------- ----------------------------------------------- ---------------------------------------------- ein ---------------- ----------------------- ein ---------------- ----------------------------------------------- ----------------------------------------------------- -------------------------------- --------------------- ----------------------- --------------------------------------------------------------------------------- legend taxpayer parent plant seller d seller e private_letter_ruling location independent study ----------------------------------------------------------------------------------------------------------------- method commission fund director ----------- -------------------------------------------- ------------------------------------------ --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------------------ --------------------------- ----------------------- ------- ------- ------- ------- ------- ------- date date date year year year year year year plr-155471-09 a b c d e f g h i j k l ----- ------- ------- ------ ------------------ ------ ------------------ --- --- ------- ------- ------------------ dear --------------- this letter responds to your request dated date for a revised schedule of ruling amounts and an initial schedule of deduction amounts pursuant to sec_468a of the internal_revenue_code and sec_1_468a-8t of the temporary income_tax regulations the predecessor owners of the plant were previously granted schedules of ruling amounts most recently on date and date taxpayer represents the facts and information relating to its request for rulings as follows taxpayer is a wholly-owned subsidiary of parent that elects to be taxed as a corporation for federal_income_tax purposes parent files a consolidated federal_income_tax return with its affiliated corporations including taxpayer taxpayer purchased a a percent interest in the plant and related assets from seller d b percent interest and seller e c percent interest collectively sellers as part of the purchase sellers transferred the assets of the qualified and nonqualified decommissioning trust funds related to the plant to taxpayer and taxpayer assumed all decommissioning liability for the plant the service issued private_letter_ruling to the taxpayer which provided that the qualified nuclear decommissioning fund of the predecessor for the plant were transferred to taxpayer’s qualified_fund for the plant and that the taxpayer’s qualified_fund would be treated as a qualified_fund pursuant to sec_468a of the internal_revenue_code the plant is situated at location the estimated base cost for decommissioning plant is based on an independent study and the proposed method of decommissioning the plant is method plr-155471-09 based upon the assumptions used in sellers’ most recent schedule of ruling amounts it is estimated that fund assets will earn an after-tax rate of return of d percent the total cost of decommissioning plant is estimated to be e in year dollars this base cost of decommissioning plant is escalated at a --percent yearly rate resulting in a total future cost to taxpayer of decommissioning plant of -- in year dollars under ratemaking assumptions used during the first proceeding before commission the plant would no longer be included in rate base in year in the prior schedule of ruling amounts issued under sec_468a of the code as in effect prior to taxpayer represented that the funding_period and level_funding limitation period are in effect for h years year through year and the estimated_useful_life of the plant is i years year through year as elected in the initial and subsequent requests for a schedule of ruling amounts taxpayer calculated the qualifying percentage pursuant to sec_1_468a-8 of the regulations as in effect prior to date thus the percentage of the total estimated costs qualifying for deduction in the schedule of ruling amounts under prior_law was j percent sec_468a as amended by the energy tax incentives act of the act publaw_109_58 119_stat_594 allows an electing taxpayer to deduct payments made to a nuclear decommissioning reserve fund sec_468a limits the amount that may be paid into the nuclear decommissioning fund in any year to the ruling_amount applicable to that year prior to the changes made by the act the deduction was limited to the lesser_of the amount included in the utility’s cost of service for ratemaking purposes or the ruling_amount generally as a result only regulated utilities could take advantage of sec_468a the act amendment of sec_468a eliminated the cost-of-service limitation accordingly decommissioning costs of an unregulated nuclear power plant may now be funded by deductible contributions to a qualified nuclear decommissioning fund sec_468a provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund the total nuclear decommissioning cost of that nuclear power plant over the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate prior to the changes made by the act deductible contributions were limited to the amount necessary for an electing taxpayer to fund the plant’s post-1983 nuclear decommissioning costs determined as if decommissioning costs accrued ratably over the estimated_useful_life of the plant provided that the taxpayer elected to establish a plr-155471-09 fund in prior_law also did not allow a taxpayer electing to establish a fund later than to contribute to that fund any amount in excess of that amount necessary to fund the ratable portion of the plant’s nuclear decommissioning costs beginning in the year the fund is established sec_468a now allows a taxpayer to contribute to a nuclear decommissioning fund the entire cost of decommissioning the plant including both the pre-1984 amount that was denied under the law prior to the act as well as any amount attributable to any year after in which a taxpayer had not established a fund under sec_468a sec_468a provides that the deduction for the contribution of the previously-excluded amount is allowed ratably over the remaining useful_life of the nuclear plant sec_468a provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within 2½ months after the close of the tax_year this section applies to payments made pursuant to either a schedule of ruling amounts or a schedule of deduction amounts sec_1_468a-1t a provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1t b of the regulations is a taxpayer that has a qualifying interest in any portion of a nuclear power plant a qualifying interest is among other things a direct ownership_interest sec_1_468a-2t b provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year the limitation on the amount of cash payments for purposes of sec_1 468a- 2t b does not apply to any special transfer permitted under sec_1_468a-8t sec_1_468a-3t a provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3t a provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on reasonable assumptions concerning the after-tax rate of return to be earned by the amounts collected for decommissioning the total estimated cost of decommissioning the nuclear plant and the frequency of contributions to a nuclear decommissioning fund for a taxable_year under sec_1_468a-3t a the internal_revenue_service shall provide plr-155471-09 a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3t a provides that the taxpayer bears the burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the regulations and that it is based on reasonable assumptions that section also provides additional guidance regarding how the service will determine whether a proposed schedule of ruling amounts is based on reasonable assumptions for example if a public_utility commission established or approved the currently applicable rates for the furnishing or sale by the taxpayer of electricity from the plant the taxpayer can generally satisfy this burden_of_proof by demonstrating that the schedule of ruling amounts is calculated using the assumptions used by the public_utility commission in its most recent order in addition a taxpayer that owns an interest in a deregulated nuclear plant may submit assumptions used by a public_utility commission that formerly had regulatory jurisdiction over the plant as support for the assumptions used in calculating the taxpayer’s proposed schedule of ruling amounts with the understanding that the assumptions used by the public_utility commission may be given less weight if they are out of date or were developed in a proceeding for a different taxpayer the use of other industry standards such as the assumptions underlying the taxpayer's most recent financial assurance filing with the nrc are described by the temporary regulations as an alternative means of demonstrating that the taxpayer has calculated its proposed schedule of ruling amounts on a reasonable basis sec_1_468a-3t a further provides that consistency with financial_accounting statements is not sufficient in the absence of other supporting evidence to meet the taxpayer’s burden_of_proof sec_1_468a-3t b provides that in general the ruling_amount for any_tax year in the funding_period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3t c the funding_period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the last day of the estimated_useful_life of the nuclear power plant to which the fund relates sec_1_468a-3t c provides rules for determining the estimated_useful_life of a nuclear plant for purposes of sec_468a in general under sec_1_468a-3t c i a if the plant was included in rate base for ratemaking purposes for a period prior to date the date used in the first such ratemaking proceeding as the estimated date on which the nuclear plant will no longer be included in the taxpayer’s rate base is the end of the estimated_useful_life of the nuclear plant sec_1_468a-3t c i b provides that if the nuclear plant is not described in sec_1_468a-3t c i a the last day of the estimated_useful_life of the nuclear plant is determined as of the date the plant is placed_in_service under sec_1_468a-3t c i c any reasonable method may be used plr-155471-09 in determining the estimated_useful_life of a nuclear power plant that is not described in sec_1_468a-3t c i a sec_1_468a-3t d provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant sec_1_468a-3t d provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3t e enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3t f provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3t e the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year sec_1_468a-8t a provides that under the provisions of sec_468a as described above a taxpayer may make a special transfer of cash or property to the nuclear decommissioning fund this special transfer is not subject_to the sec_468a limitation the amount of the special transfer is the present_value of the pre-2005 nonqualifying percentage of the estimated future costs of decommissioning the nuclear plant that was disallowed under sec_468a prior to the act sec_1_468a-8t a defines the pre-2005 nonqualifying percentage as equal to percent reduced by the sum of the qualifying percentage used in determining the taxpayer’s last schedule of ruling amounts for the fund under sec_468a as it existed prior to the act and the percentage transferred in any previous special transfer sec_1_468a-8t a provides that the taxpayer is not required to transfer the entire amount eligible for the special transfer in one year but must take any prior special transfers into account in calculating the pre-2005 qualifying percentage further pursuant to sec_1_468a-8t c a taxpayer making a special transfer in more than one year must request a new schedule of deduction amounts in connection with each special transfer sec_1_468a-8t b provides that the deduction for the special transfer is allowed ratably over the remaining useful_life of the nuclear plant under sec_1 468a- 8t b iii the deduction for property contributed in a special transfer is limited to the lesser_of the fair_market_value of the property or the taxpayer’s basis in the property plr-155471-09 under sec_1_468a-8t b the taxpayer recognizes no gain_or_loss on the special transfer of property the taxpayer’s basis in the fund is not increased by reason of the special transfer of property and the fund’s basis in the property transferred in the special transfer is the same as the transferee’s basis in that property immediately prior to the special transfer sec_1_468a-8t c provides that taxpayer may not make a special transfer to a qualified nuclear decommissioning fund unless the taxpayer requests from the irs a schedule of deduction amounts in connection with such transfer a request for a schedule of deduction amounts may be made in connection with a request for a schedule of ruling amounts but in such case the calculations for both the schedule of ruling amounts and the schedule of deduction amounts must be separately_stated as stated above prior to the changes made by the act deductible contributions were limited to the lesser_of the amount necessary to fund the plant’s post-1983 nuclear decommissioning costs or the amount necessary to fund the plant’s decommissioning costs for that portion of the plant’s estimated_useful_life for which a fund had been established under that prior_law sellers were allowed to contribute j percent of the amounts necessary to fully decommission its share of the plant sec_468a allows a taxpayer to contribute to the nuclear decommissioning fund the pre- amount that was denied under the law prior to the act thus taxpayer is able to contribute the additional k percent of the amounts necessary to decommission its ownership share of plant we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we conclude that the taxpayer may make a special transfer of l in year and may ratably deduct the amount contributed for the year through year tax years as set forth below schedule of deduction amounts year ----------- ----------- ----------- deduction amount ----------------------- ----------------------- ----------------------- the special transfer amount stated above is the maximum amount permitted to be transferred to the fund under sec_468a if taxpayer transfers a lesser amount to the fund the taxpayer may deduct that lesser amount ratably over the period of years described above further in the event that taxpayer transfers a lesser amount for year in order to make an additional special transfer in a later year including a special transfer of the difference between the special transfer amount stated above and the lesser amount transferred in year taxpayer must request a new schedule of plr-155471-09 deduction amounts and in that request must take the year transfer into account and recalculate the pre-2005 qualifying percentage in such request we note that if taxpayer elects to make a special transfer of property for all or a portion of this special transfer the amount of the deduction is the lesser_of the fair_market_value of the property transferred or the basis of the property in the hands of the taxpayer immediately prior to the transfer in either event the deduction of the taxpayer with respect to the property is limited to the taxpayer’s basis in the property we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we reach the following conclusions pursuant to sec_1_468a-3t a taxpayer has met its burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the code and regulations and is based on reasonable assumptions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1t b of the regulations taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3t d of the regulations the proposed schedule of ruling amounts was derived by following the assumptions contained in an independent commissioning study that taxpayer has represented is a standard type study used in the industry based on that representation taxpayer has demonstrated pursuant to sec_1_468a-3t a that the proposed schedule of ruling amounts is based on reasonable assumptions and is consistent with the principles of sec_468a and the regulations thereunder the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the ruling_amount applicable to the fund as set forth under sec_1_468a-2t b of the regulations based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code we have approved the following revised schedule of ruling amounts the mandatory review date for this matter remains the same approved schedule of ruling amounts year ruling_amount plr-155471-09 ----------- ----------- ----------- ----------------------- ----------------------- ----------------------- if any of the events described in sec_1_468a-3t f occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above specifically no determination is made whether the independent commissioning study conforms to industry standards and practices this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7t a a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch passthroughs special industries


be department of the treasury internal_revenue_service washington d c tax exempt and government entities jun sel tier na ad re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning date this extension applies to the eligible amortization charge bases established as of date the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan’s actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the manager and to the manager this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact sincerely yours s n cum ez_ david m ziegler manager ep actuarial group


internal_revenue_service number release date index number -------------------------------------------- -------------------------- ---------------------------------- re ----------------------------------------------- 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 plr-127495-15 date december legend decedent date spouse date ------------------------------------------------------------- ------------------------ ----------------------------------------------------- -------------------------- dear ----------------------------- this letter responds to your authorized representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a timely form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election plr-127495-15 it is represented that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of decedent’s death including any taxable_gifts made during his lifetime you request an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-127495-15 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i 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 taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term 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 sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 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 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a plr-127495-15 see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date it is represented that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void plr-127495-15 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs special industries by lorraine e gardner lorraine e gardner senior counsel branch passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date jul contact person al l 4i9as - good employer_identification_number identification_number telephone number t eo b4 dear sir or madam this in reference to your letter dated date requesting advance approval of your amended grant procedures we originally approved your grant procedures in a letter dated date under your amended grant-making procedures your current scholarship program the c program will be separated into two distinct programs one for children of united_states based employees of b and its wholly owned subsidiaries planning to attend four-year institutions listed in the d the e program and one for children of united_states employees of b and its wholly owned subsidiaries planning to attend community colleges junior colleges technical schools or trade schools listed in the d the f program for purposes of both the e program and the f program only the children of united_states based active full-time employees are eligible to submit an application and subsequently be awarded a scholarship children of retirees deceased employees or employees on lay-off will no longer be eligible to participate under the proposed e program children of united_states based active full-time employees p of b and its wholly owned subsidiaries are eligible to participate in the e program an applicant must be a secondary school senior graduating during the current academic year and entering a college or university listed in the d in the summer or fall of the following academic year there are no specific minimum eligibility requirements regarding gpa or class standing but each applicant must reasonably be expected to attend an accredited college or university and must meet the minimum standards for admission to such institution all policies regarding the imposition of scholastic aptitude test sat requirements will be based on the recommendations of the e program selection committee from an outside wholly independent nonprofit_educational_organization you estimate that you will receive approximately applications each year for the e program the maximum number of grants awarded under the e program in any year will not exceed the lesser_of or of the number of employees’ children who i were eligible ii were applicants for such scholarships and iii were considered by the selection committee in selecting the scholarship recipients for that year winners will be selected from a national pool of eligible applicants representing approximately domestic b locations by the selection committee the selection committee will evaluate applicants based on overall academic achievement leadership ability and civic involvement financial aid will not be a factor in the evaluation of applicants the selection committee will prepare a prioritized list of deserving candidates each year and you will award in order of priority scholarships to deserving applicants up to the maximum number of allowable e program scholarships the scholarship award will consist of a total award of dollar_figure payable at dollar_figure per year checks will be made payable to the applicable college or university the initial award of dollar_figure will be payable upon proof of enrollment at the college or university to be attended by the scholarship recipient provided that the recipient's parent is then employed by b or one of its whoily owned subsidiaries each subsequent award will be payable upon proof of continued education and satisfaction of such academic standards as may be recommended by the selection committee all policies regarding off-schedule payments probation the selection of alternates and the circumstances under which awards may be made to alternates will be based on recommendations of the selection committee winners may hold other scholarships including appointments to the g while the selection committee will be responsible for the general administration of the e program you will monitor all reports from the selection committee and other aspects of the program to assure compliance with the program's purpose and procedures once awarded grants are not subject_to termination as a result of the termination of a parent's employment with b there is no commitment intention or requirement to induce scholarship recipients to apply for employment with you or b and recipients are free to choose their own course of study without influence from you or b under the proposed f program children of united_states based active full-time employees of b and its wholly owned subsidiaries within the united_states are eligibte to participate in the f program an applicant must be a secondary school senior graduating during the current q academic year and entering a community college junior college technical school or trade schoo listed in the d in the summer or fall of the following academic year there are no specific minimum eligibility requirements regarding gpa or class standing but each applicant must reasonably be expected to attend an accredited community or junior college or trade or technical school and must meet the minimum standards for admission to such an institution all policies regarding the imposition of sat requirements will be based on the recommendations of the f selection committee you estimate that you will receive approximately applications each year for the f program the maximum number of grants awarded under the f program in any year will not exceed the lesser_of or of the number of employees’ children who i were eligibie ii were applicants for such scholarships and iii were considered by the selection committee in selecting the scholarship recipients for that year winners will be selected from a national poo of eligible applicants representing approximately domestic b locations by a selection committee from an outside wholly independent nonprofit_educational_organization the f program selection committee will evaluate applicants based on overall academic achievement leadership ability and civic involvement financial aid will not be a factor in the evaluation of applicants the f program will prepare a prioritized list of deserving candidates each year and you will award in order of priority scholarships to deserving applicants up to the maximum numberof allowable f program scholarships the scholarship award will consist of a total award of dollar_figure payable at dollar_figure per year checks will be made payable to the applicable community or junior college or technical or trade school the initial award of dollar_figure will be payable upon proof of enrollment at the qualifying school attended by the grantee provided that the grantee’s parent is then employed by b or one of its wholly owned subsidiaries in the united_states the subsequent award will be payable upon proof of continued education and satisfaction of such academic standards as may be recommended by the f program selection committee all policies regarding off-schedule payments probation selection of alternates and the circumstances under which awards may be made to alternates will be based on recommendations of the f program selection committee winners may hold other scholarships including appointments to any of the g while the f program selection committee will be responsible for the general administration of the f program you will monitor all reports from the f program selection committee and other aspects of the program to assure compliance with the program’s purpose and procedures grants are not subject_to termination as a result of the termination of a parent's employment with b there is no commitment intention or requirement to induce scholarship recipients to apply for employment with you or b and recipients are free to choose their own course of study without influence from you or b the e and f programs will supply the statistical information on applications received and grants made which will enable you to maintain the records required by revproc_76_47 1976_2_cb_670 you will ensure compliance with the percentage tests under section dollar_figure of revproc_76_47 in the aggregate with respect to your other scholarship programs available to mg e b same individuals sec_4945 of the code provides for the imposition of taxes on each taxable_expenditure of a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 sec_4945 of the code provides that sec_4945 shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if it is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_institution described in sec_170 of the code revproc_76_47 1976_2_cb_670 sets forth guidelines for a private_foundation conducting an employer related grant program to obtain advance approval of its procedures for conducting such a program under sec_4945 of the code sections dollar_figure through dollar_figure set forth seven conditions which a private_foundation must meet in order to obtain advance approval of its procedures under sec_4945 of the code section dollar_figure provides that a private_foundation which makes scholarships awards to children of employees of a company or to the employees themselves will meet this test if it limits these grants to of all eligible applicants or of alt those shown to be eligible in any given year renewals of grants awarded in prior years will not be considered in determining the number of grants awarded in a current_year the information provided indicates that your amended scholarship program and the procedures under which it is conducted will not differ materially from your original program approved in the letter dated date your submission indicates that your amended programs will continue to comply with the requirements of revproc_76_47 therefore based upon the information submitted and assuming your amended program will be conducted as proposed with a view to providing objectivity and nondiscrimination in the awarding of scholarship grants we rule that your e and f programs for the awarding of schoiarship grants comply with the requirements of sec_4945 of the code thus expenditures made in accordance with these procedures will not constitute taxable_expenditures within the meaning of sec_4945 of the code and as such are eligible for the exclusion from income provided for in sec_117 of the code to the extent that such grants are actually used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this ruling is conditioned on the understanding that there will be no material changes in the facts upon which it is based t is further conditioned on the understanding that no grants will be awarded to creators officers directors trustees or members of the selection committee or for a purpose inconsistent with the purposes described in sec_170 of the code d please note that this ruling is only applicable to grants awarded under your scholarship program as outlined above before you enter into any other scholarship programs you should submit a request for advance approval of that program we are informing the ohio te_ge office of this action please keep a copy of this ruling with your organization’s permanent records this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely tot v sook gerald v sack manager exempt_organizations technical group


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-102464-17 date date legend x ------------------------------------------- ------------------------------------------------------------ y ------------------------------------------- ---------------------------------------------------------------------- state -------------- a --------------------------------------------- ----------------------- b ---------------------------------- ------------------------------------------------- d1 d2 d3 d4 d5 d6 d7 ---------------------- -------------------------------- ---------------------- ------------------------ ------------------------ ---------------------- --------------------- plr-102464-17 dear ------------- this letter responds to a letter dated date and subsequent correspondence written on behalf of x from x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code facts according to the information submitted x is the state-law successor to y which was formed under the laws of state on d4 on d1 a the person who would have been the then-sole shareholder of y if y had been properly formed attempted to form y in d2 a filed a form_2553 election by a small_business_corporation for y effective d3 but a did not properly form y on d1 thus the s_corporation_election was invalid on d4 a properly formed y on d5 y was advised by its accountant that y’s s_corporation_election was ineffective on d6 a transferred a portion of a’s interest in x to a_trust b that x represents was and is an eligible shareholder of an s_corporation on d7 y converted under state state law to a limited_liability_company x in a transaction that x represents qualified as a reorganization under sec_368 x represents that y and a filed their tax returns as if y were an s_corporation this includes allocating y’s items of income loss deduction and credit to a x requests a ruling that it will be recognized as an s_corporation effective d4 law and analysis sec_1361 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 provides in part that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not 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 sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year at any time during the preceding taxable plr-102464-17 year or at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a a small_business_corporation makes an election under sec_1362 for any taxable_year and b such election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then such election shall be treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply x did not file a timely election to be treated as an s_corporation under sec_1362 effective d4 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d4 within days from the date of this letter x must submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item described above under any other provision of the code specifically we express or imply no opinion regarding whether y or its successor is otherwise eligible to be an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-102464-17 in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely david r haglund david r haglund chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


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 plr-126512-10 date date legend company ----------------------------------------------------------- ---------------------------------- date1 date2 state -------------------- ---------------------- ------------ dear -------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of company requesting a ruling under sec_1362 of the internal_revenue_code facts company incorporated in state on date1 company intended to file form_2553 election by a small_business_corporation effective date2 due to inadvertence company never filed the election company requests a ruling that it will be recognized as an s_corporation effective date2 law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s plr-126512-10 corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a a small_business_corporation makes an election under sec_1362 for any taxable_year and b the election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then the election is treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply conclusion based solely on the information submitted and representations made we conclude that company has established reasonable_cause for failing to make a timely s_corporation_election thus we conclude that company is eligible for relief under sec_1362 accordingly if company makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 effective date2 within days following the date of this letter then the election will be treated as timely made a copy of this letter should be attached to the form_2553 except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion as to whether company is otherwise eligible to be an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination plr-126512-10 pursuant to a power_of_attorney on file with this office a copy of this letter will be sent to your authorized representative sincerely s danielle m grimm acting senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si plr-121723-98 date date re legend husband wife bank trust_beneficiary daughter granddaughter b grandson bret don burford year year date court we received a letter dated date from your authorized representative requesting rulings concerning the application of the generation-skipping_transfer gst tax imposed by sec_2601 of the internal_revenue_code to the proposed modification of eight trusts according to the facts submitted in year husband and wife created inter_vivos trusts for the benefit of daughter and granddaughter a year is prior to date subsequent thereto but also prior to date granddaughter b and grandson were born and pursuant to the terms of the trust instrument trusts were also created for the benefit of granddaughter b and grandson you represent that trust is one of eight trusts and that the trusts are identical except for the beneficiaries and the investments trust was created primarily for the benefit of beneficiary and such beneficiary’s issue during the term of trust bank the corporate trustee has the sole discretion to distribute the trust estate in the best interests of beneficiary if not otherwise terminated sooner trust terminates when beneficiary dies at which time the trust estate is to be distributed to beneficiary’s issue in year the trustees petitioned court to modify paragraph of each trust instrument as modified paragraph provides that should husband cease or fail to serve as co-trustee with bank the following persons in order of succession shall serve as co-trustees with bank a wife b all of the following named persons daughter granddaughter a granddaughter b and grandson c all of such of the persons named in b who are able to act on date you received a private_letter_ruling from the internal_revenue_service that the modification to the trusts in year did not cause any of the trusts to lose their exempt status for gst tax purposes under sec_2601 you now proposed to petition court to modify paragraph once again as modified paragraph will provide that should husband cease or fail to serve as co-trustee with bank the following persons in order of succession shall serve as co-trustee with bank a wife and b the person for whom each trust is created and named with respect to trust_beneficiary if both husband and wife are unable to act as co-trustee and beneficiary is unable to act as co-trustee bank shall serve as sole trustee you represent that no additions of assets constructive or otherwise have been made to any of the trusts subsequent to date in addition no modifications or amendments other than the modification in year for which you received a private_letter_ruling on date have been made to any of the trusts in addition the trusts were irrevocable as of the date of creation prior to date you have requested a ruling that the proposed modification to paragraph of trust will not constitute an addition to trust or otherwise subject trust to the gst tax under sec_2601 of the code sec_2601 provides that a tax is imposed on every generation-skipping_transfer sec_2611 defines the term generation-skipping_transfer to mean a taxable_termination a taxable_distribution or a direct_skip sec_2612 defines the term taxable_distribution to mean any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip sec_2613 defines the term skip_person as including a natural_person assigned to a generation that is two or more generations below the generation assignment of the transferor trust in this case is a generation-skipping_trust because trust provides for distributions to persons that are two or more generations below the transferors’ generation thus unless trust is excepted from the gst tax provisions by reason of b a of the tax_reform_act_of_1986 act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations trust would be subject_to the gst tax section b a of the act and sec_26_2601-1 of the regulations provide that the gst tax shall not apply to any gst under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added a modification of a generation-skipping_trust that is otherwise exempt under the act and the regulations will generally result in a loss of its exempt or grandfathered status if the modification changes the quality value or timing of any powers beneficial_interest rights or expectancies originally provided for under the terms of the trust based on the facts presented and representations made we conclude that the proposed modification of trust is administrative in nature and will not result in any change in the quality value or timing of any beneficial_interest in trust consequently trust will continue to be exempt from the gst tax therefore provided there are no additions constructive or otherwise to trust neither distributions from nor the termination of trust will be subject_to the gst tax under sec_2601 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under the cited provisions or any other provisions of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of this ruling is being sent to your authorized representative sincerely assistant chief_counsel passthroughs and special industries by_____________________ george masnik chief branch enclosure copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c date cc dom fs it a number release date uilc internal_revenue_service national_office field_service_advice memorandum for deborah a butler assistant chief_counsel field service cc dom fs from subject 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 taxpayer shareholder law firm partnership lessor partner sublessee property a year year year year year year year year fy date date date date date date date date date date date date date date n o p q r s t u v w x y z issue s whether the amounts paid to settle a lawsuit are specified liability losses within the meaning of sec_172 whether legal expenses_incurred in the lawsuit are specified liability losses conclusion amounts paid to settle the lawsuit are not specified liability losses the legal expenses are not specified liability losses facts the facts are stated in detail in your request for field_service_advice some of the dates however are relevant to this matter and are restated here taxpayer a domestic_corporation was the general_partner of partnership there were seven limited partners partnership had a long-term ground lease on property a and subleased the property to sublessee in year it began negotiations with sublessee to sell the ground lease on date shareholder decided to sell partnership’s rights in the ground lease to sublessee in exchange for dollar_figuren and an assumption of the leasehold mortgage how this decision was reached was apparently at issue the limited partners claimed that taxpayer reached this decision without their consent lessor offered to exchange the property with partnership through a like-kind_exchange on date shareholder contacted law firm regarding purchase of property a also on date taxpayer not partnership attempted to enter into a purchase agreement for property a with an intermediary selected by lessor in date taxpayer acting on partnership’s behalf agreed to an increase in rent due lessor which it passed through to sublessee on date taxpayer sent letters to the partners offering to purchase their interest in partnership all the partners except partner assigned their interests in partnership to taxpayer during date sublessee sued partnership for breach of the agreement to sell the ground lease during the litigation sublessee accused taxpayer of breaching its fiduciary duties to the partners on date a second set of letters was sent to the partners in date taxpayer settled the litigation with sublessee by agreeing to acquire property a from lessor on date taxpayer sent partner a third letter giving him the same choices as before partner advised taxpayer that he was unable to make an educated decision concerning his options and requested additional information on date taxpayer sent partner a letter indicating that partnership was dissolved on date partnership acquired property a from lessor for dollar_figureo on date taxpayer purportedly acting on behalf of partnership which it had earlier claimed had been dissolved agreed to sell property a to an unrelated party for dollar_figurep on date taxpayer sent partner a schedule_k-1 for year indicating that partnership ceased doing business as of date and that partner 1's interest in partnership was sold to taxpayer on or about date on date the partners filed a complaint in state court against taxpayer shareholder and law firm an amended complaint was filed in year alleging offenses including breach of fiduciary duty constructive fraud fraud breach of contract negligence negligent misrepresentation conversion rico professional negligence and conspiracy partner settled his claims with the defendants including taxpayer in date taxpayer shareholder and the law firm agreed to pay partner dollar_figureq the other partners settled their claims in year the defendants agreed to pay them dollar_figurer on its income_tax for year taxpayer claimed deductions for legal expenses of dollar_figures and the settlement with partner of dollar_figuret for year it claimed a deduction for legal expenses of dollar_figureu for year it claimed a tort claim expense deduction of dollar_figurev taxpayer filed amended returns for year and year claiming carrybacks from year to year of dollar_figurew from year to year of dollar_figurex and from year to year of dollar_figurey and to year of dollar_figurez law and analysis this memorandum assumes for the purposes of analysis of the sec_172 issue that the amounts have been substantiated and that they are in fact deductible in the years claimed for the years in question sec_172 provided that taxpayers were able to carry net operating losses back three years and forward years an exception to this rule sec_172 provided that in the case of a taxpayer that has a specified_liability_loss the specified_liability_loss shall be a net_operating_loss_carryback to each of the taxable years preceding the taxable_year of the loss before its amendment by the tax and trade relief extension act of pub_l_no section sec_172 defined specified_liability_loss as the sum of the following amounts to the extent taken into account in computing the nol for the taxable_year taxpayer was on a fiscal_year ending fy all references to tax_year are for years ending fy sec_172 was amended in to provide for a 2-year carryback and a 20-year carryforward a any amount allowable as a deduction under sec_162 or sec_165 which is attributable to - i product_liability or ii expenses_incurred in the investigation or settlement of or opposition to claims against the taxpayer on account of product_liability b any amount not described in subparagraph a allowable as a deduction under this chapter with respect to a liability which arises under a federal or state law or out of any tort of the taxpayer if - i in the case of a liability arising out of a federal or state law the act or failure to act giving rise to such liability occurs at least years before the beginning of the taxable_year or ii in the case of a liability arising out of a tort such liability arises out of a series of actions or failures to act over an extended period of time a substantial portion of which occurs at least years before the beginning of the taxable_year a liability is not taken into account unless the taxpayer used an accrual accounting_method throughout the period or periods during which the acts or failures to act giving rise to the liability occurred settlement we do not believe that the settlement payments are subject_to sec_172 the legislative_history suggests that sec_172 should be read narrowly 107_tc_177 aff’d 171_f3d_655 9th cir citing conf_rep no 98th cong 2d sess c b vol while sealy did not concern a tort payment covered by sec_172 we think the principle of narrow construction enunciated in that case applies to the analysis of that subsection as well we believe that the liability settled by the taxpayer is not part of the narrow class of liabilities intended to be covered by the statute first the liability does not arise out of a series of actions or failures to act it is our position that single act torts are not covered by sec_172 the tort alleged against taxpayer amounts to one act namely misrepresentations made by taxpayer when it offered to purchase the partners’ limited_partnership interests specifically taxpayer misrepresented the value of the ground lease and failed to divulge any information relating to partnership’s purchase of property a while the one act of defrauding the partners included several steps we think the statutory requirement for a series of actions precludes the use of the longer carryback period second it seems clear to us as it did to you that the liability did not arise out of a series of actions taken over an extended period of time assuming that each step identified in the partners’ complaint was essential to the commission of the tort the tort was committed over a period of less than two years the statute on the other hand specifically requires that the liability must arise out of a series of actions or failures to act over an extended period of time all the actions relating to the partners’ claim occurred in year and year the portion of sec_172 providing the special ten-year carryback was initially added by the deficit_reduction_act_of_1984 sec_91 of that act was the same section that added the economic_performance rules of sec_461 of the code thus sec_172 should be interpreted in the context of its enactment as part of the overall changes to the code resulting from adopting the economic_performance rules in enacting the economic_performance rules congress recognized that this resulted in pushing deductions substantially further into the future than had been the rule under the all_events_test sec_172 represents an effort to ameliorate the possible harshness created by that rule given a plain reading of the statute as well as the interrelationship between the economic_performance rules and sec_172 we do not think that congress intended the period of time involved here to be considered an extended period of time and would be willing to defend such a position we do not believe that a tort-- even one involving a series of actions which we do not think this one does-- committed in such a short_period could be covered by sec_172 legal expenses irrespective of whether settlement of the underlying liability is covered by sec_172 any attendant legal or professional fees with respect to that liability are not those fees arise from a contract not a tort sealy is directly on point t c pincite case development hazards and other considerations if you have any further questions please call the branch telephone number by clifford m harbourt senior technician reviewer income_tax accounting branch


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 eoeg eo2 plr-137724-15 date date legend ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ----------------------------- ----------------------------------------------------------------------------- trust association subsidiary company ------------------ state year ------- ---------------------------------------------------------------------------------------------- trust ---------------------------------------------------------------------------------------------- agreement ----- ------- ------- ------------------ year year date dear --------------- this letter is in response to the ruling_request your authorized representative submitted on date that request and subsequent correspondence seeks several rulings including that income the trust receives upon completion of the transaction described below will be excludable from gross_income under sec_115 of the internal_revenue_code code facts the association is incorporated in state and is treated as an organization described in sec_501 of the code its membership is limited to certain types of public school entities as enumerated in its bylaws in state each of its current members qualifies as a state of the united_states a political_subdivision of a state of the united plr-137724-15 states or an entity the income of which is excluded from gross_income under sec_115 of the code the association’s mission is to promote public education and improve public school board governance in state the association formed the trust in year trust was formed to provide risk management and insurance related_services to the association’s members since its formation trust has provided the participants in its insurance program with risk management services negotiated the design of policies with other insurance providers and endorsed such policies in order to be a participant in trust an entity must be a member of the association qualify as one of the enumerated types of public school entities in state and participate in one of the trust’s programs to participate in one of the trust’s programs an entity must qualify as a state of the united_states a political_subdivision of a state or an entity the income of which is excluded from gross_income under sec_115 of the code a member of the association has the option but is not required to participate in the trust’s programs the trust is governed by a board_of trustees consisting of between seven and eleven trustees the trustees are elected by members of the association who are also participants the trust agreement provides that on termination no distribution will be made unless the entity receiving the distribution qualifies as a state a political_subdivision of a state or an entity the income of which is excluded from gross_income under sec_115 of the code the irs issued a private_letter_ruling to the trust in year concluding that its income is excludable from gross_income under sec_115 of the code the irs issued a second private_letter_ruling to the trust in year confirming that its income would continue to be excluded from gross_income under sec_115 of the code after the trust placed the majority of its insurance programs in subsidiary a state licensed for-profit insurance_company and thereby altered the way it serves its participants subsidiary also received a private_letter_ruling from the irs in year concluding that its income is excludable from gross_income under sec_115 of the code trust owns all of the outstanding_stock of subsidiary and is the sole member of company a state limited_liability_company that is treated as a disregarded_entity for purposes of federal income taxes subsidiary provides insurance and reinsurance to trust’s participants company provides services related to insurance claims risk management employee_benefits and benefits counseling to the public school members of association trust has determined that owning subsidiary and company is no longer economically feasible and that a buyer with greater capital and risk tolerance will be positioned to offer better insurance products to its participants plr-137724-15 under the proposed transaction the trust will sell all of the outstanding_stock of subsidiary and substantially_all of the assets of company to an unrelated third party for fair_market_value certain insurance activities that were discussed in the year and year private letter rulings have been conducted directly by the trust and have not been placed in subsidiary or company thus these insurance activities will not be part of the proposed transaction and upon completion of the transaction the trust will continue to conduct these insurance activities as discussed in the year and year private letter rulings upon completion of the transaction the trust will engage primarily in programs that strive to advance public education in state through financial and educational support for its participants referred to herein as expanded activities according to the trust the expanded activities will promote the adoption of policies and practices that will improve the quality of public education in state the trust represents that the expanded activities will accomplish the trust’s mission by providing training sessions and conferences disseminating information pertinent to the successful operation of public education studying and interpreting legislation that will impact public education contracting with third-party vendors to provide necessary consulting and additional resources to the trust’s participants and informing the public of the conditions and needs of public schools the trust agreement was amended on date to list the expanded activities in its purpose provision with respect to contracts with third-party vendors the trust represents that it will conduct this expanded activity in a manner which will ensure that the agreements do not provide more than an incidental benefit to private interests the trust administers a student accident insurance program upon completion of the transaction the trust will continue to administer the student accident insurance program which provides benefits for medical_expenses related to injuries to student athletes participating in school-supervised or sponsored activities as part of the expanded activities the coverage also includes accidental death and dismemberment benefits the trust markets this policy to the participants bills the participants and collects their premiums the trust represents that it has and will continue to take the appropriate precautions to ensure that its operation of this program does not provide more than an incidental benefit to private interests the student accident insurance program was not discussed in the year or year private letter rulings the trust plans to use a majority of the proceeds from the sale of its insurance assets to fund the trust’s expanded activities including its administration of the student accident insurance program as discussed above the remaining proceeds will be utilized to conduct the trust’s insurance activities as discussed in its year and year private letter rulings rulings requested plr-137724-15 the trust requests the following rulings the expanded activities that the trust will perform qualify as the exercise of an essential_governmental_function under sec_115 the income from the transaction is excluded from the trust’s income under sec_115 after the trust engages in the expanded activities its income will be excluded from gross_income under sec_115 and the use of the proceeds from the transaction to fund the expanded activities will be the exercise of an essential_governmental_function and such income will accrue to a state or political_subdivision thereof within the meaning of sec_115 law sec_115 of the code provides that gross_income does not include income derived from any public_utility or the exercise of any essential_governmental_function and accruing to a state or any political_subdivision thereof revrul_77_261 1977_2_cb_45 holds that income generated by an investment fund established by a state to hold revenues in excess of the amounts needed to meet current expenses is excludable from gross_income under sec_115 of the code revrul_90_74 1990_2_cb_34 holds that the income of an organization formed funded and operated by political subdivisions to pool various risks eg casualty public liability workers’ compensation and employees’ health is excludable from gross_income under sec_115 the revenue_ruling states that the income of such an organization is excluded from gross_income as long as private interests do not participate in the organization or benefit more than incidentally from the organization analysis ruling the expanded activities that the trust will perform qualify as the exercise of an essential_governmental_function under sec_115 after the transaction the trust plans to provide training sessions and conferences disseminate information pertinent to the successful operation of public education study and interpret legislation that will impact public education contract with third-party vendors to provide necessary consulting and additional resources to the trust’s participants and inform the public of the conditions and needs of public schools the trust’s engagements with third-party vendors will not provide more than an incidental benefit to private interests the trust also plans to continue to administer the student plr-137724-15 accident insurance program in a manner that does not provide more than an incidental benefit to private parties the activities described above relate directly to the provision of public education and its accompanying responsibilities and obligations and utilize economies of scale on behalf of state political subdivisions of state and entities in state whose incomes are excluded under sec_115 to assist them in their provision of public education and in meeting their accompanying responsibilities and obligations the activities do not provide more than an incidental benefit to private parties accordingly they are essential governmental functions under sec_115 of the code ruling the income from the transaction is excluded from the trust’s income under sec_115 trust has determined that owning subsidiary and company is no longer economically feasible or beneficial to its participants due to regulatory and market pressures trust has also determined that a buyer with greater capital and risk tolerance will be positioned to offer better insurance products to its participants under the proposed transaction the trust will sell all of the outstanding_stock of subsidiary an entity whose income is excluded under sec_115 of the code the trust will also sell substantially_all of the assets of company an entity for which the trust is the sole member and that is disregarded for purposes of federal_income_tax the buyer of these assets is an unrelated third party and the assets will be sold for fair_market_value based upon your representations we conclude that the proposed transaction will ensure the financial integrity of state entities political subdivisions of state or entities in state whose incomes are excluded under sec_115 the proposed transaction will not provide more than an incidental benefit to private parties accordingly the income derived from the proposed transaction will be derived from the exercise of an essential_governmental_function under sec_115 of the code the trust agreement provides that on termination no distribution will be made unless the entity receiving the distribution qualifies as a state a political_subdivision of a state or an entity the income of which is excluded from gross_income under sec_115 of the code accordingly income derived from the proposed transaction will accrue to a state or a political_subdivision of a state under sec_115 of the code ruling after the trust engages in the expanded activities including the student accident insurance program its income will be excluded from gross_income under sec_115 under ruling we have concluded that the expanded activities qualify as essential governmental functions under sec_115 of the code the trust agreement provides that on termination no distribution will be made unless the entity receiving the plr-137724-15 distribution qualifies as a state a political_subdivision of a state or an entity whose income is excluded from gross_income under sec_115 of the code accordingly income to the trust will accrue to a state or a political_subdivision of a state under sec_115 of the code after the trust engages in the expanded activities ruling the use of the proceeds from the transaction to fund the expanded activities will be the exercise of an essential_governmental_function and such income will accrue to a state or political_subdivision thereof within the meaning of sec_115 under ruling we have concluded that the expanded activities qualify as essential governmental functions under sec_115 of the code under ruling we have concluded that the income derived from the proposed transaction will be derived from the exercise of an essential_governmental_function under sec_115 of the code accordingly the use of the proceeds from the transaction to fund the expanded activities will be the exercise of an essential_governmental_function under ruling sec_2 and we have concluded that income derived from the proposed transaction will accrue to a state or a political_subdivision of a state under sec_115 of the code conclusion based on the foregoing we rule that ruling the expanded activities that the trust will perform qualify as the exercise of an essential_governmental_function under sec_115 of the code ruling the income from the transaction is excluded from the trust’s income under sec_115 of the code ruling after the trust engages in the expanded activities its income will be excluded from gross_income under sec_115 of the code ruling the use of the proceeds from the transaction to fund the expanded activities will be the exercise of an essential_governmental_function and such income will accrue to a state or political_subdivision thereof within the meaning of sec_115 of the code this ruling is based on the facts as they were presented in the ruling_request and on the understanding that there will be no material changes to those facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections expressly described herein plr-137724-15 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request that material is subject_to verification during an 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 will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative if you have any questions about this ruling please contact the person whose name and phone number are shown in the heading of this letter sincerely andrew f megosh jr senior tax law specialist tax exempt government entities cc