internal_revenue_service number release date index number ---------------------------- ------------------- ------------------------------------------- ---------------------------- ---------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no ---------------- telephone number -------------------- refer reply to cc ita b05 plr-125305-14 date november ty -------- legend taxpayer parent exempt_organization member partnership taxable_year a percent b percent state affidavit affidavit related partnership dear ----------------- -------------------------------------------- ----------------------- -------------------------- ----------------------- -------------------- ----------------------- -------------------------- ---------------------------------------- ----------------------- ------ -------------- -------------- ------------ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ---------------------------------------------- this letter is in response to a request for a private_letter_ruling dated date submitted on your behalf by your authorized representative specifically you have requested an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations for taxpayer a tax-exempt_controlled_entity under sec_168 of the internal_revenue_code to make an election under sec_168 to not be treated as a tax-exempt_controlled_entity plr-125305-14 facts taxpayer was formed in tax_year in state and is taxed as a c_corporation for federal_income_tax purposes taxpayer is wholly owned by parent parent is a percent owned by exempt_organization a not-for-profit corporation exempt from taxation under sec_501 and b percent owned by member based on exempt organization’s majority ownership_interest in and control of parent which is the owner of taxpayer taxpayer is a tax-exempt_controlled_entity within the meaning of sec_168 taxpayer is the general_partner of partnership partnership’s real_property was placed_in_service in tax_year and taxpayer filed a timely federal_income_tax return for tax_year but failed to make the sec_168 election on that return taxpayer’s failure to make the required sec_168 election was discovered for the first time when evidence of such election was requested in the case of related partnership which is also owned by exempt_organization however from affidavit affidavit and the other materials submitted it is clear that taxpayer at all times intended to make the sec_168 election to not be treated as a tax-exempt_controlled_entity affidavit and affidavit further make it clear that taxpayer’s return preparer was unaware that an affirmative election statement was required to be attached to the taxpayer’s federal tax_return for tax_year upon discovering its failure taxpayer promptly sought an extension of time in which to file the sec_168 election taxpayer makes the following representations notwithstanding omitting the statement to make the sec_168 election from the tax_return for tax_year every tax_return prepared and filed by taxpayer reflects the same treatment as if the sec_168 election had been made taxpayer is not under audit nor is being considered by an appeals officer or federal court for any_tax year in which the sec_168 election should have been made or for any_tax year affected by that election taxpayer is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 taxpayer is not using hindsight in requesting the relief sought the requested relief will not result in a lower tax_liability in the aggregate for all tax years affected by the sec_168 election than taxpayer would have had if the sec_168 election had been timely made finally although the period of limitations on assessment under sec_6501 for tax_year has expired taxpayer states that the government is not prejudiced in this case and thus relief should be granted law sec_167 of the internal_revenue_code provides generally for a depreciation deduction for property used in a trade_or_business under sec_168 the alternative plr-125305-14 depreciation system must be used for any tax-exempt_use_property as defined in sec_168 sec_168 provides that for purposes of sec_168 if any property which but for this subparagraph is not tax-exempt_use_property is owned by a partnership having both a tax-exempt_entity and a nontax-exempt entity as partners and any allocation to the tax-exempt_entity is not a qualified_allocation then an amount equal to such tax- exempt entity’s proportionate share of such property is treated as tax-exempt_use_property sec_168 provides generally that any tax-exempt_controlled_entity is treated as a tax-exempt_entity for purposes of sec_168 under sec_168 a tax-exempt_controlled_entity means any corporation without regard to that subparagraph and sec_168 if percent or more in value of the corporation’s stock is held by one or more tax-exempt entities other than a foreign_person_or_entity sec_168 applies similar rules in the case of tiered partnerships and other entities under sec_168 a tax-exempt_controlled_entity can elect not to be treated as a tax-exempt_entity such an election is irrevocable and will bind all tax-exempt entities holding an interest in the tax-exempt_controlled_entity under sec_301_9100-7t of the procedure and administration regulations a sec_168 election must be made by the due_date of the tax_return for the first taxable_year for which the election is to be effective sec_301_9100-7t provides the manner in which the sec_168 election is made sec_301_9100-1 provides that the commissioner of internal revenue has discretion to grant a reasonable extension of time to make a regulatory election sec_301_9100-1 defines the term regulatory election as including any election the due_date for which is prescribed by a regulation because the due_date of the sec_168 election is prescribed in sec_301_9100-7t the sec_168 election is a regulatory election sec_301_9100-1 through provide the standards the service will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-3 provides that requests for extensions of time for regulatory elections other than automatic extensions of time covered in sec_301_9100-2 will be granted when the taxpayer provides evidence including affidavits to establish that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government plr-125305-14 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer - i requests relief before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election under sec_301_9100-3 a taxpayer is considered to have not acted reasonably and in good_faith if the taxpayer - i seeks to alter a return position for which an accuracy-related_penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires a regulatory election for which relief is requested ii was fully informed of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief sec_301_9100-3 provides that the service will grant a reasonable extension of time only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made under sec_301_9100-3 the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section analysis the information submitted indicate that taxpayer at all times intended from the outset to make the sec_168 election and taxpayer’s failure to make the sec_168 election was inadvertent taxpayer represents that it has requested relief before the failure to make the sec_168 election was discovered by the service pursuant to plr-125305-14 an examination there is no evidence that taxpayer is using hindsight in requesting relief further based on the facts presented and the representations made taxpayer will not have a lower tax_liability for all tax years affected by the sec_168 than it would have had if the sec_168 election had been timely made although the taxable_year in which the sec_168 election should have been made is closed under sec_6501 the above representations support our conclusion that taxpayer has acted reasonably and in good_faith therefore the interests of the government will not be prejudiced by the granting of relief conclusion based solely on the facts as represented and the applicable law we conclude that the requirements of sec_301_9100-3 have been met and the request for relief under sec_301_9100-3 is granted accordingly taxpayer is treated as if it had made the sec_168 election with the tax_return it filed for tax_year taxpayer must attach the aforementioned sec_168 election and the information set forth in sec_301_9100-7t to its next return if taxpayer files electronically it may satisfy this requirement by attaching a statement to the return that provides the date and control number of this letter_ruling in addition the letter_ruling or statement should be attached for all subsequent returns and amended returns for all taxable years to which this ruling is relevant pursuant to sec_301_9100-7t a copy of this letter and the sec_168 election statement also should be attached to the federal_income_tax returns of each of the tax-exempt shareholders or beneficiaries of taxpayer 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 further we express no opinion concerning the assessment of any interest additions to tax additional_amounts or penalties for failure_to_file a timely income_tax return with respect to any taxable_year the ruling in this letter is based upon the information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party although this office has not verified any of the material submitted in support of the request for the ruling it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-125305-14 enclosed is a copy of the letter showing the deletions proposed to be made when it is disclosed under sec_6110 if you have any questions concerning this matter please contact the individual whose name and telephone number appear at the top of the letter in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely seoyeon sharon park assistant to the branch chief branch office_of_chief_counsel income_tax accounting enclosure cc


significant index no department of the treasury internal_revenue_service washington d c oct tax exempt and government entities oivision tep ila au re dear this letter constitutes notice that the service has approved your request for a modification of its prior approval of a 10-year extension for amortizing the plan’s unfunded liabilities for the plan_year beginning date the unfunded liabilities are described in code sec_412 and sec_302 b b of the employee retirement security act of erisa prior to amendment by the pension_protection_act of ppa ‘06 the conditions of this tentative approval are outlined in this letter the prior amortization extension was granted on date subject_to certain conditions one of the conditions stated that the plan's funded ratio calculated by dividing the plan's market_value of assets by its actuarial accrued liability computed by using the unit credit method and the plan assumptions as of date is a no less than for each valuation_date from date through date inclusive b no less than as of date c for each valuation_date subsequent to date no less than greater than the floor funded ratio as of the previous valuation_date for example because the floor funded ratio as of date i sec_82 the funded ratio must be at least as of date and as of date the approval would be retroactively null and void if the conditions were not met however the ruling indicated that the service would consider modifications of these conditions especially in the event that unforeseen circumstances beyond the control of the plan might cause the actual experience of the plan to fail the funded ratio condition an example of such unforeseen circumstance would be market fluctuations which affect the value of the plan’s assets this unforeseen circumstance happened for the plan_year ended march -_ with a general decline in asset values worldwide the plan had met the funded ratio condition above for the plan years april 2c april negative fund eared the assumed for the plan_year ended march this resulted in a funded ratio as of date of had the the funded ratio would have been the plan's asset retum was and this approval modifies condition outlined above effective date as follows no other condition is modified the plan's funded ratio calculated by dividing the plan's market_value of assets by its actuarial accrued liability computed using the unit credit method and the pian assumptions as of date is a no less than as of date b c no less than for each valuation_date from date through date inclusive for each valuation_date subsequent to date no less than greater than the floor funded ratio as of the previous valuation_date until a funded ratio of is achieved as of april for example because the floor funded ratio as of date i sec_58 the funded ratio must be at least as of date and as of date please note that the address has changed for filing copies of the actuarial valuation report and schedule mb form the new address is irs - ep classification metro tech center fulton street brooklyn ny if any one of the prior and amended conditions is not satisfied the approval to extend the amortization periods of the unfunded liabilities will be null and void retroactive to date however the service will consider modifications of these conditions especially in the event that unforeseen circumstances beyond the control of the plan may cause the actual experience of the plan to fail the funded ratio condition an example of such an unforeseen circumstance would be market fluctuations which affect the value of the plan's assets of course any request for a modification would be considered another ruling_request and would be subject_to an additional user_fee your attention is called to sec_412 c of the code and sec_302 c of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while the amortization extension remains in place please note that any amendment that increases liabilities for a profit sharing plan or any other retirement plans whether qualified or unqualified maintained by the trustees for the plan and covering participants of the plan to which this ruling applies would be considered an amendment for purposes of sec_412 c of the code and sec_302 c of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan whether qualified or unqualified maintained by the trustees for the plan and covering participants of the plan to which this ruling applies would be considered an amendment for purposes of sec_412 c of the code and sec_302 cx7 of erisa this ruling is directed only to the taxpayer that requested it sec_61 kx3 of the code provides that it may not be used or cited by others as precedent ’ we have sent a copy of this letter to the to the and to your authorized representative pursuant to a power of attomey on file in this office if you require further assistance in this matter please contact sincerely yours te g2 yy david m ziegler manager employee_plans actuarial group


office_of_chief_counsel internal_revenue_service memorandum number release date cc psi cgabrysh preno-149594-10 uilc date date to holly l mccann chief excise_tax program sbse from frank boland chief branch office of associate chief_counsel passthroughs and special industries cc psi b7 subject retail tax on imported trucks this responds to your request for non-taxpayer specific legal advice regarding the imposition of the sec_4051 retail_truck_tax on imported trucks in various scenarios all of the trucks described in the scenarios have chassis and bodies of the type that are subject_to the sec_4051 tax this document may not be used or cited as precedent sec_4051 of the internal_revenue_code imposes a percent excise_tax on the first_retail_sale of certain enumerated articles including bodies and chassis of highway trucks sec_4051 excludes from the tax imposed by sec_4051 truck bodies and chassis that are suitable for use with a vehicle that has a gross vehicle weight gvw of big_number pounds or less sec_4052 defines the term first_retail_sale as the first sale for a purpose other than for resale or leasing in a long-term_lease after production manufacture or importation sec_145_4052-1 of the temporary excise_tax regulations under the highway revenue act of pub l provides that for purposes of sec_4051 the term first_retail_sale means a taxable sale described in sec_145_4052-1 preno-149594-10 sec_145_4052-1 provides that the sale of an article is a taxable sale unless --- i the sale is a tax-free sale under sec_4221 ii for sales after date see sec_48_4052-1 iii there has been a prior taxable sale of the article sec_145_4052-1 provides that for purposes of the regulations under sec_4051 the use of an article will be deemed to be a sale of the article sec_145_4052-1 provides that if the sale of an article is a taxable sale under sec_145_4052-1 the tax shall be computed on the price as determined under sec_145_4052-1 sec_145_4052-1 provides that the price for which an article is sold includes the total consideration paid for the article whether that consideration is paid in money services or other forms sec_145_4052-1 provides rules for determining the sec_4051 tax when a manufacturer producer importer or related_person is liable for this tax sec_48_4052-1 of the manufacturers and retailers excise_tax regulations provides that tax is not imposed by sec_4051 on the sale of an article for resale or leasing in a long-term_lease if by the time of the sale the seller has in good_faith accepted from the buyer a statement that the buyer executed in good_faith in substantially the same form and subject_to the same conditions as the certificate described in sec_145 a except that the certificate must be signed under penalties of perjury and need not refer to form_637 or include a registration number sec_145_4052-1 provides that rules similar to the rules of sec_4221 and the regulations thereunder apply to the regulations under sec_4051 sec_4221 provides in part that the sale of an article taxable under sec_4051 is exempt from tax if the article is sold for export sec_48_4221-1 and sec_48_4221-3 provide criteria that must be met for this exemption in revrul_85_95 1985_2_cb_204 the domestic manufacturer of a truck whose body and chassis were subject_to the sec_4051 tax sold the truck for export to a dealer in a foreign_country the truck was used in the foreign_country x a domestic used truck wholesaler and retailer purchased the used truck in the foreign_country and imported the used truck into the united_states for resale x sold the imported and used truck to a retail customer the revenue_ruling held that x’s sale of this truck to its retail customer was the first_retail_sale of the truck in the united_states after importation the retail tax did not apply to the original manufacturer’s sale of the truck for export because the sale was not a sale at retail no initial retail_sale taxable or tax-free occurred before the exportation of the truck out of the united_states the first_retail_sale after the vehicle preno-149594-10 was subsequently imported into the united_states presented the first and only opportunity to impose the tax scenario facts m a united_states truck manufacturer is a form_637 registrant that exported a truck to a foreign_country and sold the truck there to a foreign dealer m did not pay a sec_4051 excise_tax on this transaction because m claimed that the truck sale was exempt from the sec_4051 tax because sec_4221 exempts from tax otherwise taxable sales of trucks that are sold for export the foreign dealer resold the truck to f an entity that used the truck in the foreign_country f then sold the truck in the foreign_country to a u s retailer of used trucks r r imported the truck into the united_states and sold the truck to a u s customer analysis m’s sale of the truck to the foreign dealer was not the first_retail_sale of the truck because the sale occurred outside the united_states similar to the situation described in revrul_85_95 this sale was not exempt under sec_4221 because the sale would not have been subject_to tax in any event the later sales of the truck by the foreign dealer and by f in the foreign_country are also foreign sales that the code does not tax therefore the first_retail_sale of the truck occurred when r sold the truck to a u s customer m’s registration status is irrelevant to this analysis r is liable for the sec_4051 tax because r made the first_retail_sale of the truck the tax on r’s sale is computed consistent with sec_145_4052-1 scenario facts m a united_states truck manufacturer is a form_637 registrant that sold a truck in the united_states to a foreign dealer for export to a foreign_country at the time of sale m had received from the foreign dealer a certificate described in sec_48 a exemption_certificate in the foreign_country the foreign dealer resold the truck to f an entity that used the truck in the foreign_country f then sold the truck in the foreign_country to u a united_states trucking company u imported the truck into the united_states for use in its business analysis because m received from the foreign dealer an exemption_certificate m’s sale of the truck in the united_states was not the first_retail_sale of the truck and thus was not subject_to the sec_4051 tax the sales of the truck by the foreign dealer and f in the foreign_country are foreign sales that the code does not tax therefore the first_retail_sale of the truck occurred when u used the truck in the united_states sec_145_4052-1 equates use of a taxable article with its sale m’s registration status is irrelevant to this analysis preno-149594-10 u is liable for the sec_4051 tax because u’s use of the truck is treated as a sale of the truck under sec_145_4052-1 the tax on u’s use of its imported truck is computed under sec_145_4052-1 scenario facts m a united_states truck manufacturer is a form_637 registrant that sold a truck in the united_states to a foreign dealer for export to a foreign_country at the time of sale m had not received from the foreign dealer an exemption_certificate m however claimed that the truck sale was exempt from the sec_4051 tax because sec_4221 exempts from tax otherwise taxable sales of trucks that are sold for export in the foreign_country the foreign dealer resold the truck to f an entity that used the truck in the foreign_country f then sold the truck in the foreign_country to u a united_states trucking company u imported the truck into the united_states for use in its business analysis because m did not receive from the foreign dealer an exemption_certificate m’s sale of the truck in the united_states was the first_retail_sale of the truck and thus was subject_to the sec_4051 tax however because the sale was a sale for export the sec_4051 tax did not apply to this sale assuming all the sec_4221 conditions are met the sales of the truck by the foreign dealer and f in the foreign_country are foreign sales that the code does not tax u’s first use of the truck in the united_states is not the first_retail_sale in the united_states and thus not subject_to tax under sec_4051 scenario facts m a united_states truck manufacturer is a form_637 registrant that sold a truck in the united_states to a foreign dealer for export to a foreign_country at the time of sale m had not received from the foreign dealer an exemption_certificate m however claimed that the truck sale was exempt from the sec_4051 tax because sec_4221 exempts from tax otherwise taxable sales of trucks that are sold for export in the foreign_country the foreign dealer resold the truck to u a united_states trucking company who imported the truck into the united_states in an unused and undamaged condition u then used the truck in the united_states in its business analysis because m did not receive from the foreign dealer an exemption_certificate m’s sale of the truck in the united_states was the first_retail_sale of the truck and thus was subject_to the sec_4051 tax however because the sale was a sale for export the sec_4051 tax did not apply to this sale assuming all the sec_4221 conditions are met u’s first use of the truck in the united_states is the first_retail_sale in the united_states because the truck was returned to the united_states in an unused and undamaged condition sec_48_4221-3 u is liable for the sec_4051 tax because u’s use of the truck is treated as a sale of the truck under sec_145_4052-1 the tax on u’s use of its imported truck is computed under sec_145_4052-1 preno-149594-10 scenario facts r a united_states retailer of used trucks bought a truck in a foreign_country where the truck was manufactured and used r imported this truck into the u s and sold the truck to a retail customer analysis r’s sale of its truck after its importation to a retail customer is the first_retail_sale of the truck in the united_states see sec_4052 r is liable for the sec_4051 tax because r is made the first_retail_sale of the truck in the united_states the tax on r’s sale of the truck is computed under sec_145 d please call celia gabrysh at if you have any further questions


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 plr-157462-05 date march legend decedent spouse trust trustees date date year year year year year law firm dear ------------------ -- ------------------------------------------------------ ----------------------------------------------------- ------------------------------------------------------------------ ------------------ ---------------------- ------- ------- ------- ------- ------- ---------------------- this is in response to a letter dated date submitted on your behalf by your authorized representative requesting an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to make an election under sec_2632 with respect to the automatic allocation of generation-skipping_transfer gst_exemption to transfers made to trust the facts and representations submitted are summarized as follows on date decedent and spouse established trust an irrevocable_trust for the benefit of their five children and their children’s issue the trustees of trust are trustees trustees may distribute all or any part of the trust’s income for the health support maintenance and complete education of decedent’s and spouse’s children and their pursuant to the terms of trust during the lifetimes of decedent and spouse the upon the death of the survivor of decedent and spouse the date of division the plr-157462-05 issue during each year that cash or other_property is transferred to trust by decedent or spouse or premiums with respect to life_insurance policies held by trust are paid_by either decedent or spouse each of their children shall have the unrestricted right to demand and immediately receive from trust a share equal to the value of the property contributed and the amount of premiums_paid divided by the number of the children living on january of such year the maximum amount which a child may demand in any calendar_year is limited to dollar_figure each year on december the total amount a child may withdraw shall be reduced by the greater of dollar_figure or percent of the principal of the trust as of december principal and accumulated income of trust is to be divided into equal shares one for each living child of decedent and spouse and one for each deceased child who is survived by issue each share shall be set_aside in a separate trust the trustees shall distribute income to the child for whom the separate trust is set_aside in quarterly or other convenient installments the trustees may also distribute principal to or for the benefit of a class consisting of the child and the child’s issue for health support maintenance and complete education after the expiration of one year from the date of division a child has the right to withdraw one-third of the market_value of the trust principal after the expiration of four years from the date of division a child has the right to withdraw one-half of the market_value of the trust principal after the expiration of seven years from the date of division a child has the right to withdraw all the remaining principal of his or her trust upon withdrawal the child’s separate trust shall terminate or for the benefit of persons and organizations exclusive of the child’s creditors the child’s estate or the creditors of the child’s estate as the child shall appoint by specific reference in the child’s will however if a federal gst tax would be imposed upon the child’s death with respect to the trust property over which he or she has a power_of_appointment and if said tax would be imposed at a rate equal to or higher than the marginal federal estate_tax rate which would be imposed if the child’s trust were included in the child’s taxable_estate then the child may also exercise the power_of_appointment in favor of his or her creditors or his or her estate any unappointed trust principal shall be distributed to the child’s issue per stirpes but if the child is not represented by issue then to the issue of decedent and spouse distributed to or for the benefit of persons and organizations exclusive of the predeceased child’s creditors the child’s estate or the creditors of the child’s estate as the predeceased child shall appoint by specific reference in the child’s will however if a federal gst tax would be imposed upon the child’s death with respect to the trust property over which he or she has a power_of_appointment and if said tax would be imposed at a rate equal to or higher than the marginal federal estate_tax rate which would be imposed if the child’s trust were included in the child’s taxable_estate then the upon the death of a child the trustees shall distribute any remaining principal to the separate trust for a child who predeceased decedent and spouse shall be plr-157462-05 child may also exercise the power_of_appointment in favor of his or her creditors or his or her estate any unappointed trust principal shall be distributed to the child’s issue per stirpes during year year and year various gifts and deemed gifts were made to trust decedent and spouse elected to treat the transfers as being made one-half by each spouse under sec_2513 decedent and spouse timely filed united_states gift and generation-skipping_transfer_tax returns form sec_709 for gifts made in year year and year decedent’s and spouse’s form sec_709 were prepared by law firm the form sec_709 however did not properly reflect gifts made or deemed to be made during year year and year accordingly amended form sec_709 for year year and year were filed in year to correct certain defects in the original form sec_709 despite the filing of amended form sec_709 for year year and year an election to opt_out of the automatic allocation rules was not made on any of the form sec_709 at the time trust was created an indirect_skip and generation-skipping_trust as well as the automatic allocation rules under sec_2632 were not in effect decedent and spouse were not aware of the need to make the election under sec_2632 for transfers to trust made in and thereafter during the course of administering decedent’s estate it became apparent that a portion of decedent’s and spouse’s gst tax exemptions may have been inadvertently allocated to transfers to trust as a result of the gifts and deemed gifts made in year year and year decedent’s estate and spouse request a ruling that they each be granted an extension of time under sec_301_9100-3 to elect pursuant to sec_2632 to have the automatic allocation rules under sec_2632 not apply to decedent’s and spouse’s transfers to trust in year and for all future years sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer is defined as the excess of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of gst_exemption allocated to the trust or to property transferred in a direct_skip and the denominator of which is the value of the property transferred to the trust or involved in the direct_skip reduced by the sum of certain taxes and charitable deductions plr-157462-05 sec_2631 as in effect at the time of the transfers in this case provides that sec_2632 effective for transfers subject_to the gift or estate_tax after sec_2632 provides that the term indirect_skip means any transfer of for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable date provides that if any individual makes an indirect_skip during such individual’s lifetime any unused portion of such individual’s gst_exemption shall be allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero if the amount of the indirect_skip exceeds such unused portion the entire unused portion shall be allocated to the property transferred property other than a direct_skip subject_to the gift_tax made to a gst_trust sec_2632 provides in part that the term gst_trust means a_trust that could have a generation-skipping_transfer with respect to the transferor unless the trust falls within any of six enumerated exceptions under sec_2632 an individual may elect to have the automatic allocation of gst_exemption not apply to an indirect_skip sec_2632 provides that the election shall be deemed to be timely if filed on a timely filed gift_tax_return for the calendar_year in which the transfer was made or on such later date or dates as may be prescribed by the secretary regulations provides that a transferor may prevent the automatic allocation of gst_exemption elect out with respect to any transfer or transfers constituting an indirect_skip made to a_trust in the case of a transfer treated under sec_2513 as made one- half by the transferor and one-half by the transferor’s spouse each spouse shall be treated as a separate transferor who must satisfy separately the requirements of sec_26_2632-1 to elect out with respect to the transfer sec_26_2632-1 provides the manner for making an election out to elect out the transferor must attach a statement election out statement to a form_709 the election out statement must identify the trust and specifically must provide that the transferor is electing out of the automatic allocation of gst_exemption with respect to the described transfer or transfers further unless the election out is made for all transfers made to the trust in the current_year and or in all future years the current-year transfers and or future transfers to which the election out is to apply must be specifically described or otherwise identified in the election out statement sec_26_2632-1 of the generation-skipping_transfer_tax plr-157462-05 sec_26_2632-1 provides that the form_709 with the attached election out statement must be filed on or before the due_date for timely filing of the form_709 for the calendar_year in which the first transfer to be covered by the election out was made sec_2642 provides in relevant part that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an election out under sec_2632 sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides in relevant part that under sec_2642 the time for electing out of the automatic allocation rules is to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an election described in sec_2632 under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make 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_9100-3 provides the standards used 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 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an election described in sec_2632 under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the 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 reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election plr-157462-05 a gst_trust is defined in sec_2632 in general as any trust that could have a generation-skipping_transfer a_trust is a gst_trust unless it meets one of the exceptions described in sec_2632 through vi where a sufficient possibility exists based on the statutory criteria that the trust corpus will not be distributed to lower generations based upon the facts submitted and the representations made none of the exceptions in sec_2632 apply to trust and accordingly trust is a gst_trust for purposes of sec_2632 based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore decedent’s estate and spouse are each granted an extension of time of days from the date of this letter to make the election out of the automatic allocation of gst_exemption under sec_2632 with respect to the transfers to trust in year and all future years the election should be made in accordance with the provisions of sec_26_2632-1 of the regulations the supplemental form_709 and election out statement are to be filed with the internal_revenue_service center cincinnati ohio a copy of this letter should be attached to the form_709 a copy is enclosed for this purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 sincerely heather c maloy associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of letter-


department of the treasury internal_revenue_service washington d c date chief_counsel number release date conex-105184-18 index number the honorable john a defrancisco new york state senator capitol albany ny attention ------------------------ dear mr defrancisco thank you for your letter dated date requesting an opinion about a proposal advanced by the governor of the state of new york in his executive budget this proposal establishes a charitable gifts trust fund and allows individual taxpayers a credit against state_income_tax for a percentage of amounts contributed to such a fund during the immediately preceding_taxable_year specifically you asked for our opinion about whether amounts contributed by taxpayers under this proposal would be recognized by the irs as a charitable_contribution allowable as a deduction under sec_170 of the internal_revenue_code section dollar_figure of revproc_2018_1 2018_1_irb_1 provides that the offices of associate chief_counsel ordinarily do not issue letter rulings on matters involving the federal tax consequences of any proposed federal state local municipal or foreign legislation therefore we are unable to provide an opinion on the governor’s proposal nevertheless we are aware of his and similar proposals and are continuing to study the application of the federal tax laws to these matters conex-105184-18 thank you for providing information on this matter if you have any questions please contact me or -------------- at -------------------- sincerely robert m casey acting chief branch office of associate chief_counsel income_tax accounting


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 3-plr-119378-02 date date legend corporation shareholders date dear this letter responds to a letter dated date and subsequent correspondence requesting a ruling under sec_1362 of the internal_revenue_code facts corporation was incorporated on date corporation intended to be taxed as an s_corporation but failed to file timely a form_2553 election by a small_business_corporation applicable law sec_1362 generally provides that a small_business_corporation may elect to be an s_corporation for federal tax purposes sec_1362 governs the timeliness of such an election as well as its effective date generally if an election to be treated as an s_corporation is made within the first plr-119378-02 two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation beginning in the year in which the election was made if the election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will not be treated as having made an effective election to be treated as an s_corporation for federal tax purposes until the following taxable_year sec_1362 provides that if an election to be treated as an s_corporation for federal tax purposes is either made untimely or not made at all and the secretary determines that there was reasonable_cause for the failure to make a timely election then the secretary may treat the corporation as having made a timely election conclusion based on the facts submitted and representations made we conclude that corporation has established reasonable_cause for failing to make a timely election to be an s_corporation accordingly provided corporation files a completed form_2553 effective date with the appropriate service_center within days from the date of this letter such election will be treated as timely made a copy of this letter should be attached to the form_2553 and is enclosed for that purpose except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code specifically we express or imply no opinion concerning whether corporation otherwise qualifies as 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 sincerely yours jeanne m sullivan senior technician reviewer branch office of associate chief_counsel passthroughs and special industries enclosures cc copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court ted and tammy estes petitioners v commissioner of internal revenue respondent docket no filed date bruce a moates for petitioners bruce k meneely for respondent memorandum opinion dawson judge this case was assigned to special_trial_judge daniel j dinan pursuant to rule sec_180 sec_181 and sec_183 unless otherwise indicated section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure - - the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge dinan special_trial_judge this case is before the court on petitioners’ motion and supplemental motion for award of litigation and administrative costs pursuant to the provisions of rule and of sec_7430 of the internal_revenue_code in effect at the time the petition in this case was filed although respondent requested a hearing on this motion we find that a hearing is not necessary see rule a accordingly we rule on petitioners’ motion on the basis of the parties’ submissions and the existing record petitioners resided in oklahoma city oklahoma at the time the petition was filed in this case background the overriding issue in this case was the substantiation of expenses and costs of goods sold claimed by petitioners to have been incurred in connection with petitioner husband’s petitioner business while the question of whether petitioners initially maintained adequate business records remains disputed by the parties the poor condition of the records at the time of respondent’s examination is not disputed petitioner contends that a fire partially destroyed his records making them unavailable to respondent the parties agree that for one reason or another complete records did not exist at the time of the audit and that reconstructions of petitioners’ income and expenses had to be made the reconstructions to a large extent were based upon petitioners’ checks and deposit tickets from the years in issue the examining agent also relied upon bank records and summary documents prepared by petitioners’ accountant the primary issues discussed by the parties prior to the issuance of the notice_of_deficiency were cost_of_goods_sold gross_receipts and the sale of oil royalties the third issue sale of oil royalties was resolved in petitioners’ favor prior to the issuance of the notice_of_deficiency because petitioners believed they would owe no taxes if the first issue cost_of_goods_sold were decided in their favor petitioners in settlement negotiations agreed to concede all other issues if respondent made a favorable determination regarding the cost_of_goods_sold amounts respondent issued a statutory_notice_of_deficiency to petitioners dated date the notice set forth the following adjustments advertising expense dollar_figure -o- -o- aircraft expense -0- -0- dollar_figure commission expense -0- dollar_figure -0- cost_of_goods_sold big_number big_number big_number depreciation expense gross_receipts big_number big_number insurance expense interest_income misc other expense net_operating_loss_deduction reclassification items sale of oil royalties taxes licenses expense travel expense truck expense utilities phone expense self-employment_tax deduction capital_gains_and_losses taxable social_security deduction for exemptions total adjustments taxable_income on return’ taxable_income as adjusted -o- dollar_figure dollar_figure dollar_figure -o- big_number big_number big_number big_number big_number big_number big_number big_number big_number -o- big_number -o- big_number big_number big_number big_number big_number big_number -o- -o- big_number big_number big_number big_number big_number -o- big_number big_number -o- big_number big_number -o- --0- big_number big_number big_number big_number big_number big_number big_number big_number the taxable_income amounts are those which the notice_of_deficiency indicates were on the original returns filed by petitioners these adjustments resulted in the determination that petitioners were liable for the following deficiencies sec_6662 a accuracy-related_penalties and sec_6651 additions to tax in the total amount of dollar_figure deficiencies dollar_figure dollar_figure dollar_figure penalties big_number --q- big_number additions to tax --q- --q- big_number total big_number big_number big_number petitioners filed a petition with the court on date seeking a redetermination of the deficiencies stated in the notice respondent filed an answer on date in the answer respondent took the same position as reflected in the notice_of_deficiency petitioners’ counsel first met with a - - representative and counsel for respondent on date at this meeting several issues were discussed among them were various details relating to the proper cost_of_goods_sold amounts including the contested issue of the amount of beginning_inventory for in addition petitioners presented documents regarding insurance premiums which respondent accepted as substantiation of properly deductible expenses at a meeting on date petitioners presented additional material regarding the beginning_inventory issue at another meeting held on date several topics were again discussed including travel and entertainment_expenses for which respondent allowed a partial deduction at this meeting respondent made a settlement offer which proposed to make some concessions favorable to petitioners in exchange for reciprocal concessions respondent contends that petitioners provided new information with regard to the costs of goods sold issue at this meeting but petitioners dispute this contention after the meeting respondent made final calculations regarding the settlement offer and forwarded the offer to petitioners on date the offer consisted of the following liabilities in the total amount of dollar_figure deficiencies dollar_figure dollar_figure --o- penalties big_number --q- --q- additions to tax --0- --0- --0- total big_number big_number --o- petitioners rejected this settlement offer counsel for both parties along with respondent’s appeals officer met on date counsel again met on date this time with petitioner present respondent and petitioners dispute whether and to what extent new evidence was given in these later stages of negotiation to substantiate the amounts claimed as cost_of_goods_sold the parties also dispute whether petitioners’ personal conversations with respondent’s counsel yielded information previously not available to respondent after this meeting however respondent made the decision to concede the case in whole to petitioners a stipulated decision was entered on date the decision document stated that petitioners were not liable for any deficiencies penalties or additions to tax ’ the statement of income_tax changes---prepared by respondent and filed with the ' the statement of income_tax changes lists an overassessment for taxable_year in the amount of dollar_figure the decision document however states that there were no overpayments in the years at issue court by petitioners with their motion for costs----lists the following basis for settlement of advertising expense aircraft expense commission expense cost_of_goods_sold depreciation expense gross_receipts insurance expense interest_income misc other expense net_operating_loss_deduction reclassification items sale of oil royalties taxes licenses expense travel expense truck expense utilities phone expense self-employment_tax deduction capital_gains_and_losses taxable social_security deduction for exemptions total adjustments taxable_income on return taxable_income as adjusted the case dollar_figure -o- --0- -o- -o- dollar_figure -o- dollar_figure -o- -o- big_number -o- big_number big_number -o- big_number big_number -o- big_number big_number big_number -o- big_number big_number big_number big_number big_number -o- big_number -o- big_number big_number big_number big_number big_number big_number big_number -o- -o- big_number big_number big_number -o- -o- -o- big_number big_number -o- -o- -o- --o- --o- --o- big_number big_number big_number big_number big_number big_number a motion by petitioners to vacate the decision was filed on date and was subsequently granted a motion by petitioners for litigation and administrative costs was filed on date elsewhere in the record unclear appropriate ruling on petitioners’ administrative costs however the settlement adjustments seemingly do not accurately reflect the adjustments agreed to by the parties the reasons for these discrepancies are the sole issue before the court as reflected is the motion for litigation and --- - discussion sec_7430 provides for the award of reasonable administrative and litigation costs to a taxpayer in an administrative or court_proceeding brought against the united_states involving the determination of any_tax interest or penalty pursuant to the internal_revenue_code an award of administrative or litigation costs may be made where the taxpayer is the prevailing_party exhausted available administrative remedies and did not unreasonably protract the administrative or judicial proceeding see sec_7430 b the costs claimed must also be reasonable in amount see sec_7430 these requirements are conjunctive and failure to satisfy any one will preclude an award of costs to petitioners see 88_tc_492 to be a prevailing_party the taxpayer must show that the taxpayer substantially prevailed with respect to the amount in controversy or with respect to the most significant issue s presented and the taxpayer satisfied the net_worth requirement see sec_7430 a if respondent establishes that the position_of_the_united_states in the proceeding wa sec_3 this requirement does not apply to an award for reasonable_administrative_costs see sec_7430 --- - substantially justified however a taxpayer is not a prevailing_party for purposes of sec_7430 see sec_7430 b ’ after concessions by respondent the remaining issues are whether the position_of_the_united_states in the proceeding was substantially justified and whether the amounts of administrative and litigation costs claimed by petitioners are reasonable because we hold that respondent’s position was substantially justified we need not consider respondent’s alternative argument that the administrative and litigation costs requested by petitioners are not reasonable the substantially justified standard under sec_7430 is applied as of the separate dates respondent took positions in the administrative and judicial proceedings see sec_7430 for purposes of administrative costs the position_of_the_united_states is that taken in an administrative_proceeding as of the earlier of the date of the receipt by the taxpayer of the notice of decision by the internal_revenue_service office of appeals or the date of the notice_of_deficiency see sec_7430 b the position_of_the_united_states for purposes of litigation costs refers to the position_of_the_united_states ina judicial because the petition in this case was filed after date under sec_7430 the burden is on respondent to show that the government’s position was substantially justified see taxpayer bill of right sec_2 publaw_104_168 110_stat_1452 108_tc_430 -- - proceeding see sec_7430 a a judicial proceeding in this court 1s commenced with the filing of a petition see rule a generally respondent initially takes a position in the litigation on the date he files the answer in response to the petition see eg han v commissioner tcmemo_1993_386 the commissioner’s position is substantially justified if that position could satisfy a reasonable person and if it has a reasonable basis in both fact and law see 487_us_552 determining the reasonableness of the commissioner’s position and conduct requires considering what the commissioner knew at the time see 85_tc_927 the commissioner’s position can be justified even if the commissioner eventually concedes the case see 92_tc_760 petitioners’ records were at best in a disordered state when respondent sought to review them only incomplete information was available to respondent and respondent was forced to rely upon reconstructed records to determine petitioners’ tax_liability it is well established that taxpayers are required to keep adegquate books_and_records and in the absence of such respondent may determine a taxpayer’s tax_liability by any method which respondent finds to clearly reflect income see sec_6001 sec_446 sec_1_6001-1 income_tax regs sec_1 l a b income_tax regs this is true even where the taxpayer’s records are destroyed by fire and the taxpayer’s reconstructions are inadequate see eg jernigan v commissioner tcmemo_1978_13 the record in this case indicates that respondent adopted a reasonable and therefore substantially justified position in light of the inadequacy of petitioners’ books_and_records and the information accessible to respondent throughout the administrative proceedings and in respondent’s filing of the answer in this case on date petitioners argue that respondent was not substantially justified in his position because respondent’s counsel ultimately offered to concede the entire tax_liability for all years in issue based upon essentially the same information that was available to respondent prior to the issuance of the notice_of_deficiency we find however that respondent’s position was substantially justified in this case because of the lack of adequate books_and_records available to respondent the fact that respondent’s counsel ultimately decided to concede the case may reflect a consideration of a variety of factors----including litigation risks--which earlier were not considered or which were petitioners contend that respondent’s position is that taken in a notice of decision which was sent to petitioners on date several months before the notice_of_deficiency it is unclear from the record whether this notice was in fact a final_decision by the appeals_office this is not determinative in this case however because we find that respondent was substantially justified at all times during the administrative_proceeding not weighed as heavily by respondent furthermore the record shows that the parties were actively engaged in negotiations throughout the administrative and litigation process and that respondent did not unreasonably delay acting upon any information which he received from petitioners in view of the foregoing we find that the position_of_the_united_states was substantially justified accordingly we hold that petitioners are not entitled to administrative and litigation costs under sec_7430 based on this holding we need not consider respondent’s alternative argument that the administrative and litigation costs requested by petitioners are not reasonable petitioners’ motion will therefore be denied an appropriate order and decision will be entered


department of the treasury internal_revenue_service washington d c tax se aio government entities division dec - uniform issue list tp ratis legend administrator a employer b plan x plan y dear this is in response to correspondence dated date as supplemented by correspondence dated august october and date in which a request for a letter_ruling was submitted with respect to the applicability of rollovers of certain distributions to roth iras described in sec_408a of the internal_revenue_code code administrator a administers retirement and disability plans for employees of employer b retired employees of employer b and their beneficiaries are paid retirement benefits primarily through plan x and plan y plan x and plan y are qualified_plans within the meaning of sec_401 of the code and their related trusts are tax exempt within the meaning of sec_501 there are several types of employee contributions which can be made to plan x and plan y the first type is a mandatory retirement deduction mandatory retirement deductions are mandatory_contributions withheld from the basic_pay of employees who participate in either plan x or plan y the second type of contribution is discretionary contributions permitted in some circumstances for prior civilian service or prior military service performed that was not covered by plan x or plan y as explained below page nn certain participants in plan x or plan y have the ability to make discretionary contributions including interest of amounts equal to the mandatory retirement deductions that would have been withheld from the employee’s basic_pay during a prior period_of_service that were previously not withheld because that prior service was originally excluded from coverage common types of service excluded from coverage under both plan x and plan y are service pursuant to an appointment of less than one year in duration and service pursuant to an intermittent appointment ie an appointment without either a full-time or part-time regular schedule the right to make these contributions is more restrictive under plan y than under plan x if a plan x participant had previously excluded service prior to becoming appointed to a position subject_to plan x coverage that participant may make a discretionary contribution equal to the plan x mandatory retirement deductions which would have been withheld from basic_pay for the period of excluded service plus interest under plan x a participant may make this discretionary contributions regardless of when the noncovered_service was performed however under plan y discretionary contributions and interest may only be made for such noncovered_service performed prior to date discretionary contributions are also available to plan x participants who terminate employment with employer b and are subsequently reemployed ‘if an individual leaves employment with employer b has plan x mandatory retirement deductions to his credit in plan x and is at least days away from entitlement to receive an annuity that individual can apply for a refund of his contributions to plan x if that individual has performed at least one year_of_service but less than five years_of_service subject_to plan x mandatory retirement deductions the refund of mandatory retirement deductions includes interest plan x the individual may make discretionary contributions which represent a redeposit of the refunded mandatory retirement deductions plus interest if the individual is later reemployed by employer b and participates in discretionary contributions can also be made for a period of military service performed after date and before the date of initial employment with employer b under both plan x and pian y a contribution for prior military service permits the use of that service in the computation of the annuity if with certain exceptions the employee is not receiving a military pension based upon such service in general if a contribution for this military service_credit is made within two years after the date of the initial employment to a employer b civilian position interest is not payable on that contribution if the contribution is made at a later date interest is payable on the contribution another type of contribution is a voluntary contribution voluntary contributions are made by employees who participate in plan x to purchase additional_amounts of annuity these voluntary contributions made in multiples of dollar_figure up to a maximum of percent of all basic_pay earned by the employee during his or her creditable service and interest thereon may be distributed to an employee or former employee as an alternative to using the contributions to purchase additional_amounts of annuity in certain circumstances under both plan x and plan y mandatory retirement deductions and discretionary contributions and interest thereon may be distributed to eligible employees or former employees or their beneficiaries in a single sum distribution this single sum payment is defined under both plans as a lump-sum page credit under plan x and plan y an employee who has separated from service with employer b or an employee whose coverage under plan y has terminated at least days prior to eligibility for payment of an immediate_annuity may apply to administrator a for payment of the lump-sum credit in addition if an employee or former employee dies before the commencement of an annuity from either plan and there are no survivors entitled to be paid a survivor annuity the lump-sum credit shall be paid to an individual other than the former employee although voluntary contributions may be used to purchase additional annuity benefits at retirement a current or former employee is permitted to receive a distribution of these contributions in a lump sum payment with interest before receiving an additional annuity based upon the voluntary contributions voluntary contributions are permitted only in plan x mandatory retirement deductions discretionary contributions and voluntary contributions are after-tax contributions based upon the facts and representations stated above the following rulings are requested mandatory retirement deductions discretionary contributions and voluntary contributions and interest thereon if distributed in a lump sum distribution from plan x or plan y can be rolled over into a roth_ira the related interest of any mandatory retirement deductions discretionary contributions and voluntary contributions distributed from plan x or plan y in a lump sum distribution and rolled over into a roth_ira is subject_to taxation with respect to the tax_year of the distributee or recipient in which distributed sec_402 of the code provides that except as otherwise provided in this section any amount actually distributed to any distributee by any employees’ trust described in sec_401 which is exempt from tax under sec_501 shall be taxable to the distributee in the taxable_year of the distributee in which distributed under sec_72 relating to annuities sec_408a of the code provides the applicable_requirements concerning roth iras sec_408a provides that the term roth_ira means an individual_retirement_plan as defined in sec_7701 which is designated in such manner as the secretary may prescribe at the time of the establishment of the plan as a roth_ira sec_408a of the code states that no rollover_contribution may be made to a roth_ira unless it is a qualified_rollover_contribution sec_408a of the code provides in pertinent part that for purposes of this section the term qualified_rollover_contribution means a rollover_contribution to a roth_ira from an eligible_retirement_plan but only if in the case of any eligible_retirement_plan as defined in sec_402 other than clauses i and ii thereof such rollover_contribution meets the requirements of sec_402 sec_402 of the code provides rules applicable to rollovers from exempt trusts sec_402 provides that the term eligible_retirement_plan means i an page individual_retirement_account described in sec_408 ii an individual_retirement_annuity described in sec_408 other than an endowment_contract iii a qualified_trust iv an annuity plan described in sec_403 v an eligible_deferred_compensation_plan described in sec_457 which is maintained by an eligible_employer and vi an annuity_contract described in sec_403 sec_402 of the code states that the term qualified_trust means an employees’ trust described in sec_401 which is exempt from tax under sec_501 sec_402 of the code provides that the term eligible_rollover_distribution means any distribution to an employee of all or any portion of the balance_to_the_credit of the employee in a qualified_trust except that such term shall not include-a any distribution which is one of a series of substantially_equal_periodic_payments not less frequently than annually made for the life or life expectancy of the employee or the joint lives or joint life expectancies of the employee and the employee’s designated_beneficiary or for a specified period of years or more b any distribution to the extent such distribution is required under sec_401 c any distribution which is made upon hardship of the employee and d any qualified disaster-relief distribution within the meaning of sec_72 sec_408a of the code concerns rollovers from an eligible_retirement_plan other than a roth_ira sec_408a provides in relevant part that notwithstanding sec_402 in the case of any distribution to which this paragraph applies there shall be included in gross_income any amount which would be includible were it not part of a qualified_rollover_contribution sec_408a of the code provides that the rules provided in sec_408a shall apply to a distribution from an eligible_retirement_plan as defined by sec_402 other than a roth_ira maintained for the benefit of an individual which is contributed to a roth_ira maintained for the benefit of such individual in a qualified_rollover_contribution sec_408a of the code provides with respect to a rollover from an eligible_retirement_plan that a taxpayer shall not be allowed to make a qualified_rollover_contribution to a roth_ira from an eligible_retirement_plan as defined by sec_402 other than a roth_ira during any taxable_year if for the taxable_year of the distribution to which such contribution relates- i the taxpayer’s adjusted_gross_income exceeds dollar_figure or ii the taxpayer is a married individual filing a separate_return sec_408a is effective for distributions after date and before date sec_408a defines adjusted_gross_income as adjusted_gross_income with certain adjustments modified_adjusted_gross_income notice_2008_30 2008_12_irb_638 date miscellaneous pension_protection_act changes question and answer-1 provides that distributions from a qualified_plan described in sec_401 of the code can be rolled over to a roth_ira the rollover can be made through a direct_rollover from the plan to the roth_ira or an amount can be distributed from the plan and contributed rolled over to the roth_ira within days in either case the amount rolled over must be an eligible_rollover_distribution as defined in sec_402 and pursuant to sec_408a there is included in gross_income any amount that would be includible if the distribution were not rolled over in page addition for taxable years beginning before date an individual can not make a qualified_rollover_contribution from an eligible_retirement_plan other than a roth_ira if for the year the eligible_rollover_distribution is made he or she has modified_adjusted_gross_income exceeding dollar_figure or is married and files a separate_return notice_2008_30 provides guidance with respect to certain distribution-related provisions of the pension_protection_act of p l ppa ’06 that are effective in a section of ppa ’06 addressed in the notice relates to rollovers from eligible retirement plans to roth iras prior to amendment by ppa ’06 sec_408a of the code provided that a roth_ira could only accept a rollover_contribution of amounts distributed from another roth_ira from a non-roth ira ie a traditional or simple_ira or from a designated_roth_account described in sec_402a these rollover_contributions to roth iras were called qualified rollover_contributions a qualified_rollover_contribution from a non-roth ira to a roth_ira was called a conversion an individual who rolled over an amount from a non-roth ira to a roth_ira included in gross_income any portion of the conversion amount that would have been includible in gross_income if the amount were distributed without being rolled over for distributions before a conversion contribution is permitted only if the ira owner’s adjusted_gross_income does not exceed certain limits section of ppa amended the definition of qualified_rollover_contribution in sec_408a of the code to include additional plans under this expansion in addition to the rollovers described in the preceding paragraph a roth_ira can accept rollovers from other eligible retirement plans as defined in sec_402 the amendments made by section of ppa ’06 are effective for distributions made after date with respect to your first ruling_request effective for distributions made after date an individual who receives amounts from a tax qualified_retirement_plan described in sec_401 of the code is able to roll over the distribution into a roth_ira if the rollover requirements are met however effective for distributions after date and before date an amount distributed from a qualified_retirement_plan can not be rolled over to a roth_ira during any_tax year if for the tax_year in which the distribution is made from the eligible_retirement_plan the individual’s modified_adjusted_gross_income exceeds dollar_figure or the individual is married and files a separate_return therefore with respect to your first ruling_request we conclude that mandatory retirement deductions discretionary contributions and voluntary contributions and interest thereon if distributed in a lump sum distribution from plan x or plan y can be rolled over into a roth_ira with respect to your second ruling_request the tax-deferred treatment of rollovers that ordinarily applies under sec_402 of the code applicable to qualified_plans will not apply for distributions rolied over to a roth_ira for any distribution from an eligible_retirement_plan which is contributed to a roth_ira in a qualified_rollover_contribution the individual on whose behalf the roth_ira is maintained will have to include in gross_income any amount which would have been includible were it not part of a qualified_rollover_contribution ordinarily the distribution of any amount from a code sec_401 plan is taxed under the code sec_72 annuity rules under these rules the page portion of a distribution that represents the return of after-tax contributions or other basis will not be includible in income and the portion that represents income will be taxable therefore with respect to your second ruling_request we conclude that the related interest of any mandatory retirement deductions discretionary contributions and voluntary contributions distributed from plan x or plan y in a lump sum distribution and rolled over into a roth_ira is subject_to taxation with respect to the tax_year of the distributee or recipient in which distributed no opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter assumes that plan x and plan y are and were qualified under sec_401 of the code and their related trusts are and were exempt from tax under sec_501 at all times relevant 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 please address all correspondence to se t ep ra t ld at sincerely yours yo manager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose


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 b05 plr-129502-18 date date ty ------- legend ------------------------------------------------------------ -------------------------------------------------------------------------------------- taxpayer taxpayer ------------------------------------------------------------------------------------------------------------- -------------- state a ---------- station --------------------------------------------------- market --------------- x percent ------------------ dollar_figurex ------------------ dollar_figurey ---------------- dollar_figurez ------------------------ date a ------------------- date b -------------------------- date c buyer -------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- dear -------------------- this responds to your request for a private_letter_ruling dated date regarding the application of sec_1033 of the internal_revenue_code to your transactions you have requested a ruling that the sale of spectrum-based content distribution rights associated with the station constituted a sale under a threat of an involuntary_conversion for purposes of sec_1033 facts plr-129502-18 taxpayer a state a corporation is a diversified media and entertainment business taxpayer is the common parent of an affiliated_group_of_corporations and files a consolidated federal_income_tax return taxpayer uses the accrual_method of accounting and files on a december taxable year-end taxpayer is a wholly-owned subsidiary of taxpayer taxpayer has elected to be classified as an association_taxable_as_a_corporation for u s federal_income_tax purposes taxpayer is a member of the affiliated_group filing a consolidated federal_income_tax return the common parent of which is taxpayer taxpayer uses the accrual_method of accounting and files on a december taxable year-end for u s federal_income_tax purposes taxpayer was treated as the owner of the spectrum-based content distribution rights associated with the station a full-power uhf television station in market the station operated pursuant to licenses and permits issued by the fcc which authorized the station to deliver video audio data and other content over specific broadcast frequencies pursuant to applicable provisions of the middle class tax relief and job creation act of spectrum act the fcc is implementing a mandate by congress to repurpose spectrum in the mhz band currently used by television broadcasters to help meet the nation’s accelerating needs for mobile broadband and other new bandwidth- intensive technologies the spectrum act required the fcc to undertake two related but independent processes to reclaim spectrum currently used for television broadcasting i an incentive auction and ii a repacking the incentive auction is intended to motivate existing television broadcasters to relinquish some or all of their spectrum usage rights to accommodate the requirements of the wireless carriers within the repurposed spectrum repacking is an involuntary reassignment of remaining broadcast television stations to a narrower segment of spectrum lower in the band the purpose of the repacking is to allow the fcc to assemble a near nation-wide contiguous band of spectrum in the upper mhz band for reallocation to mobile broadband the spectrum act provided broadcasters with three relinquishment options for participating in the incentive auction first broadcasters could relinquish their spectrum-based content distribution rights in their entirety and cease broadcasting second broadcasters operating on frequencies in the uhf band could voluntarily agree to relocate to frequencies in the vhf band third broadcasters could relinquish their rights to deliver content over a television broadcast channel and instead agree to share a single channel with another broadcaster middle class tax relief and job creation act of pub_l_no sec_6403 plr-129502-18 alternatively broadcasters could also forgo participation in the incentive auction altogether and remain on the air however that would mean accepting as part of the repacking process the potential to be reassigned to a different possibly inferior less valuable uhf channel without compensation other than reimbursement from a limited fund for the cost of moving to the new channel on date the fcc released a report and order2 adopting rules to implement the spectrum act including the incentive auction and repacking process under the rules the incentive auction was to consist of a reverse auction and a forward auction the reverse auction would determine the price at which a broadcast station would be willing to relinquish some or all of its spectrum-based content distribution rights the forward auction would set the price that the wireless carriers would pay for the new licenses for repurposed spectrum after the auction was completed broadcasters whose bids were accepted in the auction received their payments from the forward auction proceeds the fcc will also use proceeds from the forward auction to reimburse certain spectrum relocation costs of broadcasters who do not elect to sell any remaining proceeds will be deposited with the federal treasury broadcasters who chose to forego the incentive auction and instead remain on the air were subject_to repacking mandatory relocation to different operating frequencies at the direction of the fcc non-participating stations operating in that portion of the upper mhz band that is being repurposed for mobile broadband licenses were almost certain to be forced to change to a new channel in a lower portion of the existing uhf band in addition some non-participating stations not operating in the repurposed band could still have been required to operate on new channels to accommodate other stations being moved to other frequencies although the fcc was obligated to use all reasonable efforts in the repacking process to replicate a station’s coverage area and population served there was no guarantee that a broadcast station’s coverage area and population served would in fact be preserved following the repacking in addition broadcasters forced to change to a new channel through repacking are incurring significant out-of-pocket costs to obtain new broadcasting facilities and equipment taxpayer represents that at the time it decided to sell spectrum-based content distribution rights associated with the station it believed that a material portion of its total anticipated out-of-pocket repacking costs would not be reimbursed by the fcc given the station’s particular circumstances taxpayer believed it was almost certain that the station’s spectrum-based content distribution rights would be repacked on date a taxpayer agreed to sell to buyer an x percent portion of the station’ sec_2 expanding the economic and innovation opportunities of spectrum through incentive auctions report and order fcc rcd plr-129502-18 spectrum-based content distribution rights for dollar_figurex buyer made payment to taxpayer in two installments dollar_figurey was paid on date b and dollar_figurez was paid on date c requested ruling you have requested a ruling that the sale of spectrum-based content distribution rights associated with the station pursuant to the actions of the fcc constituted a sale under a threat of an involuntary_conversion for purposes of sec_1033 law and analysis sec_1033 of the code generally provides that if property as a result of its destruction in whole or in part theft seizure or requisition or condemnation or threat or imminence thereof is compulsorily or involuntarily converted into money and the taxpayer within the period provided in sec_1033 and for the purpose of replacing such property purchases other_property similar_or_related_in_service_or_use to the property so converted or purchases stock in the acquisition of control of a corporation owning such other_property at the election of the taxpayer the gain shall be recognized only to the extent that the amount_realized upon such conversion regardless of whether such amount is received in one or more taxable years exceeds the cost of such other_property or such stock one of the circumstances in which a sec_1033 requisition or condemnation occurs is where a taxpayer’s property is subjected to a compensable governmental taking for public use under the fifth_amendment of the u s constitution 279_f2d_220 ct_cl 196_fsupp_129 d c mass revrul_69_254 1969_2_cb_162 revrul_58_11 1958_1_cb_273 the fifth_amendment provides in part that no private property be taken for public use without just compensation however the meaning of condemnation or requisition for purposes of sec_1033 of the code is not strictly limited to takings within the meaning of the fifth_amendment in revrul_82_147 1982_1_cb_190 a federal_law prohibited the use of motor boats with motors of greater than horsepower on designated lakes in wilderness areas it also provided that if the horsepower restriction made the operation of a resort uneconomical the owner of the resort could require the government to purchase its resort at its fair_market_value determined without regard to the horsepower restrictions the horsepower restriction made the operation of the taxpayer’s resort uneconomical and the taxpayer sold its fishing lodge to the federal government in holding that the government’s purchase of the resort constituted a condemnation within the meaning of sec_1033 the service did not refer to a fifth_amendment taking but instead emphasized that the horsepower restriction in addition to the provision authorizing purchase of a resort at its fair_market_value without regard to the restriction effectively constitutes a taking of property upon payment of fair compensation plr-129502-18 in the present case the fcc’s repacking process is functionally equivalent to a direct physical taking of private property for a public use without the consent of the property owner because it effectively deprived taxpayer of its assets taxpayer 2’s choice to sell a portion of the station’s spectrum-based content distribution rights was not a meaningful choice choosing to forego the incentive auction would have subjected the spectrum-based content distribution rights sold by taxpayer to the repacking process due to taxpayer 2’s unique circumstances it was almost certain that the spectrum-based content distribution rights associated with the station would have been acquired by the fcc in the repacking indeed following the incentive auction the spectrum-based content distribution rights associated with the station were repacked in revrul_63_221 1963_2_cb_332 the service stated that for purposes of sec_1033 threat_or_imminence_of_condemnation is generally considered to exist where a property owner is informed either orally or in writing by a representative of a governmental body that the government_entity has decided to acquire his property and the property owner has reasonable grounds to believe from the information conveyed to him by such representative that the necessary steps to condemn the property will be instituted if a voluntary sale is not arranged in revrul_81_180 1981_2_cb_161 the service considered a situation where a taxpayer learned through newspaper reports that a city intended to acquire its property by condemnation for public use if a sale could not be negotiated city officials confirmed the accuracy of the reports the taxpayer sold its property to a third party thereafter but before the city actually condemned the property the service concluded that the sale was made under the threat_or_imminence_of_condemnation because the property was sold after the taxpayer was given reasonable grounds to believe that its property would be taken these authorities indicate that a voluntary sale qualifies as an involuntary_conversion under sec_1033 if the threat_or_imminence_of_condemnation is present at the time of sale however the threat need not be a certainty a threat exists if the taxpayer may reasonably believe from representations of the government and surrounding circumstances that a forced sale is likely to take place in this case the fcc’s decision to impose on taxpayer mandatory modification of its broadcast facilities if it decided not to participate in the incentive auction including forced relocation to a different operating frequency and the potential to incur service losses unreimbursed out-of-pocket costs and reduced value for its remaining assets creates the reasonable grounds to believe that condemnation is forthcoming the fcc’s threat of repacking taxpayer 2’s station to different frequencies and the consequent loss of economic utility of its related property constitute an involuntary_conversion plr-129502-18 the fcc has provided taxpayer with notice through the spectrum act and the report and order of its intent to acquire the type of spectrum-based content distribution rights that taxpayer possessed in the station under its unique circumstances taxpayer reasonably believed that if it did not sell spectrum-based content distribution rights associated with the station it was almost certain that the fcc would take taxpayer 2’s rights and force the station to relocate to different channels accordingly taxpayer 2’s sale of spectrum-based content distribution rights associated with the station constitutes a disposition under the threat_or_imminence_of_condemnation for purpose of sec_1033 of the code conclusion the sale of the spectrum-based content distribution rights associated with the station constituted a sale under a threat of an involuntary_conversion for purposes of sec_1033 caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling 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 sincerely william a jackson branch chief branch office_of_chief_counsel income_tax accounting