t c summary opinion united_states tax_court danita j leonard petitioner v commissioner of internal revenue respondent docket no 12719-07s filed date danita j leonard pro_se veena luthra for respondent dawson judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended and in effect for the year at issue and rule references are to the tax_court rules_of_practice and procedure decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a dollar_figure deficiency in petitioner’s federal_income_tax for after a concession by respondent the issues for decision are whether petitioner is entitled to the following dependency_exemption deductions for a friend belinda pearson and ms pearsons’ two minor grandchildren a p and j p a child_care_credit for j p a child_tax_credit and an additional_child_tax_credit for a p and j p an earned_income_credit and an education credit background some of the facts have been stipulated the stipulation and accompanying exhibits are incorporated herein by this reference petitioner resided in virginia when the petition was filed in petitioner was unmarried she was employed as a correctional officer on her federal_income_tax return for which was prepared by h_r block eastern enterprises i petitioner filed as a head_of_household reported adjusted_gross_income of dollar_figure and claimed dependency_exemption deductions of dollar_figure respondent concedes that petitioner is entitled to head_of_household filing_status thus resulting in an increase in petitioner’s standard_deduction to dollar_figure from dollar_figure the court uses initials when referring to minor children see rule a each for belinda pearson ms pearson and for a p and j p who were listed as petitioner’s foster children a child_care_credit of dollar_figure for j p a child_tax_credit of dollar_figure and an additional_child_tax_credit of dollar_figure an earned_income_credit of dollar_figure and an education credit of dollar_figure ms pearson is petitioner’s friend a p and j p who were and years of age in are the children of sheniqua lee pearson and jason p pearson a p and j p are ms pearson’s grandchildren a p and j p are not petitioner’s foster children on date the juvenile and domestic relations district_court of williamsburg granted temporary legal and physical custody of a p and j p to ms pearson which continued until date when a final order was entered giving legal and physical custody of the grandchildren to her without any visitation rights by their parents during the entire year ms pearson a p and j p lived in petitioner’s rented apartment the rent was dollar_figure per month ms pearson who is disabled has lived in petitioner’s household for about years in her only source_of_income was social_security disability benefits of dollar_figure which was used in part to support herself and a p and j p j p attended child care at la petite academy in at a total cost of dollar_figure most payments for his care were made by check by petitioner but some were made by ms pearson petitioner and ms pearson pooled their financial resources in to provide support for themselves and the two children a p and j p petitioner had adjusted_gross_income of dollar_figure and ms pearson had dollar_figure from social_security disability benefits for a total of dollar_figure divided equally the total support for each occupant of the household was dollar_figure neither petitioner nor ms pearson had any other sources of income to support themselves and the children they received no support from any federal state or social service agencies petitioner and ms pearson received no food stamps or rent subsidies the father and mother of a p and j p provided nothing for the children’s support the arrangement for supporting members of the household was that petitioner would pay the apartment rent and ms pearson would pay other expenses until her social_security_benefits were consumed and then petitioner’s salary would be used to pay for all other expenses thus out of the total funds dollar_figure available for the support of all household members ms pearson provided percent and petitioner provided percent therefore petitioner provided more than percent for the support of ms pearson a p and j p in ms pearson was not required to file a federal_income_tax return for and did not file one petitioner’s employer virginia peninsula regional jail required her to take a college course once every years in order to maintain her position as a corporal she complied with the job requirement by taking a college course in at a cost of dollar_figure she claimed a lifetime_learning_credit of dollar_figure on form_8863 education credits hope_and_lifetime_learning_credits on her income_tax return in the notice_of_deficiency respondent determined petitioner’s filing_status to be single rather than head_of_household and reduced the standard_deduction by dollar_figure and respondent disallowed the claimed dependency_exemption deductions for ms pearson a p and j p the child_care_credit for j p the child_tax_credit and additional_child_tax_credit the earned_income_credit and the education credit discussion petitioner has the burden of proving that she is entitled to the claimed dependency_exemption deductions and other tax benefits at issue in this case see rule a petitioner has not claimed or shown that she meets the requirements under sec_7491 to shift the burden_of_proof to respondent as to any factual issue relating to her liability for tax dependency_exemption deductions a taxpayer is entitled to claim a dependency_exemption only if the claimed dependent is a qualifying_child or a qualifying_relative as defined under sec_152 and d sec_152 a qualifying_child is defined as the taxpayer’s child brother sister stepbrother or stepsister or a descendant of any of them sec_152 and the term child includes a legally adopted individual and a foster_child placed in the care of the taxpayer by an authorized_placement_agency or court order sec_152 neither a p nor j p is a qualifying_child because neither is related to petitioner and neither is her adopted or foster_child thus to be petitioner’s dependents they must be qualifying relatives likewise ms pearson must be a qualifying_relative to qualify as petitioner’s dependent an individual who is not a qualifying_child may still under certain conditions qualify as a dependent if he or she is a qualifying_relative sec_152 under sec_152 a qualifying_relative is an individual a who bears a qualifying relationship to the taxpayer b whose gross_income for the year is less than the sec_151 exemption_amount c who receives over one-half of his or her support from the taxpayer for the taxable_year and d who is not a qualifying_child of the taxpayer or of any other taxpayer for the taxable_year sec_152 a - g lists eight types of qualifying relationships seven of which involve various familial relationships that do not cover petitioner’s claimed dependents the eighth type of qualifying relationship applies to an individual other than the taxpayer’s spouse who has the same principal_place_of_abode as the taxpayer and is a member of the taxpayer’s household for the taxable_year sec_152 in order for an individual to be considered a member of a taxpayer’s household the taxpayer must maintain the household and both the taxpayer and the individual must occupy the household for the entire taxable_year sec_1_152-1 income_tax regs a taxpayer maintains a household when he or she furnishes more than one-half of the expenses for the household see sec_2 revrul_64_41 c b part respondent has conceded that petitioner qualifies for head_of_household status and thereby has effectively conceded that petitioner maintained the household for clearly ms pearson a p and j p occupied the household for all of and petitioner furnished more than one-half of the expenses for the household accordingly each of them satisfies the qualifying relationship_test pursuant to sec_152 in addition we conclude on this record that petitioner provided over one-half of the support for ms pearson a p and j p for furthermore as members of the household ms pearson a p and j p are considered to have received equal parts of petitioner’s contributions as their support see 46_tc_446 affd per curiam 378_f2d_32 5th cir just to make ends meet and provide for the financial survival of their household petitioner paid most of their personal living_expenses respondent does not contend and the record does not show that the gross_income_test is disputed however respondent points out that it is likely that the children petitioner claimed as her dependents are the qualifying children of ms pearson and therefore are not petitioner’s qualifying relatives under sec_152 we disagree sec_152 defines a qualifying_relative for whom the taxpayer may claim a dependency_exemption deduction under sec_151 sec_152 provides that an individual is not a qualifying_relative of the taxpayer if the individual is a qualifying_child of any other taxpayer we conclude as the commissioner has recently done in notice_2008_5 2008_2_irb_256 that a taxpayer otherwise eligible to claim a dependency_exemption deduction for an unrelated child is not prohibited by sec_152 from claiming the deduction if the child’s parent or other person with respect to whom the child is defined as a qualifying_child is not required by sec_6012 to file an income_tax return and does not file an income_tax return or files an income_tax return solely to obtain a refund of withheld income taxes ms pearson who as the grandmother of a p and j p could have claimed them as her qualifying children was not required to file and did not file an income_tax return for see sec_6012 one-half of her social_security disability benefits of dollar_figure for that year was less than the base_amount provided by sec_86 so none of her benefits were includable in gross_income pursuant to sec_86 thus petitioner not ms pearson was eligible to claim and was entitled to the dependency_exemption deductions for a p and j p for child_care_credit sec_21 and b generally provides for a child_care_credit with respect to employment-related_expenses that are incurred to enable the taxpayer to be gainfully_employed including expenses to care for a qualifying_individual with exceptions not relevant here a qualifying_individual is generally defined as an individual who is either a qualifying_child of the taxpayer within the meaning of sec_152 who has not turned or a dependent of the taxpayer who is physically or mentally incapable of caring for himself or herself and shares the same place of abode with the taxpayer for more than one-half of the taxable_year sec_21 we note that respondent does not contend that a p and j p were the qualifying children of their parents who abandoned them and provided nothing for their support as previously discussed j p was not a qualifying_child of petitioner within the meaning of sec_152 but only a qualifying_relative under sec_152 moreover petitioner does not allege and the record does not indicate that either child is physically or mentally incapable of caring for herself or himself although petitioner did pay most of the employment-related_expenses for the care of j p at la petite academy which enabled her to be employed the claimed credit must be disallowed because he was not her qualifying_child under the law accordingly respondent’s determination on this issue is sustained child_tax_credit and additional_child_tax_credit sec_24 authorizes a child_tax_credit with respect to each qualifying_child of the taxpayer a qualifying_child means an individual who meets the requirements of sec_152 and who has not attained the age of sec_24 sec_152 provides in pertinent part in general --the term qualifying_child means with respect to any taxpayer for any taxable_year an individual-- a who bears a relationship to the taxpayer described in paragraph b who has the same principal_place_of_abode as the taxpayer for more than one-half of such taxable_year c who meets the age requirements of paragraph and d who has not provided over one-half of such individual’s own support for the calendar_year in which the taxable_year of the taxpayer begins relationship --for purposes of paragraph a an individual bears a relationship to the taxpayer described in this paragraph if such individual is-- a a child of the taxpayer or a descendant of such a child or b a brother sister stepbrother or stepsister of the taxpayer or a descendant of any such relative neither a p nor j p satisfies the sec_152 relationship_test accordingly they do not fit within the meaning of qualifying_child as defined by sec_24 therefore petitioner is not entitled to a child_tax_credit for either a p or j p for petitioner claimed an additional_child_tax_credit on the basis of a p and j p as qualifying children for taxable_year subject_to limitations on the basis of adjusted_gross_income a taxpayer is allowed for the year a child_tax_credit with regard to each qualifying_child of the taxpayer sec_24 a portion of the child_tax_credit may be refundable as an additional_child_tax_credit if the taxpayer has an unused child_tax_credit sec_24 therefore since there is no unused child_tax_credit petitioner is also not entitled to an additional_child_tax_credit for because a p and j p are not her qualifying children earned_income_credit sec_32 allows an eligible_individual an earned_income_credit against the individual’s income_tax_liability sec_32 limits the credit allowed through a phaseout and sec_32 prescribes different percentages and amounts used to calculate the credit the limitation amount is based on the amount of the taxpayer’s earned_income whether the taxpayer has no children one qualifying_child or two or more qualifying children to be eligible to claim an earned_income_credit with respect to a child the taxpayer must establish that the child is a qualifying_child of the taxpayer as defined in sec_152 sec_32 neither a p nor j p is a qualifying_child under sec_152 as previously discussed although petitioner is not eligible to claim an earned_income_credit under sec_32 for one or more qualifying children she may be an eligible_individual under sec_32 for a taxpayer is eligible under this subsection only if his or her adjusted_gross_income was less than dollar_figure revproc_2004_71 sec_3 2004_2_cb_970 petitioner’s adjusted_gross_income for was dollar_figure therefore she is not eligible for an earned_income_credit for education credit sec_25a provides in part sec_25a lifetime_learning_credit -- per taxpayer credit --the lifetime_learning_credit for any taxpayer for any taxable_year is an amount equal to percent of so much of the qualified_tuition_and_related_expenses paid_by the taxpayer during the taxable_year for education furnished during any academic period beginning in such taxable_year as does not exceed dollar_figure dollar_figure in the case of taxable years beginning before date special rules for determining expenses -- b expenses eligible for lifetime_learning_credit --for purposes of paragraph qualified_tuition_and_related_expenses shall include expenses described in subsection f with respect to any course of instruction at an eligible_educational_institution to acquire or improve job skills of the individual sec_25a provides in part sec_25a definitions --for purposes of this section-- qualified_tuition_and_related_expenses -- a in general --the term qualified_tuition_and_related_expenses means tuition and fees required for the enrollment or attendance of-- i the taxpayer ii the taxpayer’s spouse or iii any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under sec_151 at an eligible_educational_institution for courses of instruction of such individual at such institution eligible_educational_institution --the term eligible education institution means an institution-- a which is described in sec_481 of the higher education act of u s c as in effect on the date of the enactment of this section and b which is eligible to participate in a program under title iv of such act in order to improve her job skills and maintain her position as a corporal with the virginia peninsula regional jail petitioner took a college course at a qualified educational_institution in and paid the tuition expense of dollar_figure as an eligible_student she had adjusted_gross_income of less than dollar_figure for that year and claimed an exemption for herself she also reported a tax of dollar_figure on line of her form 1040a u s individual_income_tax_return she claimed a dollar_figure education credit on her return using the lifetime_learning_credit respondent disallowed the credit in the notice_of_deficiency on the ground that one or more dependent exemptions claimed on your return have been disallowed this obviously was referring to the dependency_exemption deductions claimed for the children a p and j p that was incorrect petitioner claimed the credit for the college course she had taken we conclude on these facts that petitioner has met the requirements for the lifetime_learning_credit see sec_1 25a- c example income_tax regs therefore respondent’s determination on this issue is not sustained to reflect our disposition of the disputed issues and respondent’s concession decision will be entered under rule


department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c date cc ita b04 conex-129903-05 office_of_chief_counsel number info release date uil no the honorable bill nelson united_states senator east robinson street suite orlando fl attention dolly kobernat dear senator nelson this letter responds to your inquiry dated date on behalf of your constituents ------------------------------------------------------- they wrote about obtaining a private_letter_ruling granting them additional time to complete a like-kind_exchange of properties they need additional time because the severe hurricanes and tropical storms that struck florida in delayed construction of the replacement_property beyond the prior extension periods they also wrote that they never actually received the proceeds of the property they sold because the proceeds remained in escrow unfortunately the -------------transaction does not qualify as a like-kind_exchange under sec_1031 of the internal_revenue_code we contacted them to discuss their situation the ------------ told us that they directed the qualified_intermediary who was holding the cash proceeds to turn the proceeds over to their realtor the realtor is now holding the proceeds to fund the construction of the new property under current law receipt of cash proceeds by a taxpayer or the taxpayer’s agent disqualifies the taxpayer from deferring tax on the gain of the property they sold if a qualified_intermediary turns over exchange_funds to the seller or his realtor the exchange ends the transaction becomes a sale and the seller must recognize any realized gain we do not have authority to change this result i hope this information is helpful if we can assist you further please contact me or ------ -------------------------at office of associate chief_counsel sincerely michael j montemurro acting branch chief income_tax accounting


tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c mar u i l xxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxx legend taxpayer a xxxxxxxxxxxxx individual xxxxxxxxxxxxx ira x iray xxxxxxxxxxxxx xxxxxxxxxxxxx bank c company p amount d individual m date dear xxxxxxxxx date2 date xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx this is in response to your request dated date as supplemented by correspondence dated date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code - - - - - - - - 2'01 the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a as beneficiary received two distributions from ira x and ira y totaling amount d maintained by individual b her deceased husband taxpayer a asserts that her failure to accomplish a rollover of amount d within the 60-day period prescribed by sec_408 of the code was due to an error committed by individual m of bank c for not providing the necessary letter of acceptance to company c individual b maintained ira x and ira y with company p on date individual b passed away and taxpayer a decided to rollover the funds from ira x and ira y to another qualified ira account with bank c accordingly taxpayer a met with individual m of bank c who completed the rollover forms and had taxpayer a sign them on date taxpayer a relied on the advice of individual m and thought that amount d from ira x and ira y was rolled over timely as she instructed taxpayer a represents that it was not until march when she received a form 1099-r from company p that she became aware that amount d was not rolled over as she instructed tax payer a called company p and was advised that it did not receive a letter of acceptance from individual m of bank c which is required to facilitate the rollover taxpayer a states that neither she nor individual m knew about the letter of acceptance company p also told taxpayer a that on date company p called her to verify where to send the funds which taxpayer a recalls that she told them to send the funds to her home address at that time taxpayer a thought company p was referring to funds related to a death_benefit and not the distributed funds she instructed to be rolled over amount d has not been used for any other purpose and is held in taxpayer a's checking account with bank c documentation submitted by individual m of bank c acknowledged that an error occurred when the transaction was processed as a distribution to taxpayer a's account based on the foregoing facts and representations you request that the internal_revenue_service the service waive the 60-day rollover requirement contained in sec_408 of the code with respect to amount d sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 d a of the code provides that sec_408 d of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual received the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not included in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 i r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred ' the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover was due to an error committed by individual m of bank c therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira x taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute amount d into a rollover ira provided all other requirements of code sec_408 except the 60-day requirement are met with respect to such contribution the contribution of amount d will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code 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 a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office 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 have any questions concerning this ruling please contact xxxxxxxxxxxxxx at xxxxxxxxxxx all correspondence should be addressed to se t ep ra t sincerely yours cihh- - sherri m edelman manager employee_plans technical enclosures deleted copy of letter_ruling notice of intention to disclose cc xxxxxxxxxxxx


internal_revenue_service number release date index numbers --------------------------------------------------- ------------------------ ------------------------------------------------------- --------------------------------------------- --------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ----------------- telephone number ------------------- refer reply to cc psi b03 plr-124305-09 date date x --------------------------------------------------------------------------------------------------- ----------------------- legend country ------------ date ------------------- dear ---------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting that x be granted an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity under sec_301_7701-3 facts x was formed under the laws of country on date x represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes x intended to be classified as a disregarded_entity effective date however due to inadvertence form_8832 entity classification election was not timely filed law sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in plr-124305-09 sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 plr-124305-09 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 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 we are sending a copy of this letter to your authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely s curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service te_ge eo examination commerce dallas texas date date tax_exempt_and_government_entities_division release number release date legend org organization name xx date address address org address employer_identification_number person to contact id number contact numbers voice fax last date for filing a petition with the tax_court august 20xx certified mail - return receipt requested dear this is a final adverse determination_letter as to your exempt status under sec_501 of the internal_revenue_code your exemption from federal_income_tax under sec_501 of the code is hereby revoked effective january 20xx you have agreed to this adverse determination by signing form_6018 our adverse determination was made for the following reasons internal_revenue_code sec_6001 requires organizations exempt from tax to keep such records and render such statements as are required by such rules and regulations as the secretary may prescribe sec_1_6033-2 h requires organizations exempt from tax to submit such additional information as may be required by the internal_revenue_service for the purpose of inquiring into the organization’s exempt status your organization is no longer operating you failed to keep the required records and you did not file annual information returns you failed to meet the requirements of sec_501 and sec_1 c -1 d in that you failed to establish that you were operated exclusively for an exempt_purpose contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all years thereafter processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code lf you decide to contest this determination in court you must initiate a suit of declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ' day after the date this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment you may write to the tax_court at the following address you also have the right to contact the office_of_the_taxpayer_advocate you can call and ask for taxpayer_advocate assistance or you can contact the taxpayer_advocate office located nearest you by calling or by writing to taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations or extend the time fixed by law that you have to file a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions in regards to this matter please contact the person whose name and telephone number are shown in the heading of this letter thank you for your cooperation sincerely yours nanette m downing director eo examinations tax exempt and government entities oivision org address department of the treasury internal_revenue_service mc dsm tege walnut street r des moines lowa date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary lf you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at lf you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication publication report of examination sincerely sunita lough director eo examinations letter catalog number 34809f err 886a department of the vreasury - internal_revenue_service name of taxpayer explanation of items schedule no or exhibit year period ended 20xx org org legend org organization name dir - dir vp cp xx date county county city city state state co-1 co-2 companies issue does org org with little to any activities along with noncompliance of sec_6001 for maintaining adequate_records as the service prescribes and noncompliance with sec_6033 requirements to file an annual information_return qualify for exemption under sec_501 of the internal_revenue_code facts the organization began its existence on april 20xx org operated during april - september 20xx for the spring cleanup of the ditches and highways waterways and just before the fall cleanup of the highways waterways the articles of incorporation were filed with the state of state along with dissolution clause contained in the fourth paragraph of the articles of incorporation filed this same date the organization did not receive a determination_letter as their gross_receipts were less than dollar_figure where they were not required to file the form_1023 application_for exemption the purpose of org was two-fold to raise awareness of the need to clean and keep clean the nations highways and to organize volunteer efforts to clean local and national roadways org operated for approximately the first days the co-1 checking account acct in city state was opened the account closed on september 20xx the organization did not file a form_990 return they would have been required to file a form 990-n during 20xx org operated with no formalized board or any minutes of meeting on april 20xx the directors of org waived the notice of first meeting of the board_of directors of org and consent to the holding of said meeting on april 20xx the meeting never took place statement was written in their proposed bylaws it primarily had two officers husband and wife dir as president executive director and vp as vice president assistant director of org a mission a search for the state state secretary of state’s website shows an administrative dissolution with the state occurred on august 20xx for failure_to_file the biannual report on august 20xx the irs sent a letter to the organization with an information_document_request idr the letter advised of an examination and the requested records to have available during the scheduled appointment on september 20xx no bank statements were maintained for the five months during 20xx that the sole checking form 886-a rev department of the treasury - internal_revenue_service page -1- yay sec_86a department of the preasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended 20xx org org account was opened there was no check register no deposit slips or copies of any checks maintained by org the bank statements for co-1 checking account acct for months april - september 20xx timeframe were destroyed by the officers the checking account was closed during september 20xx there were little to any records made available to the examiner during the examination the organization did not keep any of the invoices or paid receipts for items purchased or rented during the spring cleanup season items purchased with revenues received during 20xx included supplies for cleaning the highways with rental of a large hot cocoa and popcorn machine for the grand opening food drive fundraiser spring 20xx kick-off cleanup event held on april 20xx there were very few receipts kept from the donations received the officer states there were out of pocket costs paid_by the dir’s however this could not be substantiated at any time during the examination there were approximately statements primarily mailed to individual business contributors as previously stated only existing statements that were provided to the agent to substantiate those sent to contributors for recordation of their membership dues paid all other hard copies of statements were recycled destroyed the contributors were mainly from county with a few from the surrounding county and county counties there was only one out of state contributor org maintained no recordation of the complied list of contributors other than a handful that were reported on the february 20xx co-2 newsletter the organization’s laptop crashed they lost most of their information regarding the contributions and amounts donated from individuals to further substantiate the revenues and expenses since the end of 20xx this organization had a website account called mid-america where it stated that org was a 501_c_3_organization and did solicitation of membership dues as donations as a result of the examination this was brought to the attention of the officer the officer states they have now closed down their website website account that was last used on 02-22-20xx up until closing out the account on 08-26-xx where examiner verified closing down of website during discussions with officer on 09-04-xx the website previously stated that we are 501c3 to date we have almost miles of state highways that’s over miles of ditch here in county and we are applying for more roadways currently we opted to sell memberships to our organization as a way to raise funds for dollar_figurea year our members get a monthly newsletter co-2 geared towards information and education and also to let our members know where the money is going we use our membership fees our numbers are increasingly very steadily everyday’ to advertise for and organize volunteer efforts to remove litter from those places the officer also used a personal email address on the webpage which is still in existence today form 886-a rev department of the treasury - internal_revenue_service page -2- ern 886a department of the treasury - internal_revenue_service name of taxpayer p explanation of items schedule no or exhibit year period ended 20xx org org all prior written contracts for the 20xx spring and fall cleanup seasons could not be found which were held between the city of city state and or county and org regarding their loosely structured agreement to clean the first miles of ditches on highway smaller town of city miles of the old highway -_ veterans’ field informal agreement to clean the city’s local park and a stretch of hwy -_- approximately miles of an interstate south of city from city to the on repeated occasions the examiner solicited the organization to provide photocopies of monthly bank statements between april - september 20xx along with front and back sides of all cancelled checks and copies of deposit tickets transfer slips however the organization is noncooperative in providing the necessary documents while org operated in existence for a few months april - september 20xx timeframe law sec_501 provides an exemption from federal_income_tax for organizations described in sec_501 sec_1_501_c_3_-1 of the income_tax regulations states that sec_501 requires an organization to be both organized and operated exclusively for one or more sec_501 purposes if the organization fails either the organizational_test or the operational_test it is not exempt the organizational_test concerns the organization’s articles of organization or comparable governing document the operational_test concerns the organization’s activities a deficiency in an organization’s governing document cannot be cured by the organization’s actual operations likewise an organization whose activities are not within the statute will not qualify for exemption by virtue of a well-written charter sec_1_501_c_3_-1 of the income_tax regulations sec_1_501_c_3_-1 of the income_tax regulations states that an organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt_purpose s an organization’s assets will be considered dedicated to an exempt_purpose if upon dissolution such assets would by reasons of a provision in the organization’s articles or by operation of law be distributed for one or more exempt purposes sec_1_501_c_3_-1 of the income_tax regulations states that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more such exempt purposes specified in sec_501 sec_6001 provides that every person liable for any_tax imposed by the irc or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe form 886-a rev department of the treasury - internal_revenue_service page -3- eon 886a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service 20xx org org sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax government’s position generally organizations exempt under sec_501 engage in activities that directly furthers the charitable or other purposes mentioned in that subparagraph these activities must serve exclusively exempt purposes sec_1 c -1 a of the regulations states that if an organization fails to meet either the organizational or the operational_test it is not exempt sec_1 c -1 d ii provides in part that an organization must be engaged in public activities their revenue and expenses measure public activities for an organization under sec_501 to satisfy the operational_test the organization’s resources must be devoted to purposes that qualify as exclusively charitable within the meaning of sec_501 and the applicable regulations these identifiable activities must be evident and justifiable on their information_return eg form_990 to satisfy the operational_test in addition to these activities being identifiable they must be supported with administrative and accounting_records ie revenue and expenses since the was not a required form for this organization they were still required to file an online form 990-n regarding their confirmation as a nonprofit an exempt_organization recognized by the service form 886-a rev department of the treasury - internal_revenue_service page -4- erin 886a department of the preasury - internal revenug service name of taxpayer explanation of items schedule no or exhibit year period ended org org 20xx as stated above to determine if org was exempt your organization does not meet the requirements under sec_6001 for maintaining adequate record as the service prescribes and sec_6033 requirements to file an annual information_return your appeal rights are contained in publication taxpayer’s position during a phone conversation held on 09-22-20xx with the agent and taxpayer it was indicated that they will be agreeing to the revocation conclusion in determining whether an organization meets the operational_test under sec_501 the issue is whether the particular activity ies undertaken by the organization is appropriately in furtherance of the organization’s exempt_purpose s the regulations provide that a charitable_organization must be engaged in public activities revenue and expenses measure activities to satisfy the operational_test resources revenue and expenses must be devoted to purposes that qualify within the meaning of sec_501 according for org to continue to satisfy the operational_test under sec_501 activities must be identifiable on their information_return and supported with administrative and accounting_records the service finds little to any current activities as org is no longer operating there were very little records provided to the examiner furthermore the organization has been uncooperative in turning over necessary bank records that include copies of front and back sides of checks deposit transfer slips and the monthly bank statements from april - july 20xx to conclude further on the operational_test org is found to not meet the operational_test of the dual component necessary in meeting both the organizational operational tests for a 501_c_3_organization to meet exempt status it is the irs’s position that the organization failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under sec_501 during 20xx org did not file the annual information_return form 990-n as was required to determine if it was exempt accordingly the organization’s exempt status is revoked effective january 20xx no form is required for this organization form 886-a rev department of the treasury - internal_revenue_service page -5-


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc corp tl-n-2634-01 uilc internal_revenue_service national_office field_service_advice memorandum for john guarnieri special trial attorney cc lm mct slphi from associate chief_counsel corporate cc corp subject bankruptcy of a member of a consolidated_group this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend corp a corp b corp c corp d corp e corp f corp g partnership taxable_year taxable_year taxable_year taxable_year tl-n-2634-01 u v w x y z business t issues whether the bankruptcy of a member of a consolidated_group causes its partnership items to convert to non-partnership items for non-partner members of the group that have an interest in the items as a result of having been included in the group’s consolidated_return whether a corporation downstream corporation that receives substantially_all of the former common parent corporation’s assets in a downstream_merger becomes the agent for the group for the tax years prior to the merger 2a what is the nature and scope of the downstream corporation’s power as agent whether the downstream corporation will be considered to have received substantially_all of the assets of the former parent for purposes of sec_1_1502-75 if a number of the assets of the former parent were conveyed to a shareholder of a few years before the downstream_merger whether the filing of a bankruptcy petition by the downstream corporation stays the running of the statute_of_limitations against all members of the old group that are not part of the bankruptcy 4a in the event that the automatic_stay does not suspend the statute_of_limitations for the non-bankrupt subsidiaries does the downstream corporation have the authority to enter into a sutton agreement for the tax years prior to the merger conclusion sec_1 the bankruptcy of a corporation holding a separate interest in a partnership will convert its partnership items to nonpartnership_items after these items convert to nonpartnership_items the other members of the consolidated filing group who are tl-n-2634-01 severally liable for these items will no longer have their tax_liability determined by reference to these items as partnership items thus the other members of the consolidated_group will no longer be considered partners under sec_6231 with respect to the bankrupt corporation’s separately held items the above rules apply to the present case as follows corp g and corp b filed petitions in bankruptcy thus the separately held partnership items of each in partnership converted to nonpartnership_items this also converts these same items for any member of the consolidated filing group whose income_tax_liability is determined by taking these items into account and 2a sec_1_1502-75 provides that a group remains in existence even if its former common parent is no longer the common parent if the members of the affiliated_group succeed to and become the owners of substantially_all of the assets of such former parent and there remains one or more chains of includible corporations connected through stock ownership with a common parent_corporation which is an includible_corporation and which was a member of the group prior to the date such former parent ceases to exist under these facts corp g is the successor common parent of the group with full authority to act for the group for periods before and after the downstream_merger as mentioned above sec_1_1502-75 provides that a group remains in existence even though its former common parent is no longer the common parent if the members of an affiliated_group succeed to and become the owners of substantially_all of the assets of such former parent as there is no conclusive evidence that the disposition of the assets and the downstream_merger are part of one integrated transaction the group will be considered to have received substantially_all of the assets of the former common parent thereby satisfying the requirements of sec_1_1502-75 the assessment_period for the tax_liability of the debtor is suspended pursuant to sec_6503 if a timely notice_of_deficiency is issued during the bankruptcy case the suspension of the assessment_period will last as long as the period for filing the tax_court petition is suspended plus days the tax_court petition period will remain suspended until the automatic_stay is no longer in effect which in a chapter case will ordinarily occur when the bankruptcy case is dismissed or a discharge is granted as a result of the confirmation of the chapter plan b c sec_362 d a question has been raised as to whether the consolidated_group would be estopped from denying that the downstream corporation is the agent of the group for years prior to the merger because the downstream corporation represented that it was the agent of the group under sec_1_1502-75 because we have concluded that corp g is the common parent of the group and therefore authorized to act as its agent for all tax periods we offer no opinion on this issue tl-n-2634-01 4a the debtor became the common parent of the group see issue above and was a member of the group during taxable_year thus the assessment_period would be suspended for the nondebtor subsidiaries under sec_6503 to the same extent the assessment_period is suspended for the debtor facts in february of taxable_year corp c and corp b formed a partnership with other unrelated companies the service determined that the partnership transaction was in effect a disguised sale of the assets of corp c and corp b and issued a final_partnership_administrative_adjustment fpaa to the partnership for taxable_year corp c filed a petition with the tax_court as the partner other than the tax_matters_partner in response to the fpaa corp c’s motion for summary_judgment filed in the partnership case was denied and an interlocutory appeal was filed with the court_of_appeals which dismissed the case for lack of appellate jurisdiction in taxable_year corp d the parent of corp b and corp c filed a consolidated tax_return for taxable_year corp b and corp c were included as affiliates in the taxable_year consolidated_return in addition u other affiliates were identified in the return of the total v members of the consolidated_group at least w members potentially x members that were part of the taxable_year group are still in existence today in taxable_year corp d transferred y subsidiaries to a newly formed corporation corp e and then spun off corp e to corp d’s ceo and a family_partnership in early taxable_year several persons alleged to have been injured by business t products filed a lawsuit claiming that the taxable_year spinoff was a fraudulent conveyance to the best of our knowledge this suit is still pending before the united_states district_court also in taxable_year corp d underwent another reorganization which took the form of several downstream mergers prior to the mergers in taxable_year corp d owned corp a which in turn owned corp f corp f owned corp c which in turn owned a number of subsidiaries including corp b and corp g in october of taxable_year corp d merged into corp a in a downstream_merger on the same date corp a merged into corp f in a downstream_merger subsequently corp f merged into corp c in downstream_merger in november of taxable_year corp c merged into corp g in a downstream_merger tl-n-2634-01 prior to the downstream mergers described above corp d did not designate a new agent for the group as required by sec_1_1502-77 nor have the remaining members of the group designated a new agent in january of taxable_year corp g filed a chapter bankruptcy petition none of corp g’s subsidiaries were included in the bankruptcy filing in march of taxable_year corp g sent a letter to the justice_department wherein it stated that pursuant to the downstream_merger in late taxable_year corp g became the common parent_corporation of the consolidated_group under sec_1_1502-75 in august of taxable_year corp b filed for bankruptcy law and analysis issue when a partner files a petition in bankruptcy its partnership items are treated as nonpartnership_items sec_6231 sec_6231 and temp sec_301_6231_c_-7t a the items become nonpartnership_items for the taxable_year of the bankruptcy petition and all prior years id this prevents a partner’s bankruptcy from staying a tefra tax_court proceeding for other partner sec_1502 in the same partnership 89_tc_198 sec_6231 defines a partner who will be bound by tefra partnership proceedings as including both partners in the partnership and any other person whose income_tax_liability under subtitle a is determined in whole or in part by taking into account directly or indirectly partnership items of the partnership thus sec_301_6231_a_2_-1t a provides that a spouse who files a joint_return with an individual holding a separate interest in a partnership shall be treated as a partner by virtue of her joint liability for her spouse’s partnership items similarly a nonpartner corporation is treated as a partner for purposes of the tefra procedures if it files a consolidated_return making it severally liable for partnership items of a member of the consolidated filing group u s c sec_362 stays proceedings concerning the debtor once the bankrupt partner’s items convert the partner is no longer a party to the tefra proceeding pursuant to sec_6226 thus the tefra proceeding will no longer concern the debtor within the meaning of the bankruptcy stay under u s c sec_362 tl-n-2634-01 in 231_f3d_106 2d cir the u s court_of_appeals for the second circuit considered sec_301_6231_a_2_-1t in holding that a wife was not bound by the outcome of a unified partnership proceeding where her husband’s partnership items converted to nonpartnership_items during the proceeding the partnership_interest at issue in callaway was the husband’s separate_property the court reasoned that the wife was treated as a partner under the regulation only because she filed a joint_return with a person who owned a partnership_interest therefore her tax_liability was determined in part by taking into account partnership items once the husband’s partnership items converted to nonpartnership_items the wife’s tax_liability was no longer affected by any partnership items and there was no longer any reason for her to participate in or be bound by the partnership proceedings in so holding the callaway court distinguished 99_tc_325 in dubin the tax_court held that a wife was bound by the outcome of a unified partnership audit proceeding even though her husband’s partnership items converted to nonpartnership_items prior to the conclusion of the proceeding in dubin unlike callaway the husband and wife owned the interest in the partnership as joint property therefore each was treated as having a share of partnership items that could be affected by the partnership proceeding independently of the other’s share the service intends to follow the holding of callaway in future cases consequently the bankruptcy of a corporation holding a separate interest in a partnership will convert its partnership items to nonpartnership_items after these items convert to nonpartnership_items the other members of the consolidated filing group who are severally liable for these items will no longer have their tax_liability determined by reference to these items as partnership items thus the other members of the consolidated_group will no longer be considered partners under sec_6231 with respect to the bankrupt corporation’s separately held items the above rules apply to the present case as follows corp g and corp b filed petitions in bankruptcy thus their separately held partnership items in partnership converted to nonpartnership_items this also converts these same items for any member of the consolidated filing group whose income_tax_liability is determined by taking these items into account issue sec_2 and 2a 3in the lower tax_court opinion in callaway t c memo the tax_court held that the bankruptcy of the spouse who held a separate interest in the partnership did not convert the items of his spouse who was treated as a partner solely by virtue of her filing a joint_return tl-n-2634-01 in october of taxable_year corp d merged into corp a in a downstream_merger on the same date corp a merged into corp c in a downstream_merger in november of taxable_year corp c merged into corp g in a downstream_merger as a result of these transactions corp g directly owned the stock of corps b and f and no other corporation owned more than percent of the stock of corp g generally sec_1_1502-75 provides that a group remains in existence for a tax_year if the common parent remains as the common parent and at least one subsidiary that was affiliated with it at the end of the prior year remains affiliated with it at the beginning of the year sec_1_1502-75 provides certain exceptions to the general_rule that a group’s continuation is dependent on the continued existence of the common parent sec_1_1502-75 provides that a group shall be considered as remaining in existence notwithstanding that the common parent is no longer in existence if the members of the affiliated_group succeed to and become the owners of substantially_all of the assets of such former parent and there remains one or more chains of includible corporations connected through stock ownership with a common parent_corporation which is an includible_corporation and which was a member of the group prior to the date such former parent ceases to exist in the case before us after the downstream mergers all of the old common parent’s assets remained in the group and there remained an affiliated_group with a common parent which is an includible_corporation and which was a member of the group prior to the date of the merger corp g while the language of sec_1 d ii does not specifically state which corporation will be the group’s successor common parent after a qualifying transaction we believe that the language connected through stock ownership with a common parent_corporation clearly means that the corporation that is at the top of the chain of affiliation after the transaction s is the group’s new common parent accordingly corp g succeeded corp d as the group’s common parent in 84_tc_395 the tax_court held that the successor common parent in a reverse_acquisition was the common parent for years both before and after the transaction in our view the same analysis should apply in the downstream_merger context therefore under the southern pacific rationale corp g is the agent of the group for both pre- and post-transaction years issue actually corp g immediately succeeded corp c as the group’s common parent which had in turn succeeded corp a which was the common parent after corp d merged into it tl-n-2634-01 in taxable_year z years prior to the downstream mergers corp d transferred y subsidiaries to a newly formed corporation corp e and then spun off corp e to corp d’s ceo and a family_partnership in a lawsuit unrelated to these proceedings claimants have alleged that the spinoff of corp e was a fraudulent conveyance as discussed above sec_1_1502-75 provides an exception to the general group continuation rule_of sec_1_1502-75 to qualify under the exception the group must succeed to substantially_all of the assets of its former common parent although there is no guidance on the meaning of substantially_all under sec_1 d ii we believe that for purposes of determining the assets of corp d any assets disposed of in unrelated transactions will not be considered corp d assets on the other hand assets disposed of as part of the same plan as the downstream_merger would be considered part of corp d’s assets for the purposes of determining substantially_all under sec_1_1502-75 the disposition in question here the spinoff in taxable_year occurred z years prior to the downstream_merger without more to link the spinoff with the downstream_merger than merely the litigants’ fraudulent conveyance claims in the unrelated dispute we would not include the spun off assets as part of corp d’s assets for the purposes of sec_1_1502-75 therefore in our view the substantially_all requirement is met issue sec_4 and 4a whether the filing of a bankruptcy petition by corp g referred to below as the debtor suspends the running of the statute_of_limitations against all the affiliates that joined in the taxable_year consolidated tax_return the nondebtor subsidiaries even though they are not part of the bankruptcy 4a in the event that the automatic_stay does not suspend the statute_of_limitations for the nondebtor subsidiaries does the debtor have the authority to enter into a sutton agreement for the tax years prior to the merger a consolidated_return was filed for taxable_year by the group which consisted of v entities in late taxable_year the debtor became the successor to the common parent that filed the taxable_year return through a series of downstream mergers a spinoff previously occurred in taxable_year involving y subsidiaries ownership of which was transferred to an individual and a family_corporation in taxable_year the debtor filed a chapter bankruptcy petition the filing of a bankruptcy petition does not by itself result in a suspension of the period for making an assessment sec_6503 suspends this period if the service is prohibited from making an assessment as a result of a case under title however the automatic_stay which goes into effect as of the filing of the tl-n-2634-01 bankruptcy petition does not prohibit the making of a tax_assessment b c sec_362 the bankruptcy code was amended by the bankruptcy reform act of to permit tax assessments this amendment is effective for bankruptcy cases filed on or after the date of enactment_date prior to the amendments tax assessments were prohibited by the automatic_stay and therefore the sec_6501 period was suspended by sec_6503 thus sec_6503 does not suspend the sec_6501 period in the present case if a timely notice_of_deficiency is issued while the automatic_stay is in effect the sec_6501 period may be indirectly suspended as a result of bankruptcy this is because the automatic_stay bars the commencement or continuation of tax_court proceedings concerning the debtor b c sec_362 with the automatic_stay preventing the taxpayer from petitioning the tax_court the taxpayer’s period for filing a tax_court petition is suspended pursuant to sec_6213 and the service is precluded from making an assessment pursuant to sec_6213 prior to the expiration of the period for filing a tax_court petition this has the effect of suspending the sec_6501 period pursuant to sec_6503 in summary the assessment_period for the tax_liability of the debtor is suspended pursuant to sec_6503 if a timely notice_of_deficiency is issued during the bankruptcy case the suspension of the assessment_period will last as long as the period for filing the tax_court petition is suspended plus days the tax_court petition period will remain suspended until the automatic_stay is no longer in effect which in a chapter case will ordinarily occur when the bankruptcy case is dismissed or a discharge is granted as a result of the confirmation of the chapter plan b c sec_362 d the consideration as to whether sec_6503 applies turns on the status of the debtor under the consolidated_return_regulations since the debtor was a member of the group in taxable_year and became the group’s common parent under sec_1_1502-75 it is the agent for the non- bankrupt subsidiaries with respect to the consolidated_return for taxable_year and would thus be precluded under the automatic_stay from filing a petition in the tax_court therefore as discussed above the assessment_period will be suspended for the nondebtor subsidiaries under sec_6503 to the same extent the assessment_period is suspended for the debtor case development hazards and other considerations tl-n-2634-01 please call if you have any further questions associate chief_counsel corporate by gerald fleming senior technician reviewer branch office of associate chief_counsel corporate cc


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 corp b1 plr-118518-17 date date legend distributing controlled -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- ------------------------------ -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- -------------------------- busine sec_1 --------------------------------------------------- busine sec_2 --------------------------------------------------------------------------------- date -------------------- company -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- --------------------------- partnership -------------------------------------------------------------------------------------------- ----------------------------------------------------------- a b c d ---- ----- ---------------------------------- ---------------------------------- plr-118518-17 e f g -------------------------------------------------------------------------------------------- --- ---- ---- dear -------------------- this letter responds to your authorized representatives’ letter dated date requesting rulings on certain federal_income_tax consequences of a proposed transaction the proposed transaction the relevant information provided in that request and in subsequent correspondence is summarized below the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalties 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 this letter is issued pursuant to section dollar_figure of revproc_2017_1 2017_1_irb_19 regarding one or more significant issues under sec_332 sec_351 sec_355 sec_368 or sec_1036 the rulings contained in this letter only address one or more discrete legal issues involved in the proposed transaction this office expresses no opinion as to the overall tax consequences of the proposed transaction or as to any issue not specifically addressed by the rulings below facts distributing is a publicly traded corporation and the common parent of an affiliated_group_of_corporations that file a consolidated united_states federal_income_tax federal tax_return distributing and its subsidiaries are engaged in busine sec_1 and busine sec_2 distributing currently conducts busine sec_1 through various domestic entities-some of which are corporations the regarded busine sec_1 entities and some of which are disregarded as separate from their respective owners for federal tax purposes the disregarded busine sec_1 entities additionally distributing holds an approximate a percent limited_partnership_interest and b percent general_partnership interest in partnership the regarded busine sec_1 entities disregarded busine sec_1 entities and partnership are collectively referred to as the busine sec_1 entities plr-118518-17 proposed transaction for what are represented to be valid corporate business purposes distributing intends to engage in the proposed transaction to distribute busine sec_1 to its public shareholders the relevant steps of the proposed transaction are set forth below i ii iii iv v vi on date distributing formed controlled as a direct wholly owned subsidiary the regarded busine sec_1 entities excluding company will convert under the relevant state statutes to limited_liability companies the conversions that will be disregarded as separate from their respective owners for federal tax purposes the converted busine sec_1 entities controlled will borrow approximately dollar_figurec from third-party financing sources distributing will contribute the busine sec_1 entities and the related liabilities to controlled in exchange for controlled stock and approximately dollar_figured the cash proceeds distributing will distribute all of the controlled stock pro_rata to its shareholders the distribution to accomplish certain deleveraging goals within e months of the distribution distributing will use the cash proceeds to pay down existing distributing debt held by third-parties the debt repayments to the extent distributing can accomplish its deleveraging goals without using all of the cash proceeds and within f months of the distribution distributing will use the remaining cash proceeds to redeem outstanding distributing stock the stock repurchases the stock repurchases will be undertaken pursuant to a stock buyback program created in connection with the distribution the debt repayments and the stock repurchases will collectively be referred to as the cash proceeds purge representations i the sum of distributing’s debt to be paid with the cash proceeds will not exceed the weighted quarterly average of the distributing debt for the 12-month_period ending upon the close of business on the last full business_day before the date on which distributing’s board_of directors initially discussed the proposed transaction plr-118518-17 ii iii with respect to each debt retired in the debt repayments distributing will not have a commitment to secure new borrowings on the same terms with the holders of such debt prior to its repayment except as otherwise described in the proposed transaction neither distributing nor controlled has any plan or intention to transfer in the aggregate more than g of the fair_market_value of the respective assets of the converted busine sec_1 entities to another corporation rulings based solely on the information submitted and the representations set forth above and provided the proposed transaction otherwise qualifies under sec_368 and sec_355 we rule as follows the cash proceeds purge will be treated as being distributed pursuant to the distribution plan_of_reorganization for purposes of sec_361 the contribution of the converted busine sec_1 entities to controlled will not preclude the conversions from qualifying as complete liquidations within the meaning of sec_332 caveats except as expressly provided herein no opinion is expressed or implied concerning the tax treatment of the proposed transaction under any provision of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the proposed transaction that is not specifically covered by the above rulings procedural statements 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 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 plr-118518-17 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely _______________________ julie t wang assistant to the branch chief branch office of associate chief_counsel corporate


internal_revenue_service number release date index number - -------------------------------------------- ------------------------- ------------------------------- ------------------------------------ --------------------------------- -------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc tege eoeg teb presp-142382-06 date date dear ----------------- this letter is in response to your application_for an allocation of authority to issue dollar_figure------- ----------------- in clean renewable energy bonds crebs under sec_54 of the internal_revenue_code the code pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on april including supplements thereto we have determined that the projects described in appendix a attached hereto are qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------------------------- -------------------------------------------------------------------------------------------------------------------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure--------------- of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the projects described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met sec_54 of the code imposes a limitation of dollar_figure on the amount of crebs which may be issued to finance qualified projects the limitation sec_54 provides that the limitation is to be allocated by the secretary of treasury in presp-142382-06 such manner as the secretary deems appropriate except that no more than dollar_figure of the limitation may be allocated to finance qualified projects of qualified borrowers which are governmental bodies section of notice_2005_98 2005_52_irb_1211 provides that the limitation will be allocated among qualified projects for which a share of such limitation has been requested beginning with the project s requesting the smallest share in dollar amount and continuing with the project s requesting the next-smallest share until the total limitation has been exhausted however in the event that dollar_figure has been allocated to qualified projects of qualified borrowers that are governmental bodies the remaining shares of the limitation will be allocated under the methodology described in the previous sentence only to qualified projects of qualified borrowers that are not governmental bodies for purposes of allocating the limitation among projects all qualified projects located at the same site and owned by the same qualified_borrower are treated as a single project and each project is treated as requesting a single allocation an allocation of shares of the limitation cannot be made with respect to the project owned by the borrower listed in appendix b because such borrower is a governmental body and dollar_figure has already been allocated to applications requesting a smaller share of the limitation to finance qualified projects owned by qualified borrowers that are governmental bodies we appreciate your submission of the application_for our consideration and encourage you to continue to pursue your plans for constructing clean renewable energy projects if you have any questions with respect to this allocation please contact --------------------- ---------or -----------------------------of the office of division counsel associate chief_counsel tax-exempt and government entities on --------------------- not a toll-free call 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 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in the appendices attached hereto is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation presp-142382-06 the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation 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 application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch borrower name project type project location amount appendix a presp-142382-06 ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility allocated ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------------------- ------------------- ----------------------- ----------------------- ----- ----------------------- ----------------------- ------------------ ----------------------- ----------------------- ------------ ----------------------- ----------------------- ----------------- ----------------------- --------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- --------------- ----------------------- ----------------------- ----- ----------------------- ----------------------- ------ presp-142382-06 ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------------------- ----------------------- ----- ----------------------- ----------------------- ------ ----------------------- ----------------------- ----- ----------------------- ----------------------- ------------- ----------------------- ------------------- ----------------------- ------------------ ----------------------- ----------------------- ----- ----------------------- ----------------------- ----------- ----------------------- ----------------------- ----------------------- --------------------- ----------------------- ----------------------- ----- ----------------------- ----------------------- ----- presp-142382-06 ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------- ----------------------- ------ ----------------------- ----------------------- ----------------------- ----------------------- ----- ----------------------- --------------------- ----------------------- ----------------------- ----------------------- --------------------- ----------------------- --------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------- ----------------------- ----------------------- ----- ----------------------- ----------------------- ------------ ----------------------- ----------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ presp-142382-06 ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------------------- ----------------------- ----------- ----------------------- ----------------------- ----- ----------------------- ----------------------- ----- ----------------------- ----------------------- ----- ----------------------- ----------------------- ------------- ----------------------- ------------------- ----------------------- ----------------------- ----------------------- --------------------- ----------------------- ----------------------- ----------- ----------------------- ----------------------- ------------ ----------------------- --------------------- ----------------------- ----------------------- ------ presp-142382-06 -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------------ ------------------ ------------------ ------------------ ----------------------- ----------------------- ----------------------- ----------------------- -------------- ----------------------- ------------------- ----------------------- ----------------------- ------------ ----------------------- ---------------------- ----------------------- ------------------- ----------------------- ------------------- ----------------------- ----------------------- ------------ ----------------------- --------------------- ----------------------- ----------------------- ------------ ----------------------- ----------------------- ------------ ----------------------- ----------------------- -------------- ----------------------- ----------------------- ------ ----------------------- --------------------- ----------------------- ------------------- --------------- --------------- --------------- --------------------- presp-142382-06 ----------------------------------- solar_energy_facility ----------------------------------- solar_energy_facility ----------------------------------- solar_energy total facility presp-142382-06 borrower name ----------------------------- ---------- appendix b project type project location solar_energy_facility ------------------------------- ------------ amount requested ---------------