internal_revenue_service number release date index number --------------------------- -------------------------------- ---------------------------------------------- ------------------------- in re ----------------------------------- ------------------- --------------------------- ------------------------- department of the treasury washington dc person to contact ---------------------- id no ------------- telephone number ------------------- refer reply to cc intl b01 - plr-105942-03 date june ty ------------------- ----------------------------------- ----------------------- ------------ -------------------------------------------------- ---------------------- -------------------------- --------------- ---------------------- ------------------------------------------------ ------------------------ ------- legend grantor country a_trust date x amount country b foreign trustee date y year z dear ------------ this is in response to your letter dated date in which you requested rulings concerning the proper income gift and generation-skipping_transfer gst tax treatment of the domestication of a foreign_trust the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts plr-105942-03 grantor who at the time was a resident and citizen of country a established the trust on date x the trust was initially funded with amount no additional capital contributions have been made foreign trustee a banking institution organized under the laws of country b was appointed trustee the trust is a foreign_trust under sec_7701 and sec_7701 of the internal_revenue_code the trust is an irrevocable_trust established for the primary benefit of grantor’s grandchildren the beneficiaries include citizens and residents of the united_states grantor retained no powers that caused him to be treated as the owner of the trust under sec_671 clause b of the deed_of_trust defines perpetuity date as the day preceding the one hundred fiftieth anniversary of the date of the deed clause a provides that until the trust division event the trustees shall be authorized to distribute to or for the benefit of grantor’s then living grandchildren as much of the net_income and or principal of the trust fund as the trustees deem advisable for the education of the grandchildren clause b provides that the trust division event shall occur upon the earlier of i a grandchild of grantor attaining years of age or ii the death of all grandchildren of grantor upon the trust division event the trust shall terminate and the trustees shall divide the assets of the trust into equal shares for grantor’s grandchildren or if any of them are not living at the trust division event then for the deceased grandchild’s issue on a per stirpes basis each such share or part of a share allocated to a descendant of grantor who is living at the trust division event shall be placed in a separate trust and the trustees thereafter shall hold administer and distribute said trust for the primary benefit of the descendant to whom such share is allocated and for the benefit of such descendant’s issue in accordance with the provisions of clause clause provides that if a_trust is to be established for the primary benefit of a beneficiary and for the benefit of such beneficiary’s issue which trust is to be held administered and or distributed in accordance with the provisions of this clause each such trust is referred to in the deed as a dynasty_trust the trustees shall manage invest and reinvest the assets of each such dynasty_trust and shall distribute the income and principal of each such dynasty_trust in accordance with the following provisions a during the term of each dynasty_trust the trustees shall distribute to or for the benefit of the beneficiary for whose primary benefit such dynasty_trust is established and for such beneficiary’s issue as much of the income and or principal of such beneficiary’s dynasty_trust as the plr-105942-03 trustees deem necessary or advisable to provide for the education and health of such beneficiary and such beneficiary’s issue during the term of each dynasty_trust the trustees also shall distribute to or for the benefit of any one or more among such beneficiary and such beneficiary’s issue who is at least years of age as much of the income and or principal of such beneficiary’s dynasty_trust as the trustees deem necessary or advisable to provide for the maintenance and support in reasonable comfort of such beneficiary and such beneficiary’s issue who are at least years of age b upon the first to occur of the death of the beneficiary for whose primary benefit such dynasty_trust is established or the perpetuity date such dynasty_trust shall terminate clause of the schedule to the deed_of_trust provides that the trust shall be governed in all respect by the laws of the trust domicile country b is the first trust domicile but the trustees may by deed change the trust domicile to any other jurisdiction that would recognize the validity of the trust and the respective interests of the beneficiaries due to a change_in_circumstances grantor established residency in the united_states on date y a date that is less than years after date x since date y grantor has been treated as the owner of the trust pursuant to sec_679 and has paid u s income_tax on the income of the trust grantor became a u s citizen in year z the trust’s advisors have determined that it would be in the best interest of the beneficiaries of the trust to convert the trust to a domestic_trust the trustee selection committee plans to change the trustee from foreign trustee to an institution organized and established under the laws of the united_states or of one of the several states in the united_states u s resident trustee the perpetuity date will be changed if necessary to comply with the applicable law rulings requested the domestication of the trust and the trust’s resulting change in status from a foreign grantor_trust to a domestic nongrantor_trust will not cause a gain recognition event under sec_684 of the code and sec_1_684-2 of the income_tax regulations at the time of the domestication or at grantor’s death no aspect of domestication including the trust’s change_of status from a foreign grantor_trust to a domestic nongrantor_trust and the change_of fiduciary from foreign trustee to u s resident trustee will give rise to a gift_for purposes of plr-105942-03 sec_2501 nor will future distributions from the trust be subject_to the gift_tax no aspect of domestication including the trust’s change_of status from a foreign grantor_trust to a domestic nongrantor_trust and the change_of fiduciary from foreign trustee to u s resident trustee will cause the gst tax under sec_2601 to apply to an otherwise taxable_termination or taxable_distribution from the trust and the dynasty trusts law and analysis ruling sec_671 provides that where it is specified in subpart e of part of subchapter_j chapter of the code that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_679 provides that a united_states_person who directly or indirectly transfers property to a foreign_trust shall be treated as the owner for his taxable_year of the portion of such trust attributable to such property if for such year there is a united_states_beneficiary of any portion of such trust sec_679 provides that if a nonresident_alien_individual has a residency_starting_date within years after directly or indirectly transferring property to a foreign_trust sec_679 and sec_6048 shall be applied as if such individual transferred to such trust on the residency_starting_date an amount equal to the portion of such trust attributable to the property transferred by such individual to such trust in such transfer sec_684 provides that except as provided in regulations in the case of any transfer of property by a united_states_person to a foreign_estate_or_trust for purposes of subtitle a of the code such transfer shall be treated as a sale_or_exchange for an amount equal to the fair_market_value of the property transferred and the transferor shall recognize as gain the excess of the fair_market_value of the property so transferred over the adjusted_basis of such property in the hands of the transferor sec_684 provides that sec_684 shall not apply to a transfer to a_trust by a united_states_person to the extent that any person is treated as the owner of such trust under sec_671 plr-105942-03 sec_1_684-2 of the income_tax regulations provides that if any portion of a foreign_trust is treated as owned by a u_s_person under subpart e of part i of subchapter_j chapter of the code and such portion ceases to be treated as owned by that person under such subpart other than by reason of an actual transfer of property from the trust to which sec_1_684-2 applies the u_s_person shall be treated as having transferred immediately before but on the same date that the trust is no longer treated as owned by that u_s_person the assets of such portion to a foreign_trust sec_1_684-2 addresses a situation where a_trust is a foreign_trust both before and after it ceases to be treated as owned by a u_s_person and the only change is the trust’s status for purposes of subpart e immediately following the change in the trust’s status the assets are held in a foreign_trust that is taxable under sec_641 et seq and is not generally subject_to u s income_tax except to the extent it derives income_from_sources_within_the_united_states in this case the trust currently is a foreign_trust although the trust’s beneficiaries include citizens and residents of the united_states sec_679 was not applicable on date x when the trust was created because grantor was a nonresident_alien when grantor became a resident_of_the_united_states on date y a date that was less than years after date x sec_679 caused sec_679 to become applicable consequently grantor has been treated as the owner of the trust since date y if the trust becomes a domestic_trust sec_679 will cease to apply and the trust will cease to be treated as owned by grantor under subpart e when the trust becomes a domestic_trust sec_684 will have no application because the domestication of the trust is not treated as a transfer to a foreign_trust sec_684 and sec_1_684-2 of the income_tax regulations apply only to transfers to foreign trusts therefore based upon the information submitted and the representations made we conclude that the domestication of the trust and the trust’s resulting change_of status from a foreign grantor_trust to a domestic nongrantor_trust will not cause a gain recognition event under sec_684 and sec_1_684-2 of the regulations at the time of domestication or at grantor’s death ruling sec_2501 provides that a tax computed as provided in sec_2502 is imposed for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that the tax imposed by sec_2501 shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible but in the case of a nonresident not a plr-105942-03 citizen_of_the_united_states the tax shall apply to a transfer only if the property is situated within the united_states sec_2512 provides that if a gift is made in property the value thereof at the date of the gift shall be considered the amount_of_the_gift sec_2512 provides that where property is transferred for less than an adequate_consideration in money_or_money's_worth then the amount by which the value of the property exceeded the value of the consideration is deemed a gift sec_25_2511-2 of the gift_tax regulations provides that a gift of property is complete to the extent the donor has so parted with dominion and control as to leave him no power to change its disposition whether for his own benefit or for the benefit of another sec_25_2511-1 provides that in the case of a gift by a nonresident_not_a_citizen_of_the_united_states if the gift was made on or after date by a donor who was not an expatriate to whom sec_2501 was inapplicable on the date of the gift by reason of sec_2501 and paragraph a of sec_25_2501-1 the gift_tax applies only if the gift consisted of real_property or tangible_personal_property situated within the united_states at the time of the transfer sec_25_2511-1 provides in part that the gift_tax is applicable only to a transfer of a beneficial_interest in property it is not applicable to a transfer of bare_legal_title to a trustee in this case grantor made a completed_gift at the time that he transferred property to the trust furthermore the transfer of title from foreign trustee to u s resident trustee would not result in a taxable gift therefore based upon the information submitted and the representations made we conclude that no aspect of domestication including the trust’s change_of status from a foreign grantor_trust to a u s nongrantor_trust and the change_of fiduciary from foreign trustee to u s resident trustee will give rise to a gift_for purposes of sec_2501 nor will future distributions from the trust be subject_to the gift_tax ruling sec_2601 imposes a tax on each generation-skipping_transfer sec_2611 provides that the term generation-skipping_transfer means -- a taxable_distribution a taxable_termination and a direct_skip sec_2612 provides that the term taxable_termination means a termination by death lapse of time release of a power or otherwise of an interest in property held in plr-105942-03 trust unless a immediately after such termination a non-skip_person has an interest in such property or b at no time after such termination may a distribution including distributions on termination be made from such trust to a skip_person sec_2612 provides that the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip sec_2612 provides that the term direct_skip means a transfer subject_to a tax imposed by chapter or of an interest in property to a skip_person sec_2613 provides that for purposes of chapter the term skip_person means a natural_person assigned to a generation which i sec_2 or more generations below the generation assignment of the transferor or a_trust if all interests in such trust are held by skip persons or if there is no person holding an interest in such trust and at no time after such transfer may a distribution including distributions on termination be made from such trust to a non-skip_person sec_2663 provides that the secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of chapter including regulations consistent with the principles of chapter sec_11 and sec_12 providing for the application of this chapter in the case of transferors who are nonresidents not citizens of the united_states nra transferors sec_26_2663-2 of the generation-skipping_transfer_tax regulations provides that chapter applies to a taxable_distribution or a taxable_termination to the extent that the initial transfer of property to the trust by a nra transferor whether during life or at death was subject_to the federal estate or gift_tax within the meaning of sec_26_2652-1 sec_26_2652-1 provides in part that for purposes of chapter a transfer is subject_to federal gift_tax if a gift_tax is imposed under sec_2501 without regard to exemptions exclusions deductions and credits in this case grantor transferred property to the trust while he was a nonresident_alien the original transfer to the trust was not subject_to federal gift_tax because neither grantor nor the trust property had u s situs because the initial transfer was not subject_to the federal gift or estate_tax the gst tax does not apply to distributions from and terminations of the trust therefore based upon the information submitted and the representations made we conclude that no aspect of domestication including the trust’s change_of status from a foreign grantor_trust to a domestic nongrantor_trust and the change_of fiduciary from foreign trustee to u s resident trustee will cause the plr-105942-03 gst tax to apply to an otherwise taxable_termination or taxable_distribution from the trust and the dynasty trusts under sec_2601 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 in particular no opinion is expressed or implied concerning whether the trust will be a domestic_trust following the change_of fiduciary from foreign trustee to u s resident trustee this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely m grace fleeman senior counsel branch office of associate chief_counsel international cc ------------------------------------ ------------------- ---------------------- -------------------------


cca_2018092715293062 id uilc number release date from sent thursday date pm to cc bcc subject -------------------------------- ----------- you stated that the appeals officer assigned to a deficiency appeal wants to ask exam to attach the referenced l sec_501 to the civil penalty form and to fix workpaper so that it has sec_6663 checked and not sec_6651 you asked whether the appeals officer’s contact with exam would be a prohibited ex_parte_communication and if there are any rules in revproc_2012_18 applicable to this situation revproc_2012_18 sec_2 makes clear that returning the case to exam for these purposes is not a prohibited ex_parte_communication as long as the request and explanation does not go beyond the types of ministerial administrative or procedural matters set forth in sec_2 however revproc_2012_18 sec_2 requires appeals to notify the taxpayer or the taxpayer’s representative that the case is being returned in part for further development the supplemental report prepared by the originating function which in this case would be the properly signed approval by the exam manager must be shared with the taxpayer or representative based on this advice i do not believe your other questions require answering if you disagree please let me know and i will ask ----- and -------- to respond let me know if you have any questions -------


department of the treasury internal_revenue_service commerce street dallas tx tax_exempt_and_government_entities_division date date person to contact number release date legend org organization name xx date address address org address certified mail dear badge number contact telephone number contact address employer_identification_number this is a final notice of adverse determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective january 20xx the following reason s you are not organized and operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you are not and have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 rather your activities further a substantial nonexempt commercial purpose and serve private rather than public interests contributions to your organization are no longer deductible effective january 20xx since your exempt status has been revoked you are required to file form_1120 u s_corporation income_tax return for all years beginning on or after january 20xx income_tax returns for subsequent years are to be filed with the appropriate service_center identified in the instructions for those returns it is further determined that your failure_to_file a written appeal constitutes a failure to exhaust your available administrative remedies however if you decide to contest this determination in court you must initiate a suit for 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 ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment to secure a petition form write to the following address please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in 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 this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely nanette m downing director eo examinations enclosures publication tax evempt and government entities division org address department of the treasury internal_revenue_service te_ge eo examination commerce street dallas texas 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 if we issue a determination_letter to you based on technical_advice no publication 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 if 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 sincerely nanette m downing director eo examinations enclosures publication publication report of examination letter catalog number 34809f form_8 a name of taxpayer org explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service ein december 20xx legend org organization name co-1 company xx date city city manager manager whether org - org the organization qualifies for exemption as an organization described within internal_revenue_code c issue facts org - org the organization is presently recognized under sec_501 as a tax- exempt_organization and was granted tax exempt status as a nonprofit corporation in november 20xx however the organization has operated and considered itself to be a for-profit organization org - org is an initiative of co-1 co-1 the organization purpose is to provide senior citizens and their families with personal in home care services the organization’s services include personal concierge services personal care and personal business the organization has timely filed form_1120 for all tax years since their incorporation during the year under examination the organization reported collecting dollar_figure in gross_sales per statement of form_1120 indicates that co-1 holds of the voting_stock in org - org on november 20xx the taxpayer’s representative called the irs and requested the application to be withdrawn from consideration the taxpayer’s representative followed up the verbal request with a written request on november 20xx the internal_revenue_service approved the application granting exemption to the organization on december 20xx the taxpayer_representative spoke with manager determination group manger the taxpayer_representative explained the situation to manager who was receptive to the taxpayer’s problem as a result of the conversation with manager a referral initiated our examination of the organization’s activities to resolve the issue in written correspondence dated june 20xx the taxpayer indicated the organization has never operated its business in a not-for-profit manner the response further explained that the organization did not receive any gift grant or contributions nor perform any charitable services co-1 co-1 an exempt_organization working with the organization provided support to pay for application fee for federal tax exemption when the organization decided to withdraw its application co-1 ceased providing any support to the organization the organization has never operated in an exclusively charitable manner which is inconsistent with sec_501 as such org- org fails to meet the operational requirements for continued exemption under sec_501 law form 886-acrev department of the treasury - internal_revenue_service page -1- form_886 a name of taxpayer org explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service ein december 20xx internal_revenue_code sec_501 provides for tax exemption to organizations organized and operated exclusively for charitable purposes and no part of the net earning which inures to the benefit of any individual regulation sec_1_501_c_3_-1 organizational and operational tests provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt regulation sec_1_501_c_3_-1 provides 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 of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose regulation sec_1_501_c_3_-1 provides an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus to meet the requirement of this subdivision it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests taxpayer's position taxpayer did not provide written position however an agreed signed form_6018 was secured from taxpayer government's position based on the facts of the examination you do not qualify for exemption since you are operated for the primary purpose of carrying_on_a_trade_or_business and is not operated exclusively for one or more purposes under sec_501 conclusion the organization does not qualify for exemption under sec_501 and its tax exempt status should be revoked effective january 20xx no contributions to your organization are deductible under sec_170 of the internal_revenue_code form 886-a cev department of the treasury - internal_revenue_service page -2-


t c summary opinion united_states tax_court matthew thomas parmeter petitioner v commissioner of internal revenue respondent docket no 30121-14s filed date matthew thomas parmeter pro_se nancy m gilmore and woodrow pengelly specially recognized for respondent summary opinion gerber judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed unless otherwise indicated all section references are to the internal continued pursuant to sec_7463 the 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 income_tax deficiency for petitioner’ sec_2012 taxable_year the issue for our consideration is the amount of the moving_expense_deduction to which petitioner is entitled for background petitioner resided in maryland at the time his petition was filed during petitioner an information_technology engineer for the u s department of the army accepted a new position and his moving_expenses were not reimbursed by his employer petitioner in a effort to save money decided to move his household belongings himself from his residence in drum pennsylvania to aberdeen proving ground maryland the distance from his old to his new residence wa sec_182 miles petitioner moved his household belongings in his pickup truck he transported his personal belongings vehicles etc by making round trips with his truck during each trip he placed the household belongings in a storage continued revenue code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure facility in the vicinity of his new job the facility charged petitioner dollar_figure per month and he stored his belongings for nine months during during four of the round trips to the vicinity of his new job petitioner rented a trailer to move larger items including vehicles the trailer rental expense was dollar_figure on each occasion before being able to use his new residence petitioner rented a hotel room for dollar_figure per night for two nights on hi sec_2012 income_tax return petitioner deducted dollar_figure for unreimbursed moving_expenses he used tax preparation software to prepare his return and did not understand how the dollar_figure was computed petitioner obtained three estimates of the cost to pack and move his household goods the estimates were from dollar_figure to approximately dollar_figure respondent in a notice_of_deficiency determined that petitioner was not entitled to deduct any part of the dollar_figure discussion a taxpayer may deduct moving_expenses paid_or_incurred in connection with the commencement of work at a new principal_place_of_work sec_217 in order for the expenses to be deductible the taxpayer must meet the conditions set forth in sec_217 respondent agrees that petitioner met those conditions the remaining question for our consideration is the amount of the deduction for moving_expenses to which petitioner is entitled moving_expenses are deductible only if they are reasonable under the circumstances of the particular move sec_1_217-2 income_tax regs requirements for the deduction for moving household goods are in pertinent part specified in sec_1_217-2 income_tax regs as follows expenses of moving household goods and personal effects include expenses of transporting such goods and effects from the taxpayer’s former residence to his new residence and expenses of packing crating and in-transit storage and insurance for such goods and effects expenses of storing and insuring household goods and personal effects constitute in-transit expenses if incurred within any consecutive 30-day period after the day such goods and effects are moved from the taxpayer’s former residence and prior to delivery at the taxpayer’s new residence petitioner chose to move his personal_property himself in order to save money he did not offer evidence of the actual expenses of transporting his personal_property under revproc_2010_51 2010_51_irb_883 he would be entitled to use the optional standard mileage rate which wa sec_23 cents per mile for the year in issue see notice_2012_1 2012_2_irb_260 petitioner drove round trips for a total of big_number miles big_number at cents per mile the cost of moving his personal_property is dollar_figure petitioner also incurred several months of storage fees for his personal_property however under sec_1_217-2 income_tax regs he is entitled only to the cost for one month or dollar_figure in accord with the 30-day limitation in that regulation petitioner also rented a trailer on four occasions to move large items including motor vehicles at a cost of dollar_figure per rental or a total of dollar_figure respondent did not question the reasonableness or number of trips that petitioner made to move his property instead respondent argued that under sec_1_217-2 income_tax regs petitioner is entitled to deduct only the cost of one trip to his new residence that regulation in pertinent part provides as follows expenses of traveling from the former residence to the new place of residence include the cost of transportation and lodging en route including the date of arrival from the taxpayer’s former residence to his new place of residence the deduction for traveling expenses from the former residence to the new place of residence is allowable for only one trip made by the taxpayer and members of his household however it is not necessary that the taxpayer and all members of his household travel together or at the same time respondent contends that the one-trip limitation of paragraph b applies to the transportation of personal_property under subparagraph respondent cited no cases for his interpretation that the one-trip limitation of paragraph b applies to travel to transport personal_property to a new residence petitioner confronted with a dollar_figure to dollar_figure cost to have a moving company move his personal_property transported the property to the new location in anticipation of moving to that residence the property was stored near the new residence in anticipation of the final move to the new residence respondent’s interpretation would ignore the actual cost incurred by individuals who move their own personal_property and would effectively limit the purpose of sec_1_217-2 income_tax regs to instances where taxpayers paid to have their personal_property commercially moved or moved by someone not a member_of_the_family the final of the trips to the new residence must be counted as petitioner’s travel to his new residence and accordingly he would not be entitled to deduct the cost of a round trip on that occasion the effect of the one-trip rule would be to reduce petitioner’s costs by dollar_figure dollar_figure so that his total mileage expense deduction would be dollar_figure dollar_figure finally petitioner incurred dollar_figure for lodging two nights at dollar_figure each while waiting to gain access to his new residence expenses_incurred following the date of arrival at and while waiting for access to the new residence are not included among those travel_expenses delineated as allowable travel expense in these circumstances sec_217 sec_1_217-2 income_tax regs in summary we hold that petitioner is entitled to a dollar_figure moving_expense_deduction under sec_217 as follows item amount transporting personal_property rental of trailers storage of personal_property total moving_expense_deduction dollar_figure dollar_figure dollar_figure dollar_figure to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court at cost services inc petitioner v commissioner of internal revenue respondent docket no 13604-96xx filed date matthew marion fondel an officer for petitioner joan ronder domike for respondent memorandum opinion cohen judge respondent determined that at cost services inc does not qualify as a sec_501 charitable_organization and therefore is not exempt from federal taxation under sec_501 pursuant to sec_7428 and title xxi of the tax_court rules_of_practice and procedure petitioner seeks a declaratory_judgment that it is a qualified_organization under sec_501 the issue for decision is whether petitioner operates exclusively for charitable purposes unless otherwise indicated all section references are to the internal_revenue_code in effect at the time the petition was filed and all rule references are to the tax_court rules_of_practice and procedure background the administrative record which includes all of the facts upon which the commissioner made the final adverse determination was submitted to the court under rule b and is incorporated herein by this reference petitioner is a nonprofit delaware corporation with its principal office located in new york new york the sole founder director and officer of petitioner is matthew marion fondel fondel who has a bachelor’s degree in electrical engineering from northwestern university before founding petitioner fondel worked temporary service jobs for years through a number of temporary service agencies on form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code petitioner stated that its principal purposes are to a eliminate poverty for inner city minorities associated with long-term unemployment and under- employment and combat the racial prejudice these individuals face in the conventional work place b promote social welfare by providing a means of obtaining a lawful income to inner city minorities and by providing them with benefits and privileges which they would enjoy if they had conventional employment for example a health care plan credit_union vacation pay etc c to reduce the burden on the federal and state governments of the current unemployment insurance system by emphasizing the placement of persons in temporary work contract work and self-employment as a means of keeping the individuals in the work place and as a means of reducing the cost to the government of paying unemployment insurance to these individuals until they can obtain conventional permanent employment petitioner’s bylaws state it is recognized that a large segment of the population will never obtain conventional employment this corporation at cost services inc a publicly supported charitable_organization is then created and empowered to assist the unemployed in marketing whatever skills they may possess and to train the unemployed in skills which are marketable xk k petitioner counsels and trains unemployed or underemployed individuals to become temporary service workers temporary service workers as defined by petitioner include secretaries word processors desktop publishers data entry operators general clerical workers receptionists and light industrial laborers initially petitioner plans to teach its clients basic computer skills in demand by local businesses that historically use temporary office labor petitioner intends to become a one- stop-job-center where job training and job placement take place in the same location petitioner works in conjunction with at cost llc llc a delaware for-profit limited_liability_company whose members include fondel and petitioner petitioner acts as the managing member of the llc petitioner or the llc assists clients in bidding for and finding temporary and contract work so that a client may be employed year-round through a series of temporary service jobs petitioner advises clients to form their own limited_liability companies or become members of the llc to create advantages for local businesses petitioner advertises to local businesses that those advantages include a reduction in their costs from temporary agencies and conventional consulting firms a relationship between companies and your llc would be business to business as with temporary agencies and conventional consulting firms rather than the employer employee relationship associated with directly hiring consultants companies can enjoy the benefits of using consultants and avoid the nightmare of having consultants they use being reclassified by the state or the irs as employees the services provided by petitioner also assist local businesses by providing a source of skilled labor at reduced costs petitioner forgoes the normal fee charged by a temporary service agency and the local businesses pay petitioner only the hourly rate of the client who acts as an independent_contractor most businesses that are aided by petitioner are located in economically depressed areas fondel who does not draw a salary performs all of the job training and job placement activities of petitioner and the llc at the time of the filing of the application_for tax-exempt treatment petitioner had referred about people to temporary personnel agencies where they were able to obtain temporary employment fondel also uses petitioner and the llc to market his own services as a temporary service worker petitioner plans to create another limited_liability_company to publish a newsletter listing temporary employment agencies in the area and their current needs for workers the purpose of this activity will be for referring clients when petitioner is unable to find work for them the primary means of support for petitioner will be from payments from clients who become members of the llc or who create their own limited_liability companies if there is a net profit after the expenses of petitioner and the llc are paid it will be distributed to fondel a payment of percent of a member’s gross_income earned from jobs obtained through petitioner is suggested petitioner will also solicit donations from nonprofit or private_foundations and local businesses that have benefited from the services of petitioner in petitioner received dollar_figure from the regis retirement_plan inc a company that petitioner helped to find a permanent employee petitioner will also receive percent of the gross_profit from the sale of the newsletter financial information included in petitioner’s application_for exempt status shows that it had occupancy expenses in of dollar_figure and itemized expenses of dollar_figure the occupancy expenses were for an apartment that served as the office of petitioner the office of the llc and the personal living quarters of fondel petitioner intends to obtain a building either by lease or gift where it can perform job training and job placement services in one location on date petitioner submitted its form_1023 application_for recognition of exemption under sec_501 c of the internal_revenue_code respondent issued an initial adverse determination on date petitioner appealed to the internal_revenue_service office of appeals which gave a final adverse determination on date denying tax-exempt status to petitioner under sec_501 the commissioner’s reasons for denial stemmed from the determination that operations of petitioner serve the private interests of fondel petitioner is operated for private benefit rather than exclusively for public purposes and petitioner has failed to establish that it is operated exclusively for exempt purposes petitioner challenges that determination in this action for declaratory_judgment discussion petitioner bears the burden of proving that it is a sec_501 organization see rule c a in order for petitioner to meet this burden the administrative record upon which this case is to be decided must contain enough evidence to support a finding contrary to the grounds set forth in the notice_of_determination see 102_tc_558 affd 37_f3d_216 5th cir 71_tc_102 a statute creating an exemption must be strictly construed see 19_tc_1146 7_tc_1449 sec_501 provides tax-exempt status for organizations described in sec_501 sec_501 includes the following organizations corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation and which does not participate in or intervene in any political campaign on behalf of or in opposition to any candidate for public_office contributions to organizations described in sec_501 are generally deductible to donors see sec_170 c to come within the terms of sec_501 an organization must be both organized and operated exclusively for tax-exempt purposes sec_1 c -1 a income_tax regs the presence of a single substantial nonexempt purpose precludes exempt status for the organization regardless of the number or importance of exempt purposes see 326_us_279 the actual purposes of the organization not necessarily limited to those purposes stated in the organizing documents are the appropriate focus see 92_tc_1053 as stated in the regulations the operational_test is as follows 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 of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1 c -1 c income_tax regs of the exempt purposes listed in sec_501 petitioner maintains that it operates for charitable purposes the term charitable is used in sec_501 in its generally accepted legal sense and includes but is not limited to relief of the poor and distressed or of the underprivileged advancement of religion advancement of education or science erection or maintenance of public buildings monuments or works lessening of the burdens of government and promotion of social welfare by organizations designed to accomplish any of the above purposes or to lessen neighborhood tensions to eliminate prejudice and discrimination to defend human and civil rights secured_by law or iv to combat community deterioration and juvenile delinquency sec_1 c -1 d income_tax regs petitioner argues that its activities which include job training and job placement for persons who otherwise would remain unemployed or underemployed lessen the burdens of the unemployment and welfare systems petitioner maintains that its goal of creating a one-stop-jjob-center was envisioned by the reemployment act of s 103d cong 2d sess and therefore its application_for tax exemption should be treated differently than other applications for tax exemptions respondent claims that petitioner has not established that it operates exclusively for charitable purposes as defined in sec_1 c -1 d income_tax regs petitioner cites the comments of the secretary of labor before the senate_finance_committee for the proposition that the government has called on citizens to take action to help reduce the burdens of the current unemployment system the secretary stated the mismatch between the current unemployment system’s structure and the needs it is pressed to serve burdens federal and state taxpayers and especially businesses with enormous costs state unemployment -- - compensation payments have exceeded dollar_figure billion in each of the last seven years and in 1993--even as recovery set in--states paid out nearly dollar_figure billion in regular unemployment benefits federal spending on administrative costs for regular unemployment insurance totalled dollar_figure billion last year but unemployment insurance is not designed to help speed workers into reemployment so despite these huge outlays the predicament of the long-term unemployed led to the repeated provisions of federal emergency unemployment_compensation payments costing dollar_figure billion over the past two years reemployment initiative hearings on s reemployment act of before the senate comm on finance 103d cong 2d sess date statement of robert b reich secretary of labor emphasis added the activities of petitioner fall outside of the definition of charitable under sec_501 petitioner trains individuals to fill temporary positions as secretaries word processors desktop publishers data entry operators general clerical workers receptionists and light industrial laborers petitioner also assists clients in finding a chain of temporary jobs so that a client will have employment year-round petitioner encourages clients to create an independent_contractor relationship with temporary employers by using a limited_liability_company to market the services of the client the act of creating a limited_liability_company might also prevent a client from being labeled as an employee of petitioner these activities are indistinguishable from the activities of a for- profit temporary service agency the only real difference between petitioner and a for-profit temporary service agency is that petitioner does not charge local businesses the standard markup that such agencies routinely collect for services however this court has held in analogous circumstances that furnishing services to local businesses at cost does not establish that an activity is charitable see 70_tc_352 in b s w group a taxpayer’s sole activity was offering consulting services at cost to nonprofit limited resource organizations engaged in various rural-related activities some but not all of the clients of the taxpayer were other exempt_organizations services of the taxpayer consisted of obtaining individuals to perform research projects for the clients the individuals that were engaged received fees for their services this court held that the taxpayer did not operate exclusively for charitable purposes as required by sec_501 because its primary purpose was commercial rather than educational charitable or scientific see b s w group inc v commissioner supra the activities of petitioner similarly constitute the conduct of a temporary service agency which is essentially a commercial venture petitioner’s own services or the services of its clients are in direct competition with for-profit businesses in the temporary service field petitioner is indistinguishable from the corporation in b s w group furthermore petitioner does not gualify as a sec_501 exempt_organization because it benefits the private interests of its founder fondel and of the llc more than incidentally petitioner submitted documents in the administrative record that state first in petitioner paid dollar_figure for an apartment that serves as the office of petitioner and of the llc and as the personal_residence of fondel second any income of petitioner remaining after the expenses of petitioner and of the llc are paid passes to fondel and third fondel uses petitioner to market his own services as a temporary service worker these nonexempt practices prevent petitioner from qualifying as a sec_501 exempt_organization see 326_us_279 petitioner attempted to retract these statements after the commissioner determined that these items would preclude petitioner from qualifying as a sec_501 organization however we review the administrative record in its entirety citing the 13th and 14th amendments to the constitution petitioner argues that respondent in violation of petitioner’s equal protection rights denied its application_for tax-exempt status because the sole founder director and officer of petitioner is a black male besides petitioner’s uncorroborated and inflammatory accusations the record is void of any suggestion that petitioner’s application_for tax-exempt status was denied because petitioner’s sole founder director and officer is a black male instead based on our above analysis we hold that the commissioner’s denial was correct and based on a determination that petitioner is not operated exclusively for exempt purposes under sec_501 for the reasons stated we conclude that petitioner is not operated as a sec_501 organization we have considered the remaining arguments of petitioner and they either are irrelevant or otherwise lack merit decision will be entered upholding respondent’s determination


t c summary opinion united_states tax_court grant a mcdonald petitioner v commissioner of internal revenue respondent docket no 583-09s filed date grant a mcdonald pro_se rebekah myers and david w sorenson for respondent gerber 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 decision to be entered is not reviewable by any 1unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure other court and this opinion shall not be treated as precedent for any other case respondent determined income_tax deficiencies and sec_6663 fraud penalties for petitioner’s and tax years in the alternative respondent determined that if petitioner is not subject_to the fraud penalties he is liable for accuracy- related penalties under sec_6662 petitioner did not appear at trial and respondent moved for dismissal for lack of prosecution and the court was disposed to grant the motion as it related to the income_tax deficiencies with respect to the fraud penalties respondent presented evidence in support of his burden to show that petitioner filed fraudulent_returns we consider here whether respondent has presented clear_and_convincing evidence of fraud for petitioner’s and tax years and or whether petitioner is subject_to the accuracy- related penalties background petitioner resided in utah at the time his petition was filed on schedule a itemized_deductions of his form_1040 u s individual_income_tax_return petitioner claimed a dollar_figure casualty_loss in connection with residential real_estate petitioner reported that a casualty had reduced the dollar_figure value of his residence to dollar_figure the dollar_figure reported casualty was reduced to dollar_figure on account of various limitations placed upon an individual’s casualty_loss claims petitioner’s dollar_figure casualty_loss reduced his dollar_figure reported income to an extent that his tax_liability was reduced to dollar_figure thereby enabling him to obtain an approximately dollar_figure refund of the dollar_figure that was withheld from his wage income during petitioner and his wife were separated and his wife was living in their residence without petitioner petitioner’s tax_return was audited and respondent’s revenue_agent examined the claimed casualty_loss petitioner explained that during his wife had dug up the basement in support of the casualty_loss claim petitioner presented invoices for repairs canceled checks insurance statements and two police reports the invoice in the total amount of dollar_figure reflected repair and replacement of the basement cement foundation outdoor deck floors drapes and window coverings and appliances including a garage door opener toilets and other items the company name shown on the invoice was designer real_estate designer respondent’s agent attempted to verify the existence of designer by checking the location and attempting to call the telephone number but no such enterprise was at the designated location and the telephone number was not in service respondent’s agent also considered the police reports petitioner provided and discovered that one of them reflected that the basement floor had been broken apart by petitioner’s wife and her friends the other police report reflected that petitioner had reported that some of the doors were unlocked and that some furniture or belongings had been stolen only the basement floor damage however was included as part of petitioner’s casualty_loss claim for federal tax purposes respondent’s agent asked petitioner to substantiate the payment of the dollar_figure to designer and petitioner provided respondent four checks to designer dated in early and totaling dollar_figure respondent’s agent noted that although the checks were dated in early they were not cashed until july and date the checks were cashed by petitioner’s nephew and when respondent’s agent asked petitioner about the delay in cashing the checks petitioner admitted that the checks were backdated in order to show payment to designer that designer was actually his nephew and that the arrangement between him and his nephew was a loan to finance the home repairs and improvements respondent’s agent checked petitioner’s nephew’s tax returns to determine whether he had reported any income regarding designer and the nephew had not reported any such income respondent’s agent checked petitioner’s bank records and determined that the issuance and cashing of the four checks totaling dollar_figure all occurred after respondent’s examination of petitioner’s tax_return had begun the agent also determined that shortly after petitioner’s nephew cashed the checks the same total dollar_figure reappeared in petitioner’s bank account petitioner related other versions of the payment for the alleged repairs or improvements but offered no proof in support of his allegations the agent also became aware that petitioner had filed for bankruptcy in and the bankruptcy filing did not list designer as a creditor petitioner’s income_tax return was also examined regarding his contributions and business_expenses the agent allowed a portion of the contributions and disallowed the remainder because petitioner was either unable to substantiate the value of contributed assets or failed to meet the recordkeeping requirements on petitioner’s schedule c profit or loss from business he reported dollar_figure of income and dollar_figure of expenses and claimed a dollar_figure loss from his business petitioner described his business as handyman service but gave varying explanations to the agent as to the type of work actually performed the items claimed on petitioner’s schedule c included contract labor depreciation employee_benefits programs and travel meals and entertainment the largest deduction was dollar_figure for employee_benefits petitioner was unable to substantiate adequately any of the claimed schedule c deductions and respondent’s agent disallowed the entire dollar_figure claimed although he did not change the reported income of dollar_figure petitioner provided oral explanations of the deductions claimed but did not provide substantiation or evidence sufficient to satisfy the agent that any amount was deductible discussion the court has already upheld the and income_tax deficiencies because of petitioner’s failure to prosecute the only question remaining is whether petitioner is liable for sec_6663 fraud penalties and or sec_6662 accuracy- related penalties with respect to the adjustments sec_6663 provides for a 75-percent penalty for any portion of an underpayment attributable to fraud fraud is defined as an intentional wrongdoing designed to evade tax believed to be owing 92_tc_661 fraudulent intent is defined as ‘actual intentional wrongdoing and the intent required is the specific purpose to evade a tax believed to be owing ’ 67_tc_143 quoting 118_f2d_308 5th cir revg 40_bta_424 if any portion of the underpayment is attributable to fraud the entire underpayment will be treated as attributable to fraud unless the taxpayer establishes by a preponderance_of_the_evidence that part of the underpayment is not due to fraud sec_6663 respondent has the burden of proving by clear_and_convincing evidence that an underpayment exists for each of the years in issue and that some portion of the underpayment is due to fraud see sec_7454 rule b fraud is never presumed but must be established by independent evidence that establishes fraudulent intent 55_tc_85 the following indicia have been developed by the courts as badges_of_fraud from which fraudulent intent can be inferred understating income maintaining inadequate records engaging in a pattern of behavior that indicates an intent to mislead concealing assets providing implausible or inconsistent explanations of behavior filing false documents and failing to provide documents to the commissioner during examination 796_f2d_303 9th cir affg tcmemo_1984_601 cooley v commissioner tcmemo_2004_49 although no single factor is necessarily sufficient to establish fraud a combination of several of these factors may be persuasive evidence of fraud see bradford v commissioner supra pincite with those principles in mind we first consider petitioner’s tax_year and his claimed casualty_loss deduction petitioner claimed a dollar_figure casualty_loss that reduced dollar_figure in income to such an extent that his tax_liability was reduced to dollar_figure thereby enabling petitioner to obtain an approximately dollar_figure refund of the dollar_figure that was withheld from his wage income respondent has shown that the only damage to petitioner’s home was to the basement foundation and was intentionally caused by his wife other than repairs for that damage all of the alleged repairs to petitioner’s home appear to be renovations or improvements sec_165 permits deductions for losses not_compensated_for_by_insurance_or_otherwise sec_165 limits the losses of individuals to those incurred_in_a_trade_or_business or any transaction entered into for profit or those arising from fire storm shipwreck or other_casualty or from theft to deduct a loss as a casualty petitioner must have incurred damage by or as a proximate result of a fire storm shipwreck or other_casualty and he must establish the amount of the loss resulting from the casualty as distinguished from other causes a casualty has been defined as the total or partial destruction of property resulting from an identifiable_event of a sudden or unexpected nature 54_f2d_537 2d cir affg 18_bta_674 56_tc_248 3_tc_1 respondent has shown that petitioner did not sustain a casualty_loss and the only damage to petitioner’s home was intentionally caused by a resident owner more significantly respondent has shown that the evidence petitioner offered in support of his claimed casualty_loss deduction was fabricated after the fact and wholly false and fraudulent it is clear that petitioner falsely claimed the dollar_figure deduction on his return moreover petitioner continued his pattern of fraud and deceit by submitting backdated fabricated and false documentation of home repair respondent has met the standard of showing by clear_and_convincing evidence that petitioner intentionally filed a false return for we accordingly hold that petitioner is liable for the sec_6663 fraud_penalty on the entire underpayment for his tax_year with respect to the tax_year respondent disallowed some of petitioner’s contribution deductions for lack of complete substantiation or failure to meet the technical requirements for deduction respondent also disallowed all of petitioner’s claimed schedule c business deductions of dollar_figure but did not disturb the dollar_figure of income petitioner reported on the schedule c by accepting the income respondent accepts that petitioner did have a business and or business income the circumstances regarding the tax_year are different from those for in that respondent has not shown for that petitioner intentionally and knowingly attempted to evade tax in addition respondent’s adjustments are more technical and more in line with a routine disallowance for lack of substantiation or for failure to meet legal requirements for there is no shown pattern of deception as there was for and no showing that petitioner intentionally attempted to evade the tax owing accordingly we hold that respondent has not shown that petitioner is liable for the sec_6663 penalty for respondent in the alternative determined that petitioner was liable for the sec_6662 accuracy-related_penalty for to sustain that penalty respondent has the burden of production see sec_7491 there is no question that respondent has met the burden of production with respect to the accuracy-related_penalty for respondent met that burden by evidence showing that petitioner failed to maintain adequate_records and or to substantiate the disallowed contribution and business deductions claimed on his tax_return under the circumstances of this case where petitioner failed to come forward and show reasonable_cause for the underpayment petitioner is liable for the sec_6662 accuracy-related_penalty for the tax_year to reflect the foregoing an appropriate order of dismissal and decision will be entered


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 b01 plr-122156-09 date date legend x d country dear -------------- ---------------------------------------------------- ---------------------- -------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a partnership for federal tax purposes facts according to the information submitted x was formed on d under the laws of country x intended to be treated as a partnership for federal tax purposes effective d however x inadvertently failed to timely file form_8832 entity classification election to be treated as a partnership for federal tax purposes law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership plr-122156-09 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with two or more members having limited_liability may elect to be treated as a partnership pursuant to the rules of sec_301 c sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election to be treated as a partnership for federal tax purposes effective d x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-122156-09 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 curt g wilson curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------- -------------------------------------------- -------------------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------ id no ----------------- telephone number --------------------- refer reply to cc psi b01 plr-102133-09 date date legend x state d ------------------------ ----------------------- ------------- ---------------------- dear --------------- this letter responds to your letter dated date and related correspondence written on behalf of x requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file an entity classification election facts the information submitted states that x is a limited_liability_company formed under the laws of state on d x intended to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d the election however was not timely filed law and analysis plr-102133-09 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a domestic eligible_entity elects otherwise the entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election with the appropriate service_center under sec_301 c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-102133-09 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code 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 sincerely curt g wilson curt g wilson associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date date legend b county c county d county e county f business x scholarship y university z city state dear we have considered your request for advance approval of your grant-making program under sec_4945 of the internal_revenue_code dated date our records indicate that you are recognized as exempt from federal_income_tax under sec_501 of the code and that you are classified as a private_foundation as defined in sec_509 your letter indicates that you will operate a grant-making program called x the purpose of x is to provide financial assistance to needy students who want to improve the quality of their lives through the pursuit of education you will partner with y provide both merit and financial based scholarships y is a university located in z academic scholarships are based solely on merit academic scholarships are awarded to first-time freshman at y who have achieved a minimum act composite and a dollar_figure cumulative gpa academic scholarships are awarded for a four year period and may be renewed as long as the recipient maintains a cumulative gpa and complete sec_30 semester hours per academic year need based scholarships are based on an applicants financial need financial need is determined by federal guidelines using an expected family contribution an applicant with an expected family contribution no greater than dollar_figure is considered needy additionally candidates must be residents of b c d or e students are encouraged to complete a scholarship application the application process requires the applicant to submit a resume essay transcript of academic fafsa fsa and completion of the free application_for federal student aid the grant award process will include student interviews student applications verification of course and grade point average personal essays and other civic and extracurricular activities to evaluate and record the qualifications of potential grantees you anticipate approximately and applicants in your first three years respectively you plan to award at least four scholarships in the first and second years and at least eight the third year a selection committee comprised of nine locally based individuals is responsible for selecting the recipients of your scholarships this committee includes your members as well as the dean of enrollment management assistant director of admissions and admission recruiters at y your selection committee insures non-biased decisions through the commitment to your original trust to make financial assistance available to needy and merit based candidates committee members have served in the local communities and have a connection with y the committee will leverage its varied gifts resources and diversity along with collaboration with y’s scholarship foundation committee to insure non-biased decisions are made no relatives of members of your selection committee or of your officers directors or substantial contributors are eligible for awards made under your program after applications are reviewed and recipients have been selected each recipient is mailed a scholarship offer the offer outlines the scholarship guidelines and y’s scholarship policy it also requires the student to accept or decline the scholarship offer once the scholarship acceptance has been received all scholarship awards are managed through y’s database which allows for yearly monitoring of eligibility should you learn that the scholarship recipient has used funds for purposes other than the pursuit of stated educational_purposes the file will be noted and all awards will be cancelled should you receive a notice that the scholarship recipient has decided to exit the program the award will be cancelled you will maintain student identification records at the office of f a local accounting service records will contain the amount and purpose of each grant and other follow-up data obtained in administering grants you will organize and conduct periodic process and activity reviews involving your trustees and the director of grants and scholarships at y grants will be assigned to y as agent to ensure payments are considered they are paid to individuals and that they are designated for educational travel study or other similar purposes by such individuals this process will include the review of a candidate’s academic grade reports financial needs and personal essays sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 as in effect on the day before the date of the enactment of the tax_reform_act_of_1986 and is to be used for study at an educational_organization described in sec_170 the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i its grant procedure includes an objective and nondiscriminatory selection process ii such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to providing objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are ‘scholarship or fellowship’ grants within the meaning of sec_117 of the code and are excludable from the gross_income of the recipients subject_to the limitations provided in sec_117 of the code including to the extent that such grants are used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely yours lois g lerner director exempt_organizations enclosures notice redacted letter


internal_revenue_service number release date index number ------------------------------- ------------------------------------------------------------ --------------------- ------------------------------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ----------------- telephone number --------------------- refer reply to cc psi b01 plr-118404-11 date date legend legend x ----------------------------------------------------------- ---------------------------------- state date year ------------- -------------------------- ------- dear --------------- this responds to the letter dated date and related correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_754 of the internal_revenue_code code facts the information submitted states that x was a limited_partnership formed under the laws of state x intended to file an election under sec_754 with its return for its taxable_year ended on date due to inadvertence the election was not filed x represents that it has filed returns for its taxable_year ended on date and subsequent years consistent with the election further x represents that it has acted plr-118404-11 reasonably and in good_faith that granting relief will not prejudice the interests of the government and that it is not using hindsight in making the election law and analysis sec_754 provides that a partnership may elect to adjust the basis of partnership property when there is a distribution_of_property or a transfer of a partnership_interest an election under sec_754 applies with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership must be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions for filing the return for such taxable_year under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely upon the facts 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 sixty days from the date of this letter to make a sec_754 election for year the election should be made in a written plr-118404-11 statement filed with the applicable service_center for association with x’s return a copy of this letter should be attached to the statement filed except as specifically ruled upon above no opinion is expressed or implied concerning the tax consequences of any facts discussed or referenced in this letter this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office copies of this letter_ruling will be sent to your authorized representatives sincerely associate chief_counsel passthroughs special industries david r haglund by david r haglund chief branch office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purpose-s