internal_revenue_service national_office technical_advice_memorandum number release date third party contact index no control no none tam-154155-02 cc psi b08 director date taxpayer name taxpayer address taxpayer identification no quarter involved date of conference legend taxpayer x issues is x a dump truck excepted from the definition of a highway vehicle under sec_48_4061_a_-1 of the manufacturers and retailers excise_tax regulations the offhighway vehicle exception so that taxpayer is not liable for the tax imposed by sec_4051 of the internal_revenue_code on its sale of x whether taxpayer is not liable for tax if at the time x was sold the purchaser certified to taxpayer that x was purchased for off-road use if the irs rules adversely to taxpayer on issues and will the irs grant taxpayer’s request to apply this technical_advice_memorandum on a nonretroactive basis under sec_7805 conclusions x is not excepted from the definition of a highway vehicle under the offhighway vehicle exception therefore taxpayer is liable for the tax imposed by sec_4051 on its sale of x taxpayer is liable for tax even if the purchaser certified that the truck was purchased for off-road use taxpayer’s request to apply this technical_advice_memorandum on a nonretroactive basis under sec_7805 is denied facts taxpayer is a retail seller of heavy trucks including x x has a standard highway chassis and body it is commonly purchased for use in transporting coal from a mine site to a tipple the dump body of x i sec_104 inches wide the dump body also includes wheel flares that increase the total width of the box to inches in the course of its business taxpayer sold several xs to purchasers but did not pay excise_tax with respect to these sales because the purchasers certified in documents provided to taxpayer that the chassis referenced below was purchased for use as an off highway coal hauler and that this vehicle is federal excise_tax exempt the purchasers did not register the xs for highway use law and analysis sec_4051 imposes on the first_retail_sale of certain enumerated articles including in each case parts or accessories sold on or in connection therewith a tax equal to percent of the article's sale price included among those articles are truck chassis and bodies sec_145 a -1 a of the temporary excise_tax regulations under the highway revenue act of pub l provides that a chassis or body is taxable only if it is sold for use as a component part of a highway vehicle as defined in sec_48_4061_a_-1 sec_48_4061_a_-1 defines a highway vehicle as any self-propelled vehicle or any trailer or semitrailer designed to perform a function of transporting a load over public highways whether or not also designed to perform other functions but does not include a vehicle described in sec_48_4061_a_-1 the term public highway includes any road in the united_states that is not a private roadway examples of vehicles that are designed to perform a function of transporting a load over the public highways are highway-type trucks truck tractors trailers and semi-trailers sec_48_4061_a_-1 provides an exception from the definition of a highway vehicle for certain vehicles specially designed for offhighway transportation this exception provides that a vehicle is not a highway vehicle if it meets two tests a it is specially designed for the primary function of transporting a particular type of load other than over the public highway in connection with construction manufacturing processing farming mining drilling timbering or an operation similar to any of the foregoing enumerated operations the special design test and b if by reason of such special design the use of the vehicle to transport such load over the public highways is substantially limited or substantially impaired the substantial impairment test in determining whether the use is substantially limited or impaired account may be taken of whether the vehicle may be driven at regular highway speeds requires a special permit for highway use is overweight overheight or overwidth for regular use and any other relevant considerations sec_48_4061_a_-1 provides the general_rule that the sale of a chassis or body is taxable if the chassis or body is in any sense reasonably suitable for use as a component part of a highway vehicle sec_48_4061_a_-1 provides that with respect to the sale of a chassis or body not including the sale of a completed vehicle described in sec_48_4061_a_-1 emphasis supplied which would otherwise be treated under sec_48_4061_a_-1 as a sale of a chassis or body enumerated in sec_48_4061_a_-1 the tax imposed under sec_4061 shall not apply to the sale if the chassis or body is actually sold for use or for resale for use as a component part of a vehicle that is not a highway vehicle within the meaning of sec_48_4061_a_-1 paragraph sec_48_4061_a_-1 iii and iv provide certain procedural requirements with which the manufacturer or reseller must comply in order to sell tax free certain chassis and bodies not completed vehicles revrul_70_350 1970_2_cb_262 holds that tax applies to the sale of a heavy- duty truck chassis irrespective of its width weight construction or the extent to which it may travel other than over the highway the fact that a chassis is designed to withstand rugged use when transporting property over rough terrain does not negate the fact that the chassis is also designed to transport property over the highway the ruling reasons that the paramount consideration in determining whether a vehicle is a highway vehicle is whether the vehicle is designed for the transportation of persons or property over the highway revrul_79_296 1979_2_cb_370 holds that tax applies to the sale of truck- tractors and low-bed semitrailers that are used in combination to transport military equipment on and off the highway and that are oversize and require special permits and or escort vehicles on most state highways the truck-tractors are eight-by-eight with a ton capacity 120-inch width and maximum speed of miles per hour with a heavy load the low-bed semitrailers have four axles and a ton capacity and are inches wide the ruling holds that while the vehicles have characteristics that impair their use on the highway in that they are oversize and require special permits those characteristics are necessary in order to enable the vehicles to carry their intended load and accomplish their highway transportation function thus the vehicles are not specially designed for offhighway transportation revrul_81_252 1981_2_cb_209 holds that tax applies to the sale of a dual- use vehicle designed to transport cargo both off-road and in over-the-highway operations because of its special design the vehicle's on-highway cargo capacity is percent less than the cargo capacity of a conventional highway-type cargo carrier however this special design does not substantially limit the vehicle's ability to transport a load over public highways to be excluded from the definition of a highway vehicle by the offhighway vehicle exception a vehicle must meet both the sec_48_4061_a_-1 special design test and the sec_48_4061_a_-1 substantial impairment test as indicated in the holdings of these revenue rulings no single characteristic such as width automatically excludes a vehicle from the definition of a highway vehicle under the offhighway vehicle exception x does not meet the offhighway vehicle exception under sec_48_4061_a_-1 because it does not meet the special design test x is designed for the primary function of transporting a particular load over the highway from the mine to the tipple x needs to meet the special design test before the substantial impairment test is relevant however even if x did meet the special design test x does not meet the substantial impairment test the only evidence submitted with respect to either test is that the width of x is slightly larger than inches thus requiring a special permit for highway use this evidence does not support a finding of substantial impairment or limitation of the use of the vehicle to transport loads over the public highways see revrul_79_296 the classification of a taxable highway vehicle is based on the design of the vehicle and not the use of the vehicle see revrul_70_350 that is whether a vehicle’s purchaser registers that vehicle for highway use or actually uses that vehicle on the highways is not determinative of whether the vehicle is designed for highway use taxpayer’s liability for tax is not affected by the purported exemption certificates concerning the use of x under sec_48_4061_a_-1 either a chassis or a body may be sold tax free for use as a component in the production of a nonhighway vehicle neither the statute nor applicable regulations set forth an exception from the tax imposed by sec_4051 based on a certificate by the purchaser related to the use of a completed vehicle as is the case here consideration of sec_7805 relief section sec_7805 provides that the secretary may prescribe the extent if any to which any ruling shall be applied without retroactive effect taxpayer requests favorable sec_7805 treatment but offers no basis for limiting retroactive application taxpayer merely indicates that it does not have sufficient records to determine the tax due and obtaining the necessary records would be very expensive the holding in a technical_advice_memorandum ordinarily is applied retroactively see section dollar_figure of revproc_2003_2 2003_1_irb_76 relief under sec_7805 usually is granted only if a taxpayer relied to its detriment on a published position of the irs or on a letter_ruling or technical_advice_memorandum issued with respect to that taxpayer there is no prior technical_advice_memorandum or letter_ruling to taxpayer taxpayer could have requested a ruling as to the proper classification of x but failed to do so rather taxpayer relied on its own interpretation of the law a taxpayer’s erroneous interpretation of the law is not a basis for relief under sec_7805 caveats a copy of this technical_advice_memorandum is to be given to the taxpayer sec_6110 provides that it shall not be used or cited as precedent in accordance with sec_6110 names addresses and other identifying numbers have been deleted


department of the treasury internal_revenue_service p o box i rs cincinnati oh release number release date uil code date employer d number contact person id number contact telephone number form you must file tax years dear this letter is our final_determination that you don't qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final because you don’t qualify as a tax-exempt_organization under sec_501 of the code donors can't deduct contributions to you under sec_170 of the code you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we'll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action we'll also notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed determination_letter under sec_6104 of the code you should contact your state officials if you have questions about how this determination will affect your state responsibilities and requirements letter rev catalog number 47632s if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 sincerely director exempt_organizations enclosure notice redacted letter proposed adverse determination under sec_501 redacted letter final adverse determination under sec_501 - no protest letter rev catalog number 47632s department of the treasury internal_revenue_service washington d c contact person identification_number contact number fax number employer_identification_number vil tax_exempt_and_government_entities_division date legend b individual c state d bank e city f date g dollar amount dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below this supersedes our previous letter dated date issue sec_1 do your operations fail to further a charitable purpose precluding you from exemption under sec_501 of the code yes for the reasons described below facts you were previously granted exemption under sec_501 of the code your exemption was revoked due to non-filing of form_990 for three consecutive years accordingly you submitted another form_1023 reapplying for exemption despite having been in existence for over ten years you have raised little income and have conducted none of the housing activities as described below you incorporated on date f in the state of c your articles of incorporation state you were formed to develop low_income_housing for charitable purposes b is your founder and president as well as your only board member you indicated you have not adopted bylaws you will provide low-income_housing or housing for the elderly or handicapped housing will be affordable to a significant segment of the elderly or handicapped persons in the community as well as low-income residents you will impose restrictions to make sure that your housing remains affordable to low-income residents candidates selected for your housing program will show a real need for affordable housing admissions will not be limited to persons of a particular age or handicap you will select those clients first that have exhausted all housing options you do not have any copies of admission paperwork because the project has not been developed on your vacant land you did not indicate or define how need was being determined for candidates methods or criteria you would use to evaluate candidates or information that would be asked of candidates to validate exhausting their personal options you submitted a copy of a proposal to the children’s court in your locality dated almost four years prior to the submission of your current form1023 in this proposal you stated your priority is to assist parents who are trying to reunite with their children but have limited resources to meet the court’s orders this proposal states you would like to fill this need by providing parents with housing employment individual counseling day care and funding to pay for other necessary services that they need to complete the court orders for family reunification with their children although this document is dated several years ago you did not conduct any of the activities described therein in the interim you said you would create other types of housing for rental at market_value as allowed by the city where the housing will be located you said once you receive grant funding you could offer of your units for low-income affordable housing you believe that with government support we can continue to assist individuals and families to achieve the american dream of becoming homeowners you also would like to develop low-income affordable housing for veterans for individuals and families that need it the most as well as individuals and families who have dependency court cases looking to regain custody of their children you believe these programs will decrease the number of renters in your community as well as provide the stepping-stone to homeownership you want to conduct a housing program to assist individuals and families regain custody of their children as well as obtain their own housing when asked to describe all of your activities since your inception you simply indicated that you have worked with the congressional office of the state of c to develop low- income afford able sic housing as well the public and private sectors to assist those in need of housing you have worked with d bank to develop low-income_housing as well as the city of e you did not elaborate on what the development included you will not charge an entrance fee or monthly fee charges will be subject_to one’s ability to pay you provided an example of an individual that can only afford a monthly payment of dollar_figure you said the renter could pay it in four installments of dollar_figure per week when asked to compare your charges with similar facilities in your area you said you have lower or no rates because it will still sic clients into program that can not afford to pay you do not have any arrangements with government agencies to absorb the cost of residents who may become unable to pay for your services because you are not a profit making organization and the agencies have very limited funding available to absorb your costs should someone not be able to pay you are committed to helping renters who may lose their ability to pay by not evicting them you said you have reserves for future expenditures but your balance_sheet showed a balance of only g dollars in cash which was your only asset listed you purchased a piece of vacant land approximately eight years ago for a minimal amount of money you intend to build an apartment building on this land your proposed apartment building is a two-story residence consisting of eight bedrooms that can hold two individuals per room totaling sixteen renters local zoning laws prevent any larger development as of now the land is still vacant you will have a social worker at the facility to assist residents with their physical emotional recreational social religious and similar needs as you want your elderly renters to have a very good quality of life you will provide these services at a reasonable cost you plan to begin your low-income_housing project within the next six months when asked how you will serve charitable purposes by complying with the safe_harbor provisions of revproc_96_32 you indicated you disagree with the revenue_procedure you have not made any provisions for who will occupy these units with regard to meeting safe_harbor guidelines as certain cities where you would like to provide housing may not agree to set_aside certain percentages for those of low and or very low income you said the cities may be incline d to setting aside for low- income affordable housing the financial data you provided includes a minimal amount of revenue received for the last years all of your expenditures were fundraising expenses law sec_1_501_c_3_-1 of the regulations states that 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 sec_1_501_c_3_-1 of the regulations provides an organization does not qualify for exemption if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1 d of the regulations defines the word charitable as used in sec_501 of the code as including the relief of the poor and distressed revrul_67_138 1967_1_cb_129 holds that the provision of housing for low-income persons accomplishes charitable and educational_purposes by relieving the poor and distressed an organization created to provide instruction and guidance to low-income families in need of adequate housing and interested in building their own homes may be exempt under sec_501 the organization's activities include conducting a training course relative to various aspects of house building and homeownership coordinating and supervising joint construction endeavors purchasing building sites for resale at cost and lending aid in obtaining home construction loans no charge is made for any of these services revrul_70_585 1970_2_cb_115 describes four scenarios for an organization providing housing - an organization formed to aid low income families to eliminate prejudice and discrimination to combat community deterioration and to to provide moderate income families with housing in a particular community all but scenario four were held to be exempt where an organization is formed for charitable purposes and accomplishes its charitable purposes through a program of providing housing for low and it is entitled to exemption under sec_501 of the code revproc_96_32 1996_1_cb_717 sets forth a safe_harbor under which organizations that provide low-income_housing are considered charitable as relieving the poor and distressed and a facts_and_circumstances_test that applies in determining whether organizations that fall outside the safe_harbor relieve the poor and distressed the safe_harbor requires that certain percentages of the units be occupied by residents that meet certain low-income standards and that the housing is affordable to the charitable beneficiaries in the case of rental housing this requirement is ordinarily satisfied by the adoption of a rental policy that complies with government-imposed rental restrictions or otherwise provides for the limitation of the tenant's portion of the rent charged to ensure that the housing is affordable to low-income and very low-income residents relevant facts and circumstances under the facts_and_circumstances_test may include but are not limited to the following a substantially greater percentage of residents than required by the safe_harbor with incomes up to percent of the area's very low-income limit limited degree of deviation from the safe_harbor percentages limitation of a resident's portion of rent or mortgage payment to ensure that the housing is affordable to low-income and very low-income residents participation in a government housing program designed to provide affordable housing operation through a community-based board_of directors particularly if the selection process demonstrates that community groups have input into the organization's operations the provision of additional social services affordable to the poor residents relationship with an existing 501_c_3_organization active in low-income_housing for at least five years if the existing organization demonstrates control acceptance of residents who when considered individually have unusual burdens such as extremely high medical costs which cause them to be in a condition similar to persons within the qualifying_income limits in spite of their higher incomes participation in a homeownership program designed to provide homeownership opportunities for families that cannot otherwise afford to purchase safe and decent housing existence of affordability covenants or restrictions running with the property revproc_2012_9 superseding revproc_90_27 1990_1_cb_514 sec_4 provides that the internal_revenue_service will recognize the tax-exempt status of an organization only if its application and supporting documents establish that it meets the particular requirements of the section under which exemption from federal_income_tax is claimed section dollar_figure states that a determination_letter or ruling on exempt status is issued based solely upon the facts and representations contained in the administrative record it further states the applicant is responsible for the accuracy of any factual representations contained in the application any oral representation of additional facts or modification of facts as represented or alleged in the application must be reduced to writing over the signature of an officer or director of the taxpayer under a penalties of perjury statement the failure to disclose a material fact or misrepresentation of a material fact on the application may adversely affect the reliance that would otherwise be obtained through issuance by the service of a favorable determination_letter or ruling section dollar_figure states that the organization must fully describe all of the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures in 326_us_279 the court held that an organization was not organized and operated exclusively for charitable purposes the court reasoned that the presence of a single nonexempt purpose if substantial in nature would destroy the exemption regardless of the number or importance of truly exempt purposes in 70_tc_352 the court found that a corporation formed to provide consulting services did not satisfy the operational_test under sec_501 of the code because its activities constituted the conduct_of_a_trade_or_business that is ordinarily carried on by commercial ventures organized for profit its primary purpose was not charitable educational or scientific but rather commercial in easter house v united_states cl_ct 476_ affd 846_f2d_78 fed cir cert_denied 488_us_907 109_sct_257 102_led_246 the court found an organization that operated an adoption agency was not exempt under sec_501 of the code because a substantial purpose of the agency was a nonexempt commercial purpose the court concluded that its primary activity was placing children for adoption in a manner indistinguishable from that of a commercial adoption agency the court found that the health-related services were merely incidental to the organization's operation of an adoption service which in and of itself did not serve an exempt_purpose the organization's sole source of support was the fees it charged adoptive parents rather than contributions from the public the court also found that the organization competed with for-profit adoption agencies engaged in substantial advertising and accumulated substantial profits accordingly the court found that the business_purpose and not the advancement of educational and charitable activities purpose of plaintiffs adoption service is its primary goal and held that the organization was not operated exclusively for purposes described in sec_501 application of law you are not operated exclusively for one or more of the purposes specified in section c -1 a of the regulations as your purposes are not exclusively charitable you are planning a housing program that will provide housing at fair market rates and that will not provide services to a charitable_class by charging market rents for a large percentage of your housing more than an insubstantial part of your activities are in furtherance of a nonexempt commercial purpose in contravention of sec_1_501_c_3_-1 of the regulations therefore you are not operated for an exempt_purpose furthermore your activities are not charitable as defined in sec_1 d of the regulations as only an incidental amount of your activities are directed towards relieving the poor and distressed your low-income_housing program will not accomplish an educational purpose as described in revrul_67_138 as you are not conducting any types of home buyer or builder training or directly assisting low-income individuals in obtaining outside housing instead you will be building and then renting more than an insubstantial amount of your units at market_value further you have described no activities that will meet the situations described in revrul_70_585 you intend on operating a housing program that while serving some low-income and needy individuals will also provide housing to individuals at market rates your program will not exclusively serve the poor or distressed you do not meet the safe_harbor provisions provided by revproc_96_32 which allow exempt_organizations to provide a certain amount of housing for income groups other than low income in order to meet the safe_harbor provisions low and very low-income tenants must occupy certain percentages of units you indicated you do not agree with the rev_proc and will not adhere to any of the requirements therein as required by revproc_2012_9 you have not established that you are organized and operated exclusively for exempt purposes and not for the private benefit of your creators you have one individual controlling your organization you have also continued to provide very few details regarding how your housing program will be operated as required by section dollar_figure of this rev_proc you must fully describe all of the activities in which you expect to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities you have failed to provide adequate details to allow us to determine that any portion of your housing activities would qualify for exemption however the information you did provide indicates you do not qualify for exemption under sec_501 of the code your housing program is operated for a nonexempt purpose which precludes exemption as seen in better business bureau of washington d c v u s other than the small percentage of low-income_housing units you plan on renting units out for market_value you are similar to the organization described above in b s w group inc which did not satisfy the operational_test under sec_501 because its activities constituted the conduct_of_a_trade_or_business that is ordinarily carried on by commercial ventures organized for profit as in easter house v united_states you are operated for a business_purpose and not the advancement of educational and charitable purposes precluding you from exemption under sec_501 of the code any amount of charitable activity you have planned is incidental to the non-exempt function of providing housing at market rates applicant’s position you said you further c purposes because you will partner with the city for block grant programs and other home investment programs you believe with this kind of grant funding you could offer of our units at low-income affordable housing you believe with this kind of government support that you can assist individuals and families to achieve the american dream of becoming a homeowner service response to applicant’s position providing individuals or families with housing is not in and of itself a c activity although you assert that if you receive some government assistance you may be able to offer of your units to low-income individuals this still does not allow you to qualify for exemption as an organization described in sec_501 as you do not meet the safe_harbor provisions of revproc_96_32 protest from applicant in response to our statement regarding your lack of activities since your incorporation almost years ago you simply reiterated your relationship with a congressman and your attempt to secure funding you were not able to obtain a building or grant funding because neither was available you also contacted a councilmember in your region you did not receive any assistance from the councilmember’s office in obtaining housing funding you again stated you were able to obtain a small grant from a d but because you are a new non-profit organization to them they would like to slowly fund you over the next five to ten years you said these are the reasons you have raised little money you provided no other detail regarding your proposed housing activities your proposed activities involving the children’s court was not implemented because funding from the congressman’s office was rescinded five years ago you were not able to secure funding at the federal state or county levels of government or through any foundations you now say you have a full board it is composed of six individuals including b four of the five additional board members are b’s family members and one is a friend business_associate you say you meet because you only intend on operating a housing program that will serve low-income and needy individuals you will only exclusively serve the poor and distressed individuals and family you say you incorporated under this mission statement you asserted that you agree with revproc_96_32 you submitted a low_income_housing resolution that stated you agree that a at least of the units will be occupied by residents that qualify as low-income and b either at least of the units will be occupied by residents that also meet the very low-income limit for the area or of the units will be occupied by residents that also do not exceed of the area’s very low-income limit up to of the units may be provided at market rates to persons who have income in excess of the low-income limit poor and distressed residents will occupy each housing project and the housing will be affordable to charitable beneficiaries response to applicant’s protest you continue to fail to provide any evidence that you have done anything but attempt to fundraise and contact government officials since your inception as required by section dollar_figure of revproc_2012_9 you must fully describe all of the activities in which you expect to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities you have failed to provide any new information or details regarding your activities you also assert that you meet because you only intend on operating a housing program that will serve low-income and needy individuals and that you incorporated under this mission statement although you make this statement you have not provided any documentation to describe what you consider needy or how you define low-income although you previously stated you disagree with revproc_96_32 you now have signed the resolution stating you will comply with it you provided nothing to substantiate this change or how you will implement it you still have provided no admission criteria or similar documentation you still have not conducted any activity over the decade since you were formed conclusion based on the facts presented above we hold that you are not exclusively charitable within the meaning of sec_501 of the code providing housing at market rates for an undefined class of individuals is a nonexempt purpose further you were revoked for failure_to_file form_990 and despite proposed operations you have conducted no charitable or educational activities in over ten years accordingly we conclude you fail the operational tests and do not qualify for exemption under sec_501 you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of why you disagree your protest statement must be filed within days of the date of this letter and should include a your organization’s name address ein number and a daytime phone b number a statement that the organization wants to protest the proposed determination c acopy of this letter showing the findings that you disagree with or the date and irs office symbols from the letter d an explanation of your reasons for disagreeing including any supporting documents e the law or authority if any on which you are relying the protest statement may be signed by one of your officers or your representative we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax-exempt status the protest statement should also include the following declaration under penalties of perjury declare that have examined this protest including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete the declaration must be signed by an officer or trustee of the organization who has personal knowledge of the facts your protest will be considered incomplete without this statement if an organization’s representative signs and submits the protest a substitute declaration must be included stating that the representative prepared the protest and any accompanying documents and whether the representative personally knows or does not know that the statement of facts in the protest and any accompanying documents are true correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you in that case you must file a form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you may fax your statement using the fax number shown in the heading of this letter if you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely director exempt_organizations enclosure publication


t c memo united_states tax_court kenneth d hanks petitioner v commissioner of internal revenue respondent docket no filed date kenneth d hanks pro_se audrey m morris for respondent memorandum opinion dawson judge this case was assigned to special_trial_judge john f dean pursuant to the provisions of sec_7443a as in effect when this case commenced and rule sec_181 and sec_183 unless otherwise indicated subsequent section references are to the internal_revenue_code as in effect for tax years for which petitioner seeks abatement of interest rule references are to the tax_court rules_of_practice and the all - - procedure the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge dean special_trial_judge on date respondent issued a notice of final_determination denying petitioner's claim for the abatement of interest for tax years and petitioner challenged the determination by timely filing a petition under sec_6404 as in effect at the time the petition was filed and rule the issue for decision is whether respondent abused his discretion by failing to abate assessments of interest relating to petitioner's and tax years background the stipulation of facts and the accompanying exhibits are incorporated herein by reference petitioner resided in hutchins texas at the time his petition was filed with the court petitioner's and federal_income_tax returns were subjected to examination by the internal_revenue_service irs beginning on date his first meeting with the revenue_agent assigned to perform the examination took place on date the revenue_agent referred petitioner's case to the criminal_investigation_division cid of irs on date the referral was evaluated and accepted by cid for investigation cid worked on the case from april or may of until it recommended that petitioner be prosecuted for attempted income_tax evasion under sec_7201 for both and the recommendation was forwarded to the department of justice for consideration on date the department of justice declined to prosecute the case and in late march or early april of the case was returned to the revenue_agent for civil disposition the revenue_agent issued his first report on date after receiving additional information from petitioner or his representatives a revised revenue_agent's_report was issued on date petitioner requested consideration of his case by the appeals_division of the irs on date the appeals_division settled with petitioner on income_tax adjustments for and petitioner and an appeals_division representative signed a form 870-ad offer to waive restrictions on assessment and collection of tax_deficiency and to accept overassessment dated date on the form petitioner agreed to the assessment of federal_income_tax deficiencies of dollar_figure for and dollar_figure for as well as accuracy-related_penalties under - sec_6662 of dollar_figure and dollar_figure for the respective years on date petitioner filed his claim for interest abatement for and for the period after date the notice of full disallowance-final determination upon which this case is based was issued to petitioner by the appeals_division of irs in dallas texas on date discussion petitioner argues that sec_6404 provides that the commissioner may abate interest attributable to unreasonable error or delay and that in his case there was continuous delay after delay after delay and error after error after error it appears to the court from the record that petitioner's complaint is that it took too long to resolve his tax matters for and pursuant to sec_6404 1i ' the tax_court has the authority to review the commissioner’s denial of a taxpayer’s request for abatement of interest the court may order an abatement where the commissioner’s failure to abate interest was an abuse_of_discretion sec_6404 the taxpayer must demonstrate that the commissioner in failing to abate interest exercised his discretion arbitrarily capriciously or without ' sec_6404 was formerly designated sec_6404 g but was redesignated sec_6404 by the internal_revenue_service restructuring reform act of publaw_105_206 sec_3309 112_stat_743 --- - sound basis in law or fact woodral v commissioner 1t c sec_6404 authorizes the commissioner to abate the assessment of interest on any deficiency attributable in whole or in part to any error or delay by an officer_or_employee of the irs in performing a ministerial_act or any payment of tax described in sec_6212 to the extent that any error or delay in such payment is attributable to an officer_or_employee of the irs being erroneous or dilatory in performing a ministerial_act in sec_6404 was amended by sec_301 of the taxpayer bill of right sec_2 publaw_104_168 110_stat_1457 to permit the commissioner to abate interest with respect to an unreasonable error or delay resulting from managerial and ministerial acts this amendment applies to interest accruing with respect to deficiencies or payments for tax years beginning after date woodral v commissioner supra pincite n accordingly the amendment is not applicable to petitioner's and tax years an error or delay by an officer_or_employee of the irs is taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved sec_6404 moreover only errors or delays occurring after the irs has contacted the taxpayer in writing with respect to the deficiency or payment are taken into account id thus - - abatement of interest for the period of time between the date a taxpayer files a return and the date respondent commences an audit is not permitted under sec_6404 sims v commissioner tcmemo_1999_414 quoting h rept pincite c b vol temporary regulations interpreting sec_6404 define the term ministerial_act as a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer's case after all prereguisites to the act such as conferences and review by supervisors have taken place sec_301_6404-2t b temporary proced admin regs fed reg date a decision concerning the proper application of law either federal or state is not a ministerial_act id petitioner has not taken the position that his claim_for_abatement of interest is based on the assessment of a deficiency attributable to any error or delay by an officer_or_employee of the irs in performing a ministerial_act see sec_6404 a the court will thus consider whether an officer_or_employee of the irs committed any error or delay in performing a ministerial_act which resulted in an assessment of interest on any payment with respect to petitioner's and tax years see sec_6404 e b in a letter attached to his request for abatement and at trial petitioner's primary complaint seemed directed at the - length of the civil and criminal examination process rather than at any particular error or act of delay committed by an irs employee the mere passage of time however does not establish error or delay in performing a ministerial_act scott v commissioner tcmemo_2000_369 hawksley v commissioner tcmemo_2000_354 taking several years to complete an examination due to the use of third-party summonses made necessary by difficulties in obtaining documentation and to the commissioner's suspicion of fraud does not prove erroneous or dilatory ministerial acts by respondent banat v commissioner tcmemo_2000_141 the commissioner's decision not to proceed with the civil case during a criminal_fraud investigation and prosecution is not a ministerial_act 113_tc_206 petitioner did make an unfocused allegation that the revenue_agent failed to return to him some records obtained during the civil examination the revenue_agent however testified that most of the documents used in the examination were photocopies obtained by the use of third-party_recordkeeper summonses see sec_7609 the revenue_agent also testified that the limited number of original documents that he did obtain were returned to --- - petitioner as shown in his case activity record copies of pages of which were stipulated by the parties petitioner has failed to describe or establish any error or delay by an officer or an employee of the irs in performing a ministerial_act that gave rise to assessments of interest on either deficiencies or payments for his and taxable years the court therefore holds that respondent’s failure to abate interest was not an abuse_of_discretion the court has considered all other arguments advanced by petitioner and to the extent not discussed above has found those arguments to be irrelevant or without merit to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court franklin a ogden petitioner v commissioner of internal revenue respondent docket no 3343-o0o1l filed date franklin a ogden pro_se gerald w douglas karen baker and peter reilly for respondent memorandum opinion panuthos chief special_trial_judge this collection review case is before the court on respondent’s motion to dismiss for lack of jurisdiction as explained in detail below we shall grant respondent’s motion to dismiss ’ unless otherwise indicated section references are to sections of the internal_revenue_code as amended and rule continued background on date respondent mailed to petitioner a final notice_of_intent_to_levy and notice of your right to a hearing requesting that petitioner pay his delinquent income taxes for the taxable_year petitioner responded by filing with the internal_revenue_service office of appeals appeals_office a request for an administrative hearing by letter dated date appeals officer jose gonzales directed petitioner to contact him by date for the purpose of scheduling an administrative hearing on date appeals officer gonzales received a letter from gary arthur demott mr demott identified in the letter as petitioner’s representative stating that petitioner intended to challenge his underlying tax_liability for by letter dated date appeals officer gonzales informed petitioner that he had received a letter from mr demott that mr demott was not duly authorized to represent petitioner and that if i do not hear from you and you do not provide additional evidence or make arrangements to pay the tax for before date i will send you a determination_letter providing your judicial rights t continued references are to the tax_court rules_of_practice and procedure this case was assigned pursuant to sec_7443a on date the appeals_office issued to petitioner a notice_of_determination concerning collection actions under sec_6320 and or notice_of_determination concerning his tax_liability the determination_letter informed petitioner that he would have days to contest the matter by filing a petition with the tax_court on date petitioner filed a petition for judicial review in the u s district_court for the district of idaho assigned docket no cv00-266-n-ejl challenging the notice_of_determination on date the district_court issued an order dismissing the case for lack of jurisdiction the order stated that petitioner would have days to file a petition for review with the tax_court on date petitioner instituted a second action in the district_court by filing a complaint and request for judicial review of administrative action assigned docket no cv01-35-n-ejl again challenging the notice_of_determination on date the district_court issued an order dismissing the case for lack of jurisdiction the order again stated that petitioner would have days to file a petition for review with the tax_court on date the court received and filed a petition for lien or levy action under code sec_6320 or d q4e- challenging the notice_of_determination the petition arrived in an envelope bearing a u s postal service postmark dated date in response to the petition respondent filed a motion to dismiss for lack of jurisdiction asserting that the petition was not filed with the court within days of the district court’s order of dismissal issued date petitioner filed an objection to respondent’s motion to dismiss asserting that his petition was filed with the court within days of the district court’s order of dismissal issued date and respondent failed to conduct an administrative hearing in this case this matter was called for hearing at the court’s motions session held in washington d c counsel for respondent appeared at the hearing and offered argument in support of respondent’s motion to dismiss although no appearance was entered by or on behalf of petitioner at the hearing petitioner filed with the court a written_statement and a supplemental written_statement pursuant to rule c petitioner repeated his argument that - at the time the petition was filed petitioner resided in sagle idaho before the hearing the court summarily denied petitioner’s motion for hearing to determine real parties_in_interest the motion was replete with frivolous arguments and among other things asserted natural_person petitioner franklin a ogden therefore requests a hearing wherein respondent must declare via a sworn statement subject_to the penalty continued - his petition was timely filed and in the alternative requested that the court direct respondent to provide him an administrative hearing discussion sec_6331 provides that if any person liable to pay any_tax neglects or refuses to pay such tax within days after notice_and_demand for payment the secretary is authorized to collect such tax by levy upon the person’s property sec_6331 provides that at least days before enforcing collection by way of a levy on the person's property the secretary is obliged to provide the person with a final notice_of_intent_to_levy including notice of the administrative appeals available to the person in the internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_685 congress enacted new sec_6320 pertaining to liens and pertaining to levies to provide protections for persons in tax collection matters sec_6320 and sec_6330 generally provide that the commissioner cannot proceed with collection by way of a lien or levy action until the person has been given notice and the opportunity for an administrative review of the matter in continued of perjury under the laws of the united_states whether it is the legal fiction franklin a ogden respondent is asserting a tax_liability for the tax_year or is respondent asserting that natural_person franklin a ogden has a tax_liability for the tax_year the form of an appeals_office hearing and if dissatisfied with judicial review of the administrative determination see 115_tc_35 114_tc_176 sec_6330 prescribes the matters a person may raise at an appeals_office hearing in sum sec_6330 provides that a person may raise collection issues such as spousal defenses the appropriateness of the commissioner's intended collection action and possible alternative means of collection sec_6330 b provides that the existence and amount of the underlying tax_liability can be contested at an appeals_office hearing only if the person did not receive a notice_of_deficiency for the taxes in question or did not otherwise have an earlier opportunity to dispute the tax_liability see 114_tc_604 goza v commissioner supra where the appeals_office issues a determination_letter to the person following an administrative hearing regarding a lien or levy action sec_6320 by way of cross-reference and d provide that the person will have days following the issuance of the determination_letter to file a petition for review with the tax_court or a federal district_court see 114_tc_492 sec_6330 provides - j- sec_6330 proceeding after hearing --- judicial review of determination ---the person may within days of a determination under this section appeal such determination-- a to the tax_court and the tax_court shall have jurisdiction to hear such matter or b if the tax_court does not have jurisdiction of the underlying tax_liability to a district_court of the united_states if a court determines that the appeal was to an incorrect court a person shall have days after the court determination to file such appeal with the correct court see 115_tc_114 dismissing a petition for lack of jurisdiction where the taxpayer failed to file his initial petition for review with the federal district_court within the 30-day period we have held that the court’s jurisdiction under sec_6320 and sec_6330 depends upon the issuance of a determination_letter and the filing of a timely petition for review see 117_tc_122 offiler v commissioner supra pincite in the instant case petitioner erroneously filed his initial petition with the district_court on date the district_court issued an order dismissing the petition for lack of jurisdiction and informing petitioner that he would have days from the date of the order to file a petition with the tax_court petitioner again failed to file a petition for review --- - with this court and instead filed a second action in the district_court petitioner mailed a petition for review to this court within days after the district_court issued its order dismissing the second action for lack of jurisdiction sec_6330 provides in unambiguous terms that if a court determines that the appeal was to an incorrect court a person shall have days after the court determination to file such appeal with the correct court the 30-day period within which petitioner had to file a petition for review with the court began to run on date--the date the district_court issued its order dismissing petitioner’s initial action for lack of jurisdiction petitioner’s position that the 30-day period should be measured from the date the district_court issued its order dismissing his second action would thwart the plain language of the statute and congress’s intent that collection review proceedings be instituted within a fixed and relatively limited time in this connection we have stated on numerous occasions that the tax_court is a court of limited jurisdiction and we may exercise our jurisdiction only to the extent authorized by congress see sec_7442 88_tc_1175 85_tc_527 we have held that the statutory periods set forth in sec_6330 are jurisdictional and cannot be extended see mccune v commissioner supra pincite cf 116_tc_255 holding that the commissioner may not waive the time restrictions imposed in sec_6330 on the basis of the foregoing we hold that we lack jurisdiction inasmuch as the petition was not timely filed with the court accordingly we shall grant respondent’s motion to dismiss for lack of jurisdiction petitioner also contends that the appeals_office issued the notice_of_determination without conducting an administrative hearing in 117_tc_159 we recently held that we shall not look behind a notice_of_determination to consider whether the appeals_office conducted an administrative hearing consistent with our holding in lunsford we hold that the notice_of_determination issued to petitioner is valid we have considered petitioner’s remaining arguments and find them to be meritless to reflect the foregoing an order of dismissal for lack of jurisdiction will be entered


department of the treasury internal_revenue_service washington d c office_of_chief_counsel number release date uilc cc intl br3 postf-167121-01 internal_revenue_service national_office field_service_advice memorandum for area_counsel heavy manufacturing and transportation edison from assistant to the branch chief cc intl br3 subject election under sec_962 and the alternative_minimum_tax this chief_counsel_advice responds to your request for advice by e-mail dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend taxpayers year one year two year three amount a amount b amount c amount d amount e amount f amount g amount h amount i amount j amount k amount l postf-167121-01 issue sec_1 if a taxpayer makes a sec_962 election for the taxable_year is alternative_minimum_tax amt liability with respect to amounts included in income under sec_951 determined by combining the taxpayer’s regular_tax attributable to that income with the taxpayer’s regular_tax on its other income and comparing the result against the combined tentative_minimum_tax tmt on such amounts is amt paid pursuant to sec_962 and sec_55 with respect to amounts included in income under sec_951 allowed as a credit in subsequent years may taxpayers revoke their sec_962 elections if the method of computing the tax due under sec_962 pursuant to issue one makes the election disadvantageous to them conclusion sec_1 no when a taxpayer makes a sec_962 election for a taxable_year the determination of whether there is amt liability with respect to amounts included in income under sec_951 is made by comparing the taxpayer’s regular_tax attributable to amounts included in income under sec_951 with its tmt attributable to such amounts yes subject_to applicable limitations amt paid pursuant to sec_962 and sec_55 with respect to amounts included in income under sec_951 is creditable under sec_53 in subsequent years uncertain under sec_1_962-2 a sec_962 election may not be revoked unless a material and substantial change_in_circumstances has occur red which could not have been anticipated when the election was made we do not have sufficient facts to determine whether taxpayers would satisfy that regulatory test since they have not applied for approval to revoke their sec_962 elections for years one two and three facts taxpayers are united_states_shareholders within the meaning of sec_951 of the code in numerous controlled_foreign_corporations cfcs on their joint income_tax returns form sec_1040 for years one two and three taxpayers timely elected under sec_962 and sec_1_962-1 and sec_1_962-2 to have income includible in their gross_income under sec_951 taxed at corporate_income_tax postf-167121-01 rates under sec_11 and sec_55 as if those amounts had been received by a corporation rather than at individual income_tax rates under sec_1 and the election taxpayers attached to their form sec_1040 for years one two and three forms and forms alternative_minimum_tax - corporations taxpayers attached the following statement to the forms this form_1120 is included as a schedule and is not a stand-alone return it is included to compute tax under sec_962 for these taxpayers the attached forms showed combined inclusions of income under sec_951 with respect to taxpayers’ investments in the cfcs and sec_78 gross up amounts to reflect the deemed-paid credits allowed to taxpayers under the election sec_962 income in the following amounts year one amount a year two amount b year three amount c sec_962 income as a result of making the election taxpayers did not include the income that would have otherwise been includible in their income under sec_951 on their form sec_1040 for years one two and three the attached forms also showed on schedules j tax due for years one two and three which combined the regular corporate_income_tax plus corporate amt from forms most of the regular corporate_income_tax was offset by the allowable foreign tax_credits the following table sets forth the tmt regular_tax regular corporate_income_tax reduced by foreign tax_credits and amt amounts for those years items tmt --------------------- regular_tax -------------------- amt year one amount d -------------------- amount g ------------------- amount j year two amount e ------------------ amount h ------------------- amount k year three amount f ------------------ amount i ---------------- amount l taxpayers included on their form sec_1040 for years one two and three as tax due on their sec_962 income only the amount of the regular_tax amounts g h and i in the above chart and not the amt amounts j k and l in the above chart postf-167121-01 taxpayers attached a statement to their form sec_1040 which showed that taxpayers determined the tax due on their sec_962 income by comparing the total regular_tax on sec_962 income from the forms schedules j lines amounts g h and i in the above chart and on non- sec_962 income from form sec_1040 with the total tmt on sec_962 income from forms lines amounts d e and f in the above chart and on non- sec_962 income from forms line sec_26 the statements reflected that this method of comparing the combined tax amounts resulted in a higher regular_tax_liability for each year taxpayers did not pay any amt for years one two and three with respect to either form_6251 alternative minimum tax- individuals or form_4626 law and analysi sec_1 determination of the sec_962 tax under sec_962 of the code and sec_1_962-1 and sec_1_962-2 an individual united_states_shareholder of a cfc may elect for a taxable_year to be taxed at corporate rates under sec_11 and sec_55 on amounts included in his or her gross_income under sec_951 and to claim a foreign_tax_credit for foreign_income_taxes deemed paid with respect to such amounts under sec_902 and sec_960 those deemed paid credits would otherwise have been limited to corporate shareholders sec_11 imposes a tax on the taxable_income of a corporation sec_55 imposes an amt on all taxpayers in addition to a taxpayer's regular income_tax_liability sec_55 provides that the amt equals the excess if any of the tmt as defined in sec_55 over the regular_tax for the taxable_year regular_tax means the regular_tax_liability for the taxable_year as defined in sec_26 and as imposed by sec_11 reduced by the foreign_tax_credit allowable under sec_27 the sec_936 credit allowable under sec_27 and the puerto rico economic activity credit under sec_30a sec_55 regular_tax_liability is modified in certain other respects not relevant here 1under sec_902 and sec_960 if there is included under sec_951 in the gross_income of a domestic_corporation any amount attributable to the earnings_and_profits of a foreign_corporation at least percent of the voting_stock of which is owned by such domestic_corporation such domestic_corporation shall be deemed to have paid_or_accrued the same proportion of the foreign corporation’s post-1986_foreign_income_taxes which the amount of earnings_and_profits of such foreign_corporation for such taxable_year so included in gross_income of the_domestic_corporation bears to such foreign corporation’s post-1986_undistributed_earnings postf-167121-01 as discussed above taxpayers included as tax due on their sec_962 income only the amount of the regular_tax amounts g h and i and not amt amounts j k and l taxpayers determined the tax due by comparing the total regular_tax on sec_962 income and non- sec_962 income with the total tmt on sec_962 income and non- sec_962 income the statements which taxpayers attached to their form sec_1040 for years one two and three showed that this method of comparing the amounts of regular_tax and tmt resulted in an amount of regular_tax that was greater than the amount of tmt for each year accordingly based on their method of computing tax due on sec_962 income taxpayers did not pay amt on their sec_962 income for those years the issue is whether amt liability with respect to sec_962 income should be computed by comparing the regular_tax on sec_962 income with the tmt on that income or whether it should be computed by comparing the combined regular_tax on sec_962 income and non- sec_962 income with the combined tmt on such amounts for the reasons discussed below we have concluded that the amt liability on sec_962 income should be determined by comparing the regular_tax with the tmt on the taxpayers’ sec_962 income only accordingly the amounts of tax due with respect to taxpayers’ sec_962 income are amounts g and j of year one amounts h and k for year two and amounts i and l for year three when an individual shareholder of a cfc makes a sec_962 election for a taxable_year sec_962 imposes tax at corporate rates on amounts included in income under sec_951 as if such amounts were received by a domestic_corporation and allows a credit for foreign taxes deemed-paid with respect to such amounts as if they were received by a domestic_corporation consistent with sec_962's treatment of the sec_951 inclusions being treated as if such amounts were received by a domestic_corporation the amount of tax due on sec_962 income should be computed separately from tax due on non- sec_962 income accordingly the computation of amt liability with respect to sec_962 income should be done separately in addition to being consistent with the express language of sec_962 this conclusion is also consistent with the statute’s purpose sec_962 was enacted in as part of the enactment of subpart_f of the code at that time the senate_finance_committee stated that the purpose of this provision sec_962 is to avoid what might otherwise be a hardship in taxing a u s individual at high bracket rates with respect to earnings in a foreign_corporation which he does not receive this provision gives such individuals assurance that their tax burdens with respect to these undistributed_foreign_earnings will be no heavier than they would have been had they invested in an american corporation doing business abroad s rept no c b pincite postf-167121-01 thus sec_962 was enacted to relieve a u s individual shareholder of a cfc from a hardship that might otherwise result from a sec_951 inclusion by ensuring that the tax burden for such individual would be no heavier than it would be if the individual had instead invested in a u s_corporation doing business abroad if the amount included in income under sec_951 were derived by a taxpayer’s domestic_corporation such amount would have been subject_to tax at the applicable corporate rates the determination of whether amt was due with respect to such amount would have been made by comparing the corporation’s regular_tax and tmt on that amount such determination would not have taken into account the shareholder’s regular_tax and tmt on its income deduction under sec_962 and minimum_tax_credit sec_962 requires a taxpayer notwithstanding sec_959 to include in its gross_income earnings_and_profits of a foreign_corporation attributable to a sec_951 inclusion with respect to which a sec_962 election applied when such earnings_and_profits are distributed to the extent that the earnings_and_profits exceed the amount of tax paid under chapter of subtitle a of the code with respect to the sec_951 inclusion the determination of the amount that must be included in income under sec_962 is made separately for distributions from each foreign_corporation see sec_1_962-3 therefore a taxpayer cannot reduce the amount that must be included in income when it receives a distribution from one foreign_corporation by the amount of tax paid pursuant to sec_962 with respect to a sec_951 inclusion attributable to another foreign_corporation pursuant to sec_962 when taxpayers receive a distribution of earnings_and_profits attributable to sec_951 inclusions for years one two and three taxpayers must include those earnings_and_profits in income the amount of a distribution by a cfc that must be included in income may be reduced for taxes paid_by taxpayers under sec_11 and sec_55 as a result of taxpayer’s sec_962 elections but may not be reduced by the taxes paid with respect to sec_951 inclusions attributable to cfcs other than the cfc making the distribution there is an issue as to whether taxpayers will be allowed to claim a credit for amt paid for years one two and three under sec_55 in other words whether taxpayers will be allowed to claim a credit for amount j paid in year one amount k paid in year two and amount l paid in year three sec_53 allows taxpayers a credit against the tax_imposed_by_chapter_1 of subtitle a of the code for any taxable_year in an amount equal to the minimum_tax_credit mtc for such taxable_year the mtc for any taxable_year is generally the excess if any of amt imposed for all prior taxable years beginning after postf-167121-01 subject_to certain adjustments not relevant here over the amount of mtc allowable for prior taxable years sec_53 and d sec_53 limits the mtc for any taxable_year to the excess if any of the regular_tax_liability for the taxable_year reduced by the sum of the credits allowable under subparts a b d e and f of subtitle a chapter 1a part iv of the code over the tmt for the taxable_year accordingly subject_to sec_53 and other applicable limitations taxpayers will be able to claim a mtc for amounts j k and l in years subsequent to the year in which they paid those amounts revocation of the elections sec_962 provides that a sec_962 election for the taxable_year for which the election is made may not be revoked except with the consent of the secretary or_his_delegate sec_1_962-2 requires taxpayers to apply to the commissioner for approval to revoke a sec_962 and provides that approval will not be granted unless a material and substantial change_in_circumstances occurs which could not have been anticipated when the election was made taxpayers have not applied for approval to revoke their elections for years one two and three therefore we do not have sufficient facts to determine whether taxpayers would satisfy sec_1_962-2 please call if you have any further questions bethany a ingwalson assistant to the branch chief cc intl br3


internal_revenue_service number info release date april cc psi 1-genin-119986-03 uilc dear we are responding to your correspondence requesting automatic relief in order to establish date as the effective date for your s_corporation_election however in your case automatic relief is unavailable under revproc_97_48 because your return for the taxable_year was filed late although we are unable to respond to your request as submitted this letter provides useful information about rectifying your situation announcement copy enclosed provides guidance on seeking relief for late s_corporation elections generally to request relief for a late s_corporation_election you must request a private_letter_ruling from the national_office the information forwarded to our office is insufficient for us to process a private_letter_ruling request the procedures for requesting a private_letter_ruling are set forth in revproc_2003_1 copy enclosed in addition taxpayers must submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their tax_return for the most recent 12-month taxable_year qualify for a reduced user_fee in the amount of dollar_figure if you qualify for the reduced fee you must include a statement claiming that your gross_income for the last 12-month taxable_year was less than one million dollars if you decide to submit a formal request for a private_letter_ruling please follow the sample format provided in appendix b of revproc_2003_1 your request should include all required procedural statements a check for the user_fee and any documents that substantiate your intent to be an s_corporation from inception please refer your request to our office by adding the following to the address attn cc pa t p o box ben franklin station washington dc direct to cc psi room in addition the irs has developed two new cd-roms to help educate small_business owners on their tax responsibilities introduction to federal taxes for small_business self-employed and a virtual small_business workshop these two cd- roms are free and can be ordered by calling the irs also provides a special website www irs gov smallbiz which is dedicated to providing information to small_business taxpayers please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2003_1


t c summary opinion united_states tax_court gregory c and phyllis lam petitioners v commissioner of internal revenue respondent docket no 12153-00s filed date gregory c and phyllis lam pro sese margaret rigg for respondent pajak special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed unless otherwise indicated section references are to the internal_revenue_code in effect for the year in issue the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency of dollar_figure and an accuracy-related_penalty of dollar_figure in petitioners’ federal_income_tax this court must decide whether petitioners are entitled to deduct expenses claimed on schedule c profit or loss from business and whether petitioners are liable for the accuracy-related_penalty under sec_6662 some of the facts in this case have been stipulated and are so found petitioners resided in san mateo california at the time they filed their petition during taxable_year petitioner gregory c lam petitioner purportedly was involved in three businesses project management photography and construction in connection with these businesses petitioners attached three schedules c profit or loss from business to their form_1040 u s individual_income_tax_return the deductions claimed on the schedule c relating to petitioner’s photography business are not at issue respondent disallowed deductions claimed on the other two schedules c because petitioners did not establish that the claimed expenses were paid_or_incurred during taxable_year or that the expenses were ordinary and necessary to petitioner’s businesses on the schedule c pertaining to petitioner’s project management business petitioner reported gross_income of dollar_figure and a net_loss of dollar_figure respondent disallowed deductions claimed on that schedule c for car and truck expenses of dollar_figure depreciation expense of dollar_figure and other expenses of dollar_figure on the schedule c pertaining to petitioner’s construction business petitioner reported gross_income of dollar_figure and a net_loss of dollar_figure respondent disallowed deductions claimed on that schedule c for car and truck expenses of dollar_figure depreciation expense of dollar_figure insurance expense of dollar_figure and other expenses of dollar_figure respondent contends that the documents offered by petitioner provide insufficient evidence to support the claimed deductions we agree sec_7491 is inapplicable here because petitioners have not complied with the requisite substantiation requirements sec_7491 sec_162 allows a deduction for ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business taxpayers however must maintain sufficient records to establish the amount of claimed deductions sec_6001 sec_1_6001-1 income_tax regs sec_274 imposes stringent substantiation requirements for the deduction of certain listed_property defined under sec_280f listed_property includes inter alia automobiles and computers sec_280f to deduct expenses for such listed_property including depreciation taxpayers must substantiate by adequate_records the following items the amount of each separate expenditure the listed property’s business and total usage the date of the expenditure or use and the business_purpose for an expenditure or use sec_274 sec_1_274-5t temporary income_tax regs fed reg date to substantiate a deduction by means of adequate_records a taxpayer must maintain an account book diary log statement of expense trip sheets and or other documentary_evidence which in combination are sufficient to establish each element of expenditure or use sec_1 5t c i temporary income_tax regs fed reg date each element of an expenditure or use must be made at or near the time of the expenditure or use sec_1 5t c ii a temporary income_tax regs fed reg date moreover when sec_274 applies as here this court cannot rely on 39_f2d_540 2d cir to estimate the taxpayer’s expenses 50_tc_823 affd per curiam 412_f2d_201 2d cir petitioner had no books of account or other records concerning his alleged businesses or any evidence of the expenditures in issue at trial petitioner had no reconstructed records to support his claimed deductions petitioner’s miscellaneous documents from third parties and some items from petitioner or his wife were not adequate to support any of his deductions petitioner relied on his own testimony it is well established that this court is not bound to accept a taxpayer’s self-serving unverified and undocumented testimony 87_tc_74 65_tc_87 we find petitioner’s testimony to be just that self-serving unverified and undocumented as such we conclude that petitioners have failed to establish that they are entitled to the deductions claimed on their schedules c under sec_162 much less under the strict standards of sec_274 as to the accuracy-related_penalty sec_6662 imposes a percent penalty on the portion of any underpayment_of_tax attributable to negligence or disregard of rules or regulations sec_6662 negligence is any failure to make a reasonable attempt to comply with the provisions of the internal revenue laws and includes any failure by the taxpayer to keep adequate books_and_records or to substantiate items properly sec_6662 sec_1_6662-3 income_tax regs moreover negligence is the failure to exercise due care or failure to do what a reasonable and prudent person would do under the circumstances 85_tc_934 disregard includes any careless reckless or intentional disregard of rules or regulations sec_6662 sec_1 b income_tax regs no penalty will be imposed with respect to any portion of any underpayment if it is shown that there was a reasonable_cause for such portion and that the taxpayer acted in good_faith with respect to such portion sec_6664 on this record we conclude that petitioners are liable for the accuracy-related_penalty under sec_6662 as imposed by respondent petitioners have failed to provide any reasonable explanation or credible_evidence to substantiate entitlement to the claimed deductions such actions are not those of a reasonable and prudent person under the circumstances reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division nov uniform issue list ther pats ns kak legend state a statutes b system c dear this is in response to a request for a private_letter_ruling dated date and supplemented by faxed letter dated date submitted on your behalf by your authorized representatives regarding the tax consequences of amendments to certain distribution provisions contained in system c and the continued eligibility for grandfather relief from the provisions of the final regulations issued by the internal_revenue_service under sec_401 of the internal_revenue_code_of_1986 code your authorized representatives have submitted the following facts and representations in connection with this request article of chapter title statutes b established system c for the benefit of eligible employees of state a and its political subdivisions on date the service issued a plan qualified under sec_401 of the code letter of determination for system c finding that system c is a system c is a governmental_plan as described in sec_414 of the code system c is also defined a benefit plan as defined in sec_414 and sec_414 of the code since system c not only provides a defined benefit to its members but also provides a benefit for certain eligible members derived from employee and employer contributions which is based on the balance of each such members’ account in other words system c contains both a defined benefit and defined contribution element page of in the state a legislature adopted the predecessor to statutes b section 38-736b formerly statutes b section 04d directing all employers of system c members to pick up the mandatory member contributions on date the service issued a private_letter_ruling to system c concluding that the amounts picked up by the employers satisfied the requirements of sec_414 of the code accordingly system c is a qualified pick-up plan described in sec_414 of the code as of date system c covered big_number active members big_number inactive members and big_number retired members membership includes state employees teachers and employees of political subdivisions of state a average annual pay for active members in fiscal_year was dollar_figure from its inception system c has allowed a retired member who elected a joint and survivor form of retirement benefit to rescind his election and pop-up to a single life benefit provided the retired member could demonstrate evidence of good health in the state a legislature removed the good health requirement and in the state a legislature extended the pop-up to members who elect life with a term certain form of pension members can pop- up at any time after retirement regardless of whether their beneficiaries are alive or dead members who have popped-up are allowed to pop-down’ to their original forms of pension and if they wish to name new beneficiaries at any time there is no limit to the number of times a member can pop-up and pop- down these rules are contained in statutes b sections b and b system c believes that these provisions have always complied with sec_401 of the code based on a reasonable and good_faith interpretation of the provisions of code sec_401 in the state a legislature session the state a legislature adopted amendments to statutes b sections b and b the amendments are contained in senate bill sb legislature second regular ssssion the amendments changed the pop-up rules for members who retire after the effective date of the amendments by allowing members who had elected a joint and survivor option of life with a term certain option to make a one-time election to revoke the prior election and pop-up to a single_life_annuity in addition the member can elect a pop-up benefit only if the member's joint annuitant or term certain beneficiary dies or ceases to be the joint annuitant or term certain beneficiary pursuant to the terms of a qualified_domestic_relations_order finally the amendments would disallow all pop-downs thus a member who retires after the effective date of the amendments and elects to pop-up would receive the single life distribution amount for the remainder of his life the intention of the amendment is to eliminate the cost associated with allowing members to pop-down when they reach the end of their lives - members who currently do so receive death_benefits without paying vas page of for them and the cost is transferred to participating employers and active members in the form of higher contribution requirements sec_4 of sb provides that the amendments contained in sb will become effective only if system c obtains a private_letter_ruling from the service by date finding that the amendments do not cause any form of benefit in system c to lose the grandfathering provisions for governmental plans contained in the final treasury regulations issued by the service under sec_401 of the code based on the foregoing facts and representations your authorized representatives have requested the following rulings the amendments contained in sb to statutes b sections b and b comply with the rules contained in treasury regulations regulations sec_1_401_a_9_-6 q a-14 which sets forth the conditions under which annuity payments are permitted to increase the amendments contained in sb to statutes b sections b and b will not cause any form of benefit contained in statutes b section to lose the grandfathering provisions for governmental plans contained in the final treasury regulations issued by the service under sec_401 of the code the definition of a governmental_plan is set-forth in sec_414 of the code which states that it is a plan established and maintained for its employees by the government of the united_states by the government of any state or political_subdivision thereof or by any agency_or_instrumentality of any of the foregoing code sec_414 states that in the case of a governmental_plan where the contributions of employing units are designated as employee contributions but where any employing unit picks up the contributions tie contributions so picked up shall be treated as employer contributions these types of plans are often referred to as pick-up plans sec_401 of the code contains the rules setting forth the minimum distribution_requirements applicable to plans qualified under sec_401 of the code these rules also apply to governmental plans in order to satisfy sec_401 of the code distributions of the employee's entire_interest under a defined_benefit_plan must be paid in the form of periodic annuity payments for the employee’s life or the joint lives of the employee and beneficiary or over a period certain that does not exceed the maximum length of the period certain as defined in regulations sec_1_401_a_9_-6 q a-3 once payments have begun the period may only be changed in accordance with regulations sec_1_401_a_9_-6 q a-13 and life or joint_and_survivor_annuity vt page of payments must satisfy the minimum distribution incidental benefit requirements of regulations sec_1_401_a_9_-6 q a-2 except as otherwise provided in this section payments must not increase regulations sec_1_401_a_9_-6 qe a-1 regulations sec_1_401_a_9_-6 q a-14 states in relevant part that annuity payments may increase to the extent of the reduction in the amount of the employee’s payments to provide for a survivor benefit but only if there is no longer a survivor benefit because the beneficiary whose life was being used to determine the required_distribution period as defined in sec_401 of the code over which payments were being made dies or is no longer the employee’s beneficiary pursuant to a qualified_domestic_relations_order with the meaning of sec_414 of the code regulations sec_1_401_a_9_-6 q a-16 states that an annuity distribution option provided under the terms of a governmental_plan in effect on date will not fail to satisfy sec_401 of the code merely because the annuity payments do not satisfy regulations sec_1_401_a_9_-6 q a-1 through provided the distribution option satisfies sec_401 of the code based on a reasonable and good_faith interpretation of the provisions of sec_401 of the code new regulations issued by the service under regulations sec_1_401_a_9_-6 q a-17 extends the protection of regulations sec_1_401_a_9_-6 q a-16 for plan years beginning date as long as the distribution rules in effect in prior years satisfy sec_401 of the code based on a reasonable and good_faith interpretation of the provisions of sec_401 of the code in senate bill legislature second with regard to ruling_request regular session the state a legislature adopted amendments to statutes b sections b and b these amendments state that a member whose original date of retirement is on or ater the effective date of this amendment to this section may exercise a one-time election to rescind the joint_and_survivor_annuity option elected by the member if the contingent annuitant dies or ceases to be a contingent annuitant pursuant to the terms of a qualified_domestic_relations_order we believe this amendment complies with the rules contained in regulations sec_1_401_a_9_-6 q a-14 which sets forth the conditions under which annuity payments are permitted to increase with regard to ruling_request the state a legislature has adopted conditional amendments to the pop-up and pop-down provisions of statutes b section which will apply to any member who retires on or after the effective date of the amendments as stated above we believe these amendments comply with the rules contained in regulations sec_1_401_a_9_-6 q a-14 as such we also believe that limiting the pop-up elections of future retirees to only the two events described in regulations sec_1_401_a_9_-6 q a-14 will not cause ee page of system c to lose the special grandfathering provisions applicable to governmental plans contained in regulations sec_1_401_a_9_-6 q a-16 applicable to pop-up and pop-down elections by members who retire before the effective date of sb because these benefits were in effect on date this ruling applies to participants of both the defined_benefit_plan and defined_contribution_plan of system c this ruling letter is directed solely to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this ruling letter is being sent to your authorized representative in accordance with a power_of_attorney on file in this office if you wish to inquire about this ruling please contact please address all correspondence to se t ep ra t3 id at sincerely yours frances v sloan mahager employee_plans technical group enclosures deleted copy form_437 cc zkkztk xkkk kek