department of the treasury internal_revenue_service washington d c contact person identification_number contact number employer_identification_number form required to be filed tax years tax_exempt_and_government_entities_division number release date date date uil dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final because you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file instructions and do not send them to this office penalty file the returns in accordance with their failure_to_file the returns timely may result in a we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 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 instructions in notice action if you agree with our deletions you do not need to take any further if you disagree with our proposed deletions follow the if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your or the irs customer service number for businesses the irs customer service number for people with hearing impairments is sincerely karen schiller acting director exempt_organizations rulings and agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c contact person identification_number contact number fax number employer_identification_number tax exempt and ’ government entities division date date uil legend state date date city area council 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 sec_501 the basis for our conclusion is set forth below facts you incorporated as a nonprofit corporation under state law on date you filed form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code on date your articles of incorporation state that you are organized exclusively for charitable purposes within the meaning of sec_501 specifically your purposes are to engage in the business of community education development and affordable housing related projects and to provide decent housing that is affordable to low- and moderate-income persons you do not currently provide any low-income_housing but intend to in the future contrary to your articles you do not currently provide any low-income_housing or related_services however you state that you intend to provide low-income_housing in the future as well as credit_counseling_services at present you spend your time conducting community engagement and advocacy activities and providing administrative services for corporation’s hardest hit fund hhf program first your community engagement and advocacy activity involves empowering and engaging community stakeholders in dialogues about issues that have an impact on health economics and welfare of low-income communities you state that t he dialogue is intended to be a catalyst for social action and the development of a plan of action for positive change specifically you advocate development of the area of city you state that the area is culturally significant however you state that suburban flight and lack of capital_investment and economic direction has led to the area’s decline and persistent blight you provide no information from the u s department of housing and urban development hud or state supporting your designation of the area as blighted nonetheless you posit that development of the area could cause the following results e e e e e elimination of blighted vacant housing stock and the creation of affordable housing within the urban service area development of commercial spaces within an existing comprehensive design which will suit the growing arts entrepreneurial needs of the area re-creation of the area’s aesthetic landscape in a way that celebrates the history and future possibilities of the area comprehensive and strategic engagement planning for the community to own and facilitate as the area transforms into a strong urban center strengthening of existing neighborhoods and increasing longer term homeownership and residency within the area as part of this activity you work to mobilize council a redevelopment advisory council established by the city in an effort to revitalize certain areas of the city you state that the council's purpose is to inform area residents development you state that mobilization of the council is necessary to provide local citizens with the opportunity to engage and shape the future of their community in a meaningful way you hope that such mobilization will serve as a catalyst to economic development ideas interests through demonstration of a viable support base within the community and cultivate growth of emerging cultural artistic expression throughout the area of opportunities for economic growth and your only mobilization activities are scheduling and conducting monthly council meetings you hold these meetings at local businesses in the area topics discussed at these meetings include defining the area’s boundaries community planning and improvements and economic incentives for businesses you spend approximately of your time conducting this activity second your administrative services involve providing initial and ongoing program eligibility determination and case management services for the hhf program administered by the corporation the hhf is a federal program administered by the u s department of treasury intended to develop locally-tailored foreclosure prevention solutions in areas hit hard by the decline in home prices during the housing crisis beginning in the state hhf program provides up to months of mortgage payment assistance for unemployed or underemployed homeowners and or payments to bring delinquent mortgages current for homeowners who have returned to work or recovered from underemployment state defines the eligibility criteria for the hhf eligibility requirements are organized into three areas household eligibility requirements property eligibility requirements and mortgage eligibility requirements one household requirement is that homeowners must have a total income below of the area media income ami as provided by hud and monthly housing debt of more than of the homeowner's gross monthly income a homeowner must meet all criteria within each category to qualify however even if a homeowner meets all criteria the homeowner's mortgage company may still deny eligibility you are an hhf advisor for more than of state’s northern counties as an hhf advisor you perform contractor and professional services as an independent_contractor and not as an agent representative or employee of the corporation these services include applicant intake eligibility determination case management and reporting activities you state that your first client contact occurs when the client is referred to you because they are in risk of default after you receive the referral and make the initial client contact you print the online application form completed by the client verify the information contained in the application collect additional supporting documentation and obtain client signatures the information solicited from clients on the online application includes certain biographical demographic employment and financial information clients must also submit additional documentation such as paystubs property information etc the corporation provides the client intake form and hhf document list once the client's file is complete you determine the client's eligibility for assistance you state that an average of two appointments is required to collect the client’s information and determine a client’s eligibility you do not state what topics if any are discussed during these sessions if the client qualifies you forward the client’s file to the corporation and schedule a closing on the loan either at your offices or at a local bank in the client's area after closing you submit the closing documents to the corporation if the client does not qualify you inform the client and refer them to a hud approved counseling agency you state that this referral service is a function of the hhf program not an independent activity and that the information solicited for referral is the same as the information solicited to determine hhf eligibility since entering into the contract with the corporation you have assisted more than clients obtain relief from the hhf and have referred more than clients who did not qualify to hud approved counseling agencies for assistance your contract with the corporation is for an initial two year term with the option for three one- year renewals under the terms of the contract hhf advisors are unable to charge applicants for services rendered instead the corporation pays hhf advisors set amounts for initial start- up costs determining eligibility closing on loans and monthly case management your funding primarily consists of amounts received under your contract with corporation you do not currently provide any educational workshops classes or seminars related to your foreclosure prevention counseling services accordingly you did not provide copies of any educational material however you state that you intend to provide educational workshops classes or seminars on mortgage foreclosure intervention financial counseling mortgage loss mitigation and consumer budgeting assistance in the future if a source of funding for such services is identified you also do not provide individual or family counseling on these topics at this time you spend approximately of your time and money conducting this activity of the time spent providing administrative services you spend the following percentage of your time performing the following services e e e e e - performing intake - evaluating applications - closing hhf loans - providing referral services to non-qualifying applicants and - performing monthly case management law r c sec_501 provides that an organization described in sec_501 shall be exempt from taxation under this subtitle unless such exemption is denied under sec_502 or sec_503 r c sec_501 describes corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific 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 including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office r c sec_501 provides that an organization with respect to which the provision of credit_counseling_services is a substantial purpose shall not be exempt from tax under subsection a unless certain additional requirements are met this section defines credit_counseling_services as - i ii iii the providing of educational information to the general_public on budgeting personal finance financial literacy saving and spending practices and the sound use of consumer credit the assisting of individuals and families with financial problems by providing them with counseling or a combination of the activities described in clauses i and ii sec_1_501_c_3_-1 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 that section if an organization fails to meet either the organizational or operational_test it is not exempt 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 sec_1_501_c_3_-1 provides that since each of the purposes specified in sec_501 is an exempt_purpose in itself an organization may be exempt if it is organized and operated exclusively for any one or more of such purposes if in fact an organization is organized and operated exclusively for an exempt_purpose or purposes exemption will be granted to such an organization regardless of the purpose or purposes specified in its application_for exemption for example if an organization claims exemption on the ground that it is educational exemption will not be denied if in fact it is charitable sec_1_501_c_3_-1 provides that the term charitable is used in sec_501 in its generally accepted legal sense and includes among other things lessening the burdens of government relief of the poor and distressed or of the underprivileged advancement of education or science erection or maintenance of public buildings monuments or works and promotion of social welfare by organizations designed to accomplish any of the above purposes or to defend human and civil rights secured_by law sec_1_501_c_3_-1 provides that the term educational as used in sec_501 relates to a the instruction or training of the individual for the purpose of improving or developing his capabilities or b the instruction of the public on subjects useful to the individual and beneficial to the community an organization may be educational even though it advocates a particular position or viewpoint so long as it presents a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion on the other hand an organization is not educational if its principal function is the mere presentation of unsupported opinion revrul_65_299 1965_2_cb_165 determined that an organization formed to advise counsel and assist individuals in solving their financial difficulties by budgeting their income and expenses and effecting an orderly payment for the payment of their obligations qualified for recognition under sec_501 revrul_69_441 1969_2_cb_115 determined that an organization formed to help reduce personal bankruptcy by informing the public on personal money management and aiding low- income individuals and families with financial problems qualified for exemption under sec_501 the organization provided information to the public on budgeting buying practices and the sound use of consumer credit through the use of films speakers and publications it aided low-income individuals and families who had financial problems by providing them with individual counseling and if necessary by establishing budget plans under a budget plan a debtor voluntarily made fixed payments to the organization the funds were kept in a_trust account and disbursed on a partial payment basis to the creditors whose approval of the establishment of the plan was obtained by the organization the services were provided without charge to the debtor the debtor received full credit against his debts for amounts paid the organization did not make loans to debtors or negotiate loans on their behalf the organization's receipts were from contributions primarily from the creditors participating in the organization's budget plans however the creditors were not required to make contributions as a condition of participation the ruling determined that by aiding low-income individuals and families who have financial problems and by providing without charge counseling and a means for the orderly discharge_of_indebtedness the organization relieved the poor and distressed furthermore by providing the public with information on budgeting buying practices and the sound use of consumer credit the organization instructed the public on subjects useful to the individual and beneficial to the community see consumer credit_counseling_services of alabama inc v united_states a f t r 2d ria d d c holding that an organization that provided free information on budgeting buying practices and the sound use of consumer credit qualified for exemption from income_tax because its activities were charitable and educational revproc_86_43 1986_2_cb_729 publishes the criteria used to determine the circumstances under which advocacy of a particular viewpoint or position by an organization is considered educational within the meaning of sec_501 and within the meaning of sec_1_501_c_3_-1 the procedure states although the service renders no judgment as to the viewpoint or position of the organization the service will look to the method used by the organization to develop and present its views the method used by the organization will not be considered educational if being advocated or if materially aid a listener or reader in a learning process it fails to provide a development from the relevant facts that would it fails to provide a factual foundation for the viewpoint or position revproc_96_32 1996_1_cb_717 sets forth a safe_harbor under which organizations that provide low-income_housing will be considered charitable as described in sec_501 because they relieve the poor and distressed as described in sec_1_501_c_3_-1 the procedure adopts the u s department of housing and urban development's hud definition of low-income and very low-income hud defines very low-income a sec_50 of an area's median income and low-income a sec_80 of the area’s median income in 326_us_279 the supreme court held that the presence of private benefit if substantial in nature will destroy an organization's tax-exempt status regardless of the organization’s other charitable purposes or activities rationale an organization seeking tax-exempt status under sec_501 must be organized and operated exclusively for charitable or other exempt purposes with no part of its net_earnings inuring to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 the presence of a single non-exempt purpose if substantial in nature will destroy exemption under sec_501 regardiess of the number or importance of any other exempt purposes 326_us_279 see sec_1_501_c_3_-1 your articles state that you operate exclusively for charitable purposes however if an organization is organized and operated exclusively for an exempt_purpose or purposes other than the ones stated the organization will be recognized regardless of the purpose or purposes specified sec_1_501_c_3_-1 regardless you do not qualify for recognition under sec_501 because you operate for one or more substantial nonexempt purpose your primary activity is providing administrative services for corporation’s hhf program you characterize this activity as counseling generally individual mortgage foreclosure counseling may be an exempt activity under certain circumstances see revrul_78_99 1978_1_cb_152 free individual and group counseling of widows revrul_76_205 1976_1_cb_154 free counseling and english instruction for immigrants revrul_73_569 1973_2_cb_179 free counseling to pregnant women revrul_70_590 1970_2_cb_116 clinic to help users of mind-altering drugs revrul_70_640 1970_2_cb_117 free marriage counseling revrul_68_71 1968_1_cb_249 career planning education through free vocational counseling and publications sold at a nominal charge additionally credit counseling may be an exempt activity under certain circumstances r c sec_501 revrul_69_441 revrul_65_299 such organizations qualify for recognition under sec_501 in part as educational organizations in sec_501 the term educational relates to a the instruction or training of the individual for the purpose of improving or developing his capabilities or b the instruction of the public on subjects useful to the individual and beneficial to the community sec_1 c - d i thus these organizations qualify because they instruct the public on subjects useful to the individual and beneficial to the community you perform no educational activities within the meaning of sec_501 rather your counseling is merely an administrative service performed on the corporation’s behalf the services you provide include performing client intake services making eligibility determinations providing case management and reporting to the corporation these services are not structured primarily to improve your clients’ understanding of their financial problems or skills in solving them additionally determining whether a client qualifies for relief under hhf does not provide a development from relevant facts that would materially aid a listener or reader in the learning process revproc_86_43 furthermore you explicitly state that you do not conduct educational workshops classes or seminars and do not intend to do so unless you can locate an independent funding source accordingly you do not instruct the public on subjects useful to the public and beneficial to the community in the same manner as the organization described in revrul_69_441 moreover your mortgage foreclosure counseling activity is not charitable within the meaning of sec_501 this section uses the term charitable in its generally accepted legal sense sec_1_501_c_3_-1 the term includes relief of the poor and distressed or of the underprivileged and the promotion of social welfare to lessen neighborhood tensions and combat community deterioration and juvenile delinquency id revproc_96_32 provides that the provision of housing to low-income and very low-income individuals as defined by hud generally relieves the poor and distressed hud defines very low-income a sec_50 of an area’s median income ami and low-income a sec_80 of ami however under the state hhf individuals with a total household_income below of ami are eligible for relief accordingly your mortgage foreclosure counseling activities are not limited to very low-income or low-income individuals therefore your clients are not necessarily poor and distressed in the same manner as the organization in revrul_69_441 additionally the hhf does not target particular geographical areas in which neighborhood tensions and juvenile delinquency are common rather relief under the hhf is available to all qualifying residents in the more than northern state counties you service you spend of your time and money providing administrative services for corporation’s hhf program the remaining of your time you spend scheduling and facilitating council meetings but you failed to provide sufficient information to determine whether this activity furthers one or more of your exempt purposes however even if this activity did further one or more exempt purposes it is merely incidental to your primary activity of providing administrative services for corporation’s hhf program consequently you are not operated exclusively primarily for one or more exempt purposes conclusion based on the above we have determined that you fail to meet the requirements necessary to be recognized as a tax-exempt_organization 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 your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete this declaration must be signed by an elected officer a member of the board_of directors or a trustee rather than an attorney or accountant you also have a right to request a conference to discuss your protest this request shouid be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see 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 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 protest as a failure to exhaust available administrative remedies 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 if you do not intend to protest this determination you do not need to take any further action 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 this address internal_revenue_service te_ge se t eo ra t constitution ave n w washington dc if you may also fax your statement using the fax number shown in the heading of this letter 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 karen schiller acting director exempt_organizations rulings and agreements


department of the treasury internal_revenue_service washington d c may number info release date uil ------------------------------------------------------------------------------------------------------------ -------------------------------------------------------- ------------------------------------------------------------------------------------------------ ------------------------- cc ita br05 genin-116310-09 dear ------------- this is in response to your letter of date in which you inquired about one of the terms and conditions of change_of revproc_2006_45 2006_45_irb_851 relating to procedures for obtaining automatic approval of changes in annual accounting periods taxable years for certain corporations your inquiry concerns the situation in which a corporation desiring to change its taxable_year owns a majority interest in a foreign_partnership a term and condition of such a corporation's change in taxable_year under revproc_2006_45 is that the foreign_partnership concurrently change its taxable_year to conform to the taxable_year of its majority interest corporate_partner specifically you asked whether such a foreign_partnership is within the scope of rev_proc 2006-46's automatic consent procedure if the foreign_partnership satisfies all of the terms and conditions required in that revenue_procedure but fails to satisfy some of those terms and conditions on a timely basis we are pleased to address your concerns as you are aware the internal_revenue_service issues both general information letters as well as private letter rulings to assist taxpayers in the preparation of their returns the procedures for requesting letter rulings are set forth in revproc_2009_1 2009_1_irb_1 this is a general information_letter as you requested sec_442 of the internal_revenue_code provides that if a taxpayer changes its annual_accounting_period the new accounting_period will become the taxpayer’s taxable_year only if the change is approved by the secretary genin-116310-09 revproc_2006_45 i r b as modified by revproc_2007_64 2007_42_irb_818 provides the exclusive procedures under which corporations within its scope may obtain automatic consent of the commissioner to change their taxable_year under sec_442 generally corporations that hold partnership interests are outside the scope of revproc_2006_45 but a corporation that owns a majority interest in a partnership is within the scope of revproc_2006_45 if the partnership concurrently changes its tax_year under revproc_2006_46 2006_45_irb_859 to the corporate majority partner's new tax_year see sec_4 and dollar_figure of revproc_2006_45 revproc_2006_46 provides the exclusive procedures under which partnerships within its scope may obtain automatic consent to change their taxable years section of revproc_2006_45 imposes certain terms and conditions of change in connection with a corporation’s taxable_year change among those terms and conditions section dollar_figure provides that if a corporation’s majority interest in a partnership is disregarded under sec_4 because the partnership is changing its taxable_year to conform to the corporation’s new taxable_year the partnership must change its taxable_year concurrently with the corporation’s taxable_year change in that event section dollar_figure provides that the partnership is deemed to be within the scope of revproc_2006_46 specifically section dollar_figure provides that if the related_entity that is required to change is a pass-through entity such as a partnership it is deemed to be within sec_4 of revproc_2002_46 notwithstanding any other limitation under sections dollar_figure and of that revenue_procedure under sec_4 of revproc_2006_46 a partnership that is changing to its required_taxable_year that is the taxable_year required under sec_706 generally is within the scope of that revenue_procedure further sec_4 of revproc_2006_46 provides that notwithstanding any limitation in this revenue_procedure to the contrary this revenue_procedure applies to a taxpayer that is required to concurrently change its annual_accounting_period as a term and condition for the approval of a related taxpayer’s change_of annual_accounting_period section dollar_figure of revproc_2006_46 explains that sec_4 clarifies that a taxpayer that is required to make a concurrent change as a term and condition of the approval of a related party’s change_of accounting_period is included in the scope notwithstanding any limitation in this revenue_procedure to the contrary you asked whether a foreign_partnership seeking to change its taxable_year under revproc_2006_46 to conform to the new taxable_year of its majority interest corporate_partner as a term and condition of the corporate partner’s change under revproc_2006_45 must do so in a timely manner the answer is no the requirement is that the change be made concurrently with the corporate partner’s change in tax_year ie for the same first effective year not that the change be made timely in fact there is no timely filing due_date for such a required concurrent change as section dollar_figure specifically provides that the change be made notwithstanding the due_date otherwise applicable in section of revproc_2006_46 genin-116310-09 section dollar_figure of revproc_2006_45 which describes the first effective year states that that year is also the first tax_year for complying with all of the terms and conditions of revproc_2006_45 thus for the corporation to satisfy these requirements the partnership is required to make its tax_year change effective for such same first effective year ie concurrently an otherwise untimely but concurrent change in taxable_year by the foreign_partnership will satisfy the majority interest corporation's concurrent change term and condition of revproc_2006_45 we thank you for your attention in this matter and hope that the general information provided is helpful if there are additional questions or if we may be of further assistance please contact ---------------------of this office at ---------------------- not a toll-free call sincerely yours s william a jackson chief branch associate chief_counsel income_tax and accounting william a jackson enclosure copy of this letter


department of the treasury internal_revenue_service washington d c d commissioner government entities ovisiyniform issue list sep tep ra legend taxpayer a ira x date amount m bank h bank w dear this is in response to a letter dated date and as supplemented by letters dated date and date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code ‘the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a maintained an individual_retirement_account ira ira x at bank w taxpayer a age asserts that on date she received a distribution of amount m from ira x and that her failure to accomplish a rollover of amount m within the 60-day period prescribed by sec_408 of the code was due to an error by a representative of bank h in not following the instructions of taxpayer a taxpayer a further represents that amount m has not been used for any other purpose taxpayer a represents that certificates of deposit cd's held in ira x matured on date and on the same day taxpayer a received a check from bank w in amount m which was from the maturing cds on date taxpayer a went to bank h with the intent to rollover amount m to a rollover ira she met with a representative of bank h and expressed her intention and desire to roll over amount m into ira certificates of deposit and instructed the representative of bank h to complete a rollover as soon as possible to avoid income_tax on the distribution however contrary to taxpayer a’s instructions the bank h representative placed the amount m check into non-ira cds taxpayer a left the bank assuming she had completed a rollover of amount m taxpayer a did not learn of the bank h error until her tax preparer notified her of the taxable_distribution at the time of her income_tax preparation amount m remains in the bank h non-ira cds pending guidance from the service in response to this ruling_request based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount m sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 page sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that - occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a rollover of amount m within the 60-day period prescribed by sec_408 of the code was due to an error by a representative of bank h in not following the instructions of taxpayer a therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount m from ira x pursuant to this ruling letter taxpayer a is granted a period of days from the date of the issuance of this letter_ruling to make a rollover_contribution of amount m to one or more rollover iras provided all other requirements of code sec_408 except the 60-day requirement are met page with respect to such contribution amount m will be considered a valid rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions please contact sincerely yours laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc


t c memo united_states tax_court todd john daniels petitioner v commissioner of internal revenue respondent docket no filed date todd john daniels pro_se randall craig schneider for respondent memorandum findings_of_fact and opinion vasquez judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax the sole issue for decision is whether the period of limitations in which respondent may assess petitioner’s tax for has expired unless otherwise indicated all section references are to the internal revenue code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the accompanying exhibits are incorporated herein by this reference at the time he filed his petition petitioner resided in california petitioner’s mother sandra kay heiser had an individual_retirement_account ira at charles schwab inc when she passed away in the ira was transferred to the sandra kay heiser trust trust petitioner was appointed the trustee and he and his sister were named beneficiaries each having a interest charles schwab inc issued the trust a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc for reporting a taxable_distribution of dollar_figure and federal_income_tax withheld of dollar_figure for the transfer from the ira to the trust on date petitioner as trustee of the trust filed form_1041 u s income_tax return for estates and trusts reporting income of dollar_figure and an income distribution_deduction in the same amount for distributions made to petitioner and his sister a schedule_k-1 beneficiary’s share of income deductions credits etc reported dollar_figure as petitioner’s share of the trust’s income but did not report that form 1041-t allocation of estimated_tax payments to beneficiaries had been filed on date petitioner filed an amended form_1041 reporting income of dollar_figure and claiming a deduction of dollar_figure for state_income_tax withheld an income distribution_deduction of dollar_figure for distributions made to petitioner and his sister and a refund of dollar_figure for federal_income_tax withheld a schedule_k-1 reported dollar_figure as petitioner’s share of the trust’s income petitioner timely filed form 1040ez income_tax return for single and joint filers with no dependents for reporting wage income of dollar_figure and interest_income of dollar_figure he received the distribution from the trust but did not report it in income on his form 1040ez on date more than three years after petitioner filed his tax_return respondent mailed petitioner a notice_of_deficiency on date petitioner timely petitioned the court for redetermination of the deficiency arguing that he was entitled to a refund of or a_trust is generally allowed to deduct taxable_income distributed to its beneficiaries see sec_651 sec_661 this income-distribution deduction implements the he-who-gets-the-income-pays-the-tax principle if a_trust keeps income the trust is supposed to pay tax on it but if a_trust distributes income the beneficiary is supposed to pay the tax tarpo v commissioner tcmemo_2009_222 credit for the dollar_figure of tax withheld and that the statute_of_limitations barred assessment of his tax_liability on date respondent issued the trust a refund of dollar_figure dollar_figure of tax withheld plus dollar_figure of interest thus resolving the first issue in dispute the only issue remaining in dispute is whether the period of limitations has expired opinion i burden_of_proof sec_6501 provides that the amount of any_tax imposed shall be assessed within three years after the return was filed petitioner contends that respondent is barred from assessing his tax for under sec_6501 the bar of the period of limitations is an affirmative defense and the party raising this defense must specifically plead it and prove it rule sec_39 sec_142 101_tc_374 aff’d without published opinion 40_f3d_385 5th cir petitioner has pleaded the defense properly thus we proceed to address his contention in questioning the validity of the notice_of_deficiency by asserting that the notice was mailed after the expiration of the 3-year period of limitations petitioner initially must prove the filing_date of his tax_return and that respondent mailed him the notice_of_deficiency after the 3-year expiration date for the period of limitations see 95_tc_227 85_tc_535 respondent concedes that petitioner has proven both thus petitioner has established a prima facie case that the period of limitations precludes respondent from making the relevant assessment for and the burden of going forward shifts to respondent see mecom v commissioner t c pincite respondent must introduce evidence that the assessment for is not barred by the period of limitations under sec_6501 id if respondent makes such a showing the burden of going forward with the evidence shifts back to petitioner id pincite notwithstanding the shifting of the burden of going forward the burden of ultimate persuasion never shifts from the party who pleads the bar of the period of limitations 51_f2d_1042 8th cir aff’g 17_bta_848 mecom v commissioner t c pincite n ii six-year period of limitations respondent relies on the six-year period of limitations under sec_6501 as an exception to the general three-year period sec_6501 generally provides that a six-year period of limitations is applicable when a taxpayer omits_from_gross_income an amount includible therein which is greater than of the amount of gross_income stated in the return petitioner has established a prima facie case that the general period of limitations has expired therefore respondent bears the burden of going forward to establish that the amount petitioner omitted exceed sec_25 of the gross_income reported in his return if respondent makes such a showing the burden shifts back to petitioner to prove that an amount he omitted from gross_income in his return shall not be taken into account because it is disclosed in the return or in a statement attached to the return in a manner adequate to apprise the secretary of the nature and amount of such item see sec_6501 in applying sec_6501 we must consider whether an adjustment to the taxpayer’s gross_income might be apparent from the face of the return to the reasonable man 64_tc_460 although sec_6501 does not require that the return disclose the exact amount of the omitted income t he disclosure must be more substantial than providing a clue that would intrigue the likes of sherlock holmes but need not recite every underlying fact 133_tc_1 citing quick trust v commissioner 54_tc_1336 aff’d 444_f2d_90 8th cir for purposes of in the amendment to sec_6501 this provision was moved to sec_6501 sec_6501 gross_income includes those items listed in sec_61 carr v commissioner tcmemo_1978_408 under sec_61 gross_income specifically includes i ncome from an interest in an estate_or_trust petitioner reported gross_income of dollar_figure on his form 1040ez of that amount is dollar_figure petitioner failed to report as gross_income his dollar_figure share of the trust’s income that was distributed to him in see sec_61 sec_652 sec_662 therefore respondent has met his burden of proving that petitioner omitted from gross_income an amount exceeding of the gross_income he reported on his form 1040ez petitioner did not reference the trust or the trust’s returns anywhere on his form 1040ez where the individual return makes no reference to the trust as a source_of_income we do not consider any documents in addition to the individual returns in determining whether the omitted income was adequately disclosed gouveia v commissioner tcmemo_2004_256 finding that the six-year period of limitations applied because the taxpayers omitted from gross_income an amount of trust income properly includible on their return in excess of of the gross_income they reported and the commissioner was not apprised of the nature and amount of the omitted income see also connell bus co v commissioner tcmemo_2004_131 the trust returns were not considered when determining the amount of gross_income omitted under sec_6501 because the taxpayers’ returns made no reference to the trusts or the trusts’ returns therefore petitioner has not proven that any amount he omitted from his return was adequately disclosed accordingly the period of limitations in which respondent may assess petitioner’s tax remains open under sec_6501 petitioner does not dispute the correctness of respondent’s adjustments in the notice_of_deficiency accordingly respondent’s determination in the notice_of_deficiency is sustained in reaching our holdings herein we have considered all arguments made and to the extent not mentioned above we conclude they are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


number release date cc ct ct-116813-00 uiln date tkokpcn 6cz dollar_figurewnngvkp grctvogpv qh 6tgcuwt pvgtpcn 4gxgpwg 5gtxkeg 1hhkeg qh jkgh qwpugn tkokpcn 6cz kxkukqp 1evqdgt 6jku dwnngvkp ku hqt kphqtocvkqpcn rwtrqugu v ku pqv c fktgevkxg title_26 and title_26 related cases hyde amendment appeals should be reviewed for abuse_of_discretion in 220_f3d_1120 9th cir the ninth circuit held the standard of review of a federal district court’s denial of a criminal defendant’s motion for attorney’s fees and litigation costs pursuant to the hyde amendment u s c 3006a is for abuse_of_discretion moreover the court determined in order to recover expenses a defendant must show more the government’s position was not substantially justified the standard for recovery under the hyde amendment’s civil counterpart the equal_access_to_justice_act eaja u s c d a than in lindberg was convicted of conspiracy to defraud the government of federal income taxes and to structure and assist in structuring currency_transactions for the purpose of evading reporting requirements the prosecution was premised on a scheme employed by lindberg’s mother the owner of several hostess bars in honolulu where through the assistance of her children she orchestrated the structuring of cash receipts from her businesses into various bank accounts on appeal the ninth circuit reversed lindberg’s conspiracy conviction citing insufficient evidence to prove he knew tax_evasion was the object of the conspiracy or that he knew it was illegal to structure currency_transactions to avoid reporting requirements subsequently he filed a motion pursuant to the hyde amendment seeking attorney’s fees and litigation costs the district_court denied his motion noting that although the ninth circuit concluded the evidence was insufficient to convict him it was sufficient for the grand jury to indict for the district_court to deny a motion for acquittal and for the jury to convict hence the government’s prosecution of him was not vexatious frivolous and or in bad faith the standards for recovery under the hyde amendment on appeal the ninth circuit addressed the issue of what is the correct standard of review to apply to appeals under the hyde amendment the court found guidance from the eleventh circuit which had noted in 198_f3d_1293 11th cir that under the hyde amendment an award of attorney’s fees shall be granted pursuant to the procedures and limitations but not the burden_of_proof provided for an award under the eaja id pincite quoting u s c 3006a therefore because the denial of an award of attorney’s fees under the eaja is reviewed for an abuse_of_discretion so should the denial of an award under the hyde amendment id the fourth circuit also adopted this conclusion in in re grand jury 214_f3d_430 4th cir however it was the fifth circuit’s rationale in 211_f3d_898 5th cir which the ninth circuit found to be most persuasive in reaching the same conclusion there the court opined the abuse_of_discretion standard should be employed because district courts are well situated to evaluate the government’s case and need flexibility to develop a workable standard for what constitutes a vexatious frivolous or bad faith position id pincite emphasizing these sentiments the ninth circuit said the district_court is in a better position than this court to distinguish between a good_faith prosecution which is thin on evidence and a prosecution so lacking in support it can only be vexatious frivolous or in bad faith next the ninth circuit turned to the burden_of_proof required under the hyde amendment the court concluded the legislative_history behind the enactment of the hyde amendment clearly illustrates the standard for recovering fees under the amendment is more demanding than under the eaja this undermined lindberg’s argument that in order to prevail he only had to show the government’s position was not substantially justified the standard for recovery under the eaja 'vjkecn 4wng 2tqjkdkvkpi 'z 2ctvg qoowpkecvkqpu rrnkgu p 2tg pfkevogpv 0qp wuvqfkcn 5gvvkpi p 7pkvgf 5vcvgu x 6cncq f vj kt vjg 0kpvj ktewkv tghtckpgf htqo etgcvkpi c dtkijv nkpg twng vjcv yqwnf tguvtkev vjg gvjkecn rtqjkdkvkqp cickpuv gz rctvg eqoowpkecvkqpu dgvyggp hgfgtcn rtqugewvqtu cpf tgrtgugpvgf rctvkgu vq qpn rquv kpfkevogpv qt ewuvqfkcn ugvvkpiu pfggf vjg eqwtv fgvgtokpgf vjg twng ycu crrnkecdng kp c rtg kpfkevogpv ukvwcvkqp yjgtg vjg iqxgtpogpv cpf vctigv eqtrqtcvkqp jcf engctn cuuwogf cfxgtuctkcn tqngu itcpf lwt rtqeggfkpiu ygtg korgpfkpi cpf vjg eqtrqtcvkqp u eqwpugn jcf kpkvkcvgf ugvvngogpv vcnmu ykvj vjg iqxgtpogpv tgictfkpi dqvj kvu ekxkn cpf etkokpcn kpxguvkicvkqpu 6jg eqwtv jqygxgt tgxgtugf vjg fkuvtkev eqwtv u hkpfkpi vjcv cp uukuvcpv 7pkvgf 5vcvgu vvqtpg jcf xkqncvgf vjg twng d c rtg kpfkevogpv kpvgtxkgy qwvukfg vjg rtgugpeg qh eqtrqtcvg eqwpugn qh cp gornq gg qh vjg vctigv eqtrqtcvkqp yjgp vjg gornq gg uckf ujg ycu dgkpi rtguuwtgf d vjg qypgt qh vjg eqtrqtcvkqp vq rtqxkfg hcnug vguvkoqp vq vjg itcpf lwt v kuuwg qp crrgcn ycu vjg crrnkecdknkv qh 4wng qh vjg cnkhqtpkc 4wngu qh 2tqhguukqpcn qpfwev yjkej dctu gz rctvg eqoowpkecvkqpu ykvj tgrtgugpvgf rctvkgu gtg vjg gornq ogpv rtcevkegu qh vjg uwdlgev eqtrqtcvkqp icxg tkug vq c wpkqp itkgxcpeg c eqornckpv vq vjg grctvogpv qh cdqt c swk vco cevkqp cpf wnvkocvgn c etkokpcn kpxguvkicvkqp d vjg grctvogpv qh wuvkeg 2tkqt vq kpfkevogpv vjg eqtrqtcvkqp u ncy gt eqpvcevgf vjg cuukipgf vq vjg ecug vq fkuewuu ugvvngogpv qh vjg iqxgtpogpv u ekxkn cpf etkokpcn kpxguvkicvkqp 9jgp vjg qypgt qh vjg eqtrqtcvkqp ngctpgf vjg eqtrqtcvkqp u dqqmmggrgt jcf dggp uwdrqgpcgf vq vguvkh dghqtg vjg itcpf lwt jg kpuvtwevgf vjg eqtrqtcvg ncy gt vq oggv ykvj jgt cpf dg rtgugpv fwtkpi jgt vguvkoqp 1p vjg fc qh jgt itcpf lwt crrgctcpeg vjg dqqmmggrgt cttkxgf cv vjg hgfgtcn dwknfkpi cjgcf qh vjg eqtrqtcvkqp u ncy gt cpf gpeqwpvgtgf vjg jcpfnkpi vjg ecug 6jg dqqmmggrgt kpvkocvgf ujg fkf pqv ykuj vq dg tgrtgugpvgf d vjg eqtrqtcvkqp u ncy gt 9jgp vjg cumgf yj vjg dqqmmggrgt tgxgcngf vjg qypgt qh vjg eqtrqtcvkqp jcf kpuvtwevgf jgt vq nkg vq vjg itcpf lwt cpf ujg dgnkgxgf vjg ncy gt u rtgugpeg ycu vq kpvkokfcvg jgt kpvq rtqxkfkpi hcnug vguvkoqp 6jg fkuewuukqp vjgp vwtpgf kpvq c hqtocn kpvgtxkgy kp yjkej vjg dqqmmggrgt rtqxkfgf hwtvjgt kpuvcpegu qh eqtrqtcvg ytqpifqkpi p tglgevkpi vjg fkuvtkev eqwtv u hkpfkpi vjcv vjg jcf eqookvvgf cp gvjkecn xkqncvkqp vjg 0kpvj ktewkv dgicp d uvcvkpi vjg crrnkecdknkv qh 4wng kp rtg kpfkevogpv pqp ewuvqfkcn ugvvkpiu owuv dg fgvgtokpgf qp c ecug d ecug dcuku 5gg 7pkvgf 5vcvgu x coocf f pf kt gtg kp xkgy qh vjg hwnn fghkpgf cfxgtuctkcn tqngu cuuwogf d vjg rctvkgu vjg u eqpvcev ykvj vjg dqqmmggrgt ycu iqxgtpgf d 4wng y g fggo 6jg eqwtv jqygxgt ygpv qp vq qrkpg ocpkhguv vjcv yjgp cp gornq gg rctv qh c fghgpfcpv eqtrqtcvkqp kpkvkcvgu eqoowpkecvkqpu ykvj cp cvvqtpg hqt vjg iqxgtpogpv hqt vjg rwtrqug qh fkuenqukpi vjcv eqtrqtcvg qhhkegtu ctg cvvgorvkpi vq uwdqtp rgtlwt cpf qduvtwev lwuvkeg 4wng fqgu pqv dct fkuewuukqpu dgvyggp vjg gornq gg cpf vjg cvvqtpg ffkvkqpcnn vjg eqwtv uvcvgf qpeg vjg gornq gg qh c eqtrqtcvkqp eqogu hqtyctf vq ikxg vtwvjhwn kphqtocvkqp eqpegtpkpi rqvgpvkcn etkokpcn cevkxkv c engct eqphnkev qh kpvgtguv gzkuvu dgvyggp vjg gornq gg cpf vjg eqtrqtcvkqp 6jku eqphnkev ugtxgu c fwcn rwtrqug hqt kv gzvkpiwkujgu vjg cdknkv qh vjg eqtrqtcvg eqwpugn vq tgrtgugpv dqvj vjg gornq gg cpf vjg eqtrqtcvkqp cpf oquv ukipkhkecpvn fgrtkxgu vjg eqtrqtcvkqp qh c dcuku vq kpxqmg vjg twng cickpuv gz rctvg eqoowpkecvkqpu ykvj tgurgev vq vjg gornq gg '8 '0 ' unfiled tax returns admissible to show willfulness in 218_f3d_840 8th cir the eighth circuit affirmed chmielewski’s conviction and sentence for violations of u s c a sec_7206 and u s c sec_371 and sec_1001 chmielewski sold slot machines to customers in the republic of south africa between and to aid his customers in avoiding the duty imposed by the south african government chmielewski sent them false sales invoices grossly understating the value of the slot machines they were importing likewise chmielewski sent the false invoices to his united_states freight forwarders who filled out the required_documentation for united_states customs finally chmielewski used unfiled tax returns reflecting higher income than the ones he actually filed with the internal_revenue_service to secure bank loans on appeal in regard to his tax conviction chmielewski argued the district_court erred in admitting evidence of prior bad acts by admitting unfiled tax returns pursuant to fed r of evid b in rejecting chmielewski’s argument the eighth circuit followed its prior holding that evidence of a taxpayer’s prior misconduct with tax returns may be relevant evidence of willfulness see 799_f2d_432 8th cir as such the district_court did not abuse its discretion when it allowed the government to show chmielewski used false returns to misrepresent his income as evidence of chmielewski’s willfulness to violate the tax laws privileges crime fraud exception in 223_f3d_775 d c cir the d c circuit held the government cannot force a lawyer to produce a client’s privileged documents to a grand jury under the crime fraud exception if the client’s claimed offense does not constitute a crime the instant appeal evolved from a previous appeal by the republican national committee rnc of an order requiring it to produce an rnc lawyer’s written material on grounds it was related to a grand jury investigation into whether a loan repayment transaction amounted to solicitation and receipt of foreign contributions by the rnc in violation of campaign laws and whether the rnc conspired to defraud the united_states by failing to disclose the transaction in the previous appeal the d c circuit reversed an order which held documents need not have been prepared in connection with a specific claim in order to be shielded by the work product privilege so long as they were prepared in anticipation of litigation on remand from that decision the district_court reviewed the documents in_camera and held them subject_to production under the crime fraud exception the evidence demonstrated the rnc sought the advice of counsel in an effort to construct the transaction in a manner designed to evade federal election campaign laws and to conceal the source of the funds used to repay the loan the district_court found the d c circuit again reversed holding the government failed to allege any conduct was criminal under federal election campaign laws the court deferred to a civil enforcement recommendation issued by the federal elections commission fec when the loan repayment was before it by a deadlock the fec found no probable cause to believe the rnc had violated the law the fec’s interpretation of the federal campaign laws invalidated the government’s theories about how the rnc may have violated those laws since the government’s theories were faulty it was legally impossible for the government to accuse the rnc of conspiring to defraud or commit an offense against the united_states thus there is no crime fraud exception crime fraud exception in 223_f3d_213 3rd cir the third circuit held a grand jury target whose attorney had been subpoenaed to testify against him and produce documents which would ordinarily be privileged was not entitled to review an ex_parte affidavit in which the government asserted the crime fraud exception to the attorney client privilege the affidavit which had been filed to establish the applicability of the crime fraud exception to the attorney client privilege contained details of the grand jury investigation the target contended without seeing the affidavit he and counsel could not effectively rebut the crime fraud exception the third circuit rejected the target’s reliance on cases recognizing the right to view such affidavits in adversarial proceedings and concluded all of the target’s arguments for access to the affidavit failed on the fact grand jury proceedings are investigative rather than adversarial the court pointed out it has consistently endorsed the use of ex_parte affidavits and in_camera proceedings to preserve grand jury secrecy when the government must present information beyond the minimal requirements of 486_f2d_85 3rd cir in schofield the third circuit required the government to justify a grand jury subpoena by making some preliminary showing by affidavit that each item was at least relevant to a grand jury investigation and properly within its jurisdiction the government followed schofield in this case by making its case for the crime fraud exception in an ex_parte affidavit the defendant relied on haines v ligget group inc 957_f2d_81 3rd cir which held in the context of civil litigation the party invoking the attorney client privilege must be given an opportunity to rebut the opponent’s prima facie showing in support of the crime fraud exception the court however distinguished haines emphasizing it was adversarial while the instant case remained in the investigative stage in the grand jury context secrecy assumes primary importance the court rejected the target’s argument that the length of the investigation two years as well as public knowledge of the nature of the investigation required the district_court to order disclosure of the ex_parte affidavit the court concluded it was neither an abuse_of_discretion nor a violation of due process for a district_court to rely on ex_parte affidavits to determine whether the crime fraud exception applies the court cited other opinions from the second and tenth circuits supporting the same conclusion the investigative nature of the proceedings also led the court to reject an argument based on the sixth amendment’s provision of right to counsel the target contended compliance with the subpoena would lead to counsel's disqualification and thus effectively infringe upon his right to counsel the court pointed out the target's right to counsel had not attached and the possibility of eventual disqualification was merely speculative at this point forfeitures civil forfeiture valid and not excessive even though underlying structuring charge was reversed in 213_f3d_805 4th cir the fourth circuit reversed the district court’s holding that funds seized from ahmad were not subject_to forfeiture ahmad operated a money exchange business and used the funds he received from his pakistani clients in the united_states to supply bridge loans to various pakistani companies the companies would repay the bridge loans by distributing rupees to the family members of ahmad’s clients following a conversation with a bank officer in ahmad structured all of his cash deposits in amounts less than dollar_figure to avoid the filing of currency transaction reports from to ahmad deposited dollar_figure million in cash cashier’s checks and wire transfers the fourth circuit affirmed ahmad’s customs fraud and related conspiracy convictions but reversed ahmad’s convictions for structuring and conspiring to structure deposits to evade the reporting requirements because the government failed to prove ahmad wilfully violated the anti-structuring statute u s c a ahmad then filed for return of the seized funds and in response the government filed an action for civil forfeiture of the dollar_figure seized the district_court entered judgment in favor of ahmad finding no statutory basis for the forfeiture and concluded the forfeiture would have in any event constituted an excessive fine on appeal the government contended the dollar_figure was forfeitable because it was directly traceable to the structuring violations and the dollar_figure was forfeitable as a substitute for property involved in the customs fraud violations and the entire amount did not constitute an excessive fine in violation of the eighth amendment in reversing the district_court the fourth circuit addressed each of the government’s contentions separately first the court addressed the validity of the forfeiture for structuring the court found although willfulness was a requirement for violations of the anti-structuring statute at the time ahmad was prosecuted and although the charges against ahmad had been reversed for lack of willfulness the government could still obtain forfeiture of the dollar_figure on grounds of structuring because under u s c congress provided for civil forfeiture without a willfulness requirement second the court addressed the validity of the forfeiture for customs fraud violations the court found ahmad’s conviction for customs fraud and for conspiracy commit customs fraud satisfied the government’s burden of demonstrating probable cause that a customs fraud violation had occurred and entitled it to civil forfeiture of the dollar_figure to turned finally the fourth circuit found the property was forfeitable only if the forfeiture did not constitute an excessive fine prohibited by the eighth amendment the court the supreme court’s grossly disproportional analysis in 524_us_321 to determine whether the forfeiture in this case was excessive bajakajian’s grossly disproportional analysis required the consideration of several factors including the nature and extent of the criminal activity its relation to other crimes its penalties and the harm it caused applying a grossly disproportional analysis to the forfeiture for structuring the court found ahmad’s structuring violations were not a single isolated untruth affecting only the government but rather a series of sophisticated commercial transactions over a period of years which were related to a customs fraud scheme thus the forfeiture of dollar_figure was not grossly disproportional to that offense the court found the remaining forfeiture of dollar_figure for customs fraud also was not grossly disproportional because the customs violations also were not a single isolated crime they were directly related to tax_fraud because the company president used inflated invoices unlawfully in filing his tax returns they were also indirectly related to ahmad’s structuring violations and caused the government to lose approximately dollar_figure of tax revenues in and government not held to actual notice standard where property owner is not incarcerated in 221_f3d_976 7th cir krecioch filed a collateral attack on the administrative forfeitures in district_court and argued the dea deprived him of due process by failing to provide actual notice of the pending proceedings when he was jailed krecioch was charged with federal narcotics offenses and offered a plea bargain two days before he accepted the deal and had his bond revoked the dea mailed to his home notices of forfeiture action against cash and automobiles seized from him a month later the dea mailed to krecioch’s home a notice of forfeiture proceedings against handguns also seized from him even though dea knew of his incarceration and had sent notice of another forfeiture action to him at the jail where he was detained krecioch argued the dea agent who appeared at his plea hearing could have served him with notice of the forfeitures krecioch relied on 112_f3d_318 8th cir which held actual notice was required when the government is prosecuting someone who is actively contesting the criminal charges against him including a count of the indictment seeking forfeiture in considering krecioch’s arguments the seventh circuit stated under established principles of due process a party is only entitled to notice that is reasonably calculated to alert him to the pendency of the action so as to afford him an opportunity to present an objection due process does not require authorities to use the best possible method of notification in this case at the time the notices regarding the cars and cash were sent there was no way the dea could have known krecioch was going to accept a plea agreement and have his bond revoked the court held therefore mailing the notices to krecioch’s home was reasonable and personal service was not required the seventh circuit disagreed with the degree to which cupples required actual notice even when the claimant is free and available at his home address because due process only requires that the government reasonably believe that notice would be likely to reach the claimant based on this the seventh circuit affirmed the district court’s grant of summary_judgment as to the cash and automobiles the seventh circuit however vacated an order of summary_judgment as to the handguns because it found the notices inadequate the seventh circuit found the notices relating to the forfeiture of the handguns which were sent to krecioch’s home after the dea knew he was incarcerated did not satisfy due process money laundering depositing of checks obtained in fraud scheme violated u s c in 221_f3d_502 3rd cir the third circuit held a beauty school owner’s deposits of financial aid checks for the tuition of ineligible students constituted money laundering in violation of u s c cefaratti pled guilty to mail fraud student_loan fraud destruction of property to prevent seizure and to engaging in monetary transactions in property derived from specified unlawful activity in violation of u s c arising from his execution of a scheme to defraud the united_states department of education doe out of student financial assistance funds cefaratti implemented a scheme to maintain his doe financial aide eligibility by submitting false deferment and forbearance forms to student_loan lenders and by making payments on behalf of student borrowers who were on the verge of defaulting in over a two year period cefaratti’s beauty school received over dollar_figure in federal funds to which it was not entitled on appeal cefaratti argued the superseding information was deficient because it failed to charge an essential element of an u s c offense that the funds involved in the monetary transaction constituted or were derived from proceeds obtained from specified unlawful activity the third circuit determined the information tracked the statutory language when it alleged cefaratti knowingly engaged in monetary transactions in criminally derived property valued over dollar_figure the court found the mail fraud to which cefaratti plead guilty was completed when he mailed fraudulent materials in furtherance of his scheme to defraud thus when he engaged in monetary transactions with the proceeds of the criminal activity after the completion of the mail fraud cefaratti’s actions fell within the statue further the loan checks made payable to both cefaratti and the students became criminally derived property when they were endorsed by the student borrowers and any subsequent monetary transactions including depositing the checks violated u s c transaction involving commingled funds supports conviction under u s c in 226_f3d_346 5th cir davis was convicted of inter alia three counts of money laundering in violation of u s c his convictions arose from the operation of an advance fee scheme wherein davis would offer to obtain funding in the form of venture capital for clients in return for a fee typically clients would approach davis seeking between dollar_figure to dollar_figure million based on fraudulent representations davis would contract to secure the funding for an average fee of dollar_figure once davis received the fee he would deposit the proceeds into various escrow accounts with no intention of ever securing any future funding at trial the government alleged davis defrauded one client into wiring dollar_figure into an account davis controlled this tainted money became commingled with dollar_figure of untainted funds already in the account subsequently davis committed a violation by writing a check on the account in the amount of dollar_figure as the issuance of the dollar_figure check constituted engaging in a monetary transaction greater than dollar_figure in property derived from the specified crime of wire fraud on appeal davis argued the dollar_figure threshold requirement specified in was not met as the difference between the existing account balance of untainted funds dollar_figure and the dollar_figure check amounted to only dollar_figure in proceeds from criminal activity see 74_f3d_1093 11th cir under there must be proof the transaction involved more than dollar_figure of tainted money introduced banking in rejecting davis’ approach the fifth circuit relied upon a rule it had developed in previous commingling cases dealing with the interstate transfer of funds obtained by fraud the court stated when the aggregate amount withdrawn from an account containing commingled funds exceeds the clean funds individual withdrawals may be said to be of tainted money even if a particular withdrawal was less than the amount of clean money in the account here the court looked to the record of trial where the government had records showing various withdrawals from the account in question made after receipt of the dollar_figure wire transfer totaling more than dollar_figure one of these withdrawals was the dollar_figure check which after it cleared the account actually lowered the account balance to under dollar_figure in support of its aggregate_theory the court cited its prior rationale in 970_f2d_1397 5th cir where in deciding whether a defendant could have engaged in a transaction in tainted funds the court opined t o view each transaction in isolation would defeat the purpose of the statute allowing sophisticated criminals to spirit stolen funds from one state to another so long as each check written did not exceed the amount of legitimate funds on hand in the bank account id pincite the court determined the commingling problem under the money laundering statutes was the same as under the transfer of funds statute and applied its own precedents rather than choosing between the commingling rules applied in other circuits compare 27_f3d_969 4th cir where clean and tainted money has been commingled any withdrawal from account is presumed tainted under up to amount of tainted funds deposited with 116_f3d_1270 9th cir in case of commingling withdrawal is only shown to be tainted under if it is the entire balance of commingled account accordingly davis’ conviction was affirmed investigative techniques wiretap order invalid if issued prior to department of justice authorization in 218_f3d_1108 9th cir the ninth circuit held under the law governing the ability of law enforcement officials to seek judicial authority to intercept communications u s c a federal court order for a wiretap is invalid if it is issued prior to securing authorization by the attorney_general or one of his her designees accordingly here the interception of communications pursuant to such an order was unlawful and any evidence obtained must be suppressed in date an assistant united_states attorney ausa submitted to the office of enforcement operations oeo in the criminal division of the department of justice a draft application_for an order to intercept communications over a cellular telephone line an oeo staff attorney reviewed the application and then notified the ausa he would recommend its approval by the appropriate department of justice official prior to securing this authorization however the application and order were brought before a federal district judge the ausa informed the judge that written authorization was on its way but had not yet been received despite this the judge signed the order approving the as of yet unauthorized application adding in his own handwriting this order is not to be executed until and unless formal approval in writing is received from the united_states attorney_general or her designee shortly thereafter oeo faxed the ausa a memorandum authorizing the wiretap application immediately the government commenced the wiretap operation resulting in a count indictment charging conspiracy to manufacture and distribute methamphetamine and related offenses the judge presiding over the criminal case granted the defendants’ motion to suppress the intercepted communications holding the wiretap authorization order was invalid because the government failed to obtain the required authorization for the application before submitting it to the court for approval on appeal the government contended although it disobeyed the statutes which set forth the mandatory procedures required in order to obtain a wiretap order partial compliance sufficed to avoid the sanction of suppression in dismissing this argument the ninth circuit strictly scrutinized u s c sec_2518 which explicitly mandates the authorization of the attorney_general or his designated agent must be secured prior to submitting an application_for a wiretap order for judicial approval moreover the identity of the authorizing official must be included in the application presented to the court these requirements were highlighted in 416_us_505 where the supreme court stated it is at once apparent that the wiretap law not only limits the crimes for which intercept authority may be obtained but also imposes preconditions to obtaining any intercept authority at all id furthermore in 416_us_562 the supreme court opined failure to secure approval of the attorney_general or her designees prior to making application_for judicial authority to wiretap renders the court authority invalid and the interception of communications pursuant to that authority ‘unlawful’ within the meaning of u s c sec_2518 id pincite as sec_2518 provides for intercepted communications the ninth circuit affirmed the holding of the district_court suppression of unlawfully the informant agreement in 47_fedclaims_698 the court of federal claims dismissed an irs informant’s claim for a reward under a tax informant agreement holding the informant breached his agreement with the service and therefore was not entitled to a reward jarvis entered into an agreement with the service under which he was to provide information on taxes owed by several taxpayers in return the service agreed to pay jarvis a portion of the taxes collected and not disclose his identity jarvis expected the service would collect dollar_figure million in taxes instead the service ultimately settled with the taxpayers and collected only dollar_figure million furthermore a special_agent disclosed jarvis’ identity to the taxpayers resulting in a suit by the taxpayers against jarvis jarvis submitted a claim for his reward to the service and the service asserted jarvis would be entitled to dollar_figure if he satisfied all the contractual conditions of the informant agreement the service paid jarvis no money and he sued the government for breach of contract arguing he was entitled to at least dollar_figure million as a reward and the service breached an implied covenant to collect the full amount of taxes owed jarvis also sought damages in the form of litigation costs incurred in defending himself in the taxpayer’s civil litigation resulting from the service’s disclosure of his identity in a prior opinion the court of federal claims dismissed a lawsuit brought by jarvis holding there was no bad faith in the service’s calculation of his reward the service had no duty to maximize the reward and the government had no obligation to pay litigation costs arising from the disclosure of the informant’s identity jarvis v united_states no 97-806t tnt - date the court of federal claims also denied jarvis’ motion to reconsider its previous decision explaining the agreement contained no indemnification provision and the service was not bound by any provision implied from the parties’ dealings jarvis v united_states no 97-806t tnt - date in the current proceeding the sole issue before the court was whether jarvis had breached the informant agreement thereby making himself ineligible for a reward the agreement provided the informant shall not be entitled to any payment under this agreement if it then goes on to list specific disqualifying circumstances including a provision which states no reward is due if payment would be inappropriate the government relied on this language to bring in violations of other provisions of the contract specifically two sections which dealt with disclosure of information and delegation of the reward the court held jarvis violated these two sections by disclosing information regarding the taxpayers to others involved in a civil suit against the taxpayers at the same time the service was investigating the taxpayers and agreeing to split his reward with others who had assisted him in his dealings with the service the court ultimately held by breaching his agreement with the service jarvis was not entitled to a reward violation of code of professional responsibility in in re complaint as to the conduct of daniel j gatti ore gatti a private practitioner licensed to practice law in oregon while gathering facts as part of his representation of a client misled others to believe he was a medical doctor when confronted by the oregon bar gatti responded the state professional responsibility board_of the oregon bar had previously held oregon department of justice lawyers who in the course of an undercover operation advised investigators to have individuals pose as janitors and injured workers for the purpose of infiltrating chiropractors’ and lawyers’ offices to obtain information about suspected fraudulent workers’ compensation claims had violated no provisions of the oregon code of professional responsibility citing this holding gatti argued since government attorneys can oversee undercover operations private practice attorneys for the purpose of gathering to conduct investigations even if in doing so they mislead information should be able since gatti put into play the role of government attorneys overseeing or rendering advice in the course of undercover operations both the united_states attorney for the judicial district of oregon and the attorney_general for the state of oregon filed amicus curiae briefs urging the supreme court of oregon to recognize a prosecutorial exception to the oregon code of professional responsibility in deciding the case the supreme court of oregon rejected gatti’s argument as well as the positions asserted by those government and private parties who had filed amicus curiae briefs the supreme court of oregon held neither government nor private attorneys were entitled to misrepresent identity and purpose to gather information without violating the oregon code of professional responsibility and ors sentencing certainty of collection of tax owed by others is not relevant to computation of tax loss in 218_f3d_1106 9th cir andra a member of an organization called the pilot connection society sold untaxing packages to several individuals against whose property the service had obtained liens andra falsely represented these untaxing packages as being capable of permanently and legally removing any obligation to pay income taxes or maintain records as well as removing the service’s levies and liens andra pled guilty to conspiracy to defraud the service and to corrupt intimidation of and interference with service agents andra appealed his sentence arguing the district_court erred by including in its calculation of tax loss the liabilities of the individuals to whom he had sold untaxing packages andra argued because these tax_liabilities were already delinquent before andra joined the pilot connection society the government had failed to prove but for andra’s involvement these individuals would have paid their tax_liabilities the ninth circuit rejected andra’s argument noting the sentencing guidelines do not require proof of but for causation in calculating tax loss rather the tax loss is the total amount of loss that was the object of the offense since andra’s plea admitted the object of the offense was conspiracy to evade payment of back taxes owed by his individual customers the inclusion of their liabilities in the tax loss resulted in andra’s sentence which correctly reflected the object of his conspiracy new opinion holds an unchallenged presentence report constitutes clear_and_convincing evidence the ninth circuit has issued a new opinion replacing its previous opinion in 198_f3d_745 9th cir date the new opinion may be found at 220_f3d_1159 9th cir romero-rendon was arrested while trying to enter the united_states illegally computer checks revealed he had a criminal history in the united_states and had previously been deported romero-rendon pled guilty to being a deported alien found in the united_states in violation of u s c at his sentencing hearing the government requested a sixteen level enhancement since his criminal history involved a violent crime romero-rendon objected to the enhancement on grounds it was based only on the presentence report psr not on conviction documents he did not allege the psr was inaccurate or challenge the psr’s characterization of his previous crime as violent on appeal romero-rendon argued the government should be required to prove his previous violent crime by clear_and_convincing evidence which it cannot do based only on the psr he based his argument on 177_f3d_824 9th cir hopper also involved a defendant whose sentence was being enhanced due to his previous violent crime hopper held when a sentencing enhancement has a severe effect on the sentence relative to the offense of conviction the government must satisfy the clear_and_convincing standard rather than the usual preponderance_of_the_evidence standard in its december opinion the ninth circuit failed to state whether romero-rendon’s sixteen level enhancement had triggered the clear_and_convincing standard and if so whether the psr constituted clear_and_convincing evidence of romero-rendon’s previous violent crime rather the ninth circuit distinguished hopper on the basis romero- rendon unlike the defendant in hopper had never alleged inaccurate or challenged the psr was the psr’s characterization of his previous crime as violent the ninth circuit held where a defendant does not challenge the accuracy of the information on which the judge bases the sentence enhancement a preponderance_of_the_evidence is the appropriate standard regardless of the severity of the enhancement in its july opinion the ninth circuit modified its december opinion by stating the psr did in fact constitute clear_and_convincing evidence of romero- rendon’s previous violent crime the ninth circuit began by referencing its previous holding in 147_f3d_889 9th cir that a psr whose accuracy is unchallenged may be relied upon to prove the defendant’s previous violent crime by a preponderance_of_the_evidence the ninth circuit noted uncertainty existed as to when the clear_and_convincing standard is triggered the court however found it did not need to resolve the conflict over when the clear_and_convincing standard is triggered since marin-cuevas did not limit its holding to instances in which the proposed enhancement is not severe the ninth circuit held a psr whose accuracy is unchallenged constitutes clear_and_convincing evidence of the defendant’s previous violent crime government bears burden at sentencing to prove tax loss in 217_f3d_960 8th cir the eighth circuit reversed the district court’s restitution order and remanded the case for resentencing tucker plead guilty to conspiracy to defraud the united_states by impeding the assessment and collection of income_tax in violation of u s c sec_371 in a series of complicated transactions involving sec_1374 tucker and a co- conspirator effectively eliminated a corporate level tax their company would have paid on the substantial capital_gain realized on the sale of company assets actually and fraudulently sold by tucker at sentencing the district_court ordered tucker to present his evidence of the tax loss first and then rejected his loss theory as a matter of law as this obviated the need for government rebuttal the government presented no evidence of the actual loss to the government the government instead relied on the tax loss calculation contained in the presentence report and the cross-examination of tucker’s witness the district_court based its restitution order on the amount of loss contained in the presentence report the eighth circuit reversed the restitution order holding the government failed to meet its burden to present affirmative evidence at sentencing of the tax loss the eighth circuit following its holdings in prior cases stated that the presentence report was not evidence and the actual loss as determined in the presentence report could not be upheld further the court stated the government had the burden to prove fact-intensive issues such as tax loss by a preponderance_of_the_evidence finding the government failed to meet this burden but finding the government was entitled to a new sentencing hearing on remand to present its loss theory the court remanded for resentencing extraterritorial loss included when crime of conviction is against united_states in 218_f3d_840 8th cir as factually set forth on page two of this bulletin the eighth circuit affirmed chmielewski’s conviction and sentence chmielewski argued the district_court erred by enhancing his sentence based on loss of duties to the south african government in affirming chmielewski’s sentence the eighth circuit found chmielewski’s false statements were domestic acts and the crime charged was a crime against the united_states therefore the principle that extraterritorial acts which are not crimes against the united_states cannot be included in determining the offense level did not apply in this case further the eighth circuit found there was no intrusion into foreign jurisdictions when the severity of chmielewski’s domestic crime was gauged by measuring the damage done to his extraterritorial victims sentencing under money laundering guidelines and two level enhancement for leadership role 221_f3d_502 3rd cir as factually set forth on page five of this bulletin the third circuit affirmed cefaratti’s conviction and sentence of months imprisonment and a two year period of supervised release cefaratti argued the district_court erred by calculating his sentence using the money laundering guidelines rather than the fraud guidelines and by enhancing his sentence two levels under u s s g sec_381 c for a leadership role in the offenses first cefaratti argued his was an atypical case in which the guideline section indicated for the statute of conviction ie money laundering was inappropriate he argued he should have been sentenced under u s s g sec_2f1 the fraud guideline because his conduct did not involve large scale drug trafficking or organized crime and his conduct as a whole was little more than routine fraud to which the money laundering was incidental in affirming cefaratti’s sentence the third circuit decided nothing in its prior decisions suggested the money laundering guidelines u s s g sec_2s1 and sec_1 could be used only for defendants who had engaged in large scale drug trafficking or organized crime further the court pointed out it had applied the money laundering sections in situations involving conduct similar to cefaratti’s and had not questioned the propriety of that application of the guidelines the court found cefaratti used criminally derived property to promote further fraud thus it could not say such conduct was minimal incidental to the underlying fraud second cefaratti argued when counts are grouped under the guidelines a defendant’s sentence is based on the highest offense level of the counts in the group in his case the u s c charge cefaratti argued therefore even if he had been a leader in the fraud he played no leadership role in the money laundering and the offense level applicable to the fraud count even when adjusted for the leadership role would have been less than that of the unadjusted u s c offense the court pointed to the guidelines in stating the determination of a defendant’s role in the offense is to be made on the basis of all conduct within the scope of u s s g sec_1b1 relevant conduct and not solely on the basis of elements and acts cited in the count of conviction further the third circuit found even if cefaratti was correct and the court should have determined the applicability of the adjustment before grouping there was sufficient evidence to support a leadership adjustment on both the fraud and the money laundering counts criminal tax bulletin table of cases october title_26 and title_26 related cases 220_f3d_1120 9th cir 222_f3d_1133 9th cir evidence 218_f3d_840 8th cir privileges 223_f3d_775 d c cir 223_f3d_213 3rd cir forfeitures 213_f3d_805 4th cir 221_f3d_976 7th cir money laundering 221_f3d_502 3rd cir 226_f3d_346 5th cir investigative techniques 218_f3d_1108 9th cir 47_fedclaims_698 in re complaint as to the conduct of daniel j gatti ore sentencing 218_f3d_1106 9th cir 198_f3d_745 9th cir date 217_f3d_960 8th cir 218_f3d_840 8th cir 221_f3d_502 3rd cir department of the treasury internal_revenue_service document catalog number 24304b


cca_2014072511471746 id uilc number release date third party communication date of communication month dd yyyy from sent friday date am to cc bcc subject fw sec_6012 filing_requirements of a foreign_trust which becomes a u s trust or vice-versa hi ---------- please see ---------- email below thanks ------------------ ------------- --------------------- from ------------------ sent friday date am to ------------------ cc --------------------------------------------- subject fw sec_6012 filing_requirements of a foreign_trust which becomes a u s trust or vice-versa --------- as discussed could you please forward this email to ----------------------and process as cca let me know if you have any questions thank you very much --------- in the email below you have asked about the income_tax return filing_requirements of a_trust that converts from a u s trust to a foreign_trust or vice versa for the year of the conversion we conclude that the trust just like an alien individual who has both nonresident and resident status during a single tax_year will have to treat the year of conversion as a dual status tax_year accordingly the trust must both file the proper year-end tax_return form_1041 or form 1040nr and attach a statement showing its income for the part of the year before the conversion sec_6012 sets forth requirements for when an individual or entity is required to file a u s federal_income_tax return in general the united_states imposes income_tax filing_requirements on all u s persons and certain foreign persons including certain foreign trusts with u s owners or other u s nexus for purposes of u s federal_income_tax and reporting sec_7701 defines the term u_s_person to mean a citizen or resident of the u s a domestic_partnership a domestic_corporation any estate other than a foreign_estate and certain trusts sec_7701 defines the term foreign_trust broadly to mean any trust other than a_trust treated as a u_s_person a_trust is defined as a united_states_person if a court within the united_states is able to exercise primary supervision over the administration of the trust the court test and one or more united_states persons have the authority to control all substantial decisions of the trust the control test satisfies both the court test and the control test is treated as a u_s_person for purposes of u s federal_income_tax and reporting a_trust that is not a u_s_person is treated as a foreign_trust sec_7701 e a_trust which sec_7701 a_trust that is a u_s_person simply files form_1041 u s income_tax return for estates and trusts a foreign_trust is treated for tax purposes just like a nonresident_alien and is required to file a form 1040nr u s nonresident_alien income_tax return to report its income from sources within the u s and income that is effectively connected with a u s trade_or_business see instructions for form 1040nr instructions for form_1041 sec_1_6012-1 provides for a dual-status tax_year for nonresident_aliens that become u s citizens or residents during the tax_year or u s citizens and residents that abandon their citizenship and thus become nonresident_aliens during the tax_year individuals that are u s citizens or residents on the last day of the tax_year must file form_1040 and enter dual-status return across the top and attach a statement usually form 1040nr showing their income for the part of the year that they were a nonresident_alien individuals that are nonresident_aliens on the last day of the tax_year must file form 1040nr enter dual-status return across the top and attach a statement usually form_1040 showing income for the part of the year that the individual was a u s citizen or resident see also pub instructions for form 1040nr because a u s trust is treated as a u_s_person and a foreign_trust is treated as a nonresident_alien for tax purposes the dual-status tax_year treatment would apply here as well the only caveat of course is that a form_1041 should be filed in lieu of form_1040 accordingly a foreign_trust that converts to a u s trust should file a form_1041 and should attach a statement form 1040nr as a schedule showing income for the portion of the year that it was a foreign_trust a u s trust that converts to a foreign_trust should file form 1040nr and attach a statement form_1041 as a schedule showing income for the portion of the year that it was a u s trust if you have any questions please do not hesitate to ask regards ------------------ ------------- ------------------


number release date id office uilc cca_2009010912000657 ---------------- from ----------------- sent friday january pm to ---------------------- cc subject response to your qsst question ---------- this responds to your question regarding whether incorrect reporting and payment of taxes by a qualified_subchapter_s_trust qsst described in sec_1361 terminated either the qsst election under sec_1361 or the s election under sec_1362 according to the facts provided the qsst reported on its income_tax returns the items on the schedule_k-1 it received from the s_corporation in which it held stock and paid the resulting taxes rather than the beneficiary reporting the items on his individual income_tax returns and paying the taxes consistent with sec_1361 the filing of an improper tax_return and payment of taxes by a qsst rather than the beneficiary are not circumstances described in sec_1361 and sec_1362 thus the improper filing and payment by itself did not cause termination of the qsst or s elections please call me if you have any questions thank you -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------