t c summary opinion united_states tax_court russell s engle and michelle c chiou petitioners v commissioner of internal revenue respondent docket no 2849-08s filed date russell s engle and michelle c chiou pro sese brooke s laurie for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a dollar_figure deficiency in petitioners’ federal_income_tax and a sec_6662 accuracy-related_penalty in a stipulation of settled issues the parties agree to the amount reported claimed adjusted amount following adjustments item income from a state_income_tax refund deduction for real_estate_taxes deduction for state_and_local_income_taxes deduction for charitable_contributions deduction for insurance expenses deduction for utilities expenses deduction for other expenses dollar_figure big_number big_number big_number big_number big_number big_number dollar_figure big_number big_number big_number big_number big_number big_number in a stipulation of facts the parties agree that petitioners are entitled to deduct on schedule c profit or loss from business the following depreciation and sec_179 expenses and that these amounts were included in the amounts respondent allowed in the notice_of_deficiency description computers and peripherals dollar_figure office furniture big_number computer_software big_number dollar_figure big_number big_number amount claimed amount allowed mercedes ml320 light truck truck cellular telephone use macrs re assets placed_in_service before other depreciation big_number big_number big_number big_number 1based on business usage rates of percent the issues remaining1 for decision are whether petitioners are entitled to a deduction for schedule c depreciation and sec_179 expenses in an amount greater than the dollar_figure that respondent allowed entitled to a deduction for schedule c car and truck expenses in an amount greater than the dollar_figure that respondent allowed and liable for the sec_6662 accuracy-related_penalty background some of the facts have been stipulated and are so found the stipulation of facts and the exhibits received into evidence are incorporated herein by reference when the petition was filed petitioners resided in california during michelle chiou ms chiou was a licensed real_estate broker who owned and operated prestige realty a real_estate brokerage firm and russell engle mr engle worked for ms chiou as a licensed real_estate salesperson in november 1the amounts of petitioners’ self-employment_tax self- employment_tax deduction child_tax_credit and additional_child_tax_credit are computational matters to be resolved in the parties’ rule_155_computations consistent with the court’s decision see sec_24 b d f ms chiou purchased a honda odyssey touring passenger minivan minivan for use in her real_estate business for a total cash price of dollar_figure which includes a cash price of dollar_figure for the minivan and accessories a document preparation fee of dollar_figure and sales_tax of dollar_figure on form_4562 depreciation and amortization petitioners reported a cost_basis of dollar_figure for the minivan and they elected to expense that amount under sec_179 they also claimed deductions for schedule c car and truck expenses of dollar_figure for the minivan and truck evidently petitioners claimed schedule c car and truck expenses of dollar_figure for the minivan and dollar_figure for the truck respondent examined petitioners’ federal_income_tax return respondent determined that petitioners were entitled to a deduction for schedule c depreciation and sec_179 expenses of dollar_figure for the minivan respondent also determined that petitioners were entitled to a deduction for schedule c car and truck expenses of dollar_figure discussion i burden_of_proof the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer bears the burden to prove 2there is no indication in the record of how respondent determined the dollar_figure 3there is no indication in the record of how respondent allocated the dollar_figure between the minivan and the truck that the determinations are in error see rule a 290_us_111 see also 503_us_79 stating that deductions are strictly a matter of legislative grace and taxpayers bear the burden of proving that they are entitled to claim the deduction but the burden_of_proof on factual issues that affect the taxpayer’s tax_liability may be shifted to the commissioner if the taxpayer introduces credible_evidence with respect to the issue and he she satisfies certain conditions sec_7491 and petitioners have not alleged that sec_7491 applies and they have neither complied with the substantiation requirements nor maintained all required records see sec_7491 and b accordingly the burden_of_proof remains on them ii sec_162 sec_179 sec_274 sec_280f and sec_6001 and the regulations thereunder sec_162 authorizes a deduction for all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business and when property is used in a trade_or_business or held_for_the_production_of_income the taxpayer may be allowed a depreciation deduction sec_167 and sec_168 alternatively the cost of sec_179 property may be expensed and deducted in the year that the property is placed 4see sec_179 for the definition of the term sec_179 property into service in certain circumstances sec_179 if the property is used for both business and other purposes then the portion of the cost that is attributable to the business use is eligible for expensing under sec_179 but only if more than percent of the use is for business purposes sec_1_179-1 income_tax regs in addition the amount of the deduction allowable under sec_179 with respect to any listed_property is subject_to the limitations of sec_280f b and d in the same manner as if it were a recovery deduction allowable under sec_168 sec_280f sec_1 280f- 2t b temporary income_tax regs fed reg date revproc_2004_20 sec dollar_figure and 2004_1_cb_642 sec_280f and d limits the amount of the depreciation deduction of passenger automobiles to certain amounts for the applicable_recovery_period see revproc_2004_20 sec dollar_figure and 2004_1_cb_642 for the applicable_amounts of the limitations sec_280f provides that if listed_property is not used predominantly in a qualified_business_use then the depreciation deduction for the property is determined under sec_168 relating to the alternative_depreciation_system ie the straight-line method rather than sec_168 7in addition the american_jobs_creation_act_of_2004 publaw_108_357 sec 118_stat_1659 amended sec_179 by adding par and limiting the expendable cost under sec_179 of a sport_utility_vehicle placed into service after date to dollar_figure see sec_179 for the definition of sport_utility_vehicle petitioners concede that the minivan’s expendable cost under sec_179 was limited to dollar_figure listed_property is defined to include passenger automobiles and any other property8 used as a means of transportation sec_280f and ii passenger_automobile means any four-wheeled vehicle that is manufactured primarily for use on public streets roads and highways and is rated at big_number pounds gross vehicle weight or less in the case of a truck or van sec_280f it also includes any part component or other item that is physically attached or traditionally included in the purchase_price of an automobile sec_1_280f-6 income_tax regs the parties agree that the minivan’s gross vehicle weight without any part component or other item is big_number pounds in addition mr engle testified that they purchased the minivan with five accessories which were all-season floor mats that weighed pounds cargo boards that weighed pounds a cargo tray that weighed pounds a third-row sunshade that weighed pounds and a cargo mat that weighed pounds he testified that the cargo tray was stored in a well the cargo boards go on 8the term listed_property does not include any other_property used as a means of transportation if substantially_all of the use of it is in a trade_or_business of providing to unrelated persons services consisting of the transportation of persons or property for compensation or hire sec_280f petitioner’s use of the minivan does not qualify for this exception 9the sale finance contract sets forth a cash price of dollar_figure for the minivan and accessories that includes a cash price of dollar_figure for the minivan and a cash price of n a for accessories top of that area and the cargo mat covered those he testified that the combined weight of the five accessories i sec_52 pounds and when they are added to the minivan’s gross vehicle weight of big_number pounds the total is big_number pounds according to mr engle since this exceeds big_number pounds it is not a sec_280f passenger_vehicle subject_to the strict substantiation and mileage log rules for listed_property to corroborate mr engle’s testimony on the acquired accessories petitioners provided photographs of the minivan’s interior that show the all-season floor mats cargo mat and third-row sunshade although there is no evidence to corroborate mr engle’s testimony as to the acquisition of the cargo boards and cargo tray the court observed his appearance and demeanor at trial and finds his testimony to be honest sincere and credible the court therefore finds that the minivan’s gross vehicle weight exceeds big_number pounds and that the minivan is excepted from the definition of passenger_automobile see sec_280f consequently the amount of petitioners’ deduction for schedule c depreciation and sec_179 expenses is not limited by sec_280f see supra note but the catchall provision of sec_280f relating to any other_property used as a means of transportation nevertheless applies and the minivan is listed_property in addition the minivan is not a qualified non-personal-use vehicledollar_figure in short petitioners’ deductions for schedule c depreciation and sec_179 expenses and schedule c car and truck expenses must be substantiated in accordance with sec_274 and the regulations thereunder as a general_rule deductions are allowed only to the extent that they are substantiated sec_274 no deductions are allowed for gifts listed_property traveling entertainment amusement or recreation unless substantiated taxpayers must keep records sufficient to establish the amounts of the items required to be shown on their federal_income_tax returns if the taxpayer establishes that he she has incurred a deductible expense yet is unable to substantiate the exact amount the court may estimate a deductible amount in some circumstances 39_f2d_540 2d cir but the court cannot estimate a taxpayer’s expenses with respect to the items enumerated in sec_274 50_tc_823 affd per curiam 412_f2d_201 2d cir rodriguez v commissioner tcmemo_2009_22 taxpayers are required to substantiate their deductions for listed_property by adequate_records or sufficient evidence to corroborate his her testimony as to the amount of the 10the flush language of sec_274 provides that any qualified non-personal-use vehicle as defined in sec_274 is not subject_to the substantiation requirements of sec_274 see sec_1_274-5t temporary income_tax regs fed reg date for a list of examples of vehicles that constitute qualified non-personal-use vehicles expenditure eg the cost of acquisition maintenance or repairs or other expenditures the amount of each business use and total use by establishing the amount of its business mileage and total mileage in the case of automobiles and other means of transportation time ie the date of the expenditure or use and the business_purpose for the expenditure or use sec_274 sec_1_274-5t temporary income_tax regs fed reg date the temporary_regulation further provides that taxpayers must maintain and produce such substantiation as will constitute proof of each expenditure or use sec_1_274-5t temporary income_tax regs supra written evidence has considerably more probative value than oral evidence and the probative value of written evidence is greater the closer in time it is to the expenditure or use id although a contemporaneous log is not required a record made at or near the time of the expenditure or use that is supported by sufficient documentary_evidence has a higher degree of credibility than a subsequently prepared statement id the corroborative evidence required to support a statement not made at or near the time of the expenditure or use must have a high degree of probative value to elevate the statement and evidence to the level of credibility reflected by a record made at or near the time of the expenditure or use supported by sufficient documentary_evidence id to satisfy the adequate record requirement the taxpayer must maintain an account book a diary a log a statement of expense trip sheets or a similar record and documentary_evidence that in combination are sufficient to establish each element of expenditure or use sec_1_274-5t temporary income_tax regs fed reg date the adequate record must be prepared or maintained in such manner that each recording of an element or use is made at or near the time of the expenditure or use sec_1_274-5t temporary income_tax regs supra mr engle testified that the reason they didn’t keep a vehicle log is because since it was being used exclusively for business we didn’t need to allocate between the business and the personal usage of the vehicle he testified that the minivan’s actual expenses were automatically downloaded by his quicken software from their credit card and bank accounts he set the code for which expense belongs to which and he used that information to prepare their tax_return he testified that the minivan was kept at their office and was used exclusively in their real_estate business for business purposes including taking a buyer’s initial deposit check to the title company taking disclosure paperwork to the buyer’s agent representing sellers at inspection appointments meeting with contractors at the properties arranging clients’ moves and placing their things in storage taking clients to see properties driving to newly listed properties for brokers’ tours driving to clients’ properties to hold open houses meeting with buyers to prepare offers and meeting with sellers to present offers and driving from fremont to warehouses in oakland hayward i believe to san jose to look for tile that would match the tile in the house he testified that the truck was used a little after they purchased the minivan but almost all the driving was done with the minivan because it was newer looked better got better mileage and had a better navigation system according to mr engle we do remember many of the trips he testified that we estimated that about a thousand miles of mileage was driven in that to 6-week period petitioners admitted that their reported big_number miles of business use and big_number miles of total use were mere estimates thus they have failed to substantiate the amounts of the minivan’s use see sec_274 sec_1_274-5t temporary income_tax regs supra with the exception of the minivan’s cost petitioners have not substantiated the amounts of each expenditure because their evidence does not establish that the amounts were expended for the minivan rather than for their truck or a sedan they also owneddollar_figure see sec_274 sec_11petitioners did not submit the underlying receipts for the continued 274-5t b i a temporary income_tax regs supra petitioners’ evidence also does not establish the date of each expenditure or use see sec_274 sec_1_274-5t temporary income_tax regs supra their evidence also does not substantiate the business_purpose of each expenditure or usedollar_figure see sec_274 sec_1_274-5t temporary income_tax regs supra accordingly respondent’s determinations are sustained and petitioners are not entitled to allowances for schedule c depreciation and sec_179 expenses and schedule c car and truck expenses greater than the amounts that respondent determined iii accuracy-related_penalty initially the commissioner has the burden of production with respect to any penalty addition_to_tax or additional_amount sec_7491 the commissioner satisfies this burden of production by coming forward with sufficient evidence that indicates that it is appropriate to impose the penalty see 116_tc_438 once the commissioner satisfies this burden of production the taxpayer continued expenditures but rather a spreadsheet entitled tax schedule and bank credit card statements 12the court also notes that although not determinative the sale finance contract shows that the primary use for which the minivan was purchased was for personal family or household not business or commercial must persuade the court that the commissioner’s determination is in error by supplying sufficient evidence of an exception id in pertinent part sec_6662 and b and imposes an accuracy-related_penalty equal to percent of the underpayment that is attributable to negligence or disregard of rules or regulations or a substantial_understatement of income taxdollar_figure negligence includes any failure to make a reasonable attempt to comply with the provisions of this title sec_6662 negligence also includes any failure by the taxpayer to substantiate items properly sec_1_6662-3 income_tax regs the term disregard includes any careless reckless or intentional disregard sec_6662 sec_6664 is an exception to the sec_6662 penalty no penalty is imposed with respect to any portion of an underpayment if it is shown that there was reasonable_cause therefor and the taxpayer acted in good_faith sec_1_6664-4 income_tax regs incorporates a facts_and_circumstances_test to determine whether the taxpayer acted with reasonable_cause and in good_faith the most important factor is the extent of the taxpayer’s effort to assess his her proper tax_liability id circumstances that may indicate reasonable_cause and good_faith include an honest misunderstanding of fact 13because the court finds that petitioners were negligent or disregarded rules or regulations the court need not discuss whether there is a substantial_understatement_of_income_tax see sec_6662 fields v commissioner tcmemo_2008_207 or law that is reasonable in light of the taxpayer’s experience knowledge and education id petitioners conceded that they understated the income from their state_income_tax refund by dollar_figure see supra p in addition they conceded that they overstated many of their claimed deductions see supra pp and note they also have not maintained adequate books_or_records nor substantiated their deductions in accordance with sec_274 and sec_6001 and the regulations thereunder see sec_1_6662-3 income_tax regs the court therefore finds that respondent has met his burden of production petitioners were negligent or disregarded rules or regulations and they have not established that they acted with reasonable_cause and in good_faith with respect to their noncompliance with the code’s requirements respondent’s determination is sustained to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court bstate of frederick r hoffman deceased marilyn c hoffman executor and marilyn c hoffman petitioners v commissioner of internal revenue respondent docket no filed date frank agostino susan m flynn and andrew d engel for petitioners craig connell and francis j strapp jr for respondent memorandum findings_of_fact and opinion foley judge by notice dated date respondent determined deficiencies of dollar_figure dollar_figure and dollar_figure in petitioners' and federal income taxes respectively all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure after concessions the issues are whether petitioners have interest_income pursuant to sec_7872 from loans made to their controlled_corporation and are entitled to deduct on their tax_return real_property_taxes findings_of_fact frederick r hoffman died on date and marilyn c hoffman was duly appointed executor of his estate at the time the petition was filed mrs hoffman resided in woodville virginia petitioners were the controlling shareholders of and routinely advanced funds to hilltop stud farm inc hilltop petitioners routinely paid hilltop’s expenses with personal funds corporate and personal records reflected the advances including expense payments as increases in petitioners’ shareholder loan accounts petitioners made nine advances in three in and four in ie hilltop’s fiscal years ending march hilltop’s and federal_income_tax returns signed by mrs hoffman as its president reflected loans from stockholders of dollar_figure dollar_figure and dollar_figure respectively hilltop did not pay interest on these amounts in hilltop repaid petitioners dollar_figure of the advances they did not report any of the dollar_figure as income in that same year hilltop paid dollar_figure to electronic keyboard service for repair of mrs hoffman’s organ hilltop recorded this transaction as a repayment of petitioners’ advances and reduced mrs hoffman’s shareholder loan account by dollar_figure petitioners prepaid dollar_figure of their real_property_taxes and deducted that amount on their tax_return respondent determined that petitioners pursuant to sec_7872 had unreported interest_income of dollar_figure dollar_figure and dollar_figure in and respectively in addition respondent disallowed petitioners’ dollar_figure prepaid real_property tax deduction opinion i interest_income from loans sec_7872 recharacterizes a below-market_loan ie loan subject_to a below-market interest rate as an arm’s-length transaction in which the lender made a loan to the borrower in exchange for a note requiring the payment of interest at a statutory rate as a result the parties are treated as if the lender made a transfer of funds to the borrower and the borrower used these funds to pay interest to the lender the transfer to the borrower is treated as a gift dividend contribution of capital payment of compensation or other payment depending on the substance of the transaction the interest payment is included in the lender’s income and generally may be deducted by the borrower see 108_tc_100 sec_7872 applies to a transaction that is a below- market loan and not described in any of certain enumerated categories see sec_7872 e we discuss the requirements in turn a below--market loan requirement to determine if the below-market_loan requirement is satisfied we must ascertain whether a transaction is a loan a demand or term_loan and subject_to a below- market interest rate see sec_7872 loan requirement respondent contends that petitioners’ advances to hilltop were loans petitioners contend their advances were capital contributions for purposes of sec_7872 any transfer of money that provides the transferor with a right to repayment including an advance may be a loan see kta-tator inc v commissioner supra pincite petitioners transferred money to hilltop recording the transfers as loans in their personal and corporate records and received repayments during the years in issue contrary testimony offered by mrs hoffman was vague contradictory and unpersuasive therefore we conclude that the advances were loans for purposes of sec_7872 and the loan requirement is satisfied demand or term_loan below-market loans fit into one of two categories demand loans and term loans see sec_7872 a demand_loan includes any loan which is payable in full at any time on the demand of the lender sec_7872 a term_loan is any loan which is not a demand_loan sec_7872 the determination of whether a loan is payable in full at any time on the demand of the lender is a factual one loans between closely held corporations and their controlling shareholders are to be examined with special scrutiny see blectric neon inc v commissioner 56_tc_1324 affd without published opinion 496_f2d_876 5th cir petitioners made loans without written repayment terms to their controlled_corporation and they determined when the loans would be repaid therefore we conclude that the loans are demand loans below-market interest rate a demand_loan is a below-market_loan if it is interest free or if interest is provided at a rate that is lower than the applicable_federal_rate afr as determined under sec_1274 see sec_7872 a petitioners made loans to hilltop and hilltop did not pay interest on these loans therefore we conclude that the loans are below-market demand loans b enumerated category requirement sec_7872 f provides that sec_7872 shall not apply to any loan to which any of certain enumerated sections applies none of the enumerated sections applies to petitioners’ loans therefore we conclude that the enumerated category requirement is met and sec_7872 applies to petitioners’ loans accordingly we hold that petitioners pursuant to sec_7872 have interest_income from below-market loans they made to hilltop petitioners contend but have not established that the loans should be deducted pursuant to sec_166 as bad_debts il deductibility of prepaid taxes sec_164 allows a deduction for real_property_taxes deduction of prepaid real_property_taxes has been disallowed where a cash_basis taxpayer failed to establish that the prepayment represented assessed rather than estimated_taxes and that such taxes were due in the year they were paid see 540_f2d_821 5th cir affg per curiam 65_tc_87 petitioners have not established that their dollar_figure prepayment represented assessed rather than estimated_taxes in addition they have conceded that the dollar_figure was not due in accordingly petitioners may not deduct the dollar_figure from their income any other contention made by the parties is irrelevant moot or meritless to reflect the foregoing decision will be entered under rule


internal_revenue_service index number number release date cc dom p si plr-103888-99 in re legend taxpayer dear this responds to your date letter on behalf of your client taxpayer in which you request rulings as to the following whether the communications excise_tax imposed by sec_4251 of the internal_revenue_code applies to amounts paid to taxpayer for its telecommunications based processing transactions and software download services the services whether amounts paid_by taxpayer to purchase bulk telecommunication services from communications providers are subject_to the sec_4251 tax taxpayer has represented the following taxpayer produces a variety of hardware and software for data communication and electronic commerce via third party gateways and routers between merchants’ point-of-service transaction terminals pos and financial service providers taxpayer offers the services to its subscribers by using the services merchants can access taxpayer’s customers the financial service providers for determination of credit information taxpayer purchases bulk communication capacity from a communications provider which it uses in providing the services to its customers taxpayer uses the phrase bulk communications_services to describe the large amount of communications time purchased by taxpayer to use taxpayer’s system for access to the financial service provider’s host systems a merchant’s pos dials a toll-free number connection the call is immediately routed to and answered by taxpayer’s modem hardware thereafter taxpayer connects the merchant’s pos system with the financial service provider’s host computers connection data from the financial service providers is thereafter transmitted along the same route back to the merchant’s pos system a similar process occurs for software downloads to the pos terminals from the financial service provider’s host systems connection is made over local or toll telephone lines taxpayer purchases the number service from a long distance carrier and the carrier collects the communications excise_tax from taxpayer connection occurs using a private network over dedicated lines and once the call enters taxpayer’s modem network it is sent over the internet and is capable of transmitting data only because of encryption hardware only taxpayer’s customers have access to taxpayer’s network further the network system does not permit intercommunication among subscribers sec_4251 imposes a tax on amounts paid for communications_services the term communications_services means local_telephone_service toll_telephone_service and teletypewriter_exchange_service sec_4251 provides that the tax is paid_by the person paying for the service under sec_4291 the person receiving the payment for the service is responsible for collecting the tax from the person making the payment sec_4252 defines local_telephone_service as the access to a local telephone system and the privilege of telephonic quality communication with substantially_all persons having telephone or radio telephone stations constituting a part of such local telephone system and any facility or service provided in connection with a service described in the term local_telephone_service does not include any service which is a toll_telephone_service or a private_communication_service sec_4252 defines toll_telephone_service as a telephonic quality communication for which a there is a toll_charge which varies in amount with the distance and elapsed transmission time of each individual communication and b the charge is paid within the united_states and a service which entitles the subscriber upon payment of a periodic charge determined as a flat amount or upon the basis of total elapsed transmission time to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located sec_4252 defines teletypewriter_exchange_service as the access from a teletypewriter or other data station to the teletypewriter exchange system of which such station is a part and the privilege of intercommunication by such station with substantially_all persons having teletypewriter or other data stations constituting a part of the same teletypewriter exchange system to which the subscriber is entitled upon payment of a charge or charges whether such charge or charges are determined as a flat periodic amount on the basis of distance and elapsed transmission time or in some other manner the term teletypewriter_exchange_service does not include any service which is local_telephone_service revrul_74_402 1974_2_cb_362 holds that amounts paid for a switched digital data communication service which provides high speed transmission of computer and other data messages between the subscriber’s offices at various locations but does not permit intercommunication with other subscribers to the service are not subject_to the tax on communications_services revrul_79_245 1979_2_cb_380 holds that amounts paid to the local telephone company for the local_telephone_service that is used with teleprocessing equipment is subject_to the tax on communications_services local_telephone_service toll_telephone_service and teletypewriter_exchange_service as defined in sec_4252 all provide the privilege of intercommunication between substantially_all persons constituting a part of the respective system in the case at hand taxpayer does not provide local toll or teletypewriter_exchange_service to its customers because the services do not permit intercommunication with other subscribers to the service additionally although taxpayer uses communications_services in providing the services it does not resell those services as such to its customers as in revrul_79_245 the communications_services purchased by taxpayer provide taxpayer with the privilege of voice quality communication with substantially_all persons in the system it is immaterial whether taxpayer chooses to exercise that privilege accordingly based on the representations made amounts paid to taxpayer for the services are not subject_to the communications excise_tax imposed by sec_4251 consequently taxpayer has no collection obligation under sec_4291 with respect to these amounts amounts paid_by taxpayer to purchase bulk telecommunications services are subject_to the communications excise_tax imposed by sec_4251 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it shall not be used or cited as precedent sincerely assistant chief_counsel passthroughs and special industries by ruth hoffman senior technical reviewer branch enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------- -------------------------------------------------- -------------------------- ------------- --------------------------- - department of the treasury washington dc person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi - plr-106190-04 date date re ---------------------------------------------------------------------------------------------------------------- -------- p sec_1 sec_2 ------------------------------------------------------------------------------------------ --------------------- ------------------------------------------------------------------------------------------ ----------------------- ------------------------------------------------------------------------------------------ ----------------------- ------- ---------------------------- -------------------------- -------------------- -------------------------- -------------------------------------------------------------------------------------- ---------------------- a b c a d industry director b dear --------------- this letter responds to a letter dated date by p on behalf of sec_1 and sec_2 p sec_1 and sec_2 will be collectively referred to as taxpayer requesting an extension of time under ' of the procedure and administration regulations to file a copy of a form_3115 application_for change in accounting_method with the internal_revenue_service irs national_office facts taxpayer is in the business of manufacturing plastic consumer goods and packaging products taxpayer’s consolidated form_1120 was timely filed for the a plr-106190-04 calendar_year on b taxpayer intended to change its method of depreciating certain depreciable assets for amt purposes pursuant to the automatic method change procedure contained in revproc_2002_9 2002_1_cb_327 to that end taxpayer timely filed the form_3115 with its consolidated federal tax_return for the taxable_year ending c during a taxpayer timely communicated to a its intent to make the accounting_method change although a reviewed the form_3115 prepared by taxpayer taxpayer was responsible for filing the original form_3115 with the a consolidated federal_income_tax return and for filing a copy of the form_3115 with the irs national_office in the process of filing the a consolidated_return taxpayer inadvertently failed to file a duplicate copy of the form_3115 with the irs national_office on d taxpayer discovered its error and contacted a for assistance in preparing the instant request revproc_2002_9 provides the procedures by which a taxpayer may obtain law and analysis automatic consent to change certain methods_of_accounting a taxpayer complying with all the applicable provisions of this revenue_procedure has obtained the consent of the commissioner of internal revenue to change the taxpayer’s method_of_accounting under sec_446 and the income_tax regulations thereunder section a of revproc_2002_9 provides that a taxpayer changing a method_of_accounting pursuant to revproc_2002_9 must complete and file a form_3115 in duplicate the original must be attached to the taxpayer's timely filed including extensions original federal_income_tax return for the year_of_change and a copy with signature of the form_3115 must be filed with the irs national_office no earlier than the first day of the year_of_change and no later than when the original is filed with the federal_income_tax return for the year_of_change sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in and to make a regulatory election sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-106190-04 requests for relief under ' will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusions based solely on the facts and the representations submitted we conclude that the requirements of and have been met accordingly an extension of time is hereby granted for taxpayer to file the necessary copy of the form_3115 with the irs national_office pursuant to a telephone conversation on date between taxpayer’s authorized representative b of a and charles magee of this office we will consider the copy of the form_3115 attached to the request at issue as properly filed for purposes of section a of revproc_2002_9 except as specifically ruled upon above no opinion is expressed or implied concerning the federal_income_tax consequences of the facts described above specifically no opinion is expressed or implied concerning i whether taxpayer is qualified to file the form_3115 for the change in method_of_accounting described above under revproc_2002_9 ii whether taxpayer meets the requirements of that revenue_procedure for the form_3115 described above or iii whether each item of property or expenditure that is the subject of the form_3115 described above meets the requirements of revproc_2002_9 this ruling is directed only to taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent being sent to taxpayer’s authorized representatives a copy of this letter is also being sent to the industry director pursuant to the power_of_attorney on file with this office a copy of this letter is sincerely enclosures copy of this letter copy for sec_6110 purposes heather c maloy associate chief_counsel passthroughs and special industries


internal_revenue_service number release date index number ------------------------------------------------------------ ------------------------ ----------------------------------------------- ----------------------------- ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number --------------------- refer reply to cc ita b07 plr-114456-15 date september re --------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- legend taxpayer ------------------------------------------------------------------------ a -------------------------------------------------------------------------------------------------- b --------------------------- date -------------------------- date -------------------------- dear --------------- this letter responds to a letter dated date submitted on behalf of taxpayer requesting an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 of the procedure and administrative regulations to make the following two regulatory elections the election under sec_168 of the internal_revenue_code not to deduct the additional first year depreciation for all classes of qualified_property placed_in_service in certain taxable years and the election under sec_168 to use the alternative_depreciation_system ads for all tangible depreciable_property placed_in_service in certain taxable years plr-114456-15 facts taxpayer represents that the facts are as follows taxpayer a subchapter_c_corporation uses the accrual_method of accounting and files federal tax returns on a calendar_year basis taxpayer is engaged in the land_contract drilling business during the taxable years ended date and date taxpayer experienced an ownership_change as defined in sec_382 as a result sec_382 limited its ability to offset post-change taxable_income by pre-change net operating losses nols taxpayer does not have in-house tax expertise and is not sophisticated in matters related to u s federal income filings due to its lack of knowledge and expertise regarding u s federal tax matters taxpayer has relied upon a an outside tax preparer to advise it on federal income matters and to prepare all u s federal_income_tax return filings based on a’s advice taxpayer did not make the election not to deduct the additional first year depreciation under sec_168 for all qualifying property place in service in the taxable years ended date and date further taxpayer did not make the election under sec_168 to use the ads for all tangible depreciable_property placed_in_service in the taxable years ended date and date taxpayer’s failure to make these elections on its federal_income_tax returns for the taxable years ended date and date increased significantly its nols for those years despite having full knowledge of the facts pertaining to the sec_382 ownership_change prior to preparing taxpayer’s federal_income_tax returns for the taxable years ended date and date a did not perform any of analysis of sec_382 further a did not inform taxpayer of the potential limitations on nols due to sec_382 after filing its federal income returns for the taxable years ended date and date taxpayer made its ownership_change documents and historical federal tax returns available to b an outside tax preparer for examination after reviewing the information b discovered that a did not advise taxpayer of the sec_382 ownership changes and of the potential limitations on nols due to the changes if taxpayer had been aware of the effects of the sec_382 ownership changes on nols and knew all available options taxpayer would have made the election not to deduct the additional first year depreciation for all classes of qualified_property placed_in_service and the election to use ads for all tangible depreciable_property placed_in_service in the taxable years ended date and date ruling requested taxpayer requests an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 to make the election under sec_168 not to deduct additional first year depreciation for all classes of qualified_property placed_in_service and the election plr-114456-15 under sec_168 to use the ads for all tangible depreciable_property placed_in_service in the taxable years ended date and date law and analysis sec_167 provides that there shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion wear_and_tear and obsolescence of property used in taxpayer’s trade_or_business the depreciation deduction provided by sec_167 for tangible_property placed_in_service after generally is determined under sec_168 sec_168 prescribes two methods_of_accounting for determining depreciation allowances one method is the general depreciation system in sec_168 and the other method is the ads in sec_168 in the case of any property to which an election under sec_168 applies sec_168 provides that the depreciation deduction provided by sec_167 is determined under the ads pursuant to sec_168 the ads is depreciation determined by using the straight_line method without regard to salvage_value the applicable convention determined under sec_168 and a recovery_period determined under the table prescribed in sec_168 for most personal_property the recovery_period is the property’s class_life sec_168 provides special rules for determining class_life sec_168 permits a taxpayer to elect for any class of property for any taxable_year to use the ads for determining depreciation for all property in that class placed_in_service during that taxable_year however in the case of nonresidential_real_property the election is made separately with respect to each property once made an election to use ads is irrevocable sec_301_9100-7t provides that the election under sec_168 must be made for the taxable_year in which the property is placed_in_service sec_301 7t a i further provides that this election must be made by the due_date including extensions of the tax_return for the taxable_year for which the election is to be effective sec_301_9100-7t provides that the election under sec_168 is made by attaching a statement to the tax_return for the taxable_year for which the election is to be effective sec_168 provides a 50-percent additional first year depreciation deduction for qualified_property i acquired by a taxpayer after date and before january and ii placed_in_service by the taxpayer before date or date for qualified_property described in sec_168 or c sec_168 provides that a taxpayer may elect not to deduct the additional first year depreciation for any class of property placed_in_service during the taxable_year the term class of property is defined in sec_1_168_k_-1 of the income_tax regulations as meaning in general each class of property described in sec_168 for example 5-year_property see section dollar_figure of revproc_2008_54 c b plr-114456-15 and section dollar_figure of revproc_2011_26 2011_16_irb_664 rules similar to the rules in sec_1_168_k_-1 for qualified_property or for 30-percent additional first year depreciation deduction apply for purposes of sec_168 as currently in effect sec_1_168_k_-1 provides that the election not to deduct the additional first year depreciation for a class of property applies to all qualified_property or percent bonus_depreciation property as applicable that is in that class of property and placed_in_service in the same taxable_year sec_1_168_k_-1 provides that the election not to deduct the additional first year depreciation must be made by the due_date including extensions of the federal tax_return for the taxable_year in which the property is placed_in_service by the taxpayer sec_1_168_k_-1 provides that the election not to deduct the additional first year depreciation must be made in the manner prescribed on form_4562 depreciation and amortization and its instructions the instructions to form_4562 for the taxable years ended date and date provides that the election not to deduct the additional first year depreciation is made by attaching a statement to the taxpayer’s timely filed tax_return including extensions indicating that the taxpayer is electing not to deduct the additional first year depreciation and the class of property for which the taxpayer is making the election under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusions based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301 have been satisfied accordingly taxpayer is granted calendar days from the date of this letter to make the election not to deduct the additional first year depreciation under sec_168 for all classes of property placed_in_service by taxpayer in the taxable years ended date and date plr-114456-15 that qualify for the additional first year depreciation and the election under sec_168 to use the ads for determining depreciation for all tangible depreciable_property placed_in_service in the taxable years ended date and date the election under sec_168 must be made by taxpayer filing an amended federal_income_tax return for each of those taxable years with a statement indicating that taxpayer is electing not to deduct the additional first year depreciation for all classes of property placed_in_service by taxpayer in that taxable_year the election under sec_168 must be made by taxpayer filing an amended federal_income_tax return for each of those taxable years with a statement indicating that taxpayer is electing to use the ads under sec_168 for all tangible depreciable_property placed_in_service by taxpayer in that taxable_year except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provisions of the code including sec_382 and other subsections of sec_168 specifically no opinion is expressed or implied on whether any item of depreciable_property placed_in_service in the taxable years ended date and date is eligible for the additional first year depreciation deduction provided by sec_168 or is required to use the ads pursuant to sec_168 through d this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer’s authorized representatives we are also sending a copy of this letter to the appropriate industry director large business international division lb_i sincerely willie e armstrong jr willie e armstrong jr senior technician reviewer branch office of associate chief_counsel income_tax accounting enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c may - yu uu uniform issue list legend decedent b financial_institution c amount h ira x account z date date date date date date dear this is in response to your request dated date as supplemented by correspondence dated date date and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code page 2uu7z3uuu2 the following facts and representations have been submitted under penalty of perjury in support of the ruling requested you are under age represent that you received a distribution from an individual_retirement_account ira x totaling amount h and that your failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to mental and physical incapacities which impaired your ability to handle your - financial affairs including the rollover of amount h on date decedent b passed away you were married to decedent b decedent b maintained ira x at financial_institution c you were named the beneficiary of percent of the funds in ira x amount h distribution of amount h from ira x in the form of a check dated on date which you deposited into your account z a non-ira account on date date you began extensive medical treatment for your illness your treatment continued until date after the day rollover period expired on date you met with your financial advisor it was at that time that you realized your failure to rollover amount h within the day time period you further represent that amount h has not been used for any other purpose you received a on medical documentation submitted with your request from treating health professionals indicates the severity of your chronic medical problems and the extent of your treatment for these conditions based on the facts and representations you request a ruling that the internal_revenue_service waive the day rollover requirement with respect to your contribution of amount h into an ira because the failure to waive such requirement would be against equity or good conscience with respect to your ruling_request 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 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 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 20u73 page 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 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 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408i 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 you presented and documentation submitted on your behalf demonstrate that you were effectively disabled due to your medical_condition and 9uu73zuu2z1 page incapable of handling your financial affairs in an appropriate manner in this regard we note that you deposited the entire amount h into account z and that amount has never been used for another purpose therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount h from ira you are granted a period not to exceed days as measured from the issuance x of this ruling letter to contribute amount h requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution of amount h into one or more iras described in code sec_408 will be considered a rollover_contribution within the meaning of sec_408 of the code into a rollover ira provided all other 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 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 in accordance with a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact 1d - please address all correspondence to se t ep ra t3 rekrekkrekkek d kk kkkkk at oo eee sincerely yours vf frances v sloan manager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose cc


internal_revenue_service number release date index number ----------------------- --------------------------------------------- --------------------------------- -------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ---------------- telephone number ---------------------- refer reply to cc psi plr-126629-18 date april x ------------------------------------------------------------------------------------------------------ ------------------------- sub1 -------------------------------------------------------------------- ------------------------ sub2 -------------------------------------------------------- ------------------------ state -------------- d1 ------------------------ dear ------------------- this letter responds to a letter dated date submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to elect to treat sub2 as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code code facts the information submitted discloses that x was formed under the laws of state on d1 and elected to be an s_corporation effective d1 x wholly owns sub1 which wholly owns sub2 x represents that it intended to elect to treat sub2 as a qsub effective d1 however x failed to timely file form_8869 qualified_subchapter_s_subsidiary election for sub2 x represents that it has filed its tax returns for all of the relevant tax years plr-126629-18 consistent with sub2 being a qsub since d1 and that x has acted in good_faith finally x represents that granting relief will not prejudice the government law and analysis sec_1361 provides that except as provided in regulations prescribed by the secretary for purposes of title_26 i a corporation that is a qsub shall not be treated as a separate corporation and ii all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines the term qualified_subchapter_s_subsidiary as a domestic_corporation that is not an ineligible_corporation as defined in sec_1361 if percent of the stock of the corporation is held by an s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations provides the time and manner of making a qsub election a taxpayer makes a qsub election for a subsidiary by filing form_8869 with the appropriate service_center sec_1_1361-3 provides that a qsub election cannot be effective more than two months and days prior to the date of filing sec_1_1361-3 provides that an extension of time to make a qsub election may be available under sec_301_9100-1 and sec_301_9100-3 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government plr-126629-18 conclusion based on the facts and representations submitted we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of time of one hundred twenty days from the date of this letter to elect to treat sub2 as a qsub effective d1 the election should be made for sub2 by filing form_8869 with the appropriate service_center with a copy of this letter attached a copy is enclosed for that purpose except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion concerning whether x is a valid s_corporation or whether sub2 is eligible to be a qsub this ruling is directed only to the taxpayer requesting it according to sec_6110 of the code this ruling may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely by laura fields laura fields senior technician reviewer branch passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ----------------------------------------- ------------------------------------- ------------------------------------ -------------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------------------------------------------- - telephone number --------------------- refer reply to cc corp plr-129348-18 date december legend purchasers s_corporation target seller state a date date company official ----------------------------------- ----------------- ---------------------------- ---------------------- -------------------------------- -------------------------------- ---------------------------- ---------------------- ------------------------------------------- ----------------------- ----------------------------- ---------------------------------------- ------------------------ ---------------------- ----------------------- ------------------ ---------------------- ------------------------------------ ------------- ----------------------------------------- plr-129348-18 tax professional ------------------------------------------------------ --------------------------- dear ------------------- this letter responds to a letter dated date submitted on behalf of purchasers s_corporation target and seller collectively the parties requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election the parties are requesting an extension of time to file an election statement under sec_1_336-2 election statement with respect to purchasers' acquisition of all of the stock of s_corporation target from seller on date the material information submitted is summarized below on date purchasers two individual taxpayers acquired all of the stock of s_corporation target a state a corporation that elected to be treated as an s_corporation for federal_income_tax purposes from seller in exchange for cash and a note the disposition it has been represented that the disposition qualified as a qualified_stock_disposition as defined in sec_1_336-1 the parties entered into a written binding agreement providing that a sec_336 election would be made with respect to the disposition on date the election statement and s_corporation target's tax_return for the taxable_year ending on date were required to be filed by date however for various reasons the tax_return and election statement were not timely filed subsequently a request was submitted under sec_301_9100-3 of the procedure and administration regulations for an extension of time to file the election statement the parties each represented that they are not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time of the request for relief regulations promulgated under sec_336 permit certain_sales exchanges or distributions of stock of a corporation to be treated as asset dispositions if the disposition is a qualified_stock_disposition as defined in sec_1_336-1 and a sec_336 election is made sec_1_336-2 provides that a sec_336 election for an s_corporation target is made by i all of the s_corporation shareholders including those who do not dispose_of any stock in the qualified_stock_disposition and the s_corporation target entering into a written binding agreement on or before the due_date including extensions of the federal_income_tax return of the s_corporation target for the taxable_year that includes the disposition date to make a sec_336 election ii the s_corporation target retaining a copy of the written_agreement and iii the s_corporation target attaching the sec_336 election statement described in sec_1_336-2 and to its timely filed plr-129348-18 including extensions federal_income_tax return for the taxable_year that includes the disposition date under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 the time for filing the election statement is fixed by the regulations ie sec_1 h iii therefore the commissioner has discretionary authority under sec_301 to grant an extension of time to file the election statement provided the parties acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by the parties company official and tax professional explain the circumstances that resulted in the failure to timely file the election statement the information establishes that the parties reasonably relied on a qualified_tax professional who failed to timely file or to advise them to timely file the election statement and the request for relief was filed before the failure_to_file the election statement was discovered by the internal_revenue_service see sec_301 b i and v based on the facts and information submitted including the representations made we conclude that the parties have acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter to file the election statement with respect to the disposition within days of the date on this letter s_corporation target must file the election statement in accordance with sec_1_336-2 the election statement must be attached to s_corporation target's tax_return for the taxable_year including date alternatively if s_corporation target files its return electronically it may satisfy the requirement of attaching a copy of this letter to the return by attaching a statement to its return that provides the date on and control number plr-129348-18 of this letter_ruling plr-129348-18 within days of the date on this letter all relevant parties must file or amend as applicable all returns and amended returns if any necessary to report the transaction consistently with the making of a sec_336 election for the taxable_year in which the transaction was consummated and for any other affected_taxable_year the above extension of time is conditioned on the parties' tax_liabilities if any being not lower in the aggregate for all years to which the sec_336 election applies than it would have been if the election statement had been timely filed taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liabilities for the years involved a determination thereof will be made by the applicable director's office upon audit of the federal_income_tax returns involved we express no opinion as to whether the disposition qualifies as a qualified_stock_disposition or any other tax consequences arising from the sec_336 election in addition we express no opinion as to the tax consequences of filing the return or making the sec_336 election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the sec_336 late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we have relied on certain statements and representations made by the parties company official and tax professional however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the sec_336 election penalties and interest that would otherwise be applicable if any continue to apply this ruling is directed only to the taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-129348-18 pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service number release date index number 45d --------------------------- ------------------------------------------------------------ ---------------- ----------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ---------------- telephone number -------------------- refer reply to cc psi b05 plr-148106-13 date april legend sub-cde allocatee fund x y d1 d2 d3 d4 d5 d6 d7 a ----------------------------------------------- ---------------------- ---------------------------------------------------------------- ---------------------- ------------------------ ---------------------- --------------------------- ---------------------- --------------------------------------------------------- ---------------------- ------------------ ---------------- ----------------------- -------------------------- -------------------------- -------------------------- ------------------ ------------ plr-148106-13 b c ------- ----- dear ---------------- this letter responds to your letter dated date and related correspondence submitted on behalf of x requesting a letter_ruling involving the new_markets_tax_credit nmtc under sec_45d of the internal_revenue_code the ruling concerns the application of the 6-month cure period under sec_1_45d-1 of the income_tax regulations to the transaction described below facts the information submitted states that allocatee a nonprofit corporation and sub-cde a limited_liability_company llc were formed to serve or provide investment capital for low-income communities or low-income persons allocatee became a qualified_community_development_entity cde on d1 sub-cde became a cde on d2 x a national banking association wholly owns y an llc y wholly owns fund also an llc both y and fund are treated as disregarded entities for federal tax purposes pursuant to an allocation agreement effective d3 the department of treasury community development financial institutions fund made a nmtc allocation to allocatee based on that allocation allocatee sub-allocated dollar_figurea of nmtc to sub-cde on d4 x through y made a capital_contribution in the amount of dollar_figurea to fund fund in turn made a capital_contribution of dollar_figurea in cash to sub-cde in exchange for a b membership interest allocatee holds the remaining c membership interest in sub- cde on or about d3 sub-cde designated fund’s capital_contribution in sub-cde as a qualified_equity_investment qei sub-cde x and fund have worked diligently to find qualified_low-income_community investments qlicis to invest the cash by d5 in order to satisfy the substantially-all requirement under sec_45d by the end of the 12-month_period specified in sec_1_45d-1 the parties have considered a number of projects due to difficult circumstances however the parties have not been able to close on any of the projects on d6 sub-cde became aware or reasonably should have become aware of its inability to invest in any of the qlicis by d5 plr-148106-13 ruling requested the 6-month cure period described in sec_1_45d-1 is available to correct sub- cde’s failure to invest substantially_all of the proceeds of the qei in a qlici within the 12-month_period specified in sec_1_45d-1 law and analysis sec_45d provides that for purposes of sec_38 in the case of a taxpayer who holds a qei on a credit_allowance_date of such investment which occurs during the taxable_year the nmtc for such taxable_year is an amount equal to the applicable_percentage of the amount_paid to the cde for such investment at its original issue sec_45d provides that the term credit_allowance_date means with respect to any qei a the date on which such investment is initially made and b each of the anniversary dates of such date thereafter sec_45d provides that the term qei means any equity_investment in a cde if a such investment is acquired by the taxpayer at its original issue directly or through an underwriter solely in exchange for cash b substantially_all of such cash is used by the cde to make qlicis and c such investment is designated for purposes of sec_45d by the cde sec_45d provides that the term qlici means a any capital or equity_investment in or loan to any qualified_active_low-income_community_business b the purchase from another cde of any loan made by such entity which is a qlici c financial counseling and other services to businesses located in and residents of low- income communities and d any equity_investment in or loan to any cde sec_1_45d-1 provides that except for the seventh year of the 7-year credit_period the term substantially_all means at least percent the substantially_all requirement must be satisfied for each annual period in the 7-year credit_period using either the direct-tracing calculation or the safe-harbor calculation as provided in the section for the first annual period the substantially-all requirement is treated as satisfied if either the direct-tracing calculation or the safe-harbor calculation is performed on a single testing_date and the result of the calculation is at least percent sec_1_45d-1 provides that the taxpayer’s cash investment received by a cde is treated as invested in a qlici only to the extent that the cash is so invested within the 12-month_period beginning on the date the cash is paid_by the taxpayer directly or through an underwriter to the cde sec_1_45d-1 provides that if a qei fails the substantially-all requirement the failure is not a recapture_event if the cde corrects the failure within plr-148106-13 months after the date the cde becomes aware or reasonably should have become aware of the failure only one correction is permitted for each qei during the 7-year credit_period conclusion under sec_45d the first nmtc is claimed on the date on which the qei is initially made sec_45d includes within the definition of a qei any equity_investment in a cde if substantially_all of such cash is used by the cde to make qlicis sec_1_45d-1 provides that the taxpayer’s cash investment received by a cde is treated as invested in a qlici only to the extent that the cash is so invested within the 12-month_period beginning on the date the cash is paid_by the taxpayer directly or through an underwriter to the cde failure to meet the substantially-all requirement within the 12-month_period means that the taxpayer’s cash investment is not treated as a qei on the date the taxpayer’s initial investment is made however sec_1_45d-1 provides a one-time 6-month cure period if a qei fails the substantially-all requirement based on the information submitted and representations made we conclude that the 6-month cure period under sec_1_45d-1 is available to correct sub-cde’s failure to invest substantially_all of the proceeds the qei in a qlici by d5 however the month cure period is not automatically tacked on to the 12-month_period specified in sec_1_45d-1 as the rule states the 6-month cure period begins on the date the cde becomes aware or reasonably should have become aware of the failure to invest substantially_all of the qei proceeds in a qlici within the month period on d6 sub-cde became aware or reasonably should have become aware of its inability to invest in any qlicis by d5 therefore for purposes of x’s qei in sub-cde through x’s ownership of y and fund sub-cde must correct its failure to invest substantially_all of the proceeds of the qei in a qlici no later than d7 we express no opinion regarding the application of any other provisions of the code or regulations plr-148106-13 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter_ruling will be sent to your authorized representative sincerely paul f handleman chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


id office uilc cca_2010121615424052 ---------------- number release date from --------------------- sent thursday date pm to --------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- --------------------------------------- cc subject revproc_2004_34 deferral in administering revproc_2004_34 we interpret sec_4 d to apply both to hotel rooms used for overnight stays and to special-function rooms such as banquet halls in either case the use of the property is ancillary to the services provided such as housekeeping section dollar_figure of revproc_71_21 treated advance_payments for hotel rooms similarly


erinternac revenue seavice washington d c tax_exempt_and_government_entities_division uics may ti ep 2a t3 legend decedent taxpayer a taxpayer b taxpayer c trust t plan x plan y company w date date date amount state w dear this is in response to the request submitted by your authorized representative in which he on your behalf seeks letter rulings under sec_402 of the internal_revenue_code code the following facts and representations support your ruling_request page decedent formerly participated in plan x which is the successor plan to plan y on or about date decedent named his spouse taxpayer a the sole beneficiary of his interest in plan x said beneficiary designation remained in effect at decedent's death company w was the custodian of plan x at the time of decedent’s death decedent whose date of birth was date died on date without having attained age taxpayer a decedent’s surviving_spouse elected to defer receiving required distributions from plan x until decedent would have attained age ya prior to his death decedent as grantor established trust t taxpayer a and taxpayer b decedent’s father were the co-trustees of trust t taxpayers a and b were also the co-executors of the estate of decedent it has been represented that taxpayer c decedent’s brother was authorized to counter-sign requests for distribution with respect to decedent’s interest in plan x on or about date taxpayer b as co-trustee of decedent’s trust t requested a distribution of the full amount standing to the credit of decedent in plan x trust t was named as the beneficiary of decedent’s plan x interest on the withdrawal form taxpayer c also signed the withdrawal form company w processed the request and distributed_amount to the trustee of trust t taxpayer b has submitted an affidavit with this ruling_request in which he indicates that taxpayer a was unaware that he taxpayer b was not authorized to request said plan x distribution taxpayer a has submitted an affidavit with this ruling_request in which she indicates that she was unaware that taxpayer b was not authorized to request the above-referenced plan x distribution and in which she also indicates that taxpayer b did not advise her of where he intended to deposit amount during calendar_year company w issued a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc which indicated a distribution totaling amount during calendar_year to the trustee of trust t as noted above trust t was not the named beneficiary of decedent’s interest in plan x based on the above facts and representations you through your authorized representative request the following letter rulings that taxpayer a was eligible to roll over the above-referenced plan x distribution totaling amount into an individual_retirement_account tra set up and maintained in her name and eee that the service waive the 60-day rollover requirement with respect to the distribution of amount from plan x because the failure to waive such requirement would be a hardship and against equity or good conscience sec_402 of the code provides generally that except as otherwise provided in sec_402 any amount actually paid or distributed from a_trust described in sec_401 which is tax-exempt under sec_501 shall be taxed to the distribute in the taxable_year of the distribute in which distributed in the amount provided under sec_72 relating to annuities sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 of the code provides in relevant part that an eligible_rollover_distribution shall not include any distribution to the extent such distribution is required under sec_401 or any distribution which is one of a series of substantially_equal_periodic_payments not less frequently than annually made i for the life or life expectancy of the employee or the joint lives or joint life expectancy of the employee and the employee’s designated_beneficiary or ii for a period of ten years or more sec_402 of the code in relevant part defines eligible_retirement_plan as i an individual_retirement_account described in sec_408 or ii an individual_retirement_annuity described in sec_408 other than an endowment_contract sec_402 states that except as provided in subparagraph b any rollover within the meaning of code sec_402 must be accomplished within days of the day on which the distributee received the property sec_402 of the code provides in relevant part that the secretary may waive the 60-day requirement under sec_402 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_402 of the code sec_1_402_c_-2 question and answer of the income_tax regulations states that if an eligible_rollover_distribution is paid to an employee and the employee contributes all or part of the eligible_rollover_distribution to an eligible_retirement_plan no ree later than the 60th day following the date the employee received the distribution the amount contributed is not currently includible in gross_income sec_402 of the code provides generally if a distribution attributable to an employee is paid to the spouse of the employee after the employee's death sec_402 of the code will apply to such distribution in the same manner as if the spouse were the employee sec_1_402_c_-2 of the regulations q a-12 provides generally that if a distribution attributable to an employee is paid to the employee's surviving_spouse sec_402 applies to the distribution in the same manner as if the spouse were the employee thus a distribution to the surviving_spouse of an employee is an eligible_rollover_distribution if it meets the applicable_requirements of sec_402 and and the associated regulations sec_1_402_c_-2 of the regulations q a b provides that any amount that is paid before january of the year in which the employee attains or would have attained age will not be treated as required under sec_401 and thus is an eligible_rollover_distribution if it otherwise qualifies rollover distributions sec_401 provides the rules for governing direct transfers of eligible revproc_2003_16 2003_4_irb_359 date provides sec_1 a of the income_tax regulations question and answer-15 provides in relevant part that an eligible_rollover_distribution that is paid to an eligible_retirement_plan in a direct_rollover is a distribution and rollover and not a transfer of assets and liabilities that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 of the code 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 with respect to your first ruling_request generally if a decedent’s qualified_plan assets pass through a third party eg an estate or a_trust and are then distributed to the decedent’s surviving_spouse said spouse will be treated as acquiring them from the third party and not from the decedent thus generally said surviving_spouse will not be eligible to roll over the qualified_plan proceeds into her own ira page however we note in this case that although taxpayer b acting as co-trustee of trust t requested the distribution of amount from plan x and that taxpayer c counter-signed the request amount was not payable to trust t but rather pursuant to decedent’s date beneficiary designation was payable outright to taxpayer a decedent’s surviving_spouse thus pursuant to code sec_402 and the above- referenced income_tax regulations taxpayer a could have received a distribution from plan x totaling amount and could have rolled it into an ira set up and maintained in her name thus with respect to your first ruling_request we conclude as follows that taxpayer a was eligible to roll over the above-referenced plan x distribution totaling amount into an individual_retirement_account ira set up and maintained in her name with respect to your second ruling_request as noted above taxpayer a did not roll over the plan x distribution into an ira set up and maintained in her name within the requisite 60-day period however her failure to do so was the result of taxpayer b’s unauthorized request for the plan x distribution taxpayer c’s unauthorized counter-signing the request and neither taxpayer b nor taxpayer c’s advising taxpayer a that the request was being made on behalf of trust t not taxpayer a the appropriate recipient therefore in response to your second ruling_request pursuant to sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from plan x thus you are granted a period of days from the issuance of this ruling letter to complete the rollover provided that there is compliance with all of the requirements of code sec_402 except the day requirement the rollover of an amount not to exceed amount into an ira set up and maintained in the name of taxpayer a will be treated as a valid rollover transaction within the meaning of code sec_402 this letter assumes that plan x was is qualified within the meaning of code sec_401 and its trust tax-exempt within the meaning of code sec_501 at all times relevant thereto it also assumes that the ira into which taxpayer a will roll over an amount not to exceed amount will be qualified within the meaning of code sec_408 at all times relevant thereto 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 page 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 pursuant to a power_of_attorney on file with the service the original of this letter_ruling is being sent to you and a copy to each of your authorized representatives if you wish to inquire about this ruling please contact 1d not a toll-free number jatq - - correspondence to se t ep ra t3 please address all sincerely yours rances v - us atiager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose


internal_revenue_service number release date index number - ------------------------------- ---------------------------------------------------- -------------------------- --------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc tege eoeg teb presp-143873-06 date dear ---------------- this letter is in response to your application_for an allocation of authority to issue --------- ------------- in clean renewable energy bonds crebs under sec_54 of the internal_revenue_code the code sec_54 of the code imposes a limitation of dollar_figure on the amount of crebs which may be issued to finance qualified projects the limitation sec_54 provides that the limitation is to be allocated by the secretary of treasury in such manner as the secretary deems appropriate except that no more than dollar_figure of the limitation may be allocated to finance qualified projects of qualified borrowers which are governmental bodies section of notice_2005_98 2005_52_irb_1211 provides that the limitation will be allocated among qualified projects for which a share of such limitation has been requested beginning with the project s requesting the smallest share in dollar amount and continuing with the project s requesting the next-smallest share until the total limitation has been exhausted however in the event that dollar_figure has been allocated to qualified projects of qualified borrowers that are governmental bodies the remaining shares of the limitation will be allocated under the methodology described in the previous sentence only to qualified projects of qualified borrowers that are not governmental bodies for purposes of allocating the limitation among projects all qualified projects located at the same site and owned by the same qualified_borrower are treated as a single project and each project is treated as requesting a single allocation an allocation of shares of the limitation cannot be made with respect to the project owned by the borrower listed in appendix a because such borrower is a governmental body and dollar_figure has already been allocated to applications requesting a smaller presp-143873-06 share of the limitation to finance qualified projects owned by qualified borrowers that are governmental bodies we appreciate your submission of the application_for our consideration and encourage you to continue to pursue your plans for constructing a clean renewable energy project sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-143873-06 borrower name appendix a project type project location ------------------------------ ------------ landfill_gas facility -------------------------------- ------------- amount requested ---------------