t c memo united_states tax_court sean s brown petitioner v commissioner of internal revenue respondent docket no filed date sean s brown pro_se james r bamberg for respondent - - - - memorandum findings_of_fact and opinion goeke judge respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure and an accuracy-related_penalty of dollar_figure for the issues for decision are whether petitioner was required to report interest_income of dollar_figure we hold that petitioner was required but failed to report such income and whether petitioner is liable for an accuracy-related_penalty pursuant to sec_6662 a we hold that he is so liable findings_of_fact petitioner resided in florida when his petition was filed in petitioner won a settlement award against the united_states postal service usps for backpay in the gross amount of dollar_figure after various amounts were withheld petitioner received a check for the settlement award of dollar_figure petitioner received a second check for interest on the settlement award of dollar_figure the remittance advice sent with the second check advised petitioner any_tax liability resulting from this payment is your responsibility the irs makes the determination on whether taxes must be paid you should consult the irs or a tax attorney to answer any_tax reporting questions that you may have 1unless otherwise indicated section references are to the internal_revenue_code in effect for the year in issue - - - - petitioner later received a form_w-2 wage and tax statement from the usps which indicated that petitioner received wages for of dollar_figure petitioner received a form 1099-int interest_income from the usps indicating that he received interest_income of dollar_figure in additionally petitioner received a form 1099-int from suncoast schools federal credit_union indicating that he received interest_income for of dollar_figure petitioner through his paid preparer amscot tax service timely and electronically filed his federal_income_tax return on that return petitioner did not report any interest_income following petitioner’s receipt of respondent’s notice_of_deficiency on date petitioner timely filed a petition with this court a trial was held in tampa florida following trial we allowed petitioner additional time to support his trial position with further evidence petitioner failed to do so thus the trial record was subsequently closed opinion i gross_income gross_income includes all income from whatever source derived sec_61 interest_income is expressly included in this definition sec_61 - - - - at trial petitioner recognized that he should have included the interest payments in his gross_income petitioner’s main contention instead is that the usps deposited dollar_figure from the settlement award into his workplace retirement account and that this amount should be excluded from income petitioner submitted no evidence of any transfer of settlement proceeds to his retirement account accordingly we cannot determine the validity of petitioner’s claim as petitioner has conceded that the interest payments should have been included in his gross_income respondent’s determinations on this issue are sustained ii accuracy-related_penalty sec_6662 and b imposes a penalty equal to of the portion of an underpayment_of_tax that is attributable to any substantial_understatement_of_income_tax a substantial_understatement_of_income_tax exists if the amount of the understatement for the taxable_year exceeds the greater of of the tax required to be shown in the return for such year or dollar_figure sec_6662 2in an amended_return which was apparently filed incorrectly petitioner also correctly included those payments - - - - petitioner underpaid his tax_liability by dollar_figure an underpayment that exceeds of the tax of dollar_figure which was required to be shown on his return accordingly petitioner is liable for the sec_6662 penalty sec_6664 provides a reasonable_cause exception to the accuracy- related penalty generally under sec_6664 no penalty is imposed under sec_6662 with respect to any portion of an underpayment if it is shown that there was reasonable_cause for such portion and that the taxpayer acted in good_faith with respect to such portion petitioner failed to argue that the reasonable_cause exception applies to his underpayment moreover the record does not suggest that he acted with reasonable_cause and in good_faith by failing to include interest_income on his return to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number ---------------------- ------------------------ -------------------------------- re ---------------------------- ---------------------------- 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 b04 plr-124468-10 date november legend decedent spouse child child child child trust trust trust trust date date trust accountant year year ---------------------- ----------------------------------------------- ---------------------- -------------------- --------------------------- ------------------------ --------------------------------------------------------------- --------------------------- -------------------------------------------------------------- --------------------------- --------------------------------------------------------------------- --------------------------- ------------------------------------------------------------------ --------------------------- -------------------------- ----------------------- --------------------------------- ------------------------------- ------- ---------- dear ----------------- this letter responds to a letter from your authorized representative dated date requesting an extension of time under sec_2642 of the internal revenue plr-124468-10 code and sec_301_9100-3 of the procedure and administration regulations to allocate your generation-skipping_transfer gst_exemption to transfers to trust sec_1 through the facts and representations submitted are summarized as follows on date a date prior to date taxpayer spouse and her husband decedent executed trust an irrevocable_trust the terms of trust provided for the creation of four separate trusts trust trust trust and trust for the benefit of each of their four children child child child and child and each child’s issue respectively on date spouse transferred cash and marketable_securities to trust sec_1 through to be divided equally among the four trusts on date a date after date spouse transferred cash and marketable_securities to trust sec_1 through to be divided equally among the four trusts spouse did not file a year form_709 to report the date transfers to trust sec_1 through and accordingly spouse did not allocate her gst_exemption to the date transfers spouse retained accountant to prepare the year form_709 united_states gift and generation-skipping_transfer_tax return to report the date transfers to trust sec_1 through on schedule a part column c of the year form_709 spouse did not elect under sec_2632 to opt_out of the automatic allocation rules of sec_2632 for purposes of allocating spouse’s gst_exemption to the date transfers to trust sec_1 through however on line of schedule c part - gst_exemption reconciliation on the year form_709 accountant mistakenly allocated less gst_exemption to the date transfers than should have been reported under the automatic allocation rules of sec_2632 you have requested the following rulings spouse will be granted an extension of time under sec_2642 and sec_301_9100-3 to allocate spouse’s gst_exemption to the date transfers to trust sec_1 through and the allocations will be based on the value of the date transfers and will be effective as of such date spouse will be granted an extension of time under sec_2642 and sec_301_9100-3 to report the correct amount of spouse’s gst_exemption allocated to the date transfers to trust sec_1 through under the automatic allocation rules of sec_2632 and the allocations will be based on the value of the date transfers and will be effective as of such date law and analysis ruling sec_1 and plr-124468-10 sec_2601 imposes a tax on every generation-skipping_transfer a generation- skipping transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 in effect for the date transfers provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 in effect for the date transfers provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption amount which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2631 in effect for the date transfers provides that for purposes of sec_2631 the gst_exemption amount for any calendar_year shall be equal to the applicable_exclusion_amount under sec_2010 for such calendar_year sec_2632 provides that if any individual makes an indirect_skip during such individual's lifetime any unused portion of such individual's gst_exemption shall be treated as allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero if the amount of the indirect_skip exceeds such unused portion the entire unused portion shall be allocated to the property transferred sec_2632 provides that for purposes of sec_2632 the term indirect_skip means any transfer of property other than a direct_skip subject_to the tax imposed by chapter made to a gst_trust sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant sec_2642 further provides that for purposes of determining whether to grant relief the time for making the allocation shall be treated as if not expressly prescribed by statute see notice_2001_50 2001_2_cb_189 sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and plr-124468-10 not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the 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 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore spouse is granted an extension of time of days from the date of this letter to allocate her available gst_exemption to the date transfers to trust sec_1 through and to report the correct amount of spouse’s gst_exemption allocated to the date transfers under the automatic allocation rules of sec_2632 the allocations will be effective as of the date of the transfers and will be based on the fair_market_value of the property transferred for federal gift_tax purposes spouse should make the allocations on supplemental form sec_709 the supplemental form sec_709 should be filed with the cincinnati service_center at the following address internal_revenue_service center cincinnati oh a copy of this letter should be attached to the supplemental form sec_709 a copy is enclosed for this purpose in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives except as expressly provided herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we are not ruling on whether trust sec_1 through will have a zero inclusion_ratio as a result of the allocations of spouse’s gst_exemption to the date and date transfers to the trusts the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-124468-10 the rulings in this letter pertaining to the federal estate and or generation-skipping_transfer_tax apply only to the extent that the relevant sections of the internal_revenue_code are in effect during the period at issue this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs special industries _____________________________ by lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


t c summary opinion united_states tax_court anthony m flores and sandra l flores petitioners v commissioner of internal revenue respondent docket no 14147-04s filed date anthony m flores and sandra l flores pro sese alan j tomsic for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that the petition was filed the decision to unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the taxable_year in issue all monetary amounts are rounded to the nearest dollar be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency in petitioners’ federal_income_tax for the taxable_year in the amount of dollar_figure the only issue for decision by the court is whether certain workers’ compensation benefits received by petitioner sandra l flores mrs flores are taxable as though they were social_security_benefits we hold that they are by virtue of sec_86 background some of the facts have been stipulated and they are so found at the time that the petition was filed petitioners resided in las vegas nevada the facts are not in dispute in date mrs flores was seriously injured at work while employed by citibank as a result of her injury mrs flores began receiving workers’ compensation benefits in date mrs flores continued to receive workers’ compensation benefits in which she received by check biweekly at the time of her injury in date mrs flores was also covered by a long-term disability policy through her employment with citibank under the terms of the policy if an employee’s disability lasted for more than a year the employee was obliged to apply for social_security_benefits accordingly in date mrs flores applied for social_security_benefits and she began receiving benefits in date by direct deposit to her bank account in mrs flores received social_security_benefits of dollar_figure which included benefits of dollar_figure paid in for mrs flores received a form ssa-1099 social_security_benefit statement for box of that form reported net benefits for of dollar_figure which was described as follows paid_by check or direct deposit dollar_figure worker’s compensation offset big_number benefits for dollar_figure petitioners attached the form ssa-1099 to their federal_income_tax return believing that the workers’ compensation offset was not includable in their income petitioners wrote the following explanation of their position on the form ssa-1099 box benefits paid is dollar_figure dollar_figure paid_by worker’s compensation not subject_to income taxes not paid_by ssa mrs flores paid her share of the premiums on this policy through payroll deductions in the notice_of_deficiency respondent determined that the workers’ compensation offset of dollar_figure was includable in petitioners’ income workers’ compensation benefits are generally not taxable if paid in place of wages lost as a result of work related accident or injury however workers’ compensation benefits may be taxable if paid in place of retirement benefits such as social_security or railroad retirement benefits in this situation the taxable_portion of your benefits would be computed using the same method used for social_security and railroad retirement discussion workers’ compensation is generally excludible from a taxpayer’s gross_income sec_104 in contrast social_security_benefits including social_security disability benefits may be includable in a taxpayer’s gross_income pursuant to a statutory formula that takes into account a number of factors including the amount of social_security_benefits received the taxpayer’s other income and the taxpayer’s filing_status sec_86 if the amount of social_security_benefits that a taxpayer receives is reduced because of the receipt of workers’ compensation benefits then the amount of the workers’ compensation benefits that cause the reduction the so-called offset amount is treated as though it were a social_security_benefit sec_86 see mikalonis v commissioner tcmemo_2000_281 willis v commissioner tcmemo_1997_290 the rationale for this provision appears in the legislative_history accompanying that enactment of sec_86 by the social_security amendments act of publaw_98_21 stat your committee’s bill provides that social_security_benefits potentially subject_to tax will include any workmen’s compensation whose receipt caused a reduction in social_security disability benefits for example if an individual were entitled to dollar_figure of social_security disability benefits but received only dollar_figure because of the receipt of dollar_figure of workmen’s compensation benefits then for purposes of the provisions taxing social_security_benefits the individual will be considered to have received dollar_figure of social_security_benefits h rept pincite in other words the purpose of sec_86 is to equalize sec_86 provides as follows sec_86 social_security_benefit -- workmen’s compensation benefits substituted for social_security_benefits --for purposes of this section if by reason of sec_224 of the social_security act any social_security_benefit is reduced by reason of the receipt of a benefit under a workmen’s compensation act the term social_security_benefit includes that portion of such benefit received under the workmen’s compensation act which equals such reduction at trial mrs flores testified that she received workmen’s compensation in an amount greater than the dollar_figure offset that was identified in her form 1099-ssa described supra p in this regard we emphasize that sec_86 serves to treat workers’ compensation benefits as though they were social_security_benefits only to the extent of the offset amount the federal tax treatment of social_security_benefits that are received by various taxpayers who may or may not be eligible to receive workers’ compensation benefits we acknowledge that mrs flores applied for social_security_benefits only because she was obliged to do so under the terms of her long-term disability policy we also acknowledge that if mrs flores had not been so obliged and if she had not actually applied for social_security_benefits then her workers’ compensation benefits would not have been subject_to federal_income_tax see sec_104 under the circumstances we can appreciate petitioners’ dismay nevertheless as the supreme court of the united_states has instructed we are dutybound to apply the law as written by the congress to the facts as they occurred and not as they might have occurred see 417_us_134 in view of the foregoing we hold for respondent on the legal issue presented reviewed and adopted as the report of the small_tax_case division we also note that respondent’s application of sec_86 is mathematically correct to reflect our disposition of the disputed issue decision will be entered for respondent


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-153162-12 date date legend parent merger sub target state a trustee business a federal_agency date date date date ----------------------------------- -------------------------------- ------------------------ -------------------------------------- -------------------------------- ------------------------ -------------------------------- ------------------------ -------------- -------------------------------- ----------------------------- ---------------------------------------------------------------- ------------------- ---------------------- --------------------------- --------------------------- plr-153162-12 dear -------------------- this letter responds to a letter dated date requesting a ruling under sec_1504 of the internal_revenue_code the material information submitted is summarized below facts parent a state a corporation is the common parent of an affiliated_group_of_corporations engaged in business a that files a consolidated federal_income_tax return the parent group target a state a corporation was previously the common parent of an unrelated consolidated_group also engaged in business a on date parent and target entered into an agreement for parent to acquire all of the outstanding target stock parent acquired all the outstanding_stock of target on date through a merger of merger sub a newly-formed wholly-owned subsidiary of parent with and into target the acquisition both the parent group and target and its subsidiaries are regulated by federal_agency which must grant approval before any merger or acquisition between two business a companies can be finalized accordingly pending approval of the acquisition by federal_agency parent transferred all of the target stock to an irrevocable voting_trust the voting_trust sanctioned by federal_agency pursuant to the terms of a voting_trust agreement the vta in exchange for all the certificates of the voting_trust trust certificates federal_agency granted approval of the acquisition on date and the voting_trust was dissolved as of date the substantive provisions of the vta include the following parent irrevocably appointed trustee as trustee trustee was required to be independent of parent or any of its affiliates as per terms of the vta trustee could at any time have resigned upon giving required notice whereupon parent could have appointed a successor trustee satisfying the independence requirements of the vta trustee was entitled to exercise any and all voting rights regarding target stock unless otherwise directed by an order of federal_agency or a court of competent jurisdiction trustee could not vote the stock of target so as to create a dependence or intercorporate relationship between parent and its affiliates on the one hand and target on the other hand trustee could not without prior approval of federal_agency vote the target stock to elect any officer or director of parent or its affiliates other than target as a director of target plr-153162-12 trustee was required to vote target stock in favor of any proposal or action effecting the acquisition of control of target by parent trustee could not vote to sell lease assign transfer or encumber target stock or major assets of target nor was the trustee to cause target to merge with or into any other entity without prior written authorization of parent parent could have at any time but only with prior written approval of federal_agency instructed trustee in writing to vote target stock in any manner in which case trustee was required to vote such stock as instructed trustee was required immediately following the receipt of each cash dividend on target stock to pay the same over to or as directed by parent trustee was required to receive and hold dividends and distributions other than cash on the same terms and conditions as it held target stock and was required to issue trust certificates representing any new or additional shares of target stock to parent parent had the right at any time to direct the sale_or_other_disposition of the whole or any part of the target stock by trustee in which case trustee was entitled to a certificate from parent that the purchaser is not a shareholder officer or director of parent or a company controlled by or affiliated with parent or a shareholder officer or director of such a company upon the order of parent trustee was required to promptly pay the proceeds of such sale to parent the voting_trust was to terminate to the extent of target stock sold furthermore trust certificates were transferable on the books of trustee by the registered holder in accordance with rules from time to time established by trustee if federal_agency approved the acquisition or any controlling law was amended such that federal_agency approval was no longer required trustee was required to transfer to parent or such other person who may have held the trust certificates all target stock as per the vta and the voting_trust was to cease to exist if federal_agency denied approval of the acquisition trustee was required to use its best efforts to sell the target stock to one or more eligible purchasers during the two-year period after the denial and to distribute the sale proceeds to parent unless sooner terminated pursuant to any other provision of the vta the vta and the voting_trust were to terminate two years after the execution of the vta which date is later than date the date the voting_trust terminated except that the vta and the voting_trust could have been extended by the parties thereto parent and target are includible corporations within the meaning of sec_1504 representations plr-153162-12 parent was the only holder of such certificates in the voting_trust and no other person ever held any ownership_interest in the trust at all times since the merger of merger sub into target i target has had only one class of equity outstanding and ii there have been no warrants options obligations convertible into stock or other similar interests in target outstanding or otherwise in existence parent fully complied with the terms of the vta absent federal_agency requirements parent would have directly owned all of the legal and beneficial interests in the target stock after the acquisition ruling parent is considered the direct owner of all the outstanding target stock for purposes of sec_1504 upon the acquisition and the creation of the voting_trust and subsequent transfer of target’s stock to it did not prevent target and each of its affiliated subsidiaries from being members of the parent group or joining a consolidated us federal_income_tax return with parent as of the acquisition caveats no opinion is expressed or implied as to the tax effect of any transaction or item discussed or referenced in this ruling letter under any other provision of the internal_revenue_code and regulations or the tax effect of any condition existing at the time of or effect resulting from the facts and circumstances herein described that are not specifically covered by the ruling set forth above procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives plr-153162-12 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling 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 request for rulings it is subject_to verification on examination sincerely ______________________ mark j weiss reviewing attorney branch office of associate chief_counsel corporate


department of the treasury internal_revenue_service washington d c jul xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx tax_exempt_and_government_entities_division u j l xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx legend taxpayer a individual ira x financial_institution c amount d trust e individual m date date2 date date4 dear xxxxxxxxx this is in response to your letter dated date as supplemented by correspondence dated date and date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 d of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of your request on date taxpayer a received a distribution from ira x totaling amount d taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to her disability and her responsibility as a caregiver for her mother individual which impaired her ability to accomplish a timely rollover within the 60-day rollover period taxpayer a resided with individual m in a jointly owned house individual taxpayer a's mother unexpectedly came to live with taxpayer a and individual m however individual required continued care and a stable environment due to her physical and mental conditions when taxpayer a's mother came to live with taxpayer a individual m promised taxpayer a that he would assist taxpayer a in caring for taxpayer a's mother but defaulted on all of his promises due to individual m's hostile behavior it became necessary for taxpayer a to move individual to a suitable house where she could care for her mother as trustee of trust e taxpayer a could have borrowed amount d from trust e to purchase another house however on date taxpayer a withdrew amount d from ira x in order to purchase a home for her and her mother with the intention to rollover amount d back into ira x when she received the funds from individual m for her share of their jointly owned house due to the delays by individual m in selling the jointly owned house taxpayer a did not receive her share of the jointly owned property until date which was after the 60-day rollover period on date she mailed amount d to financial_institution c to rollover into ira x however financial_institution c deposited amount d into taxpayer a's brokerage account and on date transferred amount d back into ira x taxpayer a represents that she is disabled due to an autoimmune disease as a result of the stress of caring for her mother she suffered a major flare up of her symptoms and was incapacitated for days taxpayer a further represents that stressful circumstances and the deterioration of her relationship with individual m and her mother's precarious health and mental condition along with her own disability impaired taxpayer a's ability to accomplish a timely rollover documentation from taxpayer a's physician and her mother's physician shows that taxpayer a has several medical conditions and is considered disabled and that her mother needs continued care and requires a stable environment because of dementia based on the facts and representations taxpayer a requests that the internal_revenue_service service waive the day rollover requirement with respect to the distribution of amount d sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual received the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not included in g ross 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 and good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occur after date are eligible for the waiver under sec_408 of the code revproc_2003_16 i r s provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability or hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with the representation that her disability and her responsibilities as a caregiver for individual b impaired her ability to accomplish a timely rollover within the 60-day rollover period therefore pursuant to code sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira x provided all other requirements of sec_408 of the code except the day requirement were met with respect to such contribution the contribution of amount d into ira x on date will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the 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 that requested it sec_611 o k of the code provides that it may not be used or cited as precedent a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file with this office if you have any questions regarding this letter please contact xxxxxxxxxxxx xxxxxxxxx all correspondence should be addressed to se t ep ra t sincerely yours vi q_ - rim edelman manager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose cc xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx


department of the treasury internal_revenue_service washington d c pore oriaies division jul uniform issue list vfr pat legend taxpayer a taxpayer b ira c roth_ira d financial_institution e ira f financial_institution g roth_ira h account account j amount amount amount amount amount dear this letter is in response to a request for a letter_ruling dated date from your authorized representative in which you request relief under sec_301 of the procedure and administration regulations p a regulations’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a is married to taxpayer b taxpayer a maintained ira c an individual_retirement_account ira under sec_408 of the internal_revenue_code the code with financial_institution e taxpayer a also maintained roth_ira d an ira under sec_408a of the code with financial_institution e taxpayer b maintained ira f an individual_retirement_account under sec_408 of the code with financial_institution g taxpayer b also maintained roth_ira h an ira under sec_408a of the code with financial_institution e on date taxpayer a transferred amount from ira c to roth_ira d on date taxpayer b transferred amount from ira f to roth_ira h at this time taxpayers a and b believed that they had successfully converted their traditional iras to roth iras unaware they were ineligible to do so for the tax_year because taxpayers a and b had adjusted_gross_income agi of amount for this tax_year the agi limit under sec_408a of the code for converting a traditional_ira to a roth_ira was dollar_figure with agi as modified under sec_408a since the modified ag of taxpayers a and b exceeded the limit for conversions during the tax_year the conversions were improper the joint form_1040 tax_return for taxpayers a and b was timely filed on date with a valid extension the tax_year is not a closed_year under the statute_of_limitations taxpayers a and b also were not aware that a conversion to a roth_ira could be recharacterized back to a traditional_ira by making an election to do so on or before the due_date of the return plus extensions for the tax_year in question the tax preparer for taxpayers a and b was not made aware of the conversions until date soon after the discovery of the improper conversions the tax preparer informed taxpayers a and b that their income amount exceeded the limit for converting funds in traditional iras to roth iras the financial advisor for taxpayers a and b contacted financial_institution e and requested that amount sec_1 and be transferred back to traditional iras he was informed that this could not be done because the request was after the date deadline for making this transfer recharacterization on date taxpayer a requested that financial_institution e transfer the entire account balance in roth_ira d amount to a non-ira investment account account on date taxpayer b also requested that financial_institution e transfer the entire account balance in roth_ira h amount to a similar non-ira investment account account j at the time the request for a private_letter_ruling was filed the internal_revenue_service the service had not discovered the need for taxpayers a and b to recharacterize the roth_ira conversions which were made in based on the foregoing facts and representations you have requested that pursuant to sec_301_9100-3 of the p a regulations taxpayers a and b each be granted an additional period of time to recharacterize their failed roth_ira conversions to traditional iras with respect to your request for relief under sec_301_9100-3 of the p a regulations code sec_408a and sec_1_408a-5 of the federal_income_tax regulations the i t regulations provide that except as otherwise provided by the secretary a taxpayer may elect to recharacterize an ira contribution made to one type of ira as having been made to another type of ira by making a trustee-to-trustee transfer of the ira contribution plus earnings to the other type of ira made to the transferee ira and not the transferor ira under sec_408a and sec_1_408a-5 this recharacterization election generally must occur on or before the date prescribed by law including extensions for filing the taxpayer's federal_income_tax return for the year of contributions in a recharacterization the ira contribution is treated as having been sec_1_408a-5 q a-6 of the i t regulations describes how a taxpayer makes the election to recharacterize the ira contribution to recharacterize an amount that has been converted from a traditional_ira to a roth_ira the taxpayer must notify the roth_ira trustee of the taxpayer's intent to recharacterize the amount the taxpayer must provide the trustee and the transferee trustee if different from the transferor trustee with specified information that is sufficient to effect the recharacterization and the trustee must make the transfer code sec_408a provided with respect to the tax_year that an individual with modified agi in excess of dollar_figure for a taxable_year is not permitted to make a qualified_rollover_contribution to a roth_ira from an individual_retirement_plan other than a roth_ira during that taxable_year sec_1_408a-4 q a-2 of the i t regulations provides in summary that an individual with modified agi in excess of dollar_figure for a taxable_year is not permitted to convert an amount to a roth_ira during that taxable_year sec_1_408a-4 q a-2 further provides in summary that an individual and his or her spouse must file a joint federal_income_tax return to convert a traditional_ira to a roth_ira and that the modified agi subject_to the dollar_figure limit for a taxable_year is the modified agi derived from the joint_return using the couple’s combined income sec_301_9100-1 sec_301_9100-2 and sec_301_9100-3 of the p a regulations in general provide guidance concerning requests for relief submitted to the service on or after date sec_301_9100-1 provides that the commissioner of internal revenue in his discretion may grant a reasonable extension of the time fixed by a regulation revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin for the making of an election or application_for relief in respect of tax under among others subtitle a of the code sec_301_9100-2 of the p a regulations lists certain elections for which automatic extensions of time to file are granted sec_301_9100-3 generally provides guidance with respect to the granting of relief with respect to those elections not referenced in sec_301_9100-2 the relief requested in this case is not referenced in sec_301_9100-2 sec_301_9100-3 of the p a regulations provides that applications for relief that fall within sec_301_9100-3 will be granted when the taxpayer provides sufficient evidence including affidavits described in sec_301_9100-3 to establish that the taxpayer acted reasonably and in good_faith and granting relief would not prejudice the interests of the government sec_301_9100-3 of the p a regulations provides that a taxpayer will be deemed to have acted reasonably and in good_faith i if the taxpayer's request for sec_301_9100-1 relief is filed before the failure to make a timely election is discovered by the service ii if the taxpayer failed to make the election because of intervening events beyond the taxpayer’s control iii if the taxpayer failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv the taxpayer reasonably relied upon the written advice of the service or v the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 of the p a regulations provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been made timely sec_301_9100-3 of the p a regulations provides that ordinarily the interests of the government will be treated as prejudiced and that ordinarily the service will not grant relief when tax years that would have been affected by the election had it been timely made are closed by the statute_of_limitations before the taxpayer's receipt of a ruling granting relief under this section in taxpayer a and b’s request for a ruling dated date the authorized representative states that it is the position of the taxpayers that the grant of the extension requested will not prejudice the interests of the government because it results in the taxpayers having the same tax_liability that would have resulted if the election to recharacterize roth_ira d and roth_ira h to traditional iras had been made timely n o in this case the modified_adjusted_gross_income of taxpayers a and b exceeded the dollar_figure limit under sec_408a of the code for tax_year thus taxpayers a and b were ineligible to convert amount from traditional_ira c to roth_ira d and amount from traditional_ira f to roth_ira h in taxpayers a and b were unaware they were ineligible to convert traditional iras to roth iras until their tax preparer informed them after date that their income amount exceeded the limit for converting funds in traditional iras to roth iras upon being informed of this taxpayers a and b transferred amount from roth_ira d and amount from roth_ira h to non-ira account and non-ira account j respectively with respect to taxpayers’ request for relief we conclude that based on the information submitted and the representations contained herein we cannot grant the relief that the taxpayers requested in this case relief under sec_301_9100-1 and sec_301_9100-3 of the p a regulations is conditioned on taxpayers a and b otherwise being able to elect to recharacterize their failed roth_ira conversions in a manner that complies with the requirements of code sec_408a and sec_1_408a-5 of the i t regulations this means that the amounts to be recharacterized must still be held by the roth iras however taxpayers a and b have transferred amount sec_3 and from roth_ira d and roth_ira h respectively to non-ira accounts as a result taxpayers a and b cannot elect to recharacterize the failed conversion amounts and the taxpayers are not eligible for relief under sec_301_9100-1 and sec_301_9100-3 of the p a regulations therefore taxpayers a and b are not authorized to transfer amount in account and amount in account j to traditional iras 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 ruling is based on the assumption that all the traditional iras and roth iras described above meet the requirements of code sec_408 and sec_408a respectively at all relevant times this letter is directed only to the taxpayers who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling has been sent to your authorized representative pursuant to if you wish to inquire about this ruling please a power_of_attorney on file in this office contact at i d sincerely yours carter lustins manager employee_plans technical group enclosures deleted copy of this letter notice cc


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date number release date conex-126231-16 uil the honorable john cornyn united_states senate providence tower sec_5001 spring valley road suite 1125e dallas texas attention dear senator cornyn --------------------- regarding required minimum distributions rmds under an i am responding to your inquiry dated date on behalf of your constituent --- ------------------------------ employer’s qualified_retirement_plan specifically she asked whether an employer may require its employees to receive an rmd on a date the employer specifies or whether the employer must permit the individual to provide the date upon which the individual wants to receive the payment sec_401 provides that an employee must start receiving rmds from his or her retirement_plan generally by april following the calendar_year in which an employee turns age 70½ or if the plan provides for it the calendar_year in which the employee retires if later sec_1_401_a_9_-2 q a-2 under sec_401 rmds after the calendar_year in which the employee turns age 70½ or retires must be made on or before the end of the calendar_year sec_1_401_a_9_-5 q a-1 c irs publication pension and annuity income page please note the tax rules do not specify a date during the calendar_year when the payment must be made nor do they specify which party determines the date on which payment will be made the retirement_plan document may specify such terms or if it does not the procedures for payment of a requested rmd generally would be within the discretion of the plan_administrator conex-126231-16 this letter includes general principles of the law it is intended for informational purposes only and is not a ruling see revproc_2016_1 sec_2 2016_1_irb_8 date i hope this information is helpful if you have questions please contact ---------------------- at our office at --------------------- --------------------- or me at sincerely victoria a judson associate chief_counsel chief_counsel tax exempt and government entities --------------------------- cc


t c memo united_states tax_court dennis burbridge and rosemary burbridge petitioners v commissioner of internal revenue respondent docket no 8415-02l filed date dennis burbridge pro_se robert mopsick for respondent memorandum findings_of_fact and opinion swift judge petitioners seek review of respondent’s notice_of_determination sustaining a notice_of_intent_to_levy relating to petitioners’ federal_income_tax liability all section references are to the internal_revenue_code in effect for the year in issue unless otherwise specified references to petitioner in the singular are to petitioner dennis burbridge findings_of_fact some of the facts have been stipulated and are so found at the time the petition was filed petitioners resided in cranford new jersey prior to her death on date petitioner’s mother maintained with aig life_insurance co aig a nonqualified single premium annuity petitioner was the beneficiary of the annuity in after the death of petitioner’s mother aig distributed to petitioner the total dollar_figure payable under the annuity aig reflected the total dollar_figure distribution on a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc which form 1099-r was mailed by aig to petitioner and to respondent on the form 1099-r dollar_figure of the total_distribution was shown as taxable_income as of date respondent’s records indicated that petitioner had not yet filed a federal_income_tax return for and on date respondent prepared for petitioner a substitute individual federal_income_tax return substitute return on which respondent treated the above dollar_figure shown on the form 1099-r as taxable_income to petitioner on date respondent mailed to petitioner a 30-day_letter proposed individual income_tax assessment treating the dollar_figure as taxable_income to petitioner on date in response to the above 30-day_letter petitioners untimely filed with respondent a form_1040 u s individual_income_tax_return which petitioners purported to be their joint federal_income_tax return on such form_1040 petitioners reflected petitioner’s receipt of the total dollar_figure annuity distribution but petitioners also treated the total dollar_figure as nontaxable income to petitioner also on the form_1040 petitioners showed no tax due and claimed a refund of dollar_figure on date respondent mailed to petitioner a notice_of_deficiency for on which respondent determined an income_tax deficiency against petitioner of dollar_figure based on the taxability to petitioner of the dollar_figure shown as taxable on the we make no finding as to whether the substitute return meets the requirements of sec_6020 see mccarthy v commissioner tcmemo_1989_479 citing 847_f2d_1379 9th cir affg an order of this court petitioners’ form_1040 for has not been accepted by respondent as a valid tax_return because contrary to the form 1099-r it reflected no portion of the dollar_figure annuity distribution as taxable_income to petitioner form 1099-r respondent’s notice_of_deficiency was mailed only to and received only by petitioner petitioner did not file a petition in this court with regard to the above notice_of_deficiency on date respondent assessed the dollar_figure income_tax deficiency set forth in the notice_of_deficiency against both petitioners on date respondent mailed to both petitioners a notice_of_intent_to_levy relating to the above tax_assessment on date petitioner submitted to respondent a request for a sec_6330 hearing on date respondent’s appeals officer mailed to petitioners a letter notifying petitioners that respondent had received petitioners’ request for a hearing on date petitioner contacted the appeals officer and scheduled a hearing on date petitioner and the appeals officer discussed the notice_of_intent_to_levy over the telephone telephone conference during the telephone conference petitioner attempted to challenge the underlying tax_liability by claiming that the total dollar_figure annuity distribution had been included on his deceased originally the appeals_office hearing was scheduled to be held in respondent’s office on date but on the morning of feb petitioner called the appeals officer and stated that he could not attend the hearing at respondent’s office the appeals officer suggested that they could discuss the notice_of_intent_to_levy over the telephone to which petitioner agreed and which they proceeded to do mother’s federal estate_tax_return that had been filed with respondent during the telephone conference respondent’s appeals officer informed petitioner that petitioner’s underlying tax_liability could not be challenged at the hearing because petitioner had received a notice_of_deficiency with regard thereto in connection with the hearing the appeals officer also informed petitioner that respondent had no record indicating that a federal estate_tax_return had been filed on behalf of petitioner’s deceased mother and petitioner failed to provide to the appeals officer any proof that such a return had been filed also in connection with the hearing the appeals officer reviewed petitioner’s case file and verified that all applicable collection laws and administrative procedures were satisfied on date respondent issued to petitioners the notice_of_determination sustaining the proposed levy opinion in the context of a sec_6330 hearing a challenge to the taxpayer’s underlying tax_liability will be considered only if the taxpayer did not receive a notice_of_deficiency or otherwise have a prior opportunity to dispute the underlying tax_liability respondent concedes that the assessment the notice_of_intent_to_levy and the notice_of_determination mailed to petitioners erroneously included petitioner rosemary burbridge sec_6330 114_tc_604 114_tc_176 if the underlying tax_liability is not at issue we review respondent’s notice_of_determination under an abuse_of_discretion standard sec_6330 118_tc_488 117_tc_183 sego v commissioner supra pincite goza v commissioner supra pincite citing h conf rept pincite 1998_3_cb_755 an abuse_of_discretion by respondent may be defined as an action that is unreasonable arbitrary or capricious clearly unlawful or lacking sound basis in law taking into account all the facts and circumstances see eg 439_us_522 122_tc_32 121_tc_111 in a sec_6330 hearing respondent is required to verify whether the requirements of all applicable laws and administrative procedures have been met to consider issues raised by a taxpayer and to determine whether the proposed collection action is more intrusive than necessary sec_6330 petitioner primarily argues that respondent erred by not allowing petitioner to challenge the merits of the underlying tax_liability and by not conducting a face-to-face hearing as stated however because petitioner received a notice_of_deficiency we do not have jurisdiction herein to consider petitioner’s underlying tax_liability sec_6330 the date telephone conference between petitioner and respondent’s appeals officer was agreed to by petitioner and constituted an appropriate hearing for purposes of sec_6330 see day v commissioner tcmemo_2004_30 leineweber v commissioner tcmemo_2004_17 dorra v commissioner tcmemo_2004_16 sec_301_6330-1 q a-d6 proced admin regs during the hearing petitioner failed to suggest any collection alternatives or to raise any other valid concerns regarding the notice_of_intent_to_levy respondent properly verified that the requirements of applicable law and administrative procedures were met and petitioner argues that if the dollar_figure annuity distribution was properly included on petitioner’s deceased mother’s federal estate_tax_return under sec_2039 no portion of the annuity distribution would be taxable to petitioner as the beneficiary of the annuity we note that the validity of this argument depends on a number of facts not in evidence nor relevant for purposes of the issue in this collection case if petitioner believes that he can produce evidence that establishes that the dollar_figure annuity distribution was taxable to the estate of petitioner’s deceased mother petitioner’s remedy if any would seem to lie in a claim_for_refund after full payment respondent balanced the need for efficient collection_of_taxes with the legitimate concern of petitioner that the collection action be no more intrusive than necessary petitioner makes various other arguments equally without merit respondent did not abuse his discretion in sustaining the notice_of_intent_to_levy as to petitioner to reflect the foregoing an order dismissing petitioner rosemary burbridge will be issued and decision will be entered for respondent as to petitioner dennis burbridge


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 b02 plr-144315-10 date date x trust ----------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------- ----------------------- beneficiary ----------------------------------------------------------------------------------------------- ------------------------ d1 d2 ------------------------ ---------------------- state ------------- dear ------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on d1 as of d2 x’s shareholders included trust x intended to be treated as an s_corporation effective d2 to this end x timely elected subchapter_s status effective d2 by filing form_2553 election by a small_business_corporation with the service however this election did not include the trust’s qualified_subchapter_s_trust qsst election which must be signed by beneficiary the trust’s beneficiary beneficiary and trust represent that they plr-144315-10 have filed income_tax returns consistent with the treatment of x as an s_corporation and trust as a qsst x represents that the invalid election was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the event resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness the corporation shall be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election was ineffective on d2 we conclude however such ineffectiveness was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as an s_corporation from d2 and thereafter provided that x’s election was not otherwise terminated under sec_1361 if x or its shareholders fail to treat themselves as described above this letter_ruling shall be null and void this ruling is conditioned on trust filing a new qsst election effective d2 with the appropriate service_center within days of this letter a copy of this letter should be attached to the qsst election plr-144315-10 except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code this ruling 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 this office a copy of this letter is being forwarded to x’s authorized representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 4-plr-114643-02 date april re legend decedent trust brother charity city state dollar_figurex date date court state statutes cite dear we received a letter dated date from your authorized representative requesting rulings under sec_2055 and sec_2518 of the internal_revenue_code with respect plr-114643-02 to the proposed reformation of trust and a disclaimer of certain interests in trust this letter responds to that request decedent died testate on date prior to her death decedent had established trust a revocable_trust that became irrevocable on decedent’s death article second of decedent’s will executed on date provides that the residue of decedent’s estate is to be distributed to trust sec_2 of trust provides that upon decedent’s death the balance of trust corpus is to be divided into two equal trusts under sec_2 paragraph one of the trusts is to be administered as follows fifty percent of the balance thereof shall continue in trust and shall be administered as follows brother at least semi-annually a all the net_income shall be paid to or for the benefit of my brother b trustee may pay to or for the benefit of my brother as much of the principal of the trust as the trustee may deem proper for his welfare comfort and support c on the death of my brother the trustee shall pay over the then remaining principal together with all income accrued and unpaid to the date of his death to the trust established for the benefit of my aunt and my aunt in the event my aunts or the survivor of them dies before the time for setting apart their trust share what remains of their share shall be distributed by the trustee as follows i to charity city state to be used in such manner as the board_of trustees shall determine from time to time sec_2 paragraph provides for the administration of the second trust as follows fifty percent of the balance thereof shall continue in trust and shall be administered as follows a all of the net_income shall be paid to or for the benefit of my aunt and my aunt or the survivor at least semi-annually b trustee may pay to or for the benefit of my aunts or the survivor of them as much of the principal of the trust as the trustee may deem proper for their welfare comfort and support c on the death of my surviving aunt the trustee shall pay over the then remaining principal together with all income accrued and unpaid to the date of her death to the trust hereinbefore established for the benefit of my brother brother to add the same to the trust estate thereof and hold and distribute the same as if it had been a part thereof immediately prior to the death of my aunt in the event my brother dies before the time for setting plr-114643-02 apart his trust share or if he dies after his trust share has been set apart but before his entire share has been exhausted what remains of his share shall be distributed by the trustee as follows i to charity city state to be used in such manner as the board_of trustees shall determine from time to time both of decedent’s aunts referenced in sec_2 paragraphs and predeceased decedent accordingly percent of the trust residue passes to the sec_2 paragraph trust brother proposes to disclaim the following interests in the sec_2 paragraph trust his right to receive discretionary distributions of trust principal under sec_2 paragraph b and a fractional share of his income_interest in the trust the numerator of which is dollar_figurex and the denominator of which is the value of the trust as finally determined for estate_tax purposes the laws of state authorize the disclaimer of an interest passing in trust if the disclaimer is in writing and delivered to the trustee the disclaimer relates back for all purposes to the date of the death of the decedent unless the testator has provided otherwise the disclaimed property passes as if the disclaimant died before the decedent state statutes further it is represented that under state law the disclaimer of a life interest causes the acceleration of the remainder_interest cite in conjunction with the execution of brother’s disclaimer trustee proposes to initiate proceedings for the judicial reformation of the sec_2 paragraph trust in accordance with sec_2055 in order to qualify the trust as a charitable_remainder_annuity_trust under sec_664 as reformed the trust will provide for an annual annuity_payment equal to of the trust estate as finally determined for federal estate_tax purposes payable to brother in quarterly installments for his life on the death of brother all remaining trust assets will be paid to charity the following rulings have been requested the proposed disclaimers by brother of the right to receive trust principal distributions and a fractional interest in the trust income during his lifetime will be qualified disclaimers under sec_2518 the proposed reformation of the trust will be a qualified_reformation under sec_2055 an estate_tax charitable deduction will be allowed for the present_value of the remainder_interest in the trust as reformed and for dollar_figurex that will pass directly to charity as a result of brother’s disclaimer ruling_request no plr-114643-02 sec_2518 provides that if a person makes a qualified_disclaimer with respect to any interest in property subtitle b relating to the estate gift and generation-skipping_transfer taxes shall apply with respect to such interest as if the interest had never been transferred to such person sec_2518 provides that the term qualified_disclaimer means an irrevocable and unqualified refusal by a person to accept an interest in property but only if- such refusal is in writing such writing is received by the transferor of the interest the transferor’s legal_representative or the holder of the legal_title to the property to which the interest related not later than the date which is months after the later of- a the date on which the transfer creating the interest in such person is made or b the day on which such person attains age such person has not accepted the interest or any of its benefits and as a result of such refusal the interest passes without any direction on the part of the person making the disclaimer and passes either- a to the spouse of the decedent or b to a person other than the person making the disclaimer sec_25_2518-1 of the gift_tax regulations provides that if a person makes a qualified_disclaimer as described in sec_2518 and sec_25_2518-2 for purposes of the federal estate gift and generation-skipping_transfer_tax provisions the disclaimed interest in property is treated as if it had never been transferred to the person making the qualified_disclaimer instead it is considered as passing directly from the transferor of the property to the person entitled to receive the property as a result of the disclaimer under sec_25_2518-3 the disclaimer of all or an undivided portion of any separate interest in property may be a qualified_disclaimer even if the disclaimant has another interest in the same property in general each interest in property that is separately created by the transferor is treated as a separate interest for example if an income_interest in securities is bequeathed to a for life then to b for life with the remainder_interest in such securities bequeathed to a’s estate and if the remaining requirements of sec_2518 are met a could make a qualified_disclaimer of either the income_interest or the remainder or an undivided portion of either interest a could not however make a qualified_disclaimer of the income_interest for a certain number of years severable property is property that can be divided into separate parts each of which after severance maintains a complete and independent existence for example a legatee of shares of corporate stock may accept some shares of the stock and make a qualified_disclaimer of the remaining shares sec_25_2518-3 provides that a disclaimer is not a qualified_disclaimer under sec_2518 if the beneficiary disclaims income derived from specific property plr-114643-02 transferred in trust while continuing to accept income derived from the remaining properties in the same trust unless the disclaimer results in such property being removed from the trust and passing without any direction on the part of the disclaimant to persons other than the disclaimant or to the spouse of the decedent sec_25_2518-3 example describes a situation where under the provisions of e’s will e’s shares of stock in x y and z corporations were to be transferred to a_trust the trust provides that all income is to be distributed currently to f and g in equal parts until f attains the age of years at that time the corpus of the trust is to be divided equally between f and g f disclaimed the income arising from the shares of x stock g disclaimed percent of g’s interest in the trust f’s disclaimer is not a qualified_disclaimer because the x stock remains in the trust if the remaining requirements of sec_2518 are met g’s disclaimer is a qualified_disclaimer sec_25_2518-3 example considers a situation where h is the income_beneficiary of a_trust and also possesses the right as trustee to invade corpus for h’s health maintenance support and happiness in addition h possesses a testamentary power to appoint trust corpus the example concludes that if h disclaims both the power to invade corpus for h’s benefit and the testamentary power to appoint corpus while retaining the income_interest h’s disclaimer will be a qualified_disclaimer sec_25_2518-3 example describes a situation where under the terms of a testamentary_trust w is to receive all trust income_for_life the trustee has the power to invade trust corpus for the support and maintenance of d during the life of w at w’s death the trust corpus is payable to d d disclaims the right to receive distributions of trust corpus during w’s lifetime but retains the right to receive the remainder at w’s death the example concludes that d’s disclaimer is a qualified_disclaimer in the present case brother proposes to execute irrevocable disclaimers of certain rights in trust it is represented that the disclaimers will be valid under state law and will be delivered to the appropriate party no later than months after decedent’s death further it is represented that brother has not accepted any benefits from the interests subject_to the disclaimers as a result of brother’s disclaimer of a fractional share of his income_interest you represent that under state law an equivalent fraction of the trust corpus will immediately be paid to charity the residuary remainderman cite therefore the disclaimed interest will not remain a part of the trust’s corpus based on the above we conclude that brother’s proposed disclaimer of his right to receive discretionary distributions of trust corpus during his lifetime will constitute the disclaimer of a separate interest in property under sec_25_2518-3 further we conclude that brother’s disclaimer of a fractional portion of his income_interest will constitute a disclaimer of an undivided portion of a separate interest in property under sec_25_2518-3 accordingly we conclude that assuming the other requirements of plr-114643-02 sec_2518 are satisfied brother’s proposed disclaimer will be a qualified_disclaimer under sec_2518 ruling requests nos and sec_2055 provides that for purposes of the federal estate_tax the value of the taxable_estate is determined by deducting from the value of the gross_estate all bequests to or for_the_use_of certain governmental entities certain corporations organized and operated exclusively for religious charitable scientific literary or education purposes and certain other fraternal and veterans organizations sec_2055 provides that where an interest in property other than an interest described in sec_170 passes or has passed_from_the_decedent to a person or for a use described in sec_2055 and an interest other than an interest that is extinguished upon the decedent’s death in the same property passes or has passed for less than an adequate_and_full_consideration in money or money’s worth from the decedent to a person or for a use not described in sec_2055 no deduction is allowed under sec_2055 for the interest that passes to the person or for the use described in sec_2055 unless in the case of a remainder_interest the interest is in a_trust which is a charitable_remainder_annuity_trust or a charitable_remainder_unitrust described in sec_664 or a pooled_income_fund described in sec_664 or in the case of any other interest the interest is in the form of a guaranteed annuity or is a fixed percentage distributed yearly sec_20_2055-2 provides that the amount of a bequest devise or transfer for which a deduction is allowable under sec_2055 includes an interest that falls into the bequest devise or transfer as a result of a qualified_disclaimer described in sec_2518 sec_2055 provides that a deduction is allowed under sec_2055 for any qualified_reformation the term qualified_reformation means a change_of a governing instrument by reformation amendment construction or otherwise that changes a reformable_interest into a qualified_interest but only if-- i any difference between- i the actuarial value determined as of the date of the decedent’s death of the qualified_interest and ii the actuarial value as so determined of the reformable_interest does not exceed percent of the actuarial value as so determined of the reformable_interest ii in the case of-- plr-114643-02 i a charitable_remainder interest the nonremainder interest before and after the qualified_reformation terminated at the same time or ii the reformable_interest and the qualified_interest are for the same period and iii such change is effective as of the decedent’s death sec_2055 provides that the term reformable_interest means any interest for which a deduction would be allowable under sec_2055 at the time of the decedent’s death but for the provisions of sec_2055 sec_2055 provides that the term reformable_interest does not include any interest unless before the remainder vests in possession all payments to persons other than an organization described in sec_2055 are expressed either in specified dollar amounts or a fixed percentage of the fair_market_value of the property sec_2055 provides however that the restriction in sec_2055 does not apply if a judicial proceeding is commenced to change the charitable interest into a qualified_interest not later than the 90th day after the last date including extensions for filing the estate_tax_return if one is required to be filed under sec_2055 the term qualified_interest means an interest for which a deduction is allowable under sec_2055 in this case as discussed above brother’s disclaimer of his right to receive discretionary distributions of trust corpus will be a qualified_disclaimer under sec_2518 thus for estate_tax purposes the interest is treated as never having passed to brother further as a result of the disclaimer brother will be treated under applicable local law as if he predeceased decedent with respect to the disclaimed interest thus for estate_tax purposes as of the date of decedent’s death brother’s right to receive trust income is deemed to be the only noncharitable interest in the trust therefore we conclude that if the disclaimer is executed and the requirements of sec_2518 are otherwise satisfied the charitable interest in the trust prior to reformation would have qualified for an estate_tax charitable deduction under sec_2055 but for the provisions of sec_2055 in other words the value of the remainder_interest in the trust determined based on the assumption that all trust income is distributed to the income_beneficiary would qualify for a charitable deduction but for the provisions of sec_2055 accordingly the first requirement for a qualified_reformation under sec_2055 will be satisfied the proposed reformation satisfies the second requirement for a qualified_reformation under sec_2055 because brother’s interest both before and after the proposed reformation will terminate at the same time ie at brother’s death moreover the reformation will be effective as of the date of decedent’s death therefore the proposed reformation satisfies the third requirement plr-114643-02 with respect to the fourth requirement based on the interest rate under sec_7520 for the month of decedent’s death of percent the difference between the actuarial value of the reformable_interest in the sec_2 paragraph trust and the qualified_interest after reformation will be less that percent of the actuarial value of the reformable_interest accordingly the proposed reformation satisfies the fourth requirement under sec_2055 the proposed reformation will satisfy the fifth requirement under sec_2055 because even though brother’s interest in the reformable trust is not expressed in a specified dollar amount or a fixed percentage of the fair_market_value of the trust it is represented that a judicial proceeding to reform the trust will be commenced within days of the date that the decedent’s federal estate_tax_return is due accordingly we conclude that the proposed reformation will be a qualified_reformation within the meaning of sec_2055 therefore an estate_tax charitable deduction will be allowable under sec_2055 for the present_value of the remainder_interest in the trust as reformed determined under sec_20_2055-2 in addition as noted above based on the submitted representations brother’s disclaimer of a fractional portion of his income_interest in trust will be a qualified_disclaimer under sec_2518 further you represent that under applicable state law as a result of the disclaimer a fractional interest in the trust corpus will pass directly to charity therefore in accordance with sec_20_2055-2 the value of the interest that passes to charity as a result of brother’s disclaimer of a fractional portion of his income_interest in trust will qualify for an estate_tax charitable deduction under sec_2055 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under the cited provisions or any other provisions of the code this ruling 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 ruling is being sent to your authorized representative sincerely associate chief_counsel passthroughs and special industries by george masnik chief branch enclosure copy for sec_6110 purposes