office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eb ec jbrichards postu-124817-16 uilc 409a date date to mark hulse division counsel tax exempt government entities from stephen tackney deputy associate chief_counsel employee_benefits tax exempt government entities subject matching_contribution sec_409a substantial_risk_of_forfeiture this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent facts on date an employee entered into an agreement to defer dollar_figure of the employee’s salary that would otherwise have been paid during with payment of the deferred_amount to be made as a lump-sum payment on date but only if the employee continues to provide substantial future services until date under the agreement the employee’s salary is reduced by dollar_figure each biweekly pay_period so x dollar_figure or dollar_figure and the employer credits matching amounts to the employee’s deferred_compensation account of of each salary reduction so x dollar_figure or dollar_figure for a total amount deferred of dollar_figure the matching amounts are credited each time a salary reduction amount is credited which is the time the salary reduction amount would otherwise be paid as salary issue may the salary that the employee could have elected to receive as compensation be treated as subject_to a substantial_risk_of_forfeiture under sec_409a through date if as part of the imposition of the service requirement through postu-124817-16 date the employer provides a matching_contribution resulting in a increase in the present_value of the amount of deferred_compensation conclusion yes an amount that an employee could have elected to receive as salary may be treated as subject_to a substantial_risk_of_forfeiture under sec_409a if the employer provides a matching_contribution resulting in a increase in the present_value of the amount deferred law and analysis sec_409a generally provides that if certain requirements related to the timing of elections distributions and funding are not met at any time during a taxable_year amounts deferred under a nonqualified_deferred_compensation_plan for that year and all previous taxable years are currently includible in gross_income to the extent not subject_to a substantial_risk_of_forfeiture and not previously included in gross_income amounts includible in income under sec_409a are also subject_to two additional taxes under sec_409a sec_1_409a-1 provides that a substantial_risk_of_forfeiture exists if the receipt of deferred_compensation is conditioned on the performance of substantial future services or the occurrence of a condition related to a purpose of the compensation and the possibility of forfeiture is substantial in general the addition of any risk of forfeiture after the legally binding right to the compensation arises or any extension of a period during which compensation is subject_to a risk of forfeiture is disregarded for purposes of determining whether such compensation is subject_to a substantial_risk_of_forfeiture however an amount will be considered subject_to a substantial_risk_of_forfeiture beyond the date or time at which the recipient otherwise could have elected to receive the amount of compensation if the present_value of the amount subject_to a substantial_risk_of_forfeiture is materially greater than the present_value of the amount the recipient otherwise could have elected to receive absent such risk of forfeiture generally under sec_1_409a-1 the addition of a risk of forfeiture is disregarded however the addition of a substantial_risk_of_forfeiture is respected if the present_value of the amount subject_to the substantial_risk_of_forfeiture is materially greater than the present_value of the amount the service provider otherwise could have elected to receive absent such risk of forfeiture under the facts here the present_value of the amount deferred by the employee i sec_25 greater than the amount the employee otherwise could have received absent the addition of the substantial_risk_of_forfeiture a increase in the present_value of the amount a service provider could have received absent the risk of forfeiture is a material increase accordingly the combined deferred_amount of salary dollar_figure plus the deferred_amount of the employer’s matching_contribution dollar_figure is subject_to a substantial_risk_of_forfeiture for purposes of sec_409a until date postu-124817-16 this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call ---------------------- if you have any further questions _____________________________ stephen b tackney deputy division counsel deputy associate chief_counsel employee_benefits tax exempt government entities


internal_revenue_service index number number release date cc ebeo - plr date attn state county plan dear this responds to your request of date on behalf of county pertaining to the exclusion_from_gross_income of line of duty disability benefits paid to disabled employees under the plan the plan which was established by county ordinance provides for annual disability retirement income to be paid to participants who are determined to be either totally and permanently disabled or partially and permanently disabled as a result of an accident or injury incurred in the line of duty sec_5 a of the plan provides that a participant regardless of the number of his or her years_of_service who reaches a termination_date by reason of a total and permanent disability incurred as a result of an accident or injury which has been determined to have been sustained in the line of duty shall be entitled to receive an annual disability retirement income equal to multiplied by the participant’s final average earnings for the three years prior to the participant’s termination_date reduced by a of the amount the participant receives in the form of disability benefits under the federal social_security act plus b of the amounts the participant receives under the state workers’ compensation act as compensation_for the accident or injury underlying the participant’s total and permanent disability plus c of the amounts the participant receives by virtue of participation in any long term disability plan sponsored by the employer plus d of the amount by which the participant’s annual earned_income exceeds the rate of earnings the participant would earn from the employer if the participant were still actively employed in the eligible class and the rank and grade in which the participant was employed as of his or her termination_date if less than three rates of earnings are available the average will be determined using the rates of earnings that are available sec_5 b of the plan provides that a participant other than a participant employed as a communications dispatcher and regardless of the number of his or her years_of_service who reaches a termination_date by reason of a permanent partial disability incurred as a result of an accident or injury which has been determined to have been sustained in the line of duty shall be entitled to receive an annual disability retirement income equal to a percentage as determined by the disability review board which shall be dependent on the extent and degree of the participant’s disability but shall be no less than and no greater than multiplied by the participant’s final average earnings for the three years prior to the participant’s termination_date reduced by a of the amount the participant receives in the form of disability benefits under the federal social_security act plus b of the amounts the participant receives under the state workers’ compensation act as compensation_for the accident or injury underlying the participant’s total and permanent disability plus c of the amounts the participant receives by virtue of participation in any long term disability plan sponsored by the employer plus d of the amount by which the participant’s annual earned_income exceeds the rate of earnings the participant would earn from the employer if the participant were still actively employed in the eligible class and the rank and grade in which the participant was employed as of his or her termination_date if less than three rates of earnings are available the average will be determined using the rates of earnings that are available in order to qualify for line of duty disability benefits under sec_5 a and b of the plan the accident or injury underlying the disability must be ruled compensable under the terms established by the disability review board you request a ruling that sec_5 a and b of the plan are statutes in the nature of workmen’s compensation acts and line of duty disability benefits paid pursuant to sec_5 a and b of the plan are therefore excludable from the gross_income of the recipients under sec_104 of the internal_revenue_code sec_61 of the internal_revenue_code provides that except as otherwise provided by law gross_income means all income from whatever source derived including compensation_for services sec_104 of the code provides that gross_income does not include amounts received under workmen's_compensation acts as compensation_for personal injuries or sickness sec_1_104-1 of the income_tax regulations states that sec_104 of the code excludes from gross_income amounts received by an employee under a workmen's_compensation_act or under a statute in the nature of a workmen's_compensation_act that provides compensation to the employee for personal_injury_or_sickness incurred in the course of employment sec_104 also applies to compensation which is paid under a workmen’s compensation act to the survivor or survivors of a deceased employee sec_104 does not apply to a retirement pension or annuity to the extent it is determined by reference to the employee's age or length of service or the employee's prior contributions even though the employee's retirement is occasioned by an occupational injury or sickness sec_104 also does not apply to amounts which are received as compensation_for a non-occupational injury or sickness nor to amounts received as compensation_for an occupational injury or sickness to the extent that they are in excess of the amount provided in the applicable workmen's_compensation_act or acts sec_5 a and b of the plan limit payment of disability benefits to participants who become totally and permanently disabled or permanently and partially disabled as a result of an on-the-job injury the benefits payable under sec_5 a and b of the plan are not determined by reference to the employee’s age length of service or prior contributions sec_5 a and b of the plan are therefore statutes in the nature of workmen’s compensation acts accordingly we conclude that line of duty disability benefits paid under sec_5 a and b of the plan other than amounts constituting the participants’ county pick up contributions benefits are excludable from the gross_income of the recipients under sec_104 of the code except as specifically ruled upon above no opinion is expressed or implied with respect to the application of any other provisions of the code or the regulations to the benefits described or to any other provision of the plan this ruling 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 sincerely harry beker chief branch office of the associate chief_counsel employee_benefits and exempt_organizations enclosure copy for sec_6110 purposes


tax_exempt_and_government_entities_division number release date legend org - organization name xx - date address - address department of the treasury internal_revenue_service te_ge eo examination commerce street dallas texas date date employer_identification_number person to contact id number contact numbers telephone fax certified mail -- return receipt requested dear this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter dated august 20xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reasons org does not operate exclusively for charitable purposes as noted in sec_1_501_c_3_-1 of the regulations this section provides an organization will be regarded as operated exclusively for one or more it engages primarily in activities which accomplish exempt purposes only if one or more of such exempt purposes specified in sec_501 org failed to meet the operational_test described in sec_1_501_c_3_-1 contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 those returns should be filed with the appropriate service_center processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia a petition or compliant in one of these three courts must be filed before the day after the date this determination was mailed to you if you wish to seek review of our determination please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the court at the following addresses you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law you have to file a petition in a united_states court the taxpayer_advocate can however see a tax matter that may not have been resolved through normal channels gets prompt and proper handling you can call and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions in regards to this matter please contact the person whose name and telephone number are shown in the heading of this letter thank you for your cooperation nanette m downing director eo examinations sincerely yours fi department of the treasury internal_revenue_service irs tax_exempt_and_government_entities_division date date taxpayer_identification_number capitol street fresno ca ro ress form tax_year s ended person to contact id number contact numbers manager's name id number manager's contact number response due_date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren't an organization described in sec_501 after we issue the final revocation letter we’ll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code if we don't hear from you if you don't respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the letter rev catalog number 34809f irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn’t a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing director eo examinations enclosures report of examination form_6018 publication publication letter rev catalog number 34809f department of the treasury - internal_revenue_service form_886 a name of taxpayer org year period ended december 20xx explanation of items schedule no or exhibit legend org -- organization name president issues xxx -- date state - state president - does the org continue to qualify for exemption from federal_income_tax under internal_revenue_code sec_501 facts the org org incorporated on april 20xx in the state of state article ii of the org's articles of incorporation state that the org is a nonprofit public benefit corporation is not organized for private gain of any person and its specific purpose is to preserve aircraft for education and enjoyment of the public the org submitted form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code to the internal_revenue_service irs on may 20xx the narrative description in part il states that the org’s activities will be to promote and encourage the preservation and operation of military aircraft to educate its members and other interested persons in methods of sage operation and maintenance of world war ii aircraft and to organize and promote fly-ins air shows air meets static displays and other public demonstrations of military aircraft to acquire restore and preserve in flying condition a collection of military equipment and historical aircraft which were flown by the nations of the world for the education and enjoyment of present and future generation of americans to construct or obtain org building facilities or the permanent protection maintenance and display of these historic military equipment aircraft period artifacts and documents as a tribute to the thousands of men and women who built serviced and flew them the irs issued an advance_ruling letter dated august 20xx recognizing the org as an organization described in internal_revenue_code code sec_501 the letter also advised the org that it could reasonably expect to be a public charity as described in code sec_107 a copy of the final_determination letter was not available current irs records show that the org is recognized as an organization described in code sec_501 and sec_107 form 886-a crev department of the treasury - internal_revenue_service page of department of the treasury - internal_revenue_service form_886 a name of taxpayer org year period ended december 20xx explanation of items schedule no or exhibit in an interview conducted with president president of the org on december 20xx he stated that the org has been inactive since 20xx the org anticipated securing military aircraft for public display in a org setting but the plans did not materialize the org solicited aircraft and related equipment from the us government in the initial year but none was received the org has not received any financial support from any source and does not have a bank account similarly the org has not incurred or paid any expenses the org does not carry on any activities law code sec_501 exempts from federal_income_tax organizations organized and operated exclusively for charitable educational and other exempt purposes provided that no part of the organization's net_earnings inures to the benefit of any private_shareholder_or_individual federal tax regulations regulations sec_1_501_c_3_-1 states in part that in order to be exempt as an organization described in code sec_501 the organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt the term exempt_purpose or purposes as used in this section means any purpose or purposes specified in sec_501 regulations sec_1_501_c_3_-1 provides that an organization will not be regarded as operated exclusively for exempt purposes if more than an insubstantial part of its activities is not in furtherance of exempt purposes taxpayer's position the taxpayer conceded that the org has not carried on a charitable activity or any other activity since 20xx the taxpayer agreed to the proposed revocation and executed form_6018 government's position the org does not continue to qualify for exemption under code sec_501 because it did not demonstrate that it is carrying on a charitable activity the org was unable to demonstrate that it was carrying on any activities the taxpayer was afforded an opportunity to provide support to demonstrate that it was carrying on a charitable activity or activities in the subsequent years but stated that the org has not been active since 20xx conclusion form 886-a rev department of the treasury - internal_revenue_service page of form 886a department of the treasury - internal_revenue_service schedule no or exhibit explanation of items org name of taxpayer year period ended the org does not continue to qualify for exemption under code sec_501 because it did not demonstrate that it carries on a charitable activity december 20xx form 886-arev page of department of the treasury - internal_revenue_service


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date gl-103360-02 uilc memorandum for associate area_counsel sb_se los angeles from mitchel s hyman senior technician reviewer branch collection bankruptcy and summonses cc pa cbs br1 cc sb la subject refund of levied pension_plan distributions this responds to your request for advice dated date concerning whether to return monies received through levies on a pension_plan after the taxpayer had died our analysis and recommendations follow this document may not be used or cited as precedent sec_6110 issue whether a third party alleging that it was wrongfully levied upon can maintain a refund_suit under 514_us_527 after the statute_of_limitations for filing a wrongful_levy has expired conclusion no sec_7426 is the exclusive remedy for wrongful_levy actions wrongful_levy suits must be filed within the statute_of_limitations provided for in sec_6532 background the internal_revenue_service levied on payments due a taxpayer from a pension_plan the taxpayer subsequently died pursuant to the terms of the plan payments were to cease at death in this case the pension_plan honored the service’s levy after the taxpayer’s death and remitted to the service funds that were not due the pension_plan failed to file an administrative claim or complaint for wrongful_levy in the nine-month period proscribed by sec_6343 and sec_6532 this case arises in the ninth circuit counsel for the pension_plan cites 64_f3d_456 9th cir as support for the proposition that sec_7426 is not the exclusive means of relief for a wrongful_levy you have gl-103360-02 asked for our opinion regarding whether the pension_plan can maintain a u s c a suit for recovery_of the funds in the ninth circuit discussion the ninth circuit in 24_f3d_1143 9th cir determined that a taxpayer had standing to bring a tax_refund action under sec_1346 for money that she had paid to release a lien for a liability that had been assessed against her former husband in this case lori williams and her then-husband jerrold rabin jointly owned their home as part owner of a restaurant rabin personally incurred tax_liabilities which he failed to satisfy the government assessed these liabilities against rabin and a lien was created in the assessed amount on all of rabin’s property including his interest in the residence see sec_6321 subsequently in anticipation of divorce rabin and williams divided their marital property there was no lien filed when rabin deeded his interest in the residence the government filed its tax_lien two weeks after the transfer no levy was ever served on the residence subsequent to the transfer williams entered into a contract to sell the house a week before the closing the government gave actual notice to williams and the purchaser of the residence of the existence of the liens the purchaser threatened to sue williams if the sale did not go through under protest williams authorized a disbursement from the sale proceeds to go directly to the internal_revenue_service to pay the amount of the liens so that she could convey clear title after the government denied william’s claim for an administrative refund williams brought suit under sec_1346 in an effort to collect a refund in the amount she had paid to satisfy the lien the district_court dismissed the action holding that sec_1346 authorizes actions only by the assessed party rabin and as such williams lacked standing to bring suit the united_states court_of_appeals for the ninth circuit reversed and that decision was affirmed by the supreme court 514_us_527 the supreme court determined that williams had standing to bring a refund_suit under sec_1346 because this provision authorizes a refund_suit by a party who though not assessed a tax paid the tax under protest to remove a federal_tax_lien from her property williams u s pincite the court rejected the service’s argument that williams had other remedies that could have been pursued to gain a return of her money the court noted that the government’s position would leave people in williams’ position without a meaningful remedy since she could not bring a wrongful_levy action in the absence of a levy a quiet title action would not permit her to sell the property quickly and the government was not obligated to enter into a lien substitution agreement under sec_6325 the rationale in the williams decision was subsequently applied by the ninth circuit in the levy context in wwsm investors v united_states f 3d 9th cir prior gl-103360-02 to this decision the ninth circuit had concluded that the exclusive remedy for a wrongful_levy was a claim under sec_7426 924_f2d_851 9th cir however in light of the williams decision the court determined that a third party could challenge a levy through a refund_suit under sec_1346 the ninth circuit however did not overturn the basic holding of winebrenner that the exclusive remedy for a wrongful_levy was a sec_7426 suit as evidenced by the decision in 87_f3d_334 9th cir in fidelity the plaintiff brought a quiet title action to challenge a levy under u s c a plaintiffs argued that in light of the decisions in williams and wwsm winebrenner was no longer good law in refuting this proposition the court stated that to the extent that a refund action is available sec_7426 is not the exclusive remedy for a wrongful_levy id pincite however if a third party has a claim for wrongful_levy under sec_7426 and seeks a quiet title action under section a but not a refund under sec_1346 winebrenner controls and sec_7426 is the exclusive remedy id pincite the ninth circuit’s view on the applicability of sec_1346 refund suits has not been adopted by any other circuit various circuits have held that a wrongful_levy suit is the exclusive remedy for a third party seeking redress against the service for levying on property to satisfy the tax_liability of another see eg 947_f2d_37 2d cir 735_f2d_447 11th cir 624_f2d_733 5th cir 549_f2d_1140 8th cir this rule effectuates congress’ intent that a short nine-month limitations_period is desirable for disputes involving tax levies because the government needs to know sooner rather than later whether it must look to the other assets of the taxpayer to satisfy the taxpayer’s liability 127_f3d_1249 10th cir quoting fidelity deposit co f 3d pincite see united sand gravel f 2d pincite congressional intent to set a short time limit for wrongful_levy actions would be completely undermined if alternate remedies allowed the tenth circuit in dahn concluded that the supreme court’s decision in williams does not require the abandonment of the sec_7426 exclusivity rule the court in dahn focused on the fact that there were no tax levies involved in the williams case and that the court in williams was primarily concerned with the unavailability of a wrongful_levy or any other remedy to the plaintiff dahn f 3d pincite there is no indication in the williams decision that the court intended to reach beyond the facts of the case before it and overturn the established principle that sec_7426 is the exclusive remedy in a wrongful_levy case id the internal inconsistency created by the holdings in wwsm and fidelity deposit co has forced the ninth circuit into the untenable position that sec_7426 exclusivity in levy cases is merely a matter of pleading in that a plaintiff who includes sec_1346 as a possible remedy may challenge a levy after the statute_of_limitations has expired while a plaintiff who does not is barred gl-103360-02 central to the supreme court’s holding in williams was the fact that absent a sec_1346 refund_suit the plaintiff had no other meaningful remedy subsequent to that decision congress passed the internal revenue restructuring act of which added sec_6325 and sec_7426 to provide a remedy to persons in the position of the plaintiff in williams sec_6325 provides that an owner of property who is not the taxpayer may request a certificate of discharge of the federal_tax_lien on the property and the service shall issue a discharge once the third party either deposits with the service an amount equal to the government’s interest in the property or furnishes to the service a bond in the like amount sec_7426 provides that if a certificate of discharge is issued that party may bring a civil_action in federal district_court for a determination of the value on the government’s interest in the property sec_7426 provides that n o other action may be brought by such person for such a determination we have consequently taken the position that third parties may no longer maintain a williams suit_for_refund the rationale for this position is that sec_6325 fixes the problem of lack of remedies that was the basis for the decision in williams based on the above discussion we believe that the service should continue to take the position in all circuits including the ninth circuit that sec_7426 is the exclusive remedy for a wrongful_levy the ninth circuit decisions in this area are inconsistent and a williams refund_suit is no longer permitted in light of the amendments to sec_6325 and sec_7426 to allow williams refund suits would render the limitation period for wrongful levies a nullity and would defeat congressional intent of ensuring prompt resolution of wrongful_levy claims we therefore recommend that the service reject any refund claim filed outside the statutory period applicable to wrongful_levy claims and our position is that we should continue to litigate this issue in the ninth circuit if you have any questions please call the attorney assigned this case pincite-3610


t c memo united_states tax_court brian benson petitioner and dannielle welch-benson intervenor v commissioner of internal revenue respondent docket no filed date brian benson for himself dannielle welch-benson for herself karen o myrick for respondent memorandum findings_of_fact and opinion morrison judge petitioner seeks relief under sec_6015 c and f from joint_and_several_liability stemming from a joint federal_income_tax return he filed with intervenor his wife for tax_year his wife owned an s_corporation that maintained parking meters and collected revenue as a subcontractor for the city of st louis the s_corporation fraudulently overbilled the city for its work including its work in the s_corporation reported all of it sec_2011 income--including the income from the fees attributable to fraudulent overbilling--on its federal_income_tax return for in date his wife was criminally charged by the u s attorney’s office for the overbilling fraud it was then that petitioner a pharmaceutical sales representative first learned about the overbilling fraud in date petitioner and his wife filed their return with the irs because his wife owned the s_corporation they were required to report the s corporation’s income as pass-through income--and they did so however they did not pay the entire resulting tax_liability on the date the joint_return was filed petitioner had reason 1unless otherwise indicated all section numbers refer to sections of the internal_revenue_code_of_1986 as amended and in effect at all relevant times all rule numbers refer to the tax_court rules_of_practice and procedure to know that his wife would not or could not pay the tax_liability reported on the return because he knew that she had no prospects for earning more money from the city of st louis in tax years before it was his wife who had made the couple’s final federal tax_liability payments in date his wife went to prison for the fraud during her prison term petitioner filed for divorce his wife was released in date the divorce is still pending the couple has split custody of their two sons as we hold below sec_6015 and c relief is not available to petitioner because the joint tax_liability in this case is not attributable to an understatement_of_tax further sec_6015 relief is not available because petitioner had reason to know that his wife could not or would not pay the joint federal tax_liability and because of other facts and circumstances including that petitioner would not suffer economic hardship if he were to pay the liability findings_of_fact the parties have stipulated some of the facts these facts are adopted by the court as factual findings both petitioner and intervenor his wife resided in missouri when petitioner filed his petition petitioner received a bachelor’s degree in biology in he received a master’s degree in business administration in or intervenor received a bachelor’s degree in business administration she received a master’s degree in human resource management intervenor received both degrees before she married petitioner on date petitioner and intervenor got married intervenor was the sole owner of dankar enterprise inc a subchapter_c_corporation that she had started in under their prenuptial agreement petitioner disclaimed any right to intervenor’s premarriage property that was identified in the agreement and vice versa intervenor’s dankar enterprise stock was identified in the agreement as part of her premarriage property thus under the prenuptial agreement petitioner disclaimed any right to the stock of dankar enterprise as explained later the prenuptial agreement was invalidated by a state divorce court in petitioner was not involved in the day-to-day operations of dankar enterprise at any time nor was he an owner or shareholder of dankar enterprise at any time starting in dankar enterprise subcontracted to provide day-to-day street parking meter maintenance and revenue collection services to the city of st louis by it had to employees at intervenor’s direction the company submitted false invoices for its subcontracting work as a result the company received more payments in and than it was entitled to the fraud was unknown to petitioner at the time petitioner and intervenor generally kept separate bank accounts including a personal account and a business account for each spouse neither petitioner nor intervenor used or had access to the other’s personal or business bank account neither petitioner nor intervenor had knowledge of the other’s separate bank account balances throughout the entire term of the marriage during petitioner and intervenor maintained a joint bank account for the payment of household bills petitioner generally wrote the checks from the joint account the checks were used to pay joint household expenses each month dankar enterprise deposited some money into the joint bank account that it reported as wages paid to petitioner for federal tax purposes petitioner did little or no work for dankar enterprise petitioner had his own job as a pharmaceutical sales representative each month the pharmaceutical company that employed petitioner deposited his wages into his personal bank account petitioner kept a certain amount every month in his personal bank account and transferred the rest into the joint bank account each month intervenor also contributed money to the joint bank account the amount varied by month petitioner and intervenor had their joint income_tax returns prepared by neil packman of rosenthal packman co petitioner and intervenor gathered their respective tax documents each year for the preparation of their return generally intervenor met with packman to deliver the tax documents relevant to the preparation of the couple’s joint income_tax return petitioner met with packman on at least one occasion before filing the couple’s electronic tax returns packman would send the couple a form_8879 irs e-file signature authorization once packman received a form_8879 signed by both petitioner and intervenor he would electronically file the tax_return packman timely filed the joint income_tax returns for petitioner and intervenor for through packman also prepared and timely filed dankar enterprise’s federal tax returns for at least through petitioner’s federal_income_tax returns for through were filed as follows year filing_status joint joint joint separate joint_return the joint_return for showed a balance due of dollar_figure on date respondent issued petitioner and intervenor a notice_of_intent_to_levy to collect the tax_liability on date intervenor contacted respondent and requested an installment_agreement under which petitioner and intervenor would fully pay the balance of the tax_liability by date respondent accepted intervenor’s proposed installment_agreement on date intervenor made a small payment against the tax_liability on date intervenor made a second payment against the tax_liability intervenor made additional payments through date and fully paid the account joint_return on date petitioner and intervenor filed their joint income_tax return showing a balance due of dollar_figure on date petitioner and or intervenor entered into an installment_agreement with respondent for payment of the tax_liability petitioner and intervenor failed to meet the requirements of the installment_agreement and it was terminated by respondent on date respondent issued to petitioner and intervenor a notice_of_intent_to_levy to collect the unpaid tax_liability for intervenor made monthly payments between april and date to fully pay the balance as petitioner credibly testified the funds for the additional payments ie the payments not made through withholding for both the and tax years ultimately came from dankar enterprise’s receipts from the city of st louis or from the general contractor on date respondent accepted dankar enterprise’s election to be treated as an s_corporation beginning date in petitioner and intervenor operated a joint_venture called bda insurance group llc it filed a federal partnership income_tax return on form_1065 u s return of partnership income for during intervenor also owned dankar realty inc an s_corporation on date petitioner learned that intervenor was going to be criminally charged for the overbilling fraud on date intervenor was charged with fraud specifically intervenor was alleged to have defrauded the general contractor and the city of st louis by causing dankar enterprise to submit false invoices to the general contractor for work that was not performed it was alleged that dankar enterprise made sham consulting payments as part of the scheme in particular it was alleged that dankar enterprise made sham consulting payments to an unnamed person who had blackmailed intervenor by threatening to reveal that dankar enterprise was submitting false invoices dankar enterprise made sham consulting payments to intervenor and at the direction of the treasurer’s office of the city of st louis dankar enterprise made sham consulting payments to a second unnamed person the criminal charges were made through the filing of an information with the u s district_court for the eastern district of missouri by an assistant u s attorney on the same day date intervenor pleaded guilty to the charges in the information on date petitioner and intervenor filed a joint federal_income_tax return for both petitioner and intervenor authorized packman to file their joint income_tax return electronically on that return petitioner and intervenor reported they earned wages of dollar_figure comprising dollar_figure of wages paid to petitioner as a pharmaceutical representative dollar_figure paid to petitioner by dankar enterprise and 2this seems to be an allegation that someone in the city treasurer’s office was operating a kickback scheme 3to be prosecuted for a felony in federal court a person must be indicted by a grand jury fed r crim p a however a person can waive the right to be indicted in which case the person may be prosecuted by an information fed r crim p b an information is a statement of the essential facts constituting the offense charged and is signed by a prosecuting attorney fed r crim p c dollar_figure paid to intervenor by dankar enterprise they reported on a schedule e supplemental income and loss that intervenor earned dollar_figure of pass-through income from dankar enterprise petitioner and intervenor reported a total_tax liability on their return of dollar_figure they also reported they owed a dollar_figure estimated-tax penalty which brought the total liability to dollar_figure they reported dollar_figure in withholdings they did not make any payments with the return which showed an unpaid tax_liability of dollar_figure respondent did not mail a notice_of_deficiency to petitioner or intervenor for tax_year petitioner’s income_tax_liability for is the partly unpaid income_tax_liability reported on the jointly filed income_tax return for on date intervenor was sentenced to months in prison for the overbilling fraud in date intervenor went to prison it was then that petitioner and intervenor first began living apart while intervenor was in prison their two sons resided with petitioner in date petitioner paid the missouri state_income_tax due for starting with the tax_year petitioner engaged one of intervenor’s tax advisers alma scarborough to prepare his federal_income_tax returns each year petitioner gathered his own tax documents and mailed them to scarborough petitioner reviewed his return scarborough mailed him a form_8879 to sign before electronically filing his return and petitioner signed and returned the form_8879 to scarborough on date petitioner filed a married-filing-separately federal_income_tax return for reporting dollar_figure in wage income from dankar enterprise dankar enterprise deposited payments recorded as petitioner’s wages into the joint bank account during in date petitioner filed for a divorce from intervenor at some point in petitioner and intervenor became legally_separated in date intervenor was released from prison intervenor did not move back in with petitioner from date petitioner and intervenor split joint custody of their sons for tax_year sec_2013 and sec_2014 petitioner did not pay the entire amounts of tax reported on his returns until respondent issued notices of intent to levy on date petitioner filed with respondent a form_8857 request for innocent spouse relief for he also requested relief from joint liability for but because he filed a separate_return for he had no joint liability from which to be relieved on or about date respondent preliminarily determined to grant petitioner full relief from the joint income_tax_liability for also on date respondent mailed to intervenor a letter informing her that respondent had preliminarily granted petitioner full relief from the joint income_tax_liability for the letter informed intervenor that she had a right to dispute the preliminary determination on date intervenor submitted to respondent a form statement of disagreement objecting to the preliminary determination to relieve petitioner of the joint income_tax_liability for on date respondent issued to petitioner a final_determination for fully denying petitioner’s request for relief also on date respondent notified intervenor of his decision to fully deny petitioner’s request for relief from the joint income_tax_liability for on date the circuit_court of st charles county the court handling the divorce proceeding declared the prenuptial agreement invalid because it did not disclose the values of any assets and therefore did not evidence that petitioner and intervenor were aware of the full extent of the rights they were giving up in date trial was held petitioner and intervenor were still married at the time of trial petitioner continues to work as a pharmaceutical sales representative opinion in general a spouse who files a joint federal_income_tax return is jointly and severally liable for the entire tax_liability sec_6013 a spouse may be relieved of the liability under sec_6015 there are three particular mechanisms under which relief is afforded found in sec_6015 c and f respectively because there is no understatement or deficiency for neither sec_6015 nor c relieves petitioner of any portion of the joint liability for see 121_tc_73 see also 120_tc_62 thus the only mechanism by which petitioner could be afforded relief is sec_6015 in determining whether petitioner is entitled to sec_6015 relief we apply a de novo standard of review see 132_tc_203 this means that we do not defer to respondent’s determination to deny relief to petitioner 705_f3d_980 9th cir aff’g tcmemo_2010_134 a fortiori we do not defer to respondent’s preliminary determination which was to grant relief to petitioner our determination employs a de novo scope of review porter v commissioner t c pincite this means we hear evidence in addition to the administrative record compiled by respondent see wilson v commissioner f 3d pincite petitioner bears the burden of proving he is entitled to relief see porter v commissioner t c pincite citing rule a sec_6015 provides that under procedures prescribed by respondent if taking into account all the facts and circumstances it is inequitable to hold an individual liable for any unpaid tax or any deficiency and relief is not available to such individual under subsection b or c respondent may relieve such individual of liability as directed by sec_6015 respondent has issued a revenue_procedure to guide his employees in determining whether a taxpayer is entitled to such equitable relief from joint_and_several_liability revproc_2013_ 2013_43_irb_397 modifying and superseding revproc_2003_61 2003_2_cb_296 revproc_2013_34 supra provides a three-step analysis for respondent’s personnel to follow in evaluating requests for equitable relief under sec_6015 the court consults this analysis when reviewing respondent’s denial of relief see 120_tc_137 revproc_2013_34 sec_4 i r b pincite lists threshold conditions that must be met before respondent will grant any equitable relief under sec_6015 revproc_2013_34 sec_4 i r b pincite lists three elements that if met require respondent to grant streamlined relief when the threshold conditions are met and revproc_2013_34 sec_4 i r b pincite sets forth seven nonexclusive factors that respondent will consider in determining whether equitable relief should be granted when the threshold conditions are met but streamlined relief is not available because of the nonsatisfaction of any of the three elements the threshold conditions revproc_2013_34 sec_4 sets forth threshold conditions that must be satisfied before respondent will consider a request for equitable relief under sec_6015 there is no dispute that petitioner satisfies all the threshold conditions except the following condition the income_tax_liability from which the requesting spouse seeks relief is attributable either in full or in part to an item of the nonrequesting spouse or an underpayment resulting from the nonrequesting spouse’s income revproc_2013_34 sec_4 we need not determine whether this threshold condition is met even if it is met petitioner is not entitled to equitable relief as we explain below the three requirements for streamlined relief revproc_2013_34 sec_4 states that when the threshold conditions of section dollar_figure are met the requesting spouse qualifies for a streamlined determination of relief under sec_6015 if the following three requirements are met the requesting spouse is no longer married to or is separated from the nonrequesting spouse at the time respondent makes his determination the requesting spouse will suffer economic hardship if relief is not granted and in an underpayment case the requesting spouse had no knowledge or reason to know when the return was filed that the nonrequesting spouse would not or could not pay the tax_liability reported on the joint tax_return see revproc_2013_34 sec_4 all three requirements must be met in order for the requesting spouse to qualify for a streamlined determination id we discuss each of these infra part sec_2 a b and c respectively a marital status petitioner was separated from intervenor when respondent made his determination the first requirement--marital status--is met b economic hardship the second requirement is that the requesting spouse will suffer economic hardship if relief is not granted id sec_4 b e conomic hardship exists if satisfaction of the tax_liability in whole or in part will cause the requesting spouse to be unable to pay reasonable basic living_expenses id in determining whether the requesting spouse will suffer economic hardship respondent is to consider the requesting spouse’s current income and expenses and the requesting spouse’s assets furthermore respondent is to base his determination on rules similar to sec_301_6343-1 proced admin regs revproc_2013_34 sec_4 b sec_301_6343-1 proced admin regs provides that in determining a reasonable amount for basic living_expenses respondent is to consider any information provided by the taxpayer ie the requesting spouse including the amount reasonably necessary for food clothing housing including utilities home-owner insurance home-owner dues and the like medical_expenses including health insurance transportation current tax_payments including federal state and local alimony child_support or other court-ordered payments and expenses necessary to the taxpayer’s production_of_income such as dues for a trade_union or professional organization or child care payments which allow the taxpayer to be gainfully_employed respondent will consider that the requesting spouse would suffer economic hardship if two tests are met either a the requesting spouse’s income is below of the federal poverty level or b the requesting spouse’s monthly income exceeds the requesting spouse’s reasonable basic monthly living_expenses by dollar_figure or less and the requesting spouse does not have assets from which the requesting spouse can make payments toward the tax_liability and still meet reasonable basic living_expenses revproc_2013_34 sec_4 b if these two tests are not met respondent considers all facts and circumstances in determining whether the requesting spouse would suffer economic hardship if relief is not granted id as explained infra part b i we find that petitioner’s current income is dollar_figure per month which is far in excess of of the federal poverty level and as explained infra part b ii we find that petitioner’s reasonable basic living_expenses are dollar_figure which means his monthly income exceeds his reasonable basic monthly living_expenses by dollar_figure therefore petitioner does not meet the first test it is unnecessary to determine whether petitioner has assets from which he can make payments toward the tax_liability and still meet reasonable basic living_expenses ie the second test after considering all facts and circumstances we conclude that petitioner would not suffer economic hardship if he is not relieved of the joint liability i petitioner’s current monthly income is dollar_figure petitioner credibly testified that his current annual salary is dollar_figure and that he earns an additional dollar_figure of annual bonuses he also credibly testified that he receives dollar_figure per month in installment payments from the previous sale of a business petitioner’s position on brief is that he earns dollar_figure per month but it is unclear how he calculated this amount and it is contradicted by his testimony we conclude that petitioner’s current monthly income is dollar_figure dollar_figure dollar_figure ii petitioner’s reasonable basic living_expenses are dollar_figure per month dollar_figure for food and personal care the preprinted form_8857 lists various categories of expenses and subcategories within each category one category is food and personal care the subcategories for this category are food housekeeping supplies personal care products and services and clothing and clothing services petitioner’s form_8857 claimed a total of dollar_figure in the subcategories of the food-and-personal-care category on brief respondent contends that dollar_figure is the maximum allowed in the food-and-personal-care category citing as authority sec_301_6343-1 proced admin regs respondent does not contend that the actual amount of expenses in this category is less than dollar_figure therefore we consider respondent to have conceded that the amount in this category is dollar_figure petitioner’s brief makes no response to respondent’s argument that the expenses in this category are limited to dollar_figure we consider petitioner to have conceded that the amount is limited to dollar_figure petitioner’s brief states that the amount of expenses in this category is dollar_figure but we believe that this is a miscalculation we do not consider that petitioner has conceded that the appropriate amount is only dollar_figure we conclude that petitioner has dollar_figure in monthly expenses in this category zero for transportation the transportation category has two subcategories auto loan lease payment gas insurance licenses parking maintenance etc and public transportation petitioner stated on his form_8857 that he had dollar_figure in the first subcategory and did not state that he had any expenses in the second petitioner credibly testified that he owns no car that he uses a company car and that he has no car expenses in his brief he did not claim that he had any expenses in the transportation category petitioner has conceded that he has no expenses in the transportation category furthermore the evidence shows that he had none we conclude that petitioner has zero in monthly expenses in this category dollar_figure for house and utilities for the category for house and utilities petitioner claimed on his form_8857 the following amounts in the subcategories dollar_figure for rent or mortgage dollar_figure for real_estate_taxes and insurance dollar_figure for electric oil gas water trash etc dollar_figure for telephone and cell phone and dollar_figure for cable and internet respondent’s brief supplied no reasons for disagreeing with the amounts of the expenses reported on the form_8857 therefore we consider respondent to have conceded these amounts the exception is the dollar_figure for real_estate_taxes and insurance petitioner credibly testified that he no longer owns a home and that therefore he does not pay taxes or insurance on a house in his brief he did not claim that he had any expenses in the subcategory for real_estate_taxes and insurance he has therefore conceded that he has no expenses in the subcategory for real_estate_taxes and insurance furthermore the evidence shows that he had no expenses in the subcategory for real_estate_taxes and insurance we conclude that petitioner has zero in monthly expenses in the subcategory for real_estate_taxes and insurance we conclude that petitioner has dollar_figure of expenses in the category for house and utilities comprising dollar_figure for rent or mortgage dollar_figure for electric oil gas water trash etc dollar_figure for telephone and cell phone and dollar_figure for cable and internet zero for medical the category for medical on the form_8857 is composed of two subcategories health insurance premiums and out-of-pocket expenses in petitioner’s brief he claims that he has dollar_figure in expenses in the medical category 4although petitioner testified his rent was dollar_figure we gather he was rounding up from dollar_figure the amount on the form_8857 however he does not point to any evidence of this amount nor are we aware of any such evidence in the record we conclude that petitioner has zero in expenses in this category dollar_figure for expenses in the other category the last category on form_8857 is other expenses the subcategories in this other category are the following child and dependent care caregiver expenses income_tax_withholding estimated_tax payments term life_insurance premiums retirement contributions employer required retirement contributions voluntary union dues unpaid state and local_taxes minimum payment student loans minimum payment court-ordered debt payments ie child_support and miscellaneous a dollar_figure for child and dependent care expenses respondent concedes that petitioner has dollar_figure in expenses in the subcategory for child and dependent care b dollar_figure for caregiver expenses respondent concedes that petitioner has dollar_figure in expenses in the subcategory for caregiver expenses c dollar_figure for income_tax_withholding petitioner’s brief does not quantify the amount he claims is withheld for income_tax respondent contends that petitioner has dollar_figure of expense in this subcategory this amount roughly corresponds to actual withholding for and we hold that the amount is dollar_figure d zero for estimated_tax payments although petitioner claimed dollar_figure in this subcategory his brief concedes that this amount is zero e zero for retirement contributions employer required petitioner did not claim an amount in this subcategory on his form_8857 or in his brief f zero for retirement contributions voluntary petitioner contends that he has dollar_figure of expenses for voluntary retirement contributions however petitioner has not shown that his voluntary contributions to his retirement_plan are a condition of his continued employment they are not basic living_expenses see revproc_2013_34 sec_4 b adopting sec_301_6343-1 proced admin regs see also yancey v commissioner tcmemo_2017_59 at no economic hardship because requesting spouse could withdraw from sec_401 plan g zero for union dues petitioner did not claim an amount in this subcategory on his form_8857 or in his brief h zero for unpaid state and local_taxes minimum payment petitioner did not claim an amount in this subcategory on his form_8857 or in his brief i dollar_figure for student loans minimum payment respondent concedes that this amount is dollar_figure j dollar_figure for court-ordered debt payments ie child_support respondent concedes that this amount is dollar_figure k dollar_figure for miscellaneous petitioner claimed that he had dollar_figure of miscellaneous expenses on his form_8857 respondent’s brief agrees that dollar_figure is the appropriate amount on brief petitioner contends that he has miscellaneous expenses of dollar_figure of credit card expenses and dollar_figure for childrens’ activities petitioner does not point to evidence of these amounts and we cannot be sure that these amounts were not counted in other categories or subcategories we conclude that petitioner has dollar_figure of miscellaneous expenses c reason to know as to the third requirement ie no reason to know about the underpayment we find that when the return was filed petitioner had reason to know that the tax_liability reported on the return would not and could not be paid_by intervenor see revproc_2013_34 sec_4 a c ii the liabilities reported on the couple’s joint returns up to and including tax_year had been prepaid in part by withholding from petitioner’s wages this left substantial unpaid balances which intervenor eventually paid except for the unpaid balance for the tax_year for tax years and these payments--made through installment agreements and under threats of levies--were made a year after each respective return was filed as petitioner testified the ultimate source of the money intervenor used to make these payments was dankar enterprise’s receipts from the city of st louis or from the general contractor intervenor appears to have accessed dankar enterprise’s profits by having dankar enterprise pay wages to her and petitioner and pay consulting fees to her on date petitioner learned that intervenor would be charged with fraud on date the charges were made through an information and intervenor pleaded guilty on date petitioner and intervenor filed their joint_return for the return reported a pre-payment tax_liability of dollar_figure which reduced by dollar_figure of payments resulted in an unpaid tax_liability of dollar_figure petitioner testified that intervenor was unable to pay this remaining amount because the city of st louis and the general contractor stopped paying dankar enterprise after she was charged with fraud petitioner had reason to know that intervenor was unable to pay the remaining tax_liability at the time they filed the return therefore he had reason to know that intervenor would not or could not pay the dollar_figure unpaid balance petitioner argues on brief that although he was aware that there was a dollar_figure unpaid balance when the return was filed he thought that intervenor would pay the balance because she had paid the balances for prior tax years thus he contends he had no reason to believe the tax bill would not be paid_by intervenor he contends that he was not aware that the couple had initially failed to timely pay their tax_liabilities for and we need not determine whether petitioner thought that the and tax_liabilities were timely paid the tax_liability for year was entirely different when petitioner and intervenor filed the tax_return petitioner had reason to know that dankar enterprise would no longer be a source of funds for intervenor and that intervenor could not and would not pay the unpaid tax_liability revproc_2013_34 sec_4 c ii states that a reasonable expectation of payment will be presumed if the spouses submitted a request for an installment_agreement to pay the tax reported as due on the return see id sec_4 a cross-referencing sec_4 c ii petitioner argues that he should be presumed to have had a reasonable expectation that intervenor would pay the liability because she had paid the and liabilities through installment agreements however no installment_agreement was submitted to pay the liability therefore petitioner cannot benefit from this presumption petitioner also argues that the conversion of dankar enterprise from a c_corporation to an s_corporation resulted in an unanticipated increase in the couple’s joint tax_liability for compared to prior years as a c_corporation dankar enterprise was taxable on its own income and intervenor was not taxable on dankar enterprise’s income see sec_11 when dankar enterprise became an s_corporation effective its income was attributed to intervenor its sole shareholder see sec_1366 c it appears that when dankar enterprise changed from c to s status in intervenor partially avoided the potential increase in personal tax_liability by eliminating the payment of fake consulting income that had been reported on her schedules c profit or loss from business for prior years despite this change however the joint tax_liability still increased for tax_year these points can be illustrated by the chart below major sources of income reported for petitioner and intervenor tax_year source_of_income as reported income reported by dankar enterprise as c_corporation in and as s_corporation in petitioner’s wages from pharmaceutical sales petitioner’s wages from dankar enterprise intervenor’s wages from dankar enterprise total wages reported by both petitioner and intervenor intervenor’s schedule c fees for consulting services taxable_distributions from dankar enterprise to intervenor dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number not in record big_number big_number big_number big_number big_number big_number big_number big_number -0- big_number -0- -0- -0- it was an s_corporation for this year intervenor’s pass-through income from dankar enterprise as s_corporation taxable_income includes other items of income and loss not listed in the rows above tax not including estimated_tax penalty dollar_figure it was a c corporatio n for this year it was a c_corporation for this year big_number big_number big_number big_number big_number big_number while it may be true that the conversion from c to s status caused an increase in the joint income_tax_liability this increase was not unanticipated when petitioner signed the return in date the pass-through income from dankar enterprise was reported on the joint_return it was included in the joint taxable_income reported on the return and it was reflected in the tax reported on the return as petitioner testified he saw that there was a dollar_figure balance on the return and that this liability was unpaid he knew that intervenor had paid the unpaid balances from prior years using the revenue from her business dankar enterprise he also knew that after the criminal charges these revenues would not be available to her to pay the unpaid balance petitioner also argues that he did not know about intervenor’s fraudulent scheme involving dankar enterprise’s false invoices we believe he did not know about the scheme however the relevant question is whether he knew or had reason to know that the tax_liability reported on the return would not and could not be paid_by intervenor see revproc_2013_34 sec_4 a we hold that he knew or had reason to know that the tax_liability reported on the return would not and could not be paid_by intervenor finally revproc_2013_34 sec_4 a states if the nonrequesting spouse maintained control_over the household finances by restricting the requesting spouse’s access to financial information and because of the financial control the requesting spouse was not able to question the payment of the taxes reported as due on the joint_return or challenge the nonrequesting spouse’s assurance regarding payment of the taxes for fear of the nonrequesting spouse’s retaliation then the financial control will result in this factor being satisfied even if the requesting spouse knew or had reason to know that the nonrequesting spouse would not pay the tax_liability petitioner argues that intervenor restricted his access to information about dankar enterprise even if the information was restricted petitioner did not show that he feared intervenor’s retaliation therefore this requirement is not treated as satisfied petitioner is therefore not eligible for streamlined relief under revproc_2013_34 sec_4 factors considered in granting or denying equitable relief revproc_2013_34 sec_4 states that equitable relief under sec_6015 may be granted if taking into account all the facts and circumstances it would be inequitable to hold the requesting spouse responsible for all or part of the liability in making the decision respondent weighs a number of factors including but not limited to the requesting spouse’s marital status possible economic hardship if relief is not granted knowledge or reason to know that the tax_liability would or could not be paid legal_obligation to pay the outstanding federal_income_tax liability receipt of a significant benefit from the unpaid income_tax_liability compliance with income_tax laws and mental or physical health at the time of filing a marital status this factor weighs in favor of relief if the requesting spouse was no longer married to or was separated from the nonrequesting spouse when respondent made his determination revproc_2013_34 sec_4 a petitioner was separated from intervenor when respondent made his determination this factor weighs in favor of relief b economic hardship no economic hardship would result from requiring petitioner to pay the joint tax_liability see supra part b this factor is therefore neutral as to whether relief should be granted see revproc_2013_34 sec_4 b c knowledge or reason to know of intervenor’s inability to pay it was not reasonable for petitioner to believe that intervenor would or could pay the tax_liability shown on the return see supra part c therefore this factor weighs against relief see revproc_2013_34 sec_4 c ii d legal_obligation a legal_obligation in a divorce decree or other legally binding agreement regarding tax_liability will weigh in favor of relief if the nonrequesting spouse is to pay or against relief if the requesting spouse is to pay revproc_2013_34 sec_4 d petitioner’s and intervenor’s divorce decree is not final and there is no other legally binding agreement regarding tax_liability therefore this factor is neutral e significant benefit this factor concerns whether the requesting spouse significantly benefited from the unpaid income_tax_liability revproc_2013_34 sec_4 e states that a significant benefit is any benefit in excess of normal support and that if the requesting spouse enjoys the benefits of a lavish lifestyle such as owning luxury assets and taking expensive vacations this factor will weigh against relief this factor does not weigh against relief in this case petitioner did not receive any benefit in excess of normal support nor did he live a lavish lifestyle revproc_2013_34 sec_4 e states that this factor will weigh in favor of relief only if the nonrequesting spouse significantly benefited from the unpaid tax and the requesting spouse had little or no benefit we believe that petitioner benefited from the unpaid tax_liability although it was intervenor who customarily made the final payments for previous tax years and therefore benefited from not paying the balance of the tax_liability petitioner’s financial status was intertwined with intervenor’s the two shared a joint bank account into which intervenor directed money therefore this factor does not weigh in favor of relief we conclude that this factor is neutral f tax compliance whether petitioner was in compliance for tax years after will weigh for or against relief see revproc_2013_34 sec_4 f iii although petitioner timely filed his returns for the years following he did not timely pay his income_tax liabilities for and and did not make a good- faith effort to do so this factor weighs against relief g mental or physical health petitioner has not shown he was in poor physical or mental health at the time the return was filed see revproc_2013_34 sec_4 g this factor is neutral conclusion weighing all the facts and circumstances we are not persuaded that it would be inequitable to deny petitioner relief from joint_and_several_liability under sec_6015 for tax_year the marital-status factor favors relief two factors knowledge or reason to know and tax compliance weigh against relief the remaining factors economic hardship legal_obligation significant benefit and mental or physical health are neutral considering that petitioner had reason to know that intervenor would not or could not pay the tax_liability reported on the return and in the absence of economic hardship we conclude that it would not be inequitable to deny petitioner relief under sec_6015 for tax_year petitioner is not entitled to relief under sec_6015 c or f our decision will therefore favor respondent to reflect the foregoing decision will be entered for respondent


department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-100765-10 date date internal_revenue_service number release date index number ----------------------- --------------------------------- ------------------ ------------------------------ legend x ----------------------- ---------------------------- d1 ------------------------- dear ------------ this responds to the letter dated ------------------------- submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts the shareholder of x intended that x be treated as an s_corporation effective on d1 but the election to be treated as an s_corporation was inadvertently not filed accordingly x requests a ruling that it will be treated as an s_corporation effective d1 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed plr-100765-10 sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not timely file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter will be sent to x's authorized representative sincerely s david r haglund chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury index number 280g washington dc number release date person to contact telephone number refer reply to cc ebeo br4 - plr-103950-99 date date acquiring acquiring sub target date w b c d e f g h i j k plr-103950-99 this is in response to your letter of date requesting rulings under sec_280g and sec_4999 of the internal_revenue_code specifically you requested a ruling whether under the facts outlined below there will be a change in the ownership or effective_control of acquiring or in the change in the ownership of a substantial portion of the assets of acquiring within the meaning of sec_280g of the code the facts as submitted are set forth below acquiring and target are both widely-held publicly traded corporations acquiring acquiring sub a wholly-owned subsidiary of acquiring and target entered into a merger agreement dated date w pursuant to the merger agreement acquiring sub will merge with and into target the separate corporate existence of acquiring sub shall cease and target will become a wholly-owned subsidiary of acquiring the merger agreement has been approved by the board_of directors of both acquiring and target acquiring has outstanding b shares of common_stock and options to acquire c shares of acquiring stock target has outstanding d shares of common_stock and options to acquire e shares of target stock pursuant to the merger agreement at the effective date of the merger each outstanding share of target common_stock will be converted into f shares of acquiring common_stock following the merger the pre- merger acquiring shareholders will own approximately g percent of acquiring the pre- merger target shareholders will own approximately h percent of acquiring subject_to any stock_option exercises by acquiring and target employees up until the consummation of the merger all outstanding options have been treated as stock for purposes of sec_280g of the code the board_of directors will be increased from i to j members the pre-merger members of the board_of directors of acquiring will comprise k percent of the post- merger board_of directors of acquiring k being greater than percent the remaining post-merger board_of directors of acquiring will be pre-merger members of the board_of directors of target who will be endorsed by a majority of the pre-merger board_of directors of acquiring certain employees of acquiring entered into management agreements prior to the merger such employees may receive payments under the management agreements as a result of the merger acquiring represents that to the best of its knowledge no current shareholder of target will hold more than five percent of the voting power of acquiring immediately after the merger acquiring also represents that to the best of its knowledge no shareholder of target has any agreement written or unwritten express or implied to act in concert to control acquiring following the merger plr-103950-99 sec_280g of the internal_revenue_code provides that no deduction will be allowed for any excess_parachute_payment sec_280g of the code defines the term excess_parachute_payment as an amount equal to the excess of any parachute_payment over the portion of the base_amount allocated to such payment sec_280g of the code defines the term parachute_payment as any payment in the nature of compensation to or for the benefit of a disqualified_individual if i such payment is contingent on a change i in the ownership or effective_control of the corporation or ii in the ownership of a substantial portion of the assets of the corporation and ii the aggregate present_value of the payments in the nature of compensation to or for the benefit of such individual which are contingent on such change equals or exceeds an amount equal to three times the base_amount sec_4999 of the code imposes on any person who receives an excess_parachute_payment a tax equal to percent of the amount of the payment sec_1_280g-1 of the proposed income_tax regulations q a sec_27 sec_28 and sec_29 published in the federal_register on date fed reg big_number provides guidance concerning when a corporation will be considered to have undergone a change in ownership or effective_control or a change in the ownership of a substantial portion of its assets q a a provides that a change in the ownership or control of a corporation occurs on the date that any one person or more than one person acting as a group acquires ownership of stock of the corporation that together with stock held by such person or group possesses more than percent of the total fair_market_value or total voting power of the stock of such corporation q a b provides that persons will not be considered to be acting as a group merely because they happen to purchase or own stock of the same corporation at the same time or as a result of the same public offering however persons will be considered to be acting as a group if they are owners of an entity that enters into a merger consolidation purchase or acquisition of stock or similar_business transaction with the corporation q a c provides that sec_318 shall apply in determining stock ownership example of q a deals with a corporate merger there corporation p merged into corporation o and the shareholders of p received o stock in exchange for their p stock the example concludes that because the p shareholders received a greater than percent interest in o o experienced a change in ownership by implication the example concludes that p did not experience such a change q a a provides in part that a change_of effective_control of a corporation is presumed to occur on the date that either any one person or more than one person acting as a group acquires or has acquired during the 12-month_period ending on the date of the most recent acquisition by such person or persons ownership of stock of plr-103950-99 the corporation possessing percent or more of the total voting power of the stock of such corporation or a majority of the members of the corporation’s board_of directors is replaced during any 12-month_period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board_of directors prior to the date of the appointment or election the presumption of q a a and may be rebutted by establishing that the acquisition or acquisitions of the corporation’s stock or the replacement of the majority of the members of the corporation’s board_of directors does not transfer the power to control directly or indirectly the management and policies of the corporation from any one person or more than one person acting as a group to another person or group q a c contains the same language as q a b concerning when persons will be considered to be acting as a group q a d contains the same language as q a c concerning the application of sec_318 it has been represented that immediately following the merger the pre-merger acquiring shareholders will own more than percent of the total fair_market_value and total voting power of the outstanding acquiring stock the pre-merger target shareholders will own more than percent of the total voting power of the outstanding_stock of acquiring viewing the merger from acquiring’s perspective acquiring will surrender potential ownership or control when it issues its stock to target's shareholders in consideration for target stock since acquiring’s shareholders will retain sufficient stock value and voting power due to this transaction acquiring will not experience a change_of_ownership under q a as part of the transaction all of target's stock will be transferred to acquiring in consideration for the issuance of acquiring stock to target shareholders which will result in target’s shareholders receiving a greater than percent voting interest in acquiring accordingly under q a it is presumed that acquiring experienced a change in effective_control however the facts submitted indicate that the target shareholders will not act in a concerted way to control the management and policies of acquiring the facts also indicate that a majority of acquiring’s board_of directors is not being replaced in addition acquiring’s board_of directors following the merger will be endorsed by a majority of the pre-merger acquiring board_of directors accordingly based strictly on the information submitted and acquiring’s representations set forth above we rule as follows provided that after the merger the shareholders of target do not act in a concerted way to control the management and policies of acquiring the plr-103950-99 merger will not cause a change in the ownership or effective_control of acquiring nor will it cause a change in the ownership of a substantial portion of acquiring’s assets within the meaning of sec_280g of the code the provisions of sec_280g of the code will not apply to any payments pursuant to management agreements that are made by acquiring to employees or former employees of acquiring that are contingent upon the merger the provisions of sec_4999 of the code will not apply to any payments pursuant to management agreements that are made by acquiring to employees or former employees of acquiring and that are contingent upon the merger except as specifically ruled on above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion was requested and none is expressed regarding the federal_income_tax consequences of the merger described above 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 the taxpayer should attach a copy of this ruling to any income_tax return to which it is relevant temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent that the regulations are inconsistent with any conclusion in the ruling however when the criteria in section dollar_figure of revproc_99_1 1999_1_irb_6 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances plr-103950-99 in accordance with the power_of_attorney on file with this office copies of this letter are being sent to acquiring and to the other authorized representative sincerely yours robert b misner assistant chief branch office of the associate chief_counsel employee_benefits and exempt_organizations enclosure copy for purposes


- department of the treasury internal_revenue_service washington d c tax exempt and government entities feb uniform issue list tep pa i legend taxpayer a ira b financial_institution c account d financial_institution e amount amount amount dear this letter is in response to your letter dated date as supplemented by correspondence dated october november and date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he took a distribution of amount from ira b taxpayer a asserts that his failure to accomplish a rollover of amount within the 60-day period prescribed by code sec_408 was due to the failure of financial_institution e to place the funds in an ira as instructed by taxpayer a taxpayer a further represents that amount has not been used for any other purpose taxpayer a maintained ira b an individual_retirement_account ira under sec_408 of the code with financial_institution c taxpayer a represents that on date in order to change investments and obtain a better rate of return he withdrew amount from ira b taxpayer a asserts that he gave verbal instructions to an individual at financial_institution e that amount amount less his required_minimum_distribution of amount was to be deposited into an ira a check for amount was then mailed to financial_institution e with the intention that it be deposited into an ira within the 60-day period however it was deposited into account d a non-ira account the ruling_request is accompanied by a letter from financial_institution e stating that the deposit of amount into account d was due to a deposit investment directive oversight between itself and taxpayer a who does have managed ira accounts based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a timely rollover of amount was due to a deposit investment directive oversight by a money manager at financial_institution e therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b taxpayer a is granted a period of days from the issuance of this letter_ruling to transfer an amount not to exceed amount into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of 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 ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code 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 a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please contact if you wish to inquire about i d at sincerely yours coe a both manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice cc