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 cc pa apjp br2 tl-n-1982-01 uilc internal_revenue_service national_office chief_counsel_advice memorandum for associate area_counsel small_business self-employed area - pittsburgh cc sb pit from assistant chief_counsel administrative provisions judicial practice cc pa apjp subject deferral of estate_taxes under sec_6166 this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend decedent issue sec_1 whether decedent’s estate fails to qualify for an extension of time to pay estate_taxes under sec_6166 because the stock transfer restriction agreement requires a series of redemptions of stock held by the estate representing an interest_in_a_closely_held_business whether a redemption required by the stock transfer restriction agreement constitutes a distribution sale exchange or other_disposition of an interest_in_a_closely_held_business under sec_6166 whether the failure of decedent’s estate to timely make an interest payment provides sufficient cause for the service_center to issue notice_and_demand tl-n-1982-01 under sec_6166 thereby terminating the estate’s installment privileges conclusion sec_1 decedent’s estate qualifies for an extension of time to pay estate_taxes under sec_6166 the eligibility for the sec_6166 election is not affected by the subsequent redemptions required under the stock transfer restriction agreement under sec_6166 when or more of the value of an interest_in_a_closely_held_business is distributed sold exchanged or otherwise_disposed_of the sec_6166 extension ceases to apply and any unpaid installments become payable upon notice_and_demand by the service as an exception to the general_rule sec_6166 provides that certain redemptions of stock to which sec_303 applies will not be treated as distributions or withdrawals for purposes of the acceleration rule_of sec_6166 in order to determine whether or to what extent the sec_6166 exception applies your office should consider the two alternative approaches to sec_6166 explained in revrul_86_54 1986_1_cb_356 and should perform the necessary calculations as a general_rule when an estate fails to make payments of principal or interest the service may terminate the deferred payment election and force an acceleration of payment of the estate_tax by issuing notice_and_demand note however that the service cannot accelerate the estate_tax installments so long as payment is made within months of the due_date although decedent’s estate failed to pay the interest due on decedent’s estate paid the interest within months of that date consequently the service is not entitled to issue notice_and_demand and thus decedent’s estate does not lose its installment privileges simply because the interest payment was untimely facts decedent died on owning shares of stock in a closely_held_corporation the remaining shares in the corporation were owned by one other shareholder prior to decedent’s death decedent and the other shareholder entered into an agreement stock transfer restriction agreement as amended the agreement provided that upon the death of either shareholder the executor of that shareholder’s estate must offer the decedent’s shares of stock to the corporation at the price fixed pursuant to the agreement and the corporation shall then be obligated to accept the offer and purchase the decedent’s stock the stock transfer restriction agreement further provided that the corporation was required to pay to the estate the total_proceeds received from a life_insurance_policy owned by the corporation insuring the life of the deceased shareholder this payment was to be made within days after receipt of the insurance proceeds in addition the balance of the purchase_price was to be paid not less than annually tl-n-1982-01 over a term not in excess of years further the stock transfer restriction agreement provided that the estate selling the stock shall deliver the shares of stock only as payment is received the agreement also provided that any shares of stock for which payment has not been made shall not be considered sold and shall remain the property of the estate until paid for on the corporation paid decedent’s estate the proceeds from the life_insurance_policy approximately dollar_figure and redeemed shares of stock in accordance with the terms of the amended agreement beginning on the corporation redeemed shares and is scheduled to redeem shares on that day in each succeeding year until the final redemption on for each shares redeemed the stated redemption price is dollar_figure although decedent’s estate_tax_return was originally due on decedent’s estate requested and was granted an extension of time to file the return and pay the estate_tax until on decedent’s estate timely filed an estate_tax_return and elected to pay the estate_tax in installments pursuant to sec_6166 was a sunday see sec_7503 the service tentatively granted decedent’s estate’s sec_6166 election in a notice dated and indicated that the first installment was due on the service issued a billing notice to decedent’s estate on indicating that an interest payment in the amount of dollar_figure was due on the estate paid the interest on approximately weeks after the stated due_date the transcript of the account shows the following payments have been made date amount dollar_figure dollar_figure dollar_figure law and analysis for issue as a general_rule the estate_tax_return form_706 and payment of the estate_tax liability of a decedent is due within nine months of the decedent’s death sec_6075 a as an exception to the general_rule sec_6166 of the internal_revenue_code provides that if the value of an interest in a closely held tl-n-1982-01 business included in determining the gross_estate of a decedent exceed sec_35 percent of the adjusted_gross_estate the executor of the estate may elect to pay part or all of the tax imposed by sec_2001 estate_tax in two or more but not exceeding ten equal installments the first installment of tax must be paid on or before the date selected by the executor which is not more than years after the date prescribed by sec_6151 for payment of the tax an executor electing to defer estate_taxes under sec_6166 must make annual payments of interest during the deferral_period in particular interest must be paid annually during the period before the first installment of tax is due sec_6166 sec_6166 defines the term_interest in a closely_held_business to include stock in a corporation carrying_on_a_trade_or_business if i percent or more in value of the voting_stock of such corporation is included in determining the gross_estate of the decedent or ii such corporation had or fewer shareholders sec_6166 ii the determination of whether the stock of a corporation qualifies as an interest_in_a_closely_held_business is made as of the time immediately before the decedent’s death sec_6166 certain activities trigger the acceleration of the estate_tax payments in this regard sec_6166 identifies the activities which terminate the deferred payment election and force an acceleration of payment of the estate_tax in particular sec_6166 provides that if percent or more of the value of an interest_in_a_closely_held_business which qualified for installment payments under sec_6166 is distributed sold exchanged or otherwise_disposed_of then the extension of time to pay the tax shall cease to apply and the unpaid portion of the tax will be accelerated and due upon notice_and_demand sec_6166 emphasis added see also sec_20_6166a-3 thus although certain events will terminate the sec_6166 deferral those events are only note that for decedents dying after date the economic_growth_and_tax_relief_reconciliation_act_of_2001 increased the number of shareholders from to see pub_l_no 2the tax reform act of created a new sec_6166 of the code and redesignated the former section as sec_6166a pub_l_no a the economic_recovery_tax_act_of_1981 repealed sec_6166a and amended sec_6166 so that it would apply in most cases that were previously governed by sec_6166a pub_l_no sec_422 neither the economic_recovery_tax_act_of_1981 nor its legislative_history indicate any intent on the part of congress that a disposition of an interest under sec_6166a would not be a disposition under sec_6166 as a result the regulations under sec_6166a are considered applicable to this chief_counsel_advice to the extent that those regulations are not inconsistent with the language of sec_6166 tl-n-1982-01 relevant after the election has been granted the fact that acceleration may occur at a future date is not taken into account when determining whether an estate qualifies for the sec_6166 installment privilege in the present situation immediately before death decedent held shares of stock in a closely_held_corporation although the terms of the stock transfer restriction agreement required that decedent’s estate sell the shares after decedent’s death sales after death are not relevant in determining whether the estate initially qualified for the sec_6166 election such sales are relevant only for purposes of determining whether a distribution sale exchange or other_disposition occurs under sec_6166 as discussed below issue such that the sec_6166 extension ceases to apply in this case decedent’s estate qualified for an extension of time to pay estate_taxes under sec_6166 the estate qualified for the extension because the value of the shares held by decedent represented of the voting_stock of the corporation in addition decedent was only of shareholders in the corporation thus decedent’s shares of stock constituted an interest_in_a_closely_held_business within the meaning of sec_6166 moreover the value of those shares of stock exceeded percent of decedent’s adjusted_gross_estate the terms of the stock transfer restriction agreement do not disqualify decedent’s estate from initial qualification for sec_6166 deferral law and analysis for issue in general sec_6166 provides that if percent or more of the value of an interest_in_a_closely_held_business which qualified for installment payments under sec_6166 is distributed sold exchanged or otherwise_disposed_of then the extension of time to pay the tax shall cease to apply and the unpaid portion of the tax will be accelerated and due upon notice_and_demand sec_6166 see also sec_20_6166a-3 for purposes of determining whether acceleration of payments is triggered the phrase distributed sold exchanged or otherwise_disposed_of is broad in scope and comprehends all possible ways by which an interest_in_a_closely_held_business ceases to form a part of the gross_estate sec_20_6166a-3 as an exception to the general_rule of acceleration sec_6166 provides that a distribution_in_redemption_of_stock under sec_303 is not treated as a distribution for purposes of sec_6166 and for purposes of sec_6166 the value of the interest in the closely_held_business will be considered to be such value reduced by the value of the stock redeemed see also sec_20_6166a-3 note however that sec_6166 applies only if on or before the date prescribed for payment of the first installment due after the date of the distribution or if earlier on or before the day that i sec_1 year after the tl-n-1982-01 date of the distribution there is paid an amount of the tax imposed by sec_2001 estate_tax not less than the amount of money and other_property distributed sec_303 provides that a distribution_of_property to a shareholder by a corporation in redemption of stock of the corporation the value of which is included in the decedent’s gross_estate shall be treated as a distribution in full payment in exchange for the stock redeemed to the extent that the amount of the distribution does not exceed the sum of the estate inheritance legacy and succession taxes plus interest and the amount of funeral and administration_expenses allowable as deductions for federal estate_tax purposes this case involves a series of separate redemptions and payments under the stock transfer restriction agreement the agreement provides that any shares of stock for which payment has not been made shall not be considered sold and shall remain the property of the estate until paid for thus until payment is made for the stock the stock is not considered distributed sold exchanged or otherwise_disposed_of and no money or other_property attributable to the stock is considered withdrawn from the trade_or_business for purposes of sec_6166 however when payment is made for the stock a distribution sale exchange or other_disposition will occur under sec_6166 unless the exception provided in sec_6166 applies when determining whether the percent threshold is met dispositions and withdrawals are aggregated sec_6166 thus if the exception in sec_6166 does not apply acceleration of the installment payments will be triggered once decedent’s estate has redeemed percent or more of the shares of stock and the service has issued notice_and_demand your request for chief_counsel_advice makes no mention of revrul_86_54 1986_1_cb_356 which provides two alternative approaches to the requirement of g b that estate_tax must be paid in an amount not less than the amount of money and other_property distributed in the redemption on or before the date prescribed for payment of the first installment due after the date of the distribution or if earlier on or before the day that i sec_1 year after the date of the distribution we therefore recommend that your office make the calculations required under revrul_86_54 to determine whether the redemptions that have occurred to date fail in whole or in part to qualify under sec_6166 you should keep in mind that to the extent one or more redemptions qualify under sec_6166 the value of the interest in the closely_held_business is considered reduced by the value of the stock redeemed in such qualifying redemptions this affects the calculation required under sec_6166 see sec_6166 sec_20_6166a-3 example sec_2 and we would be pleased to discuss this matter with you further after you have made the necessary calculations to determine whether the aggregate of distributions sales exchanges or other dispositions and withdrawals equals or exceed sec_50 percent of the value of tl-n-1982-01 the interest in the closely_held_business as reduced in accordance with sec_6166 law and analysis for issue sec_6166 identifies the activities which terminate the deferred payment election and force an acceleration of payment of the estate_tax in particular sec_6166 provides that a failure to make any payment of principal or interest on or before the date fixed for payment including any extension of time will result in the unpaid portion of the tax payable in installments becoming due upon notice_and_demand from the secretary see also treas reg 6166a- c note however that for any payment of principal or interest made within six months after the due_date the secretary cannot give notice_and_demand for acceleration of the remaining installments sec_6166 as a general_rule when an estate fails to pay a sec_6166 installment a service_center letter is issued to inform the estate to pay the installment or lose the installment privilege irm although an estate defaults on a payment acceleration of the remaining installment payments does not actually occur until the service serves notice_and_demand for payment on the estate 419_f2d_958 7th cir note however that if an estate fails to make a timely payment but pays within six months of the due_date the estate loses the benefit of the interest rate for that payment and must include in its late payment a penalty equal to of the payment originally due multiplied by the number of months including fractions thereof from the original due_date to the date of actual payment sec_6166 iii all requests for sec_6166 installment privileges are tentatively allowed by the service i r m exhibit after the service_center receives the sec_6166 extension request the service issues a preliminary determination_letter to the estate confirming that the service has received a notice of election to make installment payments of estate_tax a tentative payment schedule is generally included see letter 249c in the present situation decedent’s estate did not timely pay the interest due on however decedent’s estate paid the interest amount within six months of the due_date thus the service is not entitled to issue notice_and_demand to terminate decedent’s estate’s installment privileges sec_6166 in the event decedent’s estate fails to make a required_payment of interest or tax within six months of the due_date the service may issue notice_and_demand and thus terminate the estate’s installment privileges sec_6166 you ask whether issuance of such notice_and_demand would be proper if the service_center tl-n-1982-01 fails to timely notify the estate of the amount of interest due this issue is not raised by the facts presented because in this case the service_center did notify decedent’s estate of the amount of interest due however we believe that even if the service_center fails to send the estate a bill for a required_payment the estate would in most cases be presumed to know the amount and due_date of the required_payment thus in the usual case in which the estate is presumed to know the amount and due_date of a required_payment issuance of notice_and_demand is proper if the estate fails to make a required_payment within six months of the due_date in such a case it is irrelevant that no bill was sent to the estate case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views please contact this office if the calculations required by revrul_86_54 1986_1_cb_356 raise legal issues that cannot be easily resolved if you have questions please contact susan l hartford at curtis g wilson by ____________________ michael l gompertz assistant to the branch chief branch


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division aug -t ep7ra t3 uniform issue list legend decedent a individual b individual c individual d amount e state f court g date l date m date n date p date q date r company w ira x page dear this is in response to your request for a private_letter_ruling submitted by your authorized representative by letter dated date concerning the proper treatment of amounts in decedent a’s individual_retirement_account ira x under sec_401 and sec_408 of the internal_revenue_code code correspondence dated date and date supplemented the request your authorized representative has submitted the following facts and representations decedent a was born on date l and died on date m while a resident of state f at age having attained his required_beginning_date as that term is defined in sec_401 of the code decedent a is survived by two children you and individual b you the son of decedent a were born on date n and were alive at the date of this ruling_request decedent a died testate and his estate is being administered in accordance with his last will and testament and related codicils the will thirteenth of the will individual b and individual c were appointed as executors of decedent a’s estate the will was duly admitted to probate on date q in court g in accordance with article as of his date of death decedent a was the owner of a rollover individual_retirement_arrangement ira ira x maintained with company w as of date p ira x has a value of approximately amount e at his date of death decedent a had been predeceased by his spouse individual d whom decedent a had previously designated as the beneficiary of ira x following her death however by means of a beneficiary designation dated date r decedent a named his estate as the beneficiary of his ira x under article fourth paragraph b of the will you and individual b are the equal beneficiaries of decedent a’s estate and are entitled to benefit from ira x individual b and individual c as co-executors of the estate of decedent a propose to transfer by means of trustee-to-trustee transfers in equal shares ira x into two newly created iras one would be titled decedent a deceased f b o your name beneficiary thereof the other would be titled decedent a ira deceased f b o individual b beneficiary thereof the inherited iras will continue to meet the minimum distribution_requirements of sec_401 of the code and distributions from the ira of which you will be the beneficiary will be based on the remaining life expectancy of decedent a with distributions therefrom made without regard to the ira set up to benefit individual b page the funds in ira x remain undistributed except that the required minimum distributions have been made based on the foregoing you request the following rulings that your one-half interest of decedent a's ira x can be segregated and a separate inherited sub-ira for purposes of determining your held in minimum required distributions under sec_401 of the code that the ira created by means of a trustee to trustee transfer which will be titled decedent a deceased f b o your name beneficiary thereof constitutes an inherited ira under sec_408 of the code that distribution requirement under the minimum required sec_401 of the code from your sub-ira may be met by distributing amounts annually from your distinct ira calculated using decedent a’s remaining life expectancy using the age of decedent a as of his birthday in the calendar_year of his death reduced by one for each subsequent a -5 question section calendar_year in accordance with answer-5 of the income_tax regulations and that the transfer of your one-half interest in decedent a’s ira to an ira in decedent a’s name for your benefit will not constitute a distribution it be within the meaning of sec_408 of the code nor will considered an attempted rollover from ira x to your distinct ira with respect to your ruling requests sec_401 of the code provides in general that if a plan participant ira holder dies after the distribution of his interest has begun in accordance with subparagraph a ii after his required_beginning_date the remaining portion of his interest must be distributed at least as rapidly as under the method of distribution being used under subparagraph a ii as of the date of death sec_401 of the code provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the ira holder attains age final income_tax regulations regulations under sec_401 and sec_408 of the code were published in the federal_register pincite federal_register date and in the internal_revenue_bulletin pincite r b date the preamble to the regulations in retevant part provide that the regulations apply for determining required minimum distributions for calendar years beginning after date page sec_1_401_a_9_-4 of the regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee's or ira holder's death generally an employee's designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of death sec_1 a -4 of the regulations q a-3 provides that only individuals maybe designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate may not be a designated_beneficiary sec_1_401_a_9_-5 of the regulations q a- a provides in summary that if an employee dies on or after his required_beginning_date without having designated a beneficiary then post-death distributions must be made over the remaining life expectancy of the employee determined in accordance with paragraph c of a-5 sec_1_401_a_9_-5 of the regulations q a- c provides in general that with respect to an employee who does not have a designated_beneficiary the applicable distribution period measured by the employee's remaining life expectancy is the life expectancy of the employee using the age of the employee as of the employee's birthday in the calendar_year of the employee's death in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after the calendar_year of the employee's death sec_1 a - of the regulations q a-1 provides the relevant single life expectancy table sec_1_401_a_9_-8 of the regulations q a-2 a provides the separate_account rules with respect to defined contribution plans a separate_account is an account under which the beneficiary or beneficiaries differ from the beneficiary or beneficiaries of the other accounts in general if separate_accounts are set up for years subsequent to the calendar_year containing the date on which the separate_accounts were established or the date of death if later a separate_account under a plan is not aggregated with the other separate_accounts under the plan in order to determine whether the distributions from such separate_account satisfy the requirements of code sec_401 instead the rules in code sec_401 apply separately to each separate_account under the plan sec_1_401_a_9_-8 of the regulations q a-3 provides that a separate_account is a separate portion of an employee's benefit reflecting the separate interest of the employee's beneficiaries under the plan as of the date of the employee's death for which separate_accounting is maintained the separate_accounting must allocate all post-death investment gains and losses contributions and forfeitures for the period prior to the establishment of the separate_accounts on a pro-rata basis in a consistent and reasonable manner among the separate_accounts page sec_1_401_a_9_-4 of the regulations q a-5 c provides in relevant part that the separate_account rules are not available to beneficiaries of a_trust with respect to the trust's interest in an employee's benefit in like manner the separate_account rules are not available to beneficiaries of an estate with respect to the estate's interest in an employee's plan or ira interest sec_408 of the code provides generally that in accordance with the rules of sec_72 amounts paid or distributed from an ira are included in the gross_income by the payee or distributee sec_408 of the code provides generally that amounts from an inherited ira cannot be rolled over into another ira in general an inherited ira is an ira maintained by an individual who acquired said ira by reason of the death of another if the acquiring individual is not the surviving_spouse of said other individual in this case as noted above you are decedent a's son revrul_78_406 1978_2_cb_157 provides that the direct transfer of funds from one ira trustee to another ira trustee even if at the behest of the ira holder does not constitute a payment or distribution to a participant payee or distributee as those terms are used in code sec_408 furthermore such a transfer does not constitute a rollover_distribution finally revrul_78_406 is applicable if the trustee to trustee transfer is directed by the beneficiary of an ira after the death of the ira owner as long as the transferee ira is set up and maintained in the name of the deceased ira owner for the benefit of the beneficiary the issues raised in this ruling_request are whether a beneficiary-son of an ira holder may after the death of the ira holder transfer her one-half interest in the deceased's ira to an ira set up to solely benefit her and whether she may receive distributions from her beneficiary ira over the deceased's remaining life expectancy without regard to the distribution decisions made by the other ira beneficiaries although neither the code nor the regulations promulgated sec_401 of the code preclude the posthumous division of ira x into more than one ira the regulations do preclude separate_account treatment for code sec_401 purposes where amounts pass through an estate in this case absent your decision to transfer by means of a trustee-to-trustee transfer your one-half interest in decedent a's ira x to your beneficiary ira as described above distributions of the entire ira x interest including your one-half would have to be made over decedent a's remaining life expectancy in accordance with sec_1_401_a_9_-5 of the regulations q a-5 c after the trustee to trustee transfer you will receive required distributions over decedent a's remaining page life expectancy thus the trustee to trustee transfer will have no effect on the timing or amount of minimum required distributions additionally a trustee to trustee transfer as described in revrul_78_406 does not constitute a distribution or payment as those terms are defined for purposes of code sec_408 finally since you are decedent a's son your one-half interest in decedent a's ira x constitutes an inherited ira as that term is defined in sec_408 of the code thus based on the specific facts and representations surrounding this ruling_request we conclude as follows that your one-half interest of decedent a's ira x can be segregated and a separate ira for purposes of determining your minimum held required distributions under sec_401 of the code in that the ira created by means of a trustee to trustee transfer which will be titled decedent a deceased f b o your name beneficiary thereof constitutes an inherited ira under sec_408 of the code that distribution the minimum required requirement under sec_401 of the code from your sub-ira may be met by distributing amounts annually from your distinct ira calculated using decedent a’s - remaining life expectancy using the age of decedent a as of his birthday in the calendar_year of his death reduced by one for each subsequent calendar_year in accordance with sec_1_401_a_9_-5 question answer-5 of the income_tax regulations and that the transfer of your one-half interest in decedent a’s ira to an ira in decedent a’s name for your benefit will not constitute a distribution within the meaning of sec_408 nor will it be considered an attempted rollover of the ira to you this ruling letter assumes that ira x either is or was qualified under code sec_408 at all times relevant thereto it also assumes that the transferee ira to be set up to benefit you will also meet the requirements of code sec_408 at all times relevant thereto finally please note that in accordance with sec_408 of the code a required_distribution must be made from the ira to be set up to benefit you no later than date if such distribution is not taken from ira x prior to the transfer described above this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this letter is being sent to your authorized representative in accordance with a power_of_attorney on file in this office page if you have any questions please call toll free number id - jat - nota sincerely yours ve rances v sloan manager employee plang’ technical group enclosures notice of intention to disclose deleted copy of ruling cc


internal_revenue_service number info release date dec cc psi 1-genin-165386-02 uilc dear we are answering your correspondence requesting automatic late s_corporation relief pursuant to revproc_97_48 you are ineligible for relief under this revenue_procedure because your tax_return for the year was late although we are unable to respond to your request as submitted this letter provides information explaining how to correct your situation announcement copy enclosed provides guidance on seeking relief for late s_corporation elections generally to request relief for a late s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a private_letter_ruling are set out in revproc_2002_1 copy enclosed in addition revproc_2002_1 requires taxpayers to submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their tax_return for the most recent 12-month taxable_year qualify for a reduced user_fee in the amount of dollar_figure if you qualify for the reduced fee you must include a statement certifying your gross_income for the last 12-month taxable_year otherwise the higher fee will apply if you decide to submit a formal request for a private_letter_ruling please review appendix b of revproc_2002_1 and be certain to include all required procedural statements also include the proper user_fee and any documents that substantiate your intent to be an s_corporation from corporate inception please refer your request to our office by adding the following to the address attn cc pa t p o box ben franklin station washington dc direct to cc psi room in addition the irs has developed two new cd-roms to help educate small_business owners on their tax responsibilities introduction to federal taxes for small_business self-employed and a virtual small_business workshop these two cd- roms are free and can be ordered by calling the irs also provides a special website www irs gov smallbiz which is dedicated to providing information to small_business taxpayers please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2002_1


internal_revenue_service number release date index number --------------------------------------------- ----------------------------------------------- -------------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-137308-11 date march legend x --------------------------------------------- ------------------------------ company ----------------------------------- state1 -------------- trust --------------------------- state2 ------------- dear -------------- this responds to a letter dated date together with subsequent correspondence submitted on behalf of x by x's authorized representative requesting plr-137308-11 an entity classification ruling under sec_7704 of the internal_revenue_code facts the information submitted states that x is a domestic life_insurance_company x currently invests through separate_accounts separate_accounts and subaccounts thereof individually investing in one or more series or funds of company company is a state1 corporation organized under the laws of state1 company is an open-end management investment_company registered under the investment_company act of the act company issues a separate series of stock representing ownership_interest in each of the funds each fund is treated as a separate corporation for federal_income_tax purposes by operation of sec_851 and each fund has elected to be taxed as a separate regulated_investment_company within the meaning of sec_851 the funds serve as funding vehicles for variable life_insurance policies and variable_annuity contracts collectively variable_contracts issued by x x is a shareholder of each of the funds company proposes to reorganize its business operations into trust a state2 statutory trust that will be the successor-in-interest to company and will adopt company’s registration_statement as a management investment_company under the act the reorganization trust will establish several series new funds pursuant to state2 law and will issue separate shares of beneficial_interest shares representing ownership interests in each of the new funds for each fund of company trust will create a corresponding new fund for the purpose of acquiring and carrying on the activities of a corresponding fund trust's declaration of trust provides that shares in the new funds may be held only be segregated_asset accounts of life_insurance_companies to support variable_contracts or other shareholders permitted under sec_1_817-5 to have a beneficial_interest in a new fund without causing the loss of look-through treatment under that regulation each fund will undergo the following steps to effectuate the reorganization each fund will transfer its assets to a new fund in exchange for shares in the new fund and the new fund's assumption of the fund's liabilities the fund will distribute in complete_liquidation the fund's shares in the new fund to its shareholders x as a current shareholder of the funds will therefore become an owner of shares in each new fund corresponding to a fund after the reorganization each subaccount of the separate_accounts will invest solely in one or more new funds the holder of a variable_contract may specify in which subaccounts of the separate_accounts the premiums are to be invested the benefits that x pays to the contract holder will reflect in part the investment return associated with and the market_value of the relevant underlying investment options supporting the variable_contract ie shares in the new funds however the benefits under the variable_contracts can vary significantly from the value of the shares in the plr-137308-11 new funds especially where a contract holder dies before his or her life expectancy typically a variable_contract cannot be redeemed within a specified period without a penalty nor sold at face value furthermore the interests in a new fund will be owned only by x other life_insurance_companies or other permissible owners of shares specified in sec_1_817-5 collectively eligible shareholders the contract holder will only have claims against the insurance_company issuing the variable_contract and not against the income gains losses or distributions of the new funds x requests a ruling that after the reorganization each new fund that is otherwise classified as a partnership for federal tax purposes will not be treated as a publicly_traded_partnership x makes the following representations regarding company’s current business operations and the future business operations of trust after the reorganization company is registered with the securities_and_exchange_commission under the act as an open-end management investment_company each fund also operates as a separate open-end management investment_company and is taxable as a separate corporation for federal_income_tax purposes by reason of sec_851 each fund has elected to be treated and has qualified as a regulated_investment_company within the meaning of sec_851 for each taxable_year of its existence and intends to qualify as a regulated_investment_company for its final short taxable_period ending on the date of the reorganization pursuant to the reorganization trust as successor-in-interest to company will adopt the company’s registration_statement as an open-end management investment_company under the act each new fund will be a separate series of trust created in conformance with state2 law and its declaration of trust the certificate of trust filed on behalf of trust includes the notice of limitation of liabilities of series as provided by state2 law neither trust nor any new fund has ever held itself out as or made an election to be classified as a corporation each new fund will consist of a separate pool of assets liabilities and stream of earnings the owners of shares of a new fund may with respect to said shares share in the income only of that new fund and correspondingly will be limited to the assets of that new fund upon the redemption of shares in or the liquidation or termination of such new fund the payment of the expenses charges and liabilities of a new fund will be limited to that new fund’s assets the creditors of a new fund are limited to the assets of that new fund for recovery_of expenses charges and liabilities plr-137308-11 each new fund will have its own investment objectives policies and restrictions which shall be the same as the objectives policies and restrictions of the corresponding predecessor fund votes of the owners of shares of the new funds may be conducted by each new fund separately with respect to matters that affect only that particular new fund except to the extent the act requires all shares to be voted as a single class of shares other than in the case of persons permitted under sec_1_817-5 to have a beneficial_interest in a new fund all shares in each new fund will be held by subaccounts of separate_accounts of one or more life_insurance_companies public access to each new fund will be available exclusively through the purchase of a life_insurance_policy or annuity_contract that qualifies as a variable_contract under sec_817 each new fund will operate as a separate business_entity for federal tax purposes and as a business_entity with more than one member will file its own federal tax_return for federal_income_tax purposes all interests in each new fund will be owned by x other life_insurance_companies and other permissible owners under sec_1_817-5 and not by the variable_contract holder following the reorganization the shares of each new fund will at all times be held by fewer than life_insurance_companies the shares of each new fund are not and will not be traded on an established_securities_market and accordingly no owner of shares will have the opportunity to engage in transactions involving the shares on an established_securities_market the shares of each new fund are not and will not be regularly quoted by any person such as a broker or dealer making a market in the shares and accordingly no owner of shares will have the opportunity to participate in any market in the shares no person regularly makes available and no person will make available to the public including customers or subscribers bid or offer quotes with respect to the shares in any new fund and no person will stand ready to effect buy or sell transactions at quoted prices for itself or on behalf of others accordingly no owner of shares will have the opportunity to engage in transactions involving shares based upon bid offer quotes no owner of shares has or will have a readily available regular and ongoing opportunity to sell or exchange shares through a public means of obtaining or providing information of offers to buy sell or exchanges shares plr-137308-11 there is no plan or intention for the redemption of shares by a new fund to be combined with the issuance of shares in the new fund to a new issuee of shares other than the right of an owner of a variable_contract to allocate premiums or contract value among one or more subaccounts of separate_accounts no owner of a variable_contract i possesses or will possess control_over the investment options of any subaccount or of any new fund ii has or will have any authority to make investment decisions concerning the assets of any subaccount or of any new fund or iii is permitted or will be permitted to select or recommend particular investments or investment strategies with respect to any subaccount or any new fund following the reorganization trust may in the future establish and designate one or more additional series any such additional trust series will engage in the same type of investment activities as are engaged in by and will satisfy the same representations as are made with respect to the new funds shares of the new funds are not and will not be transferable without first obtaining the consent of the trustees of trust the trustees may withhold consent if the trustees determine that the transfer may i result in a person who is not an eligible shareholder becoming a shareholder ii otherwise cause a new fund to cease to be an eligible_entity to which the look-through rules of sec_1_817-5 apply iii cause a new fund to be treated as a publicly-traded partnership as defined in sec_7704 or iv result in a violation of the act the securities act of or other applicable law notwithstanding the foregoing a shareholder will be permitted to transfer shares of which it is the record_owner without first obtaining the consent of the trustees if the transfer is made i to a successor that is an eligible shareholder and ii in connection with a merger consolidation sale of substantially_all assets or similar transaction to which the shareholder is party law and analysis sec_7704 provides that except as provided in sec_7704 a publicly_traded_partnership will be treated as a corporation sec_7704 provides that the term publicly_traded_partnership means any partnership if interests in such partnership are traded on an established_securities_market and interests in such partnership are readily_tradable on a secondary market or the substantial equivalent thereof sec_1_7704-1 of the procedure and administration regulations provides that for purposes of sec_7704 and sec_1_7704-1 an interest in a partnership includes a any interest in the capital or profits of the partnership including the right to partnership_distributions and b any financial_instrument or contract the plr-137308-11 value of which is determined in whole or in part by reference to the partnership including the amount of partnership_distributions the value of partnership assets or the results of partnership operations sec_1_7704-1 provides that for purposes of sec_7704 and sec_1_7704-1 a transfer of an interest in a partnership means a transfer in any form including a redemption by the partnership or the entering into of a financial_instrument or contract described in sec_1_7704-1 sec_1_7704-1 provides that for purposes of sec_7704 and sec_1_7704-1 interests in a partnership that are not traded on an established_securities_market within the meaning of sec_7704 and sec_1_7704-1 are readily_tradable on a secondary market or the substantial equivalent thereof if taking into account all of the facts and circumstances the partners are readily able to buy sell or exchange their partnership interests in a manner that is comparable economically to trading on an established_securities_market sec_1_7704-1 provides that for purposes of sec_1_7704-1 interests in a partnership are readily_tradable on a secondary market or the substantial equivalent thereof if-- i interests in the partnership are regularly quoted by any person such as a broker or dealer making a market in the interests ii any person regularly makes available to the public including customers or subscribers bid or offer quotes with respect to interests in the partnership and stands ready to effect buy or sell transactions at the quoted prices for itself or on behalf of others iii the holder of an interest in the partnership has a readily available regular and ongoing opportunity to sell or exchange the interest through a public means of obtaining or providing information of offers to buy sell or exchange interests in the partnership or iv prospective buyers and sellers otherwise have the opportunity to buy sell or exchange interests in the partnership in a time frame and with the regularity and continuity that is comparable to that described in the other provisions of sec_1_7704-1 sec_1_7704-1 provides that for purposes of sec_7704 and sec_1 interests in a partnership are not traded on an established_securities_market within the meaning of sec_1_7704-1 and are not readily_tradable on a secondary market or the substantial equivalent thereof within the meaning of sec_1_7704-1 even if interests in the partnership are traded or readily_tradable in a manner described in sec_1 b or c unless-- the partnership participates in the establishment of the market or the inclusion of its interests thereon or the partnership recognizes any transfers made on the market by-- i redeeming the transferor partner in the case of a redemption or repurchase by the partnership or ii admitting the transferee as a partner or otherwise recognizing any rights of the transferee such as a right of the transferee to receive partnership_distributions directly or indirectly or to acquire an interest in the capital or profits of the partnership plr-137308-11 sec_1_7704-1 provides that for purposes of sec_7704 and this section except as otherwise provided in sec_1_7704-1 interests in a partnership are not readily_tradable on a secondary market or the substantial equivalent thereof if i all interests in the partnership were issued in a transaction or transactions that was not required to be registered under the securities act of and ii the partnership does not have more than partners at any time during the taxable_year of the partnership revproc_2011_3 sec_3 2011_1_cb_111 provides the service will not issue a ruling on whether interests in a partnership that are not traded on an established_securities_market within the meaning of sec_7704 and sec_1_7704-1 are readily_tradable on a secondary market or the substantial equivalent thereof under sec_1 c rulings specifically pertaining to new funds supporting variable_contract arrangements of life_insurance_companies do not fall within the intended scope of the no rule area conclusion the shares in each new fund are interests in the capital or profits of the new funds therefore if the new funds are partnerships for federal tax purposes the shares would be partnership interests for purposes of sec_7704 see sec_1 a i a the sale of shares to other insurance_companies or to the separate_accounts of other insurance_companies does not fall within the definition of trading on an established_securities_market as defined in sec_7704 and sec_1_7704-1 additionally shares may only be sold to the separate_accounts of x the separate_accounts of other life_insurance_companies and other persons specified in sec_1 f and i are not regularly quoted by any person such as a broker or dealer making a market in the interests ii no person regularly makes available to the public including customers or subscribers bid or offer quotes with respect to the shares and stands ready to effect buy or sell transactions at the quoted prices for itself or on behalf of others iii the owners of shares do not have a readily available regular and ongoing opportunity to sell or exchange the interests through a public means of obtaining or providing information of offers to buy sell or exchange interests in the partnership and iv prospective buyers and sellers do not otherwise have the opportunity to buy sell or exchange shares in a time frame and with the regularity and continuity that is comparable to that described in the other provisions of sec_1 c based solely on the information submitted and the representations made we conclude that following the reorganization each new fund that is classified as a partnership will not be treated as a publicly_traded_partnership except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed or implied whether the new plr-137308-11 funds are partnerships for federal tax purposes this ruling is directed only to the taxpayer who requested 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 is being sent to x's authorized representative sincerely joy spies joy spies acting senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------------ --------------------------------------------------- --------------------------------- ----------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-143184-07 date date x ------------------------------------------------------------------------------------------------------- -------------------- d1 trust ------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ dear ------------- this responds to a letter dated date submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code x made an election to be treated as an s_corporation x’s election was inadvertently terminated effective d1 because the beneficiary of trust failed to make a timely qualified_subchapter_s_trust qsst election x represents that the termination was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or plr-143184-07 termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x’s s_corporation_election on d1 was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d1 and thereafter provided x’s s_corporation_election was valid and provided that the election was not otherwise terminated under sec_1361 this ruling is conditioned upon the beneficiary of trust filing a qsst election effective d1 for trust within sixty days of the date of this letter a copy of this letter should be attached to the election if x or its shareholders fail to treat themselves as described above this ruling is null and void except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representatives sincerely j thomas hines chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


number release date id office uilc cca-102314-08 from ---------------------- sent thursday date am to ------------------ cc ---------------------------------------------- subject re ---------------- -------- i just met with ----- regarding your question about the sec_4955 issue for the most part we agree with--------------characterization of the conversation yesterday namely we believe that -------- was of the view that the fundraising materials should be considered when determining a potential paci violation due to their tone and sheer volume as such we believe that the fundraising expenses should be included in the calculation of the excise_tax -----


internal_revenue_service number release date index number ----------------------------------- ----------------------------------- ------------------------- -------------------------- - department of the treasury washington dc person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 - plr-117700-05 date date -------------------- ---------------------- --------------------------- this letter responds to a letter dated date submitted on behalf of x -------------------------------------------- a ---------------------------------------------- d1 dear -------------- x requesting a ruling under sec_1362 of the internal_revenue_code intended for x to elect to be an s_corporation effective d1 however x inadvertently failed to timely file a form_2553 election by a small_business_corporation any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective d1 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for d1 the information submitted states that a the president and sole shareholder of x sec_1362 provides that if - a an election under sec_1362 is made for except as specifically set forth above no opinion is expressed concerning the plr-117700-05 federal tax consequences of the facts described above under any other provision of the code include whether x was or is a small_business_corporation under sec_1361 provides that it may not be used or cited as precedent being sent to x’s authorized representative pursuant to a power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer requesting it sec_6110 sincerely beverly katz senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service national_office technical_advice_memorandum date number release date case mis no tam-120743-01 cc pa apjp index uil no chief appeals_office taxpayer’s name taxpayer’s address taxpayer's identification no years involved none date of conference legend taxpayer a taxpayer b taxpayer c year date date date date date dollar_figurea dollar_figureb dollar_figurec dollar_figured dollar_figuree dollar_figuref issue whether refund claims regarding overpaid employment_taxes constitute valid claims for refund under sec_6402 of the internal_revenue_code conclusion because the claims on their faces relate only to the third and fourth quarters of year they fail to qualify as formal refund claims for tax paid in the second quarter of that year the claims do constitute informal claims for payments made in the second quarter facts tam-120743-01 taxpayer a filed two form sec_843 claim_for_refund and request for abatement on date these filings sought refunds of the medicare portion of federal_insurance_contributions_act fica_taxes paid in year one such form sought a refund of dollar_figurea for the third quarter of year and the second sought a refund of dollar_figureb for the fourth quarter of year both forms were timely filed within the limitations_period imposed by code sec_6511 the form sec_843 filed by taxpayer a each stated in section five explanations and additional claims that a protective claim has also been filed by taxpayer b due to limited information at time of due_date these protective forms filed by taxpayer b also on date were identical to taxpayer a’s filings in terms of the amount of refund sought and the calendar quarters involved taxpayer b was taxpayer a’s predecessor entity taxpayer b’s date protective filings on form_843 included the following notation in section five a refund has also been filed by taxpayer a a protective claim has been filed due to limited information at time of due_date a form_843 was also filed in the name of taxpayer b on date seeking a refund of dollar_figurec in medicare_tax for the second quarter of year dollar_figurec is the sum of dollar_figurea and dollar_figureb the form’s preparer added the words as amended to the top of the form and included the following statement in section five this amended claim serves to perfect a protective claim filed on date the form_843 filed on date was not timely filed within the limitations_period for filing a claim_for_refund provided in code sec_6511 the filing on date occurred because taxpayer a became aware that the medicare_tax at issue was paid in the second quarter of year not the third and fourth quarters as stated in the date filings of form_843 taxpayer a had also become aware that taxpayer b as opposed to taxpayer a paid the year medicare taxes for which a refund was sought the form sec_843 filed on date stated see attachments in sec_5 that section instructs the filer to e xplain why you believe this claim should be allowed and show computation of tax_refund or abatement of interest penalty or addition_to_tax taxpayers a b attached to the form sec_843 the following items form sec_941c supporting statement to correct information showing downward adjustments in wage payments for the third and fourth quarters of year and resulting decreases in medicare_tax liability and a form_5701 notice of proposed_adjustment dated date in which the service recharacterized as capital expenditures certain payments which taxpayer b’s parent_corporation treated as currently deductible the medicare overpayments for which a refund was sought arose due to the adjustments proposed in the above-noted form_5701 specifically two employees of taxpayer a received payments in year of dollar_figured each in anticipation of a corporate spin- off transaction at the time paid these distributions were treated as wages subject_to_withholding of federal_income_tax social_security_tax and medicare_tax both employees exceeded the wage ceiling set forth in code sec_3121 on payment tam-120743-01 of social_security_tax the service in its form_5701 proposed adjustments recharacterized the dollar_figuree million combined payment to the two employees as a capital_expenditure and identified the two employees by name taxpayer b’s parent_corporation accepted these proposed adjustments accordingly the date claims seek a refund of the employer and employee share of the medicare_tax paid in year on the dollar_figuree payment the amount of the requested refund is dollar_figurec derived as follows dollar_figuree x dollar_figuref employer portion dollar_figuree x dollar_figuref employee portion total refund dollar_figurec law and analysis code sec_3101 imposes a tax on an employee’s wages as defined in code sec_3121 with respect to the medicare component of fica_taxes code sec_3111 imposes an excise_tax on an employer with respect to the medicare component of fica totaling of the wages paid_by the employer sec_6402 provides that the secretary within the applicable_period of limitations may credit the amount of an overpayment_of_tax including interest against any internal revenue tax_liability of the person who made the overpayment and shall refund the balance to the person sec_6413 provides in pertinent part that if more than the correct amount of tax imposed by sec_3101 and sec_3111 is paid with respect to any payment of remuneration proper adjustments with respect to both the tax and the amount to be deducted shall be made without interest in such manner and at such times as the secretary may by regulations prescribe sec_6413 provides in pertinent part that if more than the correct amount of tax imposed by sec_3101 and sec_3111 is paid or deducted with respect to any payment of remuneration and the overpayment cannot be adjusted under subsection a of sec_6413 the amount of the overpayment shall be refunded in such manner and at such times subject_to the applicable statute_of_limitations as the secretary may by regulations prescribe sec_6511 provides that no refund may be allowed or made after the expiration of the period of limitation for filing a claim_for_refund unless a claim_for_refund is filed by the taxpayer within such period in general the period of limitation under sec_6511 for filing a refund claim is three years from the time the return was filed or two years from the time the tax was paid whichever is later sec_6532 provides in pertinent part that no suit or proceeding for the recovery_of any internal revenue tax penalty or other sum may be begun after the expiration of two tam-120743-01 years from the date a notice of disallowance is mailed to the taxpayer by certified or registered mail sec_7422 prohibits any suit or proceeding in any court for a refund of taxes unless a claim_for_refund has been filed with the secretary in the manner prescribed in regulations established by the secretary sec_301_6402-2 of the procedure and administration regulations identifies the following general requirements that must be satisfied for the filing of a proper refund claim with minor exceptions the claim must be filed with the service_center where the tax was paid reg sec_301_6402-2 the claim must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the commissioner of the exact basis thereof reg sec_301_6402-2 the statement of the grounds and the facts must be verified by a written declaration made under the penalties of perjury sec_301_6402-2 except as provided with respect to income_tax and certain other taxes the claim is to be made on a form_843 reg sec_301_6402-2 and in the case of income gift and federal unemployment taxes a separate claim is to be made for each type of tax for each taxable_year or period reg sec_301_6402-2 sec_31_6402_a_-2 of the procedure and administration regulations provides that any person who pays more than the proper amount of the employer or employee portions of fica_taxes may file a claim for credit or refund of the amount of the overpayment sec_31_6402_a_-2 provides that an employer seeking a refund of the employee portion of the fica tax must submit a number of supporting statements these consist of a statement that the employer a has repaid the amount of overcollected employee tax to the employee or b has secured the employees’ written consent to the employer’s submission of a refund claim on behalf of the employee and if the employee tax was collected in a prior year a statement that the employer has obtained from the employees a statement that a the employee has not claimed a refund_or_credit of the amount of the overcollection or that if so such a claim has been rejected and b that the employee will not claim a refund_or_credit for such amounts sec_31_6402_a_-2 provides that any claim_for_refund of fica_taxes made with respect to remuneration that was previously erroneously reported on a return or schedule as wages paid to an employee must include a statement showing the identification_number of the employer if he was required to make application therefor the name and account number of the employee the period covered by the return or schedule the amount of remuneration actually reported as wages for the employee and the_amount_of_wages which should have been reported for the employee no particular form is prescribed for making the statement required by sec_31_6402_a_-2 but form 941c or form 941c pr whichever is appropriate can be used for this purpose tam-120743-01 the claims filed in the present case on date do not qualify as formal refund claims for medicare_tax paid in the second quarter of year this follows because the claims referred only to the third and fourth quarters of year and thus failed to state the correct_tax period as required by sec_31_6402_a_-2 of the procedure and administration regulations see also 876_f2d_485 u s t c cch 5th cir held form_843 claiming employment_tax refund for fourth quarter of is not formal refund claim for third quarter despite knowledge of irs agents that taxpayer sought refund for both quarters the fifth circuit further held in gustin however that an informal claim_for_refund is valid under sec_7422 see also 314_us_186 27_fedclaims_235 u s t c cch big_number the taxpayer in gustin timely filed a form_843 claiming it overpaid its employment_taxes for the fourth quarter of the form made no reference to the third quarter of the court therefore held that the taxpayer failed to comply with the formal requirements for a refund claim with respect to the third quarter the taxpayer in gustin argued however that whatever the flaws in the form_843 it constituted an informal written claim for overpayments occurring in the third quarter the court found that an informal written claim is sufficient if it puts the commissioner of internal revenue on notice that the taxpayer believes an erroneous tax has been assessed and desires a refund for certain years gustin f 2d pincite citations omitted the court stated that there are no hard and fast rules for evaluating the sufficiency of an informal claim and each case must be decided on its own particular set of facts ‘with a view towards determining whether under those facts the commissioner knew or should have known that a claim was being made’ id pincite- citing 163_fsupp_614 the court held that the taxpayer failed to present a valid informal claim essentially because the service’s administrative file relating to the refund claim contained no indication that a refund was being sought for the third quarter id pincite the administrative file in the present case does suggest to some degree at least that the refund claims related to the second quarter of year as noted above the dollar_figuree payment to the two employees was to occur immediately before a corporate spin-off involving taxpayer b’s parent_corporation the notice of proposed_adjustment attached to the date refund claims specifically referred to this timing by stating that immediately prior to the spin-off taxpayer c through taxpayer a would pay the employees and consultants the spin-off according to the notice of proposed_adjustment occurred on date therefore an item in the taxpayer’s administrative file does suggest that the wage payment and related medicare withholding occurred before the date close of the second quarter taxpayer b then conclusively alleged in its date claim that the medicare withholding occurred in the second quarter a number of other circumstances also support a finding that the date filings constituted informal claims for refund the documents submitted on that date provided tam-120743-01 the service with precise information regarding the basis for the refund claims the form 941c submitted with the refund claims identified the dollar amount of the claim dollar_figurec and specified how that amount was derived the notice of proposed_adjustment submitted with the refund claims identified the specific transaction that produced the claimant’s entitlement to a medicare refund namely the government’s recharacterization of the dollar_figuree million wage payment the claims thus satisfy the requirement in applicable case law that an informal claim set forth the legal and factual basis for the refund see eg 32_fedclaims_636 u s t c cch big_number the refund claims in the present case were the natural consequence of the service’s decision to recharacterize the dollar_figuree payment the factual basis for the claims therefore should not have been a surprise to the service the claims_court has stated in this regard that the purpose behind the requirement of an adequate refund claim whether formal or informal is to prevent surprise through the giving of adequate notice of the nature of the claims as well as the factual basis so that the irs may begin an investigation or correct errors deluxe check printers inc v united_states cl_ct u s t c cch rev’d in part on other grounds sub nom 885_f2d_848 fed cir the courts have rejected refund claims which fail to state the nature of the claim and sufficient facts to support it see eg 325_us_293 444_f2d_1391 u s t c cch 5th cir franks v united_states u s t c cch w d la this obligation to explain the claim and provide adequate supporting facts applies to both formal and informal claims deluxe check printers inc u s t c at big_number in angelus milling co a taxpayer filed with the service a refund claim which did not include the elements required by the applicable regulations the claim consisted solely of the following elements an apportionment between the taxpayer and a related corporation of certain previously-filed claims and an attached affidavit which apparently did nothing more than portray the claim as an amendment to the previous claims angelus milling co u s pincite the taxpayer argued that despite these flaws its refund claim -- when combined with that of another taxpayer -- provided the service with sufficient facts and explanation to justify the refund id pincite in the present case each of the date filings provided full details as to the origin and basis for the refund request unlike angelus milling therefore no claims by other taxpayers had to be considered in order to make the factual and legal rationale for the date filings apparent to the service accordingly angelus milling does not compel rejection of the date claims as noted above the date filings by taxpayers a b did cross reference each other to note that taxpayer b was filing a protective claim_for_refund unlike the situation in angelus milling however each of the date filings by taxpayers a b fully described the factual and tam-120743-01 legal grounds justifying a refund as noted above the taxpayer’s claim in angelus milling did nothing more than attempt to apportion a refund the rationale for that refund was stated only in another taxpayer’s filing if it was stated at all in stoller the service assessed an income_tax deficiency on the ground that the taxpayers were taxable on income they had assigned to another individual after paying the assessed amount the taxpayers filed a refund claim with the service which was rejected the taxpayers filed a refund_suit in u s district_court claiming that the income they had assigned was non-taxable to them under the valuable consideration rule_of 228_f2d_186 2nd cir the court in stoller upheld the district court’s rejection of the refund_suit the court concluded that because the taxpayers filed a deficient refund claim with the service sec_7422 precluded a refund_suit stoller v united_states f 2d pincite the court noted that the refund claim the taxpayers filed with the service consisted solely of the following statement t he commissioner of internal revenue erroneously determined that the taxpayers’ profits from business totaled dollar_figure in lieu of dollar_figure which was the taxpayer’s correct profit from business id the court found that this statement by the taxpayers did not meet the regulatory requirement that a refund claim must set forth in detail each ground upon which a refund is claimed id the taxpayers the court noted failed to state in their refund claim that they were relying upon the valuable consideration rule accordingly the court held the claim failed to notify the service of the nature and basis of the refund request id the court in stoller also rejected the taxpayers’ argument that regardless of the shortcomings of the refund claim the service was sufficiently aware of the assignment_of_income issue this knowledge the taxpayers argued was evidenced by certain statements in a revenue agent’s report the court found that even if this knowledge could be incorporated into the refund claim that claim would still be deficient regardless of what the service may have known concerning the taxpayers’ situation the court held no valid refund claim could result from filing a paper which gives no notice of the amount or nature of the claim for which the suit is brought and refers to no facts upon which it may be founded id quoting 283_us_269 in the present case by contrast the taxpayers did not rely upon the service’s background knowledge of their tax situation instead as noted above taxpayers a and b filed on date all the documentation necessary to inform the service of the precise nature and amount of the refund claim therefore stoller does not support rejection of that claim as noted in stoller the commissioner can examine only those points to which his attention is necessarily directed id quoting 258_f2d_892 5th cir the date filings directed the service’s attention to the specific transaction that generated the refund claim and identified the tam-120743-01 exact dollar amount of that claim in franks the taxpayers filed a claim_for_refund with the service and attached to that claim a report by an irs auditor describing the issues on which the taxpayer and the service disagreed the taxpayers stated in their claim that t axpayers contest all adjustments described in the auditor’s report franks v united_states u s t c at big_number n16 the court found that the claim did not constitute a refund claim within the meaning of sec_301_6402-2 and could therefore not serve as the basis for a refund_suit under sec_7422 id at big_number the court found that by attaching the auditor’s report to their refund claim and stating that they disagreed with the adjustments in that report the taxpayers had provided the government with nothing more than mere notice that they are contesting certain amounts id more than this the court held must be provided through a refund claim the taxpayer must provide grounds for its claim and facts supporting those grounds id unlike the taxpayers in franks taxpayers a b did not support their refund claims by making a blanket objection to adjustments proposed by the service as noted by the court in franks such a blanket statement fails to inform the service of the grounds on which the taxpayer seeks a refund in the present case the taxpayers accepted the service’s proposed adjustments namely the downward adjustment to wages and the resulting increase in capital expenditures they then filed refund claims to reflect the natural consequence of that adjustment ie the drop in medicare_tax liability the grounds for the claims therefore were self-evident from the attached notice of proposed_adjustment and form sec_941c and can be stated as follows once wages dropped medicare taxes paid on those amounts necessarily became refundable because taxpayers a b -- unlike those in franks -- notified the service of the grounds for refund franks does not support denial of the date claims it should be noted that the date refund claims failed to comply with sec_31_6402_a_-2 in one respect specifically sec_31_6402_a_-2 requires the employer to include a statement that the employer has obtained from the employee a written_statement that the employee has not claimed a refund_or_credit of the amount of the overcollection or that if so such a claim has been rejected and that the employee will not claim a refund_or_credit for such amounts the failure_to_file such a statement within the time limit for filing a claim_for_refund does not make the claim untimely or invalid such a statement however is required to perfect the claim see 40_f3d_373 fed cir based upon all the facts and circumstances the claims dated date constitute informal refund claims for medicare taxes paid in the second quarter of year caveat s tam-120743-01 a copy of this technical_advice_memorandum is to be given to the taxpayer s sec_6110 of the code provides that it may not be used or cited as precedent


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b01-plr-128467-00 date date legend x state date this letter responds to a letter dated date written on behalf of x requesting a ruling that x be granted an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to file an election to be treated as a corporation for federal tax purposes under sec_301_7701-3 facts according to the information submitted on date a predecessor s_corporation converted to x a state limited_partnership x intended to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes as of date however x failed to file the election timely law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in this section an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides in part that unless a domestic eligible_entity elects otherwise it is a partnership if it has two or more members sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election with the applicable service_center sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the plr-128467-00 election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i if the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting the relief will not prejudice the interests of the government sec_301_9100-2 and sec_301_9100-3 provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusions based solely on the facts and representations submitted we conclude that the requirements of section and have been satisfied accordingly x is granted an extension of time of days from the date of this letter to file form_8832 effective on date with the appropriate service_center a copy of this letter should be attached to the election a copy is enclosed for that purpose except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provision of the code specifically we express no opinion as to whether or not x would qualify as a small_business_corporation as defined in sec_1361 this ruling is directed only to the taxpayer who requested 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 is being sent to your authorized representative s paul f kugler sincerely yours associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


id office uilc cca_2010030110462037 ---------- number release date from ------------------- sent monday march am to ------------------- cc --------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- subject and withholding and tefra i think the is fine i assume that it would be signed by the partnership for the taxes it owes -------------------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ -- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------


department of the treasury exempt_organizations rulings and agreements employer_identification_number contact person - 1d number contact telephone number til internal_revenue_service p o box room cincinnati oh number release date date date legend the fund cholarship fund college college iniversity university financial aid office dear ‘our records indicate that x was determined to be a private_foundation as defined in sec_509 of the code in january of at that time the service approved your grant making program this letter modifies our letter dated date we have considered your request dated date for advance approval of the changes to your grant-making program under sec_4945 g of the internal_revenue_code your letter indicates that x will operate a grant-making program called y the purpose of x is to create a grant program the purpose of will send applications to f at b c the amount of the grants is between w and y x and e application will be reviewed and considered on recommendation of f at and e f will be instructed to forward the selected applications to csa for scoring preparation of the scholarship committee the applicants must obtain the following criteria a be a student enrolied at b c d and e b be studying in the filed of law medicine or the ministry c have a minimum cumulative gpa of on a scale demonstrate high personal character e demonstrate academic ability and achievement and f demonstrate financial need is to provide scholarship grants to students who attend b c d and e id family members or relatives of trustees scholarship committee members or selection committee members are not eligible to apply for scholarships employees of g and their family members or relatives are not eligible to apply for scholarships scholarships may be awarded for any stated period and for varying amounts as determined by the scholarship committee awards will be applied for tuition only scholarship awards will be paid in equal installments at the beginning of each academic period during the academic year checks will be made payable to and mailed directly to b c d and e upon receipt of a bill or certificate of enrollment form from b c d and e unused funds will be returned to y scholarships are non-renewable however former recipients may reapply for a scholarship students must maintain satisfactory progress and a minimum gpa of on scale to reapply for a scholarship the following year in the event of serious malfeasance breach of traditional conduct or conduct involving moral turpitude a scholarship may be terminated at any time within the discretion of the selection committee whose decisions shall be final and binding sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship ot fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 b i ame the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or g the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that gi its grant procedure includes an objective and nondiscriminatory selection process such pr the acti jure is reasonably calculated to result in performance by grantees of s that the grants are intended to finance and gii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are excludable from the gross_income of the recipients subject_to the limitations provided by sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 b of the code ‘the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all awatd distributions can be substantiated upon request by the intemal revenue service this determination is directed only to the organization that requested it sec_6110g of the code provides that it may not be used or cited as a precedent ‘you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above in sincerely yours robert choi director exempt_organizations rulings and agreements


t c memo united_states tax_court steven m and michele e grow petitioners v commissioner of internal revenue respondent docket no filed date steven m and michele e grow pro_se amy dyar seals for respondent memorandum findings_of_fact and opinion powell special_trial_judge this case was assigned pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined a deficiency in petitioners' federal_income_tax for the taxable_year in the amount of dollar_figure section references are to the internal_revenue_code in effect for the year in issue and rule references are to the tax_court rules_of_practice and procedure petitioners resided in cary north carolina at the time they filed their petition the issues are whether petitioners are liable for income_tax on a distribution from a profit sharing plan pursuant to sec_402 and whether petitioners are liable for an early withdrawal penalty on the same distribution pursuant to sec_72 findings_of_fact in stephen m grow petitioner worked for dun bradstreet inc dun bradstreet in tampa florida where he lived with his family during dun bradstreet transferred petitioner to raleigh north carolina petitioner purchased a house in nearby cary north carolina in date because petitioner was unable to sell his house in tampa he withdrew dollar_figure from his profit sharing plan at dun bradstreet to make a downpayment on the house in cary the withdrawal constituted approximately one-half of the value of petitioner's account no portion of the withdrawn amount was rolled over into another retirement account dun bradstreet sent petitioner a form 1099-r reporting taxable_income in the amount of dollar_figure consisting of the dollar_figure withdrawal reduced by a prorated portion of petitioner's investment_in_the_contract on their jointly filed federal_income_tax return petitioners did not report any income as a result of the distribution in the notice_of_deficiency respondent determined that petitioners were liable for income_tax on the dollar_figure shown on form 1099-r pursuant to sec_408 and an early withdrawal penalty on the same amount pursuant to sec_72 opinion sec_402 applies to distributions from any employees' trust described in sec_401 including a profit sharing plan that is exempt from tax under sec_501 sec_402 provides that subject_to certain exceptions not relevant here any amount distributed from such a_trust shall be taxable to the distributee in the year of distribution under sec_72 relating to annuities sec_72 provides that an amount not received as an annuity is includable in gross_income except to the extent attributable to an individual's investment_in_the_contract petitioner received a distribution from a profit sharing plan since none of the exceptions in sec_402 apply sec_72 governs the taxability of the distribution the distribution was not received in the form of an annuity so sec_72 requires that the distribution reduced by a proportionate share of petitioner's investment_in_the_contract in the notice_of_deficiency and throughout this litigation respondent has erroneously asserted that sec_408 governs the taxability of the distribution sec_408 governs the taxability of distributions from individual_retirement_accounts distributions from profit sharing plans are covered by sec_402 because neither party disputes the issue we assume the profit sharing plan constitutes a qualified_trust within the meaning of sec_401 which is exempt from tax under sec_501 be included in gross_income the form 1099-r received by petitioner excluded a proportionate share of petitioner's investment_in_the_contract accordingly we hold petitioners underreported their gross_income by dollar_figure in sec_72 imposes an additional tax on any amount received from a qualified_retirement_plan including a profit sharing plan equal to percent of the portion of such amount which is includible in gross_income sec_72 exempts distributions from the additional tax if the distributions are made to an employee age or older to a beneficiary or to the estate of the employee on or after the death of the employee on account of disability as part of a series of substantially_equal_periodic_payments made for life to an employee after separation_from_service after attainment of age or as dividends_paid with respect to corporate stock described in sec_404 petitioner received a distribution from a qualified_retirement_plan none of the specifically enumerated exceptions in sec_72 apply to exempt the distribution from the additional tax therefore we conclude petitioners are liable for the additional tax imposed by sec_72 on the portion of the distribution includible in gross_income petitioner asserts that the distribution should be exempt from income_tax and or the additional tax imposed by sec_402 and sec_72 in support of this conclusion petitioner argues that the investment of the distribution in a house with a 30-year mortgage is akin to a retirement account and therefore tax free treatment of the distribution comports with the congressional intent underlying the tax treatment of retirement plans cf harris v commissioner tcmemo_1994_22 which is contrary to petitioner's argument petitioner further argues that the distribution was made out of necessity due to petitioners' inability to sell their house and as such literal application of the internal_revenue_code is inappropriate while we sympathize with petitioners we are not at liberty to create exceptions to the internal_revenue_code it is a well- established principle that exemptions from taxation are not to be implied they must be unambiguously proved 485_us_351 to reflect the foregoing decision will be entered for respondent