internal_revenue_service number release date index number ---------------------------------- ---------------------------------------------- ------------------------------------ in re ----------------------------- -------------------------- -------------------------- department of the treasury washington dc person to contact ----------------------------- id no ------------- ----------------------------------------------------- telephone number --------------------- refer reply to cc psi b09 - plr-123133-03 date date legend beneficiary beneficiary trust trust date date state code ----------------------------------------------------- --------------------------------------------------------- ------------------------------- ------------------------------ ---------------------------- ------------------------ ------------------------------------------------ dear ---- this letter responds to your letter dated date and prior correspondence submitted on behalf of beneficiary requesting rulings regarding the proposed division of two grandfathered generation-skipping_transfer gst trusts specifically rulings are requested under sec_61 sec_1001 and sec_2601 of the internal_revenue_code additional contributions were made to either trust the settlor of trust was the grandmother of beneficiary and beneficiary and the settlor of trust was the trust was established on date and trust was established on date no under the terms of trust and trust upon the death of beneficiary or under the terms of trust and trust beneficiary and beneficiary each plr-123133-03 grandfather of beneficiary and beneficiary trust and trust were set up to benefit the settlors and their descendants the settlors and their children are deceased beneficiary and beneficiary are the surviving grandchildren of the settlors of trust and trust and the current income beneficiaries of both trusts receive one-half of the income from trust and trust principal distributions are to be paid at the trustee’s discretion to a group consisting of beneficiary and beneficiary and the children of each of them beneficiary and beneficiary each have two children beneficiary the share of income that would have been payable to that beneficiary shall instead be payable in equal shares to the children of that beneficiary upon the death of beneficiary and beneficiary trust and trust are to be divided into as many shares as there are children of beneficiary and beneficiary the trustee may at its discretion distribute income and principal from the separate shares to each share’s beneficiary upon a child attaining twenty-five years one half of his or her share is required to be distributed to that child and upon a child attaining thirty years the balance is to be distributed to that child if any children die before distribution that deceased child’s share is to be held in trust for such deceased child’s issue to state code pursuant to the proposed reformation trust and trust each will be divided on a pro_rata basis into two separate trusts an undivided_interest in fifty percent of the assets currently held in trust will fund a new trust created for the benefit of beneficiary trust 1a and the other undivided fifty percent of the assets currently held in trust will fund a new trust to be created for the benefit of beneficiary trust 1b an undivided_interest in fifty percent of the assets now held in trust will fund a new trust created for the benefit of beneficiary trust 2a and the other undivided fifty percent of the assets currently held in trust will fund a new trust to be created for the benefit of beneficiary trust 2b the terms of each of the four new trusts will be consistent with the terms of the original trusts under the terms of the new trusts beneficiary and beneficiary will continue to be entitled to receive all of the income from their respective trusts and the trustee will continue to have the discretion to pay principal to beneficiary and beneficiary and their children from their respective trusts at the death of beneficiary or beneficiary each of their new trusts will be divided into separate shares for their children the dispositive terms of the separate shares created under the new trusts 1a 1b 1c and 1d at the death of beneficiary or beneficiary are consistent with the terms of the separate shares that were to be created upon the death of beneficiary and beneficiary under trust and trust beneficiary and beneficiary propose to obtain a judicial reformation pursuant state law authorizes trustees to divide a single trust into two or more separate sec_61 provides that gross_income includes gains derived from dealings plr-123133-03 you have requested rulings that the proposed division of trust and trust and the proposed pro_rata allocation of each existing asset among the resulting trusts will not cause any gain_or_loss by the original trusts or the resulting trusts or any of their respective beneficiaries under sec_61 or sec_1001 and sec_2 will not affect trust or trust 2’s status as exempt from the gst tax and will not cause a distribution from or termination of any interest in trust trust or any of the resulting trusts to be subject_to the gst tax trusts if the division is in the best interests of the beneficiaries of the trusts is equitable and practicable and will not defeat or substantially impair the accomplishment of the purpose of the trusts or the interests of the beneficiaries under the trusts state law further provides that a trustee of any trust that is to be divided may seek approval of the division by filing a complaint with a court that has jurisdiction over the trust the trustee of trust and trust intends to file such a complaint income_tax rulings in property property is the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized sec_1001 provides that except as otherwise provided the entire amount of the gain_or_loss on the sale_or_exchange of property is recognized that except as otherwise provided in subtitle a the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially in either kind or in extent is treated as income or as loss sustained for purposes of sec_1001 in an exchange of property each party to the exchange gives up a property interest in return for a new or additional property interest such an exchange of property is a disposition under sec_1001 see sec_1_1001-1 property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests in order to extinguish their survivorship interests properties exchanged are materially different 499_us_554 a material difference exists when the exchanged sec_1_1001-1 of the income_tax regulations provides as a general_rule an exchange of property results in the realization of gain under sec_1001 if the sec_1001 provides that the gain from the sale_or_other_disposition of revrul_56_437 1956_2_cb_507 holds that a partition of jointly owned sec_2601 imposes a tax on every generation-skipping_transfer sec_2611 defines the term generation-skipping_transfer to include a based on the information submitted and the representations made in the ruling plr-123133-03 properties embody legal entitlements different in_kind or extent or if they confer different rights and powers id pincite request the proposed division of trust and trust on a pro-rata basis into four separate trusts will not cause the interests of the trust beneficiaries to differ materially the trust beneficiaries will hold essentially the same interests before and after the pro- rata division accordingly the proposed division of the trust and trust assets among the new trusts will not cause the trusts nor the beneficiaries to recognize gain_or_loss from a sale_or_other_disposition of property under sec_61 and sec_1001 generation-skipping tax rulings taxable_distribution taxable_termination and a direct_skip under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 or c any trust in existence on date is considered an irrevocable_trust except as provided in sec_26_2601-1 or c which relate to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 in the present case trust and trust are considered to have been irrevocable on date because neither sec_2038 nor sec_2042 applies judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 instrument of an exempt trust including a trustee distribution settlement or sec_26_2601-1 provides that a modification of the governing sec_26_2601-1 provides rules for determining when a modification sec_26_2601-1 provides that except as provided in plr-123133-03 construction that does not satisfy sec_26_2601-1 b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided in the original trust furthermore a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered a shift in a beneficial_interest in a_trust in this case trust and trust are generation-skipping trusts because they each provide for distributions to more than one generation of beneficiaries below the generation of each trust’s grantor date and date are prior to date and trust and trust were irrevocable on date trust and trust therefore are exempt from the generation-skipping_transfer_tax pursuant to sec_26 b i the proposed division of trust and trust will result in four trusts two each for taxpayer and taxpayer because the dispositive terms of the resulting trusts will be the same as the terms of the original trusts the proposed division of trust and trust and the pro_rata allocation of assets among the resulting trusts of each divided trust does not shift a beneficial_interest to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification in addition the division does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided in the original trusts based on the facts submitted and representations made we conclude that the proposed division of trust and trust into two trusts each will not affect trust or trust 2’s status as exempt from the generation-skipping_transfer_tax as a result neither the division of trust and trust nor the proposed pro_rata allocation of the assets will cause a distribution from or termination of any interest in trust trust or any of the resulting trusts to be subject_to gst tax concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party if there is a change in material fact or law local or federal before the transactions considered in this ruling take effect the ruling will have no force or effect while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied the rulings contained in this letter are based upon information and pursuant to the power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer s requesting it section k plr-123133-03 being sent to beneficiary provides that it may not be used or cited as precedent enclosure copy of this letter for sec_6110 purposes sincerely melissa c liquerman chief branch office of associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc dom p si plr-110910-00 date date number release date index number legend x d1 d2 dear this letter responds to a letter dated date written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code that x's s_corporation_election will be effective as of the taxable_year beginning d2 facts according to the information submitted x was incorporated on d1 x’s shareholders decided that x would be an s_corporation as of the tax_year beginning d2 the form_2553 election by a small_business_corporation however was not timely filed x requests a ruling that it will be recognized as an s_corporation effective for the taxable_year beginning d2 under sec_1362 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides when an s election will be effective if an s election is made within the first two and one half months of a corporation's taxable_year then that corporation will be treated as an s_corporation beginning the year in which the election is made if an s election is made after the first two and one half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election or no plr-110910-00 a election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year conclusions after applying the law to the facts submitted and the representations made we conclude that x has established reasonable_cause for not making a timely election and is eligible for relief under sec_1362 accordingly assuming that x otherwise qualifies as a subchapter_s_corporation as of d2 and x’s shareholders make any adjustments to their federal_income_tax returns necessary to comply with this ruling if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 containing an effective date of d2 for the election within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is an s_corporation for federal tax purposes the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for the ruling it is subject_to verification on examination 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 a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely yours robert g honigman acting assistant to the chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi b02-plr-145805-01 date date trust h w h’s trust w’s trust unitrust_amount date date year year county state property settlement agreement dollar_figurex dear this responds to a letter dated date and subsequent correspondence written on behalf of the trust requesting rulings on a proposed division of trust under sec_664 sec_2516 and sec_1001 of the internal_revenue_code plr-145805-01 the information submitted states that h and w were married in year h and w created the trust on date and funded it with a gift of community_property no additional contributions have been made to the trust h and w are the co-trustees of the trust h and w represent that the trust is a charitable_remainder_unitrust within the meaning of sec_664 neither h nor w maintains any power individually over the trust or any of the trust’s assets at the time the trust was created h and w were married to each other and each is a beneficiary of the trust the trust is irrevocable and is subject_to and governed by the laws of state currently the trust assets are valued at approximately dollar_figurex the trust by its terms pays the unitrust_amount in equal monthly installments to h and w the unitrust recipients in equal proportion during their joint lives and following the death of either wholly to the survivor during his or her lifetime following the death of the last to die all of the remaining principal and income of the trust is payable to charitable_remainder beneficiaries each of which is an organization described in sec_170 sec_170 sec_2055 and sec_2522 h and w reserved the right to modify the charitable_remainder beneficiaries in year w commenced proceedings in the superior court of county to dissolve the marriage on date the parties entered into the property settlement agreement which constitutes a settlement of all matters between h and w and an agreement of separation between them with respect to any funds assets or properties owned by both or either of them at the time of the execution of the agreement or thereafter including the parties’ community interest in the trust property settlement agreement was incorporated by reference into the divorce decree the divorce decree was entered on date under the terms of property settlement agreement the parties propose to divide the trust into two separate charitable_remainder unitrusts the h’s trust and the w’s trust each of which is intended to be a charitable_remainder_unitrust within the meaning of sec_664 h will be the sole trustee of the h’s trust and w will be the sole trustee of the w’s trust pursuant to the proposed division of the trust into two separate trusts the trustees have agreed to an equitable allocation and division of the assets of the trust between the two separate and distinct trusts thus each of the two new unitrusts will be allocated approximately one-half of the assets of the trust and will be administered upon the same terms and conditions as the trust except that neither h nor w will retain a survivorship interest in the other’s charitable_remainder_unitrust the terms of the h’s trust will provide that in each taxable_year of the trust the trustee of the trust shall pay the unitrust_amount to h during his lifetime and after his death the trust will terminate upon termination of the h’s trust the charitable_remainder shall be distributed to one or more charitable organizations described in sec_170 sec_170 sec_2055 and sec_2522 which are designated by h plr-145805-01 the terms of the w’s trust will provide that in each taxable_year of the trust the trustee of the trust shall pay the unitrust_amount to w during her lifetime and after her death the trust will terminate upon termination of the w’s trust the charitable_remainder shall be distributed to one or more charitable organizations described in sec_170 sec_170 sec_2055 and sec_2522 which are designated by w sec_2501 provides that a tax is imposed for each calendar_year on the transfer of property by gift during the calendar_year by any individual resident or nonresident sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2512 provides that where property is transferred for less than an adequate_and_full_consideration in money_or_money's_worth then the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift and shall be included in computing the amount of gifts made during the calendar_year sec_2516 provides that where husband and wife enter into a written_agreement relative to their marital and property rights and divorce occurs within the year period beginning on the date year before such agreement is entered into whether or not such agreement is approved by the divorce decree any transfers of property or interests in property made pursuant to such agreement to either spouse in settlement of his or her marital or property rights or to provide a reasonable allowance for the support of issue of the marriage during minority shall be deemed to be transfers made for a full and adequate_consideration in money or money’s worth accordingly based on the information provided and the representations made the proposed transfer by h to w of his community_property interest in the unitrust_amount payable from the assets to be transferred from the trust to the w’s trust that are to be the separate_property of w and the proposed transfer by w to h of her community_property interest in the unitrust_amount payable from the assets to be transferred from the trust to the h’s trust that are to be the separate_property of h pursuant to the terms of the property settlement agreement do not constitute transfers subject_to federal gift taxation sec_61 provides that gross_income includes gains derived from dealings in property sec_664 provides generally that a charitable_remainder_unitrust shall be exempt from federal_income_tax plr-145805-01 sec_664 provides that a charitable_remainder_unitrust is a_trust a from which a fixed percentage which is not less than percent nor more than percent of the net fair_market_value of its assets valued annually is to be paid not less often than annually to one or more persons at least one of which is not an organization described in sec_170 and in the case of individuals only to an individual who is living at the time of the creation of the trust for a term of years not in excess of years or for the life or lives of such individual or individuals b from which no amount other than the payments described in sec_664 and other than qualified gratuitous transfers described in sec_664 may be paid to or for_the_use_of any person other than an organization described in sec_170 c following the termination of the payments described in sec_664 the remainder_interest in the trust is to be transferred to or for_the_use_of an organization described in sec_170 or is to be retained by the trust for such a use or to the extent the remainder_interest is in qualified_employer_securities as defined in sec_664 all or part of such securities are to be transferred to an employee_stock_ownership_plan as defined in sec_4975 in a qualified_gratuitous_transfer as defined by sec_664 and d with respect to each contribution of property to the trust the value determined under sec_7520 of such remainder_interest in such property is at least percent of the net fair_market_value of such property as of the date such property is contributed to the trust sec_1001 provides that the gain from the sale_or_other_disposition of property is the excess of the amount_realized over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss must be recognized except as otherwise provided sec_1_1001-1 of the income_tax regulations provides that except as otherwise provided in subtitle a of the code the gain_or_loss realized from the exchange of property for other_property differing materially either in_kind or extent is treated as income or as loss sustained sec_1041 provides that no gain_or_loss shall be recognized on a transfer of property from an individual to or in trust for the benefit of a spouse or a former spouse but only if the transfer is incident_to_divorce sec_1041 provides that for purposes of sec_1041 a transfer of property is incident to the divorce if the transfer occurs within one year after the date on which the marriage ceases or is related to the cessation of the marriage sec_1_1041-1t q a-7 of the temporary income_tax regulations addresses when a transfer of property is related to the cessation of the marriage q a-7 provides that a transfer of property is treated as related to the cessation of the marriage if the transfer is pursuant to a divorce_or_separation_instrument as defined in sec_71 and the transfer occurs not more than years after the date on which the marriage ceases a divorce_or_separation_instrument includes a modification or plr-145805-01 amendment to such decree or instrument any transfer not pursuant to a divorce_or_separation_instrument and any transfer occurring more than years after the cessation of the marriage is presumed to be not related to the cessation of the marriage this presumption may be rebutted only by showing that the transfer was made to effect the division of property owned by the former spouses at the time of the cessation of the marriage for example the presumption may be rebutted by showing that a the transfer was not made within one- and six-year periods described above because of factors which hampered an earlier transfer of the property such as legal or business impediments to transfer or disputes concerning the value or the property owned at the time of the cessation of the marriage and b the transfer is effected promptly after the impediment to transfer is removed sec_71 defines the term divorce_or_separation_instrument to mean a a decree of divorce or separate_maintenance or a written instrument incident to such decree b a written_separation_agreement or c a decree not described in sec_71 requiring a spouse to make a payments for the support and maintenance of the other spouse the settlement agreement in the instant case constitutes a divorce_or_separation_instrument within the meaning of the statute sec_1_1041-1t q a-10 provides that the transferor_of_property under sec_1041 recognizes no gain_or_loss on the transfer even if the transfer was in exchange for the release_of_marital_rights or other consideration this rule applies regardless of whether the transfer is of property separately owned by the transferor or is a division equal or unequal of community_property under sec_1041 for purposes of subtitle a the transferee is treated as having acquired the property by gift from the transferor with a carryover_basis from the transferor accordingly based on the information provided and the representations made the proposed division of the trust into two separate unitrusts will not require the recognition of any taxable_income under sec_61 by h and w and will not require the recognition of any taxable gain_or_loss under sec_1001 to the trust the h’s trust the w’s trust or the trustee of the respective trusts furthermore the division of the trust into two separate trusts will not cause the trust the h’s trust or the w’s trust to fail to qualify as charitable_remainder trusts under sec_664 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code in particular no opinion is expressed on the application of sec_4941 to the trust or whether the trust the h’s trust or the w’s trust meets or will meet the requirements of a charitable_remainder_unitrust under sec_664 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-145805-01 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to the trust’s authorized representative sincerely yours j thomas hines chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b09 plr-161436-01 date date legend trust decedent date date date date date date date date date court date bank individual plr-161436-01 beneficiary beneficiary beneficiary nephew corporation date date date date charity charity dear sir or madam this is in response to your letter dated date and prior correspondence requesting a ruling under sec_2601 of the internal_revenue_code submitted on behalf of trust trust was created under decedent’s will the will was executed on date codicils were executed on date first codicil date second codicil date third codicil date fourth codicil date fifth codicil date sixth codicil and date seventh codicil decedent died on date court issued a final judgment settling decedent’s estate on date date sec_1 through are all prior to date the relevant provisions of trust are found in the eleventh paragraph of decedent’s will paragraph eleventh provides that all the rest residue and remainder of decedent’s estate whether real or personal of every kind and description and wherever situated in which decedent has any right title or interest at the time of decedent’s death is given to bank a national banking association and individual or her alternate in trust to be held administered and distributed in accordance with the following provisions the sixth codicil to the will amended paragraph eleventh by inserting a new paragraph paragraph a and adding a number of subparagraphs under paragraph a paragraph eleventh a subparagraph as revised instructs the trustees to divide the trust estate without requiring the physical segregation of the assets except as where plr-161436-01 specifically provided as follows sub-paragraph a a provides that one-third of the assets shall be set_aside and held as a separate trust designated as a charitable_trust for the benefit of certain charitable organizations sub-paragraph a b provides that the remaining two-thirds thereof shall be set_aside and held as a separate trust designated as the trust for the benefit of each of decedent’s grandnieces and grandnephew beneficiary beneficiary and beneficiary sub-paragraph a of paragraph eleventh as revised provides that the net_income from the trust shall be paid and distributed as follows sub-paragraph a a provides for a payment of dollar_figure per month to nephew until his death or until termination of trust whichever first occurs sub-paragraph a b provides for a payment of dollar_figure per month to individual until her death or until termination of trust whichever first occurs sub-paragraph a c provides that the remainder of the net_income shall be distributed as follows until each of decedent’s grandnieces and grandnephew referred to above reaches the age of years the trustees shall pay to or apply for the benefit of each of decedent’s grandnieces and grandnephew after deducting therefrom the pro_rata share attributable to the annual payments required for the repayment of the indebtedness that may be created pursuant to paragraph tenth the amount of income as the trustees in their absolute discretion from time to time determine is necessary or proper for the child’s care support maintenance and education including college or professional education illness or extreme emergency any income not so paid shall be accumulated and added to principal when a grandniece or grandnephew attains the age of years the trustees shall pay to or for the benefit of the grandniece or grandnephew and to or for the benefit of the issue of the grandniece or grandnephew until termination of the trust after deducting therefrom the pro_rata share attributable to the annual payments required for the repayment of the indebtedness that may be created pursuant to paragraph tenth the amount of the net_income as the trustees in their absolute discretion from time to time determine is necessary or proper for the education including college or professional education illness or extreme emergency of the grandniece or grandnephew and the issue of the grandniece or grandnephew any income not so paid shall be accumulated and added to principal sub-paragraph a provides that trust shall terminate upon the date the youngest grandniece or grandnephew living at the date of decedent’s death reaches the age of years or should the youngest die prior to attaining years of age then upon the date the next youngest reaches the age of years unless sooner terminated sub-paragraph a provides that in the event of the death of any of decedent’s grandnieces and grandnephews who are beneficiaries prior to the termination of this trust the share of the deceased shall be distributed to the then living lawful issue of the deceased beneficiary by right of representation if there are no lawful living issue of the plr-161436-01 deceased beneficiary the share shall be proportionately divided between and added to and distributed to the trust for the surviving grandnieces and grandnephews sub-paragraph a provides that upon termination of trusts all of the assets set_aside for the benefit of decedent’s grandnephews and grandnieces shall be distributed to them or if any be deceased to his issue by right of representation provided however that with reference to the shares of stock in corporation should any beneficiary desire to sell his or her share upon distribution the same shall be sold or offered for sale to the remaining distributees at the fair_market_value thereof as determined by the trustees it being decedent’s specific direction that all of decedent’s shares of stock in corporation remain with members of decedent’s family and shall not be sold to any third party sub-paragraph a provides that unless terminated at an earlier date under the foregoing provisions all trusts shall terminate at the expiration of twenty-one years after the death of the last to die of the beneficiaries in being at the time of decedent’s death in case of termination the trust estate shall be distributed as provided above sub-paragraph a provides that if the payments to any beneficiary of the trust shall be insufficient in the discretion of the trustees to provide for the education illness or extreme emergency of the beneficiary the trustees may pay to the beneficiary or apply for his or her benefit a limited sum as they may deem proper or necessary for that purpose decedent requests that the trustees exercise the discretion granted only in the event of dire need on a temporary basis and only in the event the payment can be made without injury to or sale of the business_assets and real_property in the trust estate beneficiary was born on date beneficiary was born on date beneficiary was born on date decedent was born on date individual is no longer living trustee plans to petition court to modify trust to clarify certain ambiguities in the trust instrument sub-paragraph a c as modified will provide that after each of decedent’s grandnieces and grandnephews referred to above reaches the age of twenty-one years the trustees shall pay to or apply for the benefit of the grandnieces and grandnephew until termination of the trust the amount of the net_income as the trustee in its absolute discretion from time to time determines is necessary or proper for the care support maintenance education including college or professional education illness or extreme emergency of the grandnieces or grandnephew without the trustee considering any other income or resources of the beneficiary trustee shall also pay for the benefit of the issue of such grandnieces and grandnephew until termination of the trust such amount of the net_income as trustee in its absolute discretion from time to time plr-161436-01 determines as necessary or proper for the education including college or professional education illness or extreme emergency of such issue any income not so paid shall be accumulated and added to principal sub-paragraph a as modified will provide that the trusts shall terminate upon the date of the youngest grandniece or grandnephew living at the date of decedent’s death reaches the age of years or should the youngest die prior to attaining years of age then upon the date the next youngest reaches the age of years unless sooner terminated if prior to termination of this trust and in the absence of any judicial determination of incompetency the trustee has reason to believe that any beneficiary is or may be incompetent or unable to manage his or her affairs the trustee shall be guided by the following provisions in initiating its investigation that a beneficiary is incompetent or has been restored to capacity the trustee is authorized and directed to consult with the beneficiary’s parents siblings adult children and any treating physician further the trustee shall at the expense of the trust engage the services of other doctors including specialists lawyers investigators or others as will secure all pertinent information to assist the trustee in its investigation all reports and recommendations of the experts shall be made in signed writings to the trustee upon written request the trustee shall make copies of all reports available to the family members during any period while a grandniece or grandnephew is incompetent and therefore unable to receive distribution of income of the trust estate the trustee shall pay or apply the net_income of the trust as provided in sub-paragraph c a beneficiary determined by the trustee to be incompetent shall be reevaluated by a similar investigation as often as medically appropriate but at least annually if however net_income is not sufficient to satisfy the needs of the incompetent beneficiary the trustee in its discretion may pay or apply principal for the benefit of the incompetent grandniece or grandnephew up to the whole thereof in accordance with the provisions of sub-paragraph sub-paragraph a as modified will provide that in the event of the death of any of decedent’s grandnieces and grandnephews who are beneficiaries prior to the termination of this trust the share of the deceased shall be distributed to the then living lawful issue of the deceased beneficiary by right of representation if there are no lawful living issue of the deceased beneficiary the share shall be proportionately divided between and added to and distributed to the trust for the surviving grandnieces and grandnephews if prior to the termination of the trust the provisions of paragraph would require the trustee to distribute to any such issue his or her legally vested share prior to the date the issue attains the age of majority then the trustee shall defer distribution until termination of the trust estate or when such issue attains that age whichever first occurs whereupon the trustee shall promptly distribute to such issue or his or her guardian the remaining share of his or her trust or that if an issue under the age of majority dies prior to either of such events occurring then the trustee shall promptly distribute the deferred share of the trust estate to such issue’s estate in accordance with the applicable laws of his or her domicile as of the date of his or her plr-161436-01 death during the continuance of any such trust for the benefit of an issue under the age of majority net_income shall be disbursed pursuant to the provisions of sub- paragraph a c and principal shall be invaded pursuant to paragraph sub-paragraph a as modified will provide in relevant part that upon termination of the trust all of the assets set_aside for the benefit of my grandnephews and grandnieces shall be distributed to them in equal shares or if any be deceased to his issue by right of representation a definition of the term education will be added in the modification of trust providing that the term as used anywhere in the trust agreement shall be construed to include but not be limited to occupational or professional training college and postgraduate study as long as pursued to advantage by any beneficiary at an institution of his or her choice and in determining any payment to be made for education the trustee shall take into consideration the beneficiary’s related living and incidental_expenses to the extent that they are reasonable the trust instrument will be generally modified to eliminate all reference to indebtedness with the representation that the debts had been paid the trust instrument will also be generally modified to eliminate references to shares of corporation stock that trust no longer owns sub-paragraph will be modified by correctly naming the charities that are contingent remaindermen to trust the relevant provision as modified will provide that if upon termination of the trust there are then no living issue of nephew or of my grandnieces and grandnephews who are beneficiaries of the trust the trust property and undisbursed income shall be distributed one-half to charity and one-half to charity sub-paragraph as modified will provide that if the income payments to a grandniece or grandnephew is insufficient in the discretion of the trustee to provide for the care support maintenance education including college or occupational illness or extreme emergency of a grandniece or grandnephew without the trustee considering any other income or resources of the grandniece or grandnephew the trustee may pay to a grandniece or grandnephew or apply for her his or their benefit sums from principal of the trust estate as the trustee may deem proper or necessary for these purposes if the income payments to the issue of a grandniece or grandnephew shall be insufficient in the discretion of the trustee to provide for the education including college or occupational illness or extreme emergency of the issue the trustee may pay to the issue or apply for her his or their benefit sums from principal of the trust estate as the trustee may deem proper or necessary for these purposes the trustee represents that there have been no additions actual or constructive since date the trustee has requested a ruling that the proposed plr-161436-01 modifications will not cause trust to lose its status as exempt from the generation-skipping_transfer_tax sec_2601 imposes a tax on every generation-skipping_transfer sec_2611 defines the term generation-skipping_transfer to include a taxable_distribution taxable_termination and a direct_skip under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date however this exemption does not apply to additions actual or constructive that are made to the trust after date sec_26_2601-1 provides that except as provided in sec_26_2601-1 or c any trust in existence on date is considered an irrevocable_trust sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided in the original trust furthermore a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered a shift in a beneficial_interest in a_trust plr-161436-01 sec_26_2601-1 provides that for purposes of this section a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered a shift in a beneficial_interest in a_trust sec_2651 provides that for purposes of the generation-skipping_transfer_tax the generation to which any person other than the transferor belongs shall be determined in accordance with the rules set forth in this section sec_2651 provides that an individual who is a lineal descendant of a grandparent of the transferor shall be assigned to that generation which results from comparing the number of generations between the grandparent and the individual with the number of generations between the grandparent and the transferor in this case trust is a generation-skipping_trust because it provides for distributions to more than one generation of beneficiaries below the grantor’s generation trust was irrevocable on date and there have been no additions actual or constructive since that date therefore trust is exempt from the generation-skipping_transfer_tax pursuant to sec_26_2601-1 the modifications requested do not shift a beneficial_interest in trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modifications in addition the modifications do not extend the time for vesting of any beneficial_interest in the trust beyond the period provided in the original trust furthermore the modifications relating to the elimination of references to corporation and correctly naming the charities that are contingent remaindermen to trust are administrative in nature therefore the modifications are within the scope of sec_26_2601-1 and we conclude that the modifications if approved by court as presented in this letter will not affect the exempt status of trust accordingly future distributions to skip persons from trust will not be subject_to the generation-skipping_transfer_tax imposed by sec_2601 except as expressly provided herein no opinion is expressed or implied concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter plr-161436-01 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely james f hogan james f hogan senior technician reviewer office of associate chief_counsel passthroughs and special industries enclosure copy of this letter for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-110288-00 date date x a d1 d2 d3 d4 d5 x state court foundation state statute state statute dear this letter responds to a letter dated date and subsequent correspondence submitted by you on behalf of x as the authorized representative of x requesting a ruling that x’s subchapter_s_election did not terminate on d3 the information submitted states that x is a corporation organized under the laws of state x filed an election to be treated as an s_corporation effective for the taxable_year beginning d1 a the secretary of x represents that x filed its federal_income_tax return for that year and all following taxable years as an s_corporation a instructed a’s attorney to form a charitable private_foundation under the laws of state a intended that the private_foundation qualify as an organization exempt from tax under sec_501 on d2 foundation was incorporated pursuant to state statute on or about d3 a transferred x shares of x stock to foundation a represents that at the time of the transfer a believed foundation was a tax-exempt_organization under sec_501 during d4 x’s tax advisors in the course of preparing a request for a ruling that foundation was an organization exempt from tax under sec_501 discovered that foundation had been erroneously incorporated under state statute under the laws of state non-profit organizations are incorporated under state statute in addition it was determined that foundation’s articles of incorporation failed to include certain required language to ensure its qualification under sec_501 therefore foundation was not an organization exempt from tax under sec_501 the shareholders of x have a shareholders’ agreement in effect a represents that in general under this agreement a shareholder desiring to transfer shares of x must obtain the consent of the other shareholders prior to transfer a further represents that the other shareholders of x consented to a’s transfer of x shares to foundation on the condition that no adverse legal tax or other consequences would result to x or its shareholders and with the understanding that foundation was an eligible s_corporation shareholder on d5 court issued an order that the transfer of x shares to foundation on or about d3 is void ab initio and in all respects is set_aside as if the transfer had never occurred and the parties thereto are returned to the respective positions they were in prior to the transfer sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1362 provides that an s election terminates whenever at any time on or after the st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation based solely on the facts and representations submitted because a’s transfer of x shares to foundation was void ab initio under state law as determined by court we conclude that x’s s_corporation_election did not terminate on d3 accordingly a sec_3 foundation was never a shareholder of x x will be treated as continuing to be an s_corporation from d3 and thereafter provided x’s s_corporation_election was valid and has not otherwise terminated under the provisions of sec_1362 x and all its current and prior shareholders must treat x as having been an s_corporation for the period from d3 to the present in addition x and its shareholders must treat a as having been the shareholder of the x shares which a attempted to transfer to foundation and amend any prior tax returns that are inconsistent with this treatment except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x sincerely yours j thomas hines acting branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


office_of_chief_counsel department of the treasury internal_revenue_service washington d c number info release date conex-160335-04 cc psi b6 uil date ---------------------------------- u s house of representatives washington dc attention --------------------- dear congressman -------- i am responding to your inquiry dated date on behalf of your constituent ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------- requested further information on new legislation enacted as part of the jobs creation act that provides a deduction for production_costs of certain film or television productions sec_181 of the internal_revenue_code specifically she asked whether the benefits of the provision will be available to corporate investors individual investors or both the producer of a qualified_film_or_television_production may elect to deduct certain production_costs in the year incurred in lieu of capitalizing the cost and recovering it through depreciation allowances sec_181 of the code the law limits the amount of production expense a taxpayer can deduct to dollar_figure million for each qualifying production a taxpayer can deduct an additional dollar_figure million of production_costs up to dollar_figure million total if he or she incurs a significant amount of the production_costs in areas eligible for designation either as a low income community under sec_45d of the code or as a distressed county or isolated area of distress by the delta regional authority the provision does not apply if the total cost of the production exceeds dollar_figure million dollar_figure million in distressed areas the law limits qualifying productions by more than one producer to a single dollar_figure million dollar deduction dollar_figure million in distressed areas the co-producers must allocate the benefit in a manner that reasonably reflects each owner's proportionate investment in and economic_interest in the qualified production other provisions may limit an investor's deductions sec_465 of the code the producer must elect to deduct production_costs under this provision as prescribed by the secretary_of_the_treasury and by the due_date including extensions of the tax_return for the taxable_year in which production_costs are first incurred for the production until the treasury_department issues specific guidance deducting qualifying costs on the appropriate tax_return will constitute a valid election once a producer elects to deduct production_costs for a qualified_film_or_television_production under sec_181 of the code no other deduction for depreciation or amortization is a vailable for that production a producer cannot revoke this election without the treasury secretary's consent a qualified_film or television program is any production of a motion picture whether released theatrically or directly to video cassette or other format miniseries scripted dramatic television episode or movie of the week if at least percent of the total compensation spent on the production is qualified_compensation qualified_compensation is compensation_for services performed in the united_states by actors directors producers and other relevant production personnel for purposes of the percent test compensation does not include participations_and_residuals under sec_167 of the code as to a television series only the first episodes qualify under the provision qualified_property does not include sexually explicit productions ie productions requiring maintenance of records under section of title of the united_states_code for any performer in the production sec_181 of the code is effective for qualified_film and television productions for which principal photography begins after date and before date i hope our response is helpful to ----------------- if i can assist you further please contact me or --------------------------------------------------- charles b ramsey chief branch office of the associate chief_counsel passthroughs and special industries sincerely


t c memo united_states tax_court dominick galluzzo and angela galluzzo petitioners v commissioner of internal revenue respondent docket no filed date kenneth r cohen for petitioners jamie j song for respondent memorandum opinion vasquez judge this matter is before the court on respondent’s motion to dismiss for lack of jurisdiction respondent seeks dismissal on the ground that the petition was not timely filed within the time prescribed by sec_6213 or sec_7502 petitioners object to respondent’s motion and contend that respondent did not issue a valid notice_of_deficiency for any of the years before the court since as discussed below the petition was not filed within days of the alleged mailing of the notice_of_deficiency the case will be dismissed for lack of jurisdiction the question to be resolved is the ground upon which to base the dismissal unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure where jurisdiction is lacking because of the commissioner’s failure to issue a valid notice_of_deficiency we will dismiss on that ground rather than on the ground that the taxpayer failed to file a timely petition 63_tc_193 62_tc_543 34_tc_58 if respondent’s position is sustained the petition is untimely and the deficiencies and additions to tax may be assessed petitioners’ recourse then would be to pay the tax file a claim_for_refund with the internal_revenue_service irs and if the claim is denied sue for a refund in the appropriate federal district_court or the court of federal claims if petitioners’ position is sustained the notice_of_deficiency is a nullity and respondent may not assess the deficiencies or additions to tax under normal circumstances unless a valid notice_of_deficiency is issued background at the time they filed the petition petitioners resided in new jersey on date respondent purportedly mailed to each petitioner a notice_of_deficiency for the taxable years through petitioners credibly testified that they did not receive the notices of deficiency and that they did not recall receiving any correspondence from the irs in date respondent is unable to find his administrative file in this matter and accordingly is unable to provide the court or petitioners with copies of the notices of deficiency for and respondent was able to produce u s postal service form_3877 form which states that a notice_of_deficiency covering the taxable years and was mailed to each petitioner on date petitioners filed their petition with the court on date which was big_number days after the purported mailing of the notices of deficiency discussion this court’s jurisdiction to redetermine a deficiency depends upon the issuance of a valid notice_of_deficiency and a timely filed petition rule a c 93_tc_22 90_tc_142 sec_6212 expressly authorizes the commissioner after determining a deficiency to send a notice_of_deficiency to the taxpayer by certified mail or registered mail it is sufficient for jurisdictional purposes if the commissioner mails the notice_of_deficiency to the taxpayer’s last_known_address sec_6212 81_tc_42 if a deficiency_notice is mailed to the taxpayer’s last_known_address actual receipt of the notice is immaterial 857_f2d_676 9th cir aff’g 88_tc_1042 89_tc_806 frieling v commissioner t c pincite the taxpayer in turn ha sec_90 days or days if the notice is addressed to a person outside of the united_states from the date the notice_of_deficiency is mailed to file a petition in this court for a redetermination of the deficiency sec_6213 respondent asserts that he mailed a notice_of_deficiency to each petitioner for the taxable years and and that we lack jurisdiction over those years on the ground that petitioners failed to file a timely petition for redetermination petitioners contend that they never received the notices of deficiency respondent has the burden of establishing both the existence of a notice_of_deficiency as well as the date of mailing see 92_tc_729 aff’d without published opinion 935_f2d_1282 3d cir in pietanza we held that a form_3877 standing alone was not sufficient in the circumstances of that case to prove that a notice_of_deficiency was mailed to the taxpayers respondent has not shown that the facts present in this case differ in any material way from those in pietanza in pietanza as here the commissioner lost the administrative file had no copies of a notice_of_deficiency did not establish that a final notice_of_deficiency ever existed relied on a form_3877 and did not introduce evidence showing how the commissioner’s personnel prepare and mail notices of deficiency furthermore the commissioner in pietanza produced a draft copy of the notice_of_deficiency and supported the draft with affidavits from two irs employees who stated that they worked on the notice_of_deficiency at issue in our case respondent presented no such evidence he has not produced a draft copy of the notices of deficiency or any testimony from irs employees who assisted in the preparation of the notice_of_deficiency thus there is nothing in the case apart from the form_3877 itself to support a presumption of regularity by the irs see id pincite see also 678_f3d_1371 fed cir evidence of a mere mailing absent corroboration that the notice_of_deficiency was actually created is insufficient to meet the government’s burden butti v commissioner tcmemo_2008_82 koerner v commissioner tcmemo_1997_144 in sum respondent failed to prove that he issued a notice_of_deficiency to petitioners for and accordingly we will dismiss this case for lack of jurisdiction on the ground that respondent did not issue a notice_of_deficiency to petitioners for those years to reflect the foregoing an appropriate order of dismissal for lack of jurisdiction will be entered


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-150997-03 date sep ------- ---------- -------------------------------- x -------------------------------------------- a ------------------------ ---------------------------------------------- d1 year dear ms ------------- this letter 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 the information submitted states that x was incorporated on d1 in year a the president of x represents that x was intended to be an s_corporation beginning year its first taxable_year however no form_2553 election by a small_business_corporation was filed timely with the internal_revenue_service 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 sec_1362 provides that if -- a an election under sec_1362 is made for based solely on the facts and the representations submitted we conclude that x such election the secretary may treat such an election as timely made for such taxable_year has established reasonable_cause for failing to make a timely election to be an s_corporation for x's year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 provides that it may not be used or cited as precedent letter is being sent to x’s authorized representative except as specifically set forth above no opinion is expressed concerning the in accordance with the power_of_attorney on file with this office a copy of this this ruling is directed only to the taxpayer requesting it sec_6110 sincerely audrey w ellis reviewer branch office of associate chief_counsel passthroughs special industries enclosure copy of this letter copy for sec_6110 purposes


internal_revenue_service national_office technical_advice_memorandum june third party communication none date of communication not applicable index uil no case-mis no number release date director natural_resources and construction tam-118731-06 taxpayer's name taxpayer's address taxpayer's identification no year s involved date of conference ----------------------------------------------- ------------------------------------ ---------------------------------- ---------------- -------------------------------------- date legend ----------------------------------------------- ------------------------ taxpayer utility wholesaler --------------------------------------------- plant entity x marketer y agreement ------------------------------------------------- state d e -------------------------------- ------------------------------ ----- --------------------------------------------------------------- ----- ------------- ---------------------------- ------------------- tam-118731-06 issue s what is the proper asset class for the plant operated by taxpayer under agreement with marketer conclusion s the plant owned and operated by taxpayer is includable in asset class dollar_figure of revproc_87_56 c b taxpayer operates plant to generate electricity and such electricity is available for sale in the wholesale electricity market and to end-users facts taxpayer is an energy service company that has two primary businesses utility an integrated electric utility and wholesaler a wholesale energy business utility owns distribution and transmission lines and regulated generation facilities providing electric utility_services to commercial and residential customers in state wholesaler owns taxpayer’s wholesale energy business which consists of merchant power facilities that generate electricity and wholesale natural_gas pipelines taxpayer owns the plant a x megawatt natural gas-fired generating facility located in d the plant was sold by utility to entity a disregarded_entity owned by wholesaler wholesaler further developed the plant and repowered it wholesaler is wholly owned by taxpayer and is treated as a disregarded_entity for federal_income_tax purposes the plant has been exempt wholesale generator since e the plant is operated pursuant to agreement between entity and marketer an independent third party under the agreement the plant uses natural_gas that is owned and provided by marketer to generate electricity entity neither owns nor takes title to the gas used in the plant as ownership remains with marketer further entity neither owns nor takes title to the electricity produced as such ownership immediately upon its generation vests with marketer marketer sells the electricity to the end-user or another company and pays a fee to a third-party to transport the electricity to the appropriate buyer a power purchase agreement exists between marketer and utility which provides that marketer will provide utility with y mw of capacity and up to y mwhr per hour of firm energy from plant the capacity is sold to utility at predetermined rates the energy is sold to utility at market rates the remaining capacity and associated energy is available for sale by marketer to other wholesalers and end-users tam-118731-06 law and analysis sec_167 of the internal_revenue_code provides a depreciation deduction of a reasonable allowance for the exhaustion wear_and_tear or obsolescence of property used in a trade_or_business or for the production_of_income sec_168 provides a method for computing depreciation_deductions by using in part the applicable_recovery_period the applicable_recovery_period for purposes of either sec_168 or sec_168 is determined by reference to class_life sec_168 provides that the term class_life means the class_life if any which would be applicable with respect to any property as of date under former code sec_167 as if it were in effect and the taxpayer were an elector prior to its revocation sec_167 provided that a depreciation deduction would be computed based on the class_life proscribed by the secretary which reasonably reflects the anticipated useful_life of the property to the industry or group sec_1_167_a_-11 of the income_tax regulations provides rules for classifying property under former sec_167 the regulations provide that to determine the appropriate class_life of an asset the property shall be included in the asset_guideline_class for the activity in which the property is primarily used even though the use may be insubstantial in relation to all the taxpayer’s activities sec_1 m provided that asset classes shall be by industry or other groups sec_1_167_a_-11 states that asset classes are established in revproc_72_10 or its successors consistent with sec_167 a -11 b iii b which adopts the placing of assets into groups by primary activity of use revproc_72_10 established asset guideline classes based on business activity the class lives of property subject_to depreciation under sec_168 are set forth in revproc_87_56 this revenue_procedure divides assets into two broad categories asset classes dollar_figure through that consist of specific depreciable assets used in all business activities and asset classes through that consist of depreciable assets used in specific business activities based on broadly defined industry classifications the activity categories correspond to the industry classification described in the legislative_history of sec_167 an asset that falls within both an asset category that is asset classes dollar_figure through and an activity category that is asset classes through is classified in the asset category see 111_tc_105 the business activity asset class described below is set forth in revproc_87_56 dollar_figure electric utility steam production plant includes assets used in the steam power production of electricity for sale combustion turbines operated in a combined cycle with a conventional steam unit and related land improvements also includes package boilers electric generators and related assets such as electricity and steam distribution systems as used tam-118731-06 by a waste reduction and resource recovery plant if the steam or electricity is normally for sale to others taxpayer’s position is that the plant a merchant power plant and an exempt wholesale generator under the energy policy act of is properly classified as 7-year_property under sec_168 this section provides that any property which does not have a class_life and is not otherwise classified is treated as seven year property taxpayer further states the plant is not properly classified in asset class dollar_figure with a 20-year recovery_period because that asset class is limited to assets used in the steam production of electricity for sale in businesses where the use costs and risks involved are those associated with traditional utilities taxpayer states that the sec_167 regulations provide that property be classified according to its primary use recent court cases have emphasized that this is a use- driven functional standard for assigning asset classifications see 172_f3d_1255 10th cir 338_f3d_600 6th cir 354_f3d_786 8th cir in these three cases the courts in interpreting sec_1 a - b iii b determined that the classification of the pipeline companies’ assets turned on the functional and contractual relationships surrounding the use of the assets in question the costs and risks associated with their operation and the economic character of the taxpayer’s gathering activities in duke energy the 10th circuit found the gathering systems are literally used by producers for gas production and the literal terms of this description include any gathering system as long as it is used by a gas producer the plant clearly falls within the literal description of asset cla sec_49 it uses combustion turbines in a combined cycle with a conventional steam unit to produce electricity the electric power and energy so generated is delivered to the intergrated electric power transmission grid and is sold to others the fact that the owner and seller of the electric capacity and energy is different from the owner and operator of the plant is not relevant to a determination of the functional use of the plant the depreciation asset class of the plant does not turn on the identity of the owner in the above- referenced pipeline cases the circuit courts have determined that differences in ownership does not change how the pipelines are actually used clajon gas f 3d pincite see also saginaw bay f 3d pincite likewise the status of taxpayer being an exempt wholesale generator versus a regulated electric utility does not remove taxpayer from the purview of asset cla sec_49 while activity category is entitled electric gas water and steam utility_services the category does not define much less narrowly define what is encompassed within utility_services since the enactment of sec_168 macrs tax_reform_act_of_1986 specifically eliminated for depreciation purposes the distinction between asset classes based on whether or not property was tam-118731-06 public_utility regulated property the status of a taxpayer is irrelevant in determining the use of the property see also section dollar_figure of revproc_87_56 conclusion since the plant is an asset used in the steam power production of electricity for sale as specifically described in asset class dollar_figure of revproc_87_56 the plant is properly classified in asset cla sec_49 caveat s 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


t c memo united_states tax_court b g painting inc petitioner v commissioner of internal revenue respondent docket no filed date blas gaytan an officer for petitioner linda p azmon for respondent memorandum opinion dawson judge this case is before us on respondent’s motion to dismiss for lack of jurisdiction motion to dismiss on the following grounds respondent did not mail to b g painting inc petitioner a notice_of_determination regarding worker classification or make any other determination sufficient to confer jurisdiction on this court pursuant to sec_7436 and respondent did not conduct an examination in connection with an audit for petitioner as explained herein we agree with respondent and will grant his motion to dismiss background the following undisputed facts are established by the pleadings and the exhibits attached thereto at the time the petition was filed petitioner’s principal_place_of_business was in bixby oklahoma petitioner is a painting contractor that engaged individuals to perform commercial and residential painting services blas gaytan is petitioner’s president petitioner issued forms 1099-misc miscellaneous income to each worker at yearend to report the moneys received as nonemployee compensation petitioner did not treat its workers as employees in date guillermo gaytan one of petitioner’s workers filed a form ss-8 determination of worker status for purposes of federal employment_taxes and income_tax_withholding requesting a determination as to his employment status for services performed from to by letter dated january unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times respondent acknowledged receipt of the form ss-8 and requested that guillermo provide additional forms and information relating thereto by letter dated date respondent notified petitioner’s president blas that guillermo had submitted a form ss-8 respondent requested that blas complete a form ss-8 and furnish additional information the letter further advised petitioner that a response to the letter was necessary within days and that nonreceipt of a response would not preclude the internal_revenue_service irs from issuing an information_letter on the matter finally the letter advised petitioner if it is found that you owe employment_taxes as a result of this determination we may provide an information report to the irs office having examination jurisdiction for your area by letter dated date blas advised respondent that guillermo is his father and enclosed a completed form ss-8 copies of forms misc for guillermo and a list of petitioner’s workers and subcontractors for that period by letter dated date the irs ss-8 unit in holtsville new york notified guillermo that having considered his form ss-8 it determined that he is an employee for federal employment_tax purposes therefore you must pay federal_income_tax and your share of federal_insurance_contributions_act fica tax that is social_security and medicare taxes on the income you received for your services by letter 4991-a dated date the irs ss-8 unit notified petitioner of the determination that it is guillermo’s employer in pertinent part the letter 4991-a states as follows this determination is binding on the service assuming there is no change in the facts or law that form the basis for the ruling if you take a contrary position or disregard the ruling you may be referred for audit if you haven’t filed employment_tax returns you may need to do so if you filed employment_tax returns you may need to amend them employers generally must withhold income_tax and federal_insurance_contributions_act fica tax that is social_security and medicare_tax from wages paid to their employees and pay these taxes to the government employers must also pay the employer share of fica tax and federal_unemployment_tax_act futa_tax on the wages to make any necessary adjustments to pay these taxes on past wages to your employees including the use of special rates please refer to publication circular_e employer’s tax guide and publication 15-a employer’s supplemental tax guide you can get these publications by calling 1-800-tax-form or by visiting us online at www irs gov formspubs attached to both letter and letter 4991-a is form ss-8 determination analysis setting forth the specific factors used in determining that guillermo was petitioner’s employee on date blas filed a petition in this court on petitioner’s behalf seeking review of a purported notice_of_determination concerning worker classification petitioner did not attach to its petition a notice_of_determination concerning worker classification or any other document having diligently searched his records for the purported notice_of_determination concerning worker classification respondent determined that no such notice was sent to petitioner accordingly on date respondent filed a motion to dismiss this case for lack of jurisdiction on date petitioner filed a notice of objection to the motion on date respondent filed a memorandum in support of the motion to dismiss on date petitioner filed a reply to the memorandum in support of respondent’s motion to dismiss discussion the tax_court is a court of limited jurisdiction 85_tc_527 and may exercise jurisdiction only to the extent expressly provided by statute 66_tc_61 the court has jurisdiction to determine whether it has jurisdiction over a particular case 83_tc_309 jurisdiction must be shown affirmatively and as the party invoking our jurisdiction petitioner has the burden of proving that we have jurisdiction of its case see eg 114_tc_268 aff’d 22_fedappx_837 9th cir pursuant to sec_7436 this court is granted limited jurisdiction over cases involving employment status sec_7436 provides sec_7436 creation of remedy --if in connection with an audit of any person there is an actual controversy involving a determination by the secretary as part of an examination that -- one or more individuals performing services for such person are employees of such person for purposes of subtitle c or such person is not entitled to the treatment under subsection a of sec_530 of the revenue act of with respect to such an individual upon the filing of an appropriate pleading the tax_court may determine whether such a determination by the secretary is correct and the proper amount of employment_tax under such determination any such redetermination by the tax_court shall have the force and effect of a decision of the tax_court and shall be reviewable as such sec_7436 further provides that a pleading may be filed only by the person for whom the services are performed in the motion to dismiss for lack of jurisdiction respondent bases his argument on three grounds respondent did not mail to petitioner a notice_of_determination concerning worker classification as authorized by sec_7436 sufficient to form the basis for a petition to this court and confer jurisdiction respondent made no other determination with respect to petitioner’s taxable periods through or taxable years through which would confer jurisdiction on this court pursuant to sec_7436 and respondent did not make an examination in connection with an audit with respect to petitioner’s taxable periods through or taxable years through which would confer jurisdiction on this court under sec_7436 on the other hand petitioner contends that this court has jurisdiction by virtue of the alleged notice_of_determination concerning worker classification sec_7436 confers jurisdiction on this court only with regard to determinations that are made by the irs in connection with an audit of a taxpayer other irs determinations of employment status that are not made as part of a taxpayer audit including those made in the context of private letter rulings or forms ss-8 are not subject_to review by this court under sec_7436 see eg staffmore llc v commissioner tcmemo_2013_187 holding that the court had no jurisdiction over a determination as to employment status because there was no irs audit or examination petitioner has not shown that the date letter constitutes a notice_of_determination concerning worker classification or any other determination that would confer jurisdiction on this court in this case rather that letter is a determination of worker status for purposes of federal employment_taxes and income_tax_withholding which was issued in response to guillermo’s filing of a form ss-8 it was not a notice that confers jurisdiction on this court under sec_7436 further in am airlines inc v commissioner 144_tc_24 we enunciated four requirements that must be satisfied for this court to have jurisdiction under sec_7436 there must be an examination in connection with the audit of any person a determination by the secretary that one or more individuals performing services for such person are employees of such person for purposes of subtitle c or such person is not entitled to the treatment under section a of sec_530 of the revenue act of with respect to such an individual an actual controversy involving the determination as part of an examination and the filing of an appropriate pleading in the tax_court see also 142_tc_225 in its date reply to the memorandum in support of respondent’s motion to dismiss petitioner argues that am airlines was erroneously decided and flawed we disagree the irs has historically required a notice_of_determination of worker classification as a prerequisite for tax_court jurisdiction under sec_7436 chief continued clearly under the first prong of am airlines the commissioner must make an examination in connection with an audit neither the internal_revenue_code nor the regulations expressly define examination or audit for sec_7436 purposes however this court has specifically held that irs review of information provided in a form ss-8 submission is not considered an audit or examination staffmore llc v commissioner tcmemo_2013_187 see also secc v commissioner t c pincite n we note that although staffmore is the only case explicitly discussing the meaning of examination and audit in connection with sec_7436 this court has uniformly found that voluntary participation in connection with tax_administration by a taxpayer even if the taxpayer produces books_and_records for continued counsel notice cc-2016-002 date pronounced a change in this litigation position for worker classification cases the irs is no longer arguing that a notice_of_determination of worker classification is a necessary prerequisite to tax_court jurisdiction when the jurisdictional requirements set forth in two recent tax_court cases am airlines inc v commissioner 144_tc_24 and 142_tc_225 are met pursuant to this court’s date order respondent filed a memorandum on date articulating that chief_counsel notice cc- does not affect respondent’s position in this case sec_7602 authorizes the irs t o examine any books papers records or other data which may be relevant for the purpose of ascertaining the correctness of any return review by the irs does not constitute an examination or an audit see eg 74_tc_516 where the commissioner conducts a second inspection of a taxpayer’s books_and_records without first notifying the taxpayer that an additional inspection is necessary sec_7605 is violated seiffert v commissioner tcmemo_2014_4 in sum the form ss-8 process does not constitute an audit or examination but rather arises when a firm or worker voluntarily provides information to obtain a determination regarding the employment status of a worker after considering the information voluntarily provided by the parties the irs provides a ruling to the taxpayer and related parties the process exists so that taxpayers can come into compliance with their employment_tax obligation but specific tax_liabilities are not determined and tax assessments are not made the form ss-8 process is an entirely voluntary compliance initiative and a form ss-8 determination does not involve an examination in connection with an audit relating to any person as clearly required in the court’s am airlines opinion sec_7605 provides that a taxpayer shall not be subjected to unnecessary examination or investigations and only one inspection of a taxpayer’s books of account shall be made for each taxable_year unless the taxpayer requests otherwise or unless the secretary after investigation notifies the taxpayer in writing that an additional inspection is necessary we hold that because the form ss-8 determination underlying the petition in this case was not issued as part of petitioner’s examination under audit this court does not have jurisdiction pursuant to sec_7436 accordingly respondent’s motion to dismiss for lack of jurisdiction will be granted to reflect the foregoing an appropriate order of dismissal for lack of jurisdiction will be entered


id office uilc cca-251012-10 -------- number release date from ------------------- sent friday date am to -------------------- cc ----------------------------------------------------------------------------- subject waiver to extend the period to extend assessment for personal responsbility for excise_taxes ----------- it looks like the form_2750 is the proper form to use your underlying good question provisions are sec_4261 the ticket tax sec_4291 obligation to collect the ticket tax and sec_6672 failure to collect and pay over sec_4103 applies to failures to pay over fuel taxes under sec_4041 and sec_4081 that is excise_taxes on gasoline diesel_fuel and kerosene thus your assessment will not be made under sec_4103 incidentally the only form_4183 i found in the irs electronic publishing catalogue was recommendation re trust fund recovery penalty assessment i copied ---------------------and ------------------- ------------ because they are the sec_6672 subject matter experts if you have additional questions on this issue please copy them too thanks --------


internal_revenue_service number info release date index no date the honorable jeff bingaman united_states senate washington d c attention tony martinez dear senator bingaman this letter is in response to your inquiry of date on behalf of your constituents benefits they are receiving under a long-term care insurance_policy inquired about the taxation of as you requested i have responded directly to copy of our letter for your files if you need additional assistance please call donna m crisalli identification_number at enclosed is a sincerely deputy assistant chief_counsel income_tax accounting by __________________________ robert a berkovsky chief branch enclosure internal_revenue_service index no department of the treasury washington dc person to contact donna m crisalli id no telephone number refer reply to cc dom it a - cor-106737-00 date date dear senator jeff bingaman asked us to reply to your message to him concerning the taxation of benefits you are receiving under a long-term care insurance_policy sec_61 of the internal_revenue_code generally provides that gross_income means all income from any source however benefits received under a qualified_long-term_care_insurance_contract are excluded from gross_income sec_7702b states the specific requirements an insurance_contract must meet in order to be a qualified_long-term_care_insurance_contract these requirements are described on page of publication as you know and on pages of publication medical and dental expenses if your long-term care insurance_policy satisfies the requirements of sec_7702b then your benefits are not taxable we cannot provide a more specific response based on your email if you want to obtain a determination of whether the benefits under your specific long-term care insurance_policy are taxable you must submit a request for a private_letter_ruling by law we are required to charge a user_fee for private letter rulings which for most individuals is dollar_figure other requirements for submitting private_letter_ruling requests are contained in revproc_2000_1 2000_1_irb_4 i hope this information is helpful we are enclosing copies of publication and revproc_2000_1 for your assistance please call donna m crisalli at the number above if you have any questions sincerely deputy assistant chief_counsel income_tax accounting by __________________________ robert a berkovsky chief branch enclosure


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date number release date conex-151663-12 uil the honorable dan coats united_states senate washington dc attention --------------- dear senator coats i am responding to your inquiry dated date on behalf of your constituent -----------------------------------of ------------------------------------ -------------------------wrote about temporary regulations that address the tax treatment of amounts paid to acquire produce or improve tangible_property under sec_162 and sec_263 of the internal_revenue_code specifically -------------------------asked about the effect of certain provisions of the temporary regulations on small businesses she believes that the temporary regulations would require a small_business taxpayer to capitalize and depreciate a dollar_figure wastebasket because these regulations do not provide a deduction for de_minimis expenses sec_1_162-3t of the temporary regulations provides rules for materials_and_supplies under these rules the dollar_figure wastebasket is a material and supply expense because it has an acquisition_cost of dollar_figure or less if the taxpayer does not take a physical inventory of these wastebaskets at the beginning and end of the taxable_year he or she may deduct the dollar_figure wastebasket as an incidental material and supply in the year of purchase if the taxpayer does take a physical inventory of these wastebaskets he or she may deduct the dollar_figure wastebasket as a non-incidental material and supply in the year he or she begins to use the wastebasket the irs and the treasury_department received numerous comments on the temporary regulations many comments concerned the administrative burden that the temporary regulations impose on small businesses as a result in notice_2013_73 conex-151663-12 internal_revenue_bulletin the irs and the treasury_department announced that final regulations under sec_162 and sec_263 are expected to contain changes to the temporary regulations the notice also stated that all comments received would be considered including comments requesting relief for small businesses in addition on date the irs and the treasury_department amended the temporary regulations by delaying their applicable_date to taxable years beginning on or after date thus taxpayers can apply the regulations that were in effect prior to the temporary regulations until final regulations become applicable they can also choose to apply the temporary regulations for their taxable years beginning on or after date and before the applicable_date of final regulations i hope this information is helpful if you need further assistance please call me or-------- ---------------------- at ----- -------------- sincerely christopher f kane christopher f kane branch chief branch office of associate chief_counsel income_tax accounting