department of the treasury internal_revenue_service teige eo examinations commerce street mc dal dallas tx tax_exempt_and_government_entities_division number release date date feb person to contact identification_number contact telephone number in reply refer to ein uil certified mail return receipt requested dear this is a final revocation letter as to your exempt status under sec_501 of the internal an revenue code the internal revenue service’s recognition of your organization as organization described in sec_501 is hereby revoked effective january we have made this determination for the following reasons no part of your net_earnings inures to you have tailed to produce documents to establish that you are operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 and that the benefit of private shareholders or individuals you failed to respond to repeated reasonable requests to allow the internal_revenue_service to examine your records regarding your receipts expenditures or activities as required by lr c sec_6001 sec_6033 and revrul_59_95 1959_1_cb_627 as such you failed to meet the requirements of llr c sec_501 and sec_1_501_c_3_-1 in that you failed to establish that you are operated exclusively for an exempt_purpose contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december and for all years thereafier processing of income_tax returns and assessment of any taxes due wil not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits for declaratory_judgment please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note that the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the courts at the following addresses united_states tax_court second street nw washington dc us court of federal claims madison place nw washington dc u s district_court for the district of columbia constitution ave n w washington dc you may call the irs telephone number listed in your local directory an irs employee there may be able to help you but the contact person at the address shown on this letter is most familiar with your case you may also call the internal_revenue_service taxpayer_advocate the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights we can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for our assistance which is always free we will do everything possible to help you visit taxpayeradvocate irs gov or call if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours tamra heoke maria hooke director eo examinations enclosure publication department of the treasury internal_revenue_service irs tax exempt and government entities exempt_organizations examinations date date taxpayer_identification_number form tax_year s ended person to contact id number employee id contact numbers telephone fax manager’s name id number employee id manager’s contact number response due_date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren’t an organization described in sec_501 after we issue the final revocation letter we’ll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code if we don't hear from you if you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years letter rev catalog number 34809f what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn't a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you letter rev catalog number 34809f thank you for your cooperation enclosures report of examination form_6018 publication publication sincerely wak lngg for maria hooke director eo examinations letter rev catalog number 34809f schedule number or exhibit form 886-a rev date explanations of items name of taxpayer issue 20xx tax identification_number year period ended whether facts qualifies for exemption under sec_501 of the internal_revenue_code irc exhibit a provides copies of the internal_revenue_service correspondence requesting that a dissolution clause provide financial statements and minutes submit documentation to amend their articles of incorporation to include the revenue_agent sent the second third and fourth request via certified mail the organization refused to sign for it exhibit b provides copies of the form_1023 application of exempt status and addendums that the purpose of provided to the service as described in form_1023 states purpose is to improve the way children with disabilities are served in the provide the families of children with disabilities with multiple services under one roof where clients can discuss and share information their services include speech therapy occupational therapy psychology and counseling educational therapy autism therapy behavior therapy and treatment for individuals with anxiety disorders they services are limited for children from ages birth to with neurological disorders such as autism pervasive developmental delay attention deficit hyperactivity disorder obsessive compulsive disorder general anxiety disorder tourette syndrome trichotillomania and excoriation disorder they the organization refused to cooperate with the examination has an active phone number and facebook page has not filed their form_990 n ez for the tax period ending december 20xx law sec_6001 provides that every person liable for any_tax imposed by the irc or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_501_c_3_-1 provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated for one or more of the form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items name of taxpayer 20xx purposes specified in that section if an organization fails to meet either the organizational or operation test it is not exempt tax identification_number year period ended sec_1_501_c_3_-1 provides that an organization is organized exclusively for the required purposes only when its articles or other creating document authorizes it to carry on only activities that are in furtherance of those purposes an organization is not organized exclusively for exempt purposes if its articles expressly empower it to carry on other than as an insubstantial part of its activities activities which are not in furtherance of exempt purposes even though such organization is by the terms of such articles created for a purpose that is not broader than the purposes specified in sec_501 sec_1_6001-1 in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov -page_2 schedule number or exhibit form 886-a rev date explanations of items tax identification_number year period ended name of taxpayer to determine whether such entity is operated for the purposes for which it was granted tax- exempt status and to determine its liability for any unrelated_business_income_tax 20xx tax payers position unknown- the taxpayer has not responded to the service’s request for documentation regarding their exempt status and correcting their dissolution clause despite numerous attempts made by the service governments position it is the internal revenue service's position that requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under sec_501 sec_1_501_c_3_-1 and sec_1_501_c_3_-1 because their articles of incorporation lack the mandatory dissolution clause the organization also failed the organizational_test described in failed to meet the inspection conclusion must file the organization's exempt status is revoked effective january 20xx form_1120 for the tax periods ending on or after december 20xx catalog number 20810w page_ form 886-a department of the treasury-internal revenue service publish no irs gov


internal_revenue_service number info release date cc psi 1-cor-132462-01 date uilc we are responding to correspondence submitted on your behalf by to the philadelphia service_center which was subsequently forwarded to our office for consideration based on the information submitted you were under the impression that all necessary paperwork relating to the s_corporation_election had been filed in date however the internal_revenue_service has no record of receiving a timely form_2553 the window for automatic relief under revproc_98_55 involving the taxable_year closed on date unextended return_due_date because your request was postmarked after the window of relief had closed you are ineligible for automatic relief the only other option for automatic relief revproc_97_48 is also unavailable due to the fact that your return was late no extension received in date announcement copy enclosed provides guidance on seeking relief for late s_corporation elections generally to request relief for a late or invalid s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a ruling are set out in revproc_2001_1 copy enclosed in addition a proper user_fee must be submitted along with your request the fee for a ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million for the last 12-month taxable_period qualify for a reduced user_fee in the amount of dollar_figure if your business qualifies for the reduced fee your request must include a statement certifying gross_income otherwise you will be billed the higher fee please format your ruling_request as shown in appendix b of revproc_2001_1 if you decide to submit a ruling_request please provide documents supporting your intention to be an s_corporation and include the proper user_fee please refer your package to our office by adding the following to the address attn cc pa t p o box ben franklin station washington dc direct to cc psi b1 room if you have computer web access you may wish to visit www irs gov smallbiz for specialized tax information products and forms relating to small businesses please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2001_1 copy of submission


internal_revenue_service number release date index number ----------------------------------------------------- ----------------------------- ----------------------------- ---------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------ telephone number -------------------- refer reply to cc psi plr-165611-04 date january ----------------------------------------------------- ------------------- ----------------------- --------------------------------- --------------------------------------- ------------------------------- --------------------------------------------------------------------------------------- re -------------------------------------------------- legend trust x decedent date child child child bank --------------------------------------------------------------------------- city state spouse a b c d e f year date court g h ------------ ------------ ------------------------------------ ------------------------------ -------------------------- ----------------------------- --------------------------- --------------------- --------------------- ------ --------------------------- ------------------------------------------------------- ----------------------------- ------------------------ plr-165611-04 dear -------------- this is in response to a letter dated date submitted on your behalf by your authorized representative requesting rulings on the gift generation- skipping transfer gst and income_tax consequences of a proposed change_of advisory committee members of trust x will created three separate and equal trusts for the benefit of his three children their spouses and their issue child trust child trust and child trust pursuant to the terms of decedent’s will bank was appointed trustee of all trusts created under the will decedent died on date which was prior to date decedent's the facts submitted and representations made are as follows under clause b of decedent's will the income of each trust is to be paid in reasonable installments to the child for whose benefit it is set apart and upon the child's death to the deceased child's spouse to whom the child was married at the time of decedent's death and after the death of such spouse to the child's issue per stirpes if prior to the death of the last survivor of decedent’s children a child should die leaving no spouse or issue surviving the deceased child's trust is to be divided equally between the trusts for the two surviving children thereafter if a second child should die leaving no spouse or issue surviving the entire property in the two trusts is to be held as one trust for the benefit of the last survivor of decedent’s children clause c of decedent's will provides that the trusts shall terminate upon the death of the last to die of decedent's children and the spouses to whom they were married at the time of decedent's death upon termination the property in each trust is to be paid over to the issue per stirpes of the child for whose benefit the trust was created under clause of his will decedent appointed child child and child as an advisory committee any two of whom by writing signed by them were given the power with respect to the trusts created under the will to a b direct decedent’s executor and trustee as to what action is to be taken by it as owner of shares of corporate securities in the voting of such securities or in consenting to or protesting against proposed corporate action direct the executor and trustee as to sales of property held by it either as executor or trustee and sales and purchases of property plr-165611-04 c d shall be made by decedent's executor and trustee upon the direction and approval of the advisory committee remove the trustee at any time by instrument in writing designating as successor trustee a corporate fiduciary having its principal_place_of_business in city state and give its consent so that decedent's executor and trustee may borrow money when it is considered by the advisory committee that the borrowing of such money is for the benefit of any trust estate the will further provides that when any member of the advisory committee dies or becomes unwilling to act or incapable of acting the other two members are to select a person to fill the vacancy by a writing signed by the remaining members and delivered to the trustee if two members are deceased or unwilling to serve or become incapable of serving the remaining member is to select two other persons to fill the two vacancies by delivering a writing signed by the remaining member to the trustee at any time there are only two members of the committee such two members are to have full power to act but in case of disagreement between the two members the chief_executive_officer of trustee is to serve as the third member of the committee until such time as a third member is selected in the manner provided at any time there is only one member of the advisory committee alive and willing to and capable of taking action the one member is to have the power to exercise the powers of the committee but only during such time as he does not have a reasonable opportunity to select two members to fill the vacancies any member of the advisory committee who is not a beneficiary of a_trust under decedent’s will is to be paid compensation_for his services at the present time child child child and the spouses of child and child are deceased the spouse of child is still living the child trust the child trust and the child trust will terminate on the death of spouse of child child died in year survived by spouse and four children a d e and f on date by order of court the child trust was divided into four separate trusts each consisting of a one-fourth interest in each asset and each having spouse as the income_beneficiary for her lifetime trust x was created for the benefit of e and his descendants the current members of the advisory committee of trust x are a b and c a b and c have entered into an agreement of sequential resignations and successor appointments in accordance with the terms of decedent's will that will become effective upon the receipt of favorable rulings from the service under the agreement a will be deemed to have resigned as an advisor and b and c the remaining advisors will be deemed to have appointed e as an advisor thereafter c will be deemed to have resigned as an advisor and b and e will be deemed to have appointed g as an advisor immediately thereafter b will be deemed to have resigned as an advisor and e and g it is represented that the new advisors will operate in accordance with the plr-165611-04 the remaining advisors will be deemed to have appointed h as an advisor thus the new advisory committee for trust x will consist of e g and h provisions set forth in decedent's will for the advisory committee as described above it is also represented that no additions have been made to the child trust or to trust x since decedent's death the following rulings are requested the proposed resignation of advisors and appointment of successor advisors with respect to trust x will not subject trust to the application of the generation- skipping transfer gst tax under sec_2601 of the internal_revenue_code and applicable regulations the proposed resignation of advisors and appointment of successor advisors with respect to trust x will not result in any taxable gift_for federal gift_tax purposes the proposed resignation of advisors and appointment of successor advisors with respect to trust x will not result in the recognition of gain_or_loss for federal_income_tax purposes to trust x or any beneficiaries of trust x ruling sec_2601 of the internal_revenue_code imposes a tax on every under section a of the tax_reform_act_of_1986 act and section generation-skipping_transfer which is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip a of the generation-skipping_transfer_tax regulations the gst tax is generally applicable to generation-skipping transfers made after date however under section b a of the act and sec_26_2601-1 the tax does not apply to a transfer under a_trust 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 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in plr-165611-04 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 for in the original trust 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 generation-skipping_transfer or the creation of a new generation-skipping_transfer a modification that is administrative in nature that only indirectly increases the amount transferred will not be considered to shift a beneficial_interest in the trust sec_26_2601-1 example considers a situation where a_trust is modified by decreasing the number of trustees the modification pertains to the administration of the trust and does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation than the person or persons who held the beneficial_interest prior to the modification in addition the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the modification will not subject the trust to the provisions of chapter accordingly the proposed resignation of the current advisors and the appointment of successor advisors with respect to trust x is a modification that is administrative in nature this modification does not shift any beneficial_interest in trust x to any beneficiary who occupies a generation lower than the persons holding the beneficial interests further the proposed modification will not extend the time for vesting of any beneficial_interest in trust x beyond the period provided under the provisions of decedent's will or constitute an addition to trust x accordingly the proposed changes will not cause trust x to lose its gst exempt status under sec_26_2601-1 ruling sec_2501 provides that a tax computed as provided in sec_2502 is hereby imposed for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that subject_to the limitations contained in chapter the gift_tax imposed by sec_2501 will apply 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 if a gift is made in property the value thereof at the date of the gift shall be considered the amount_of_the_gift sec_2512 provides that where property is transferred for less than adequate_and_full_consideration in money or money s worth the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift plr-165611-04 based on the facts submitted and representations made we conclude that the proposed resignation of the current advisors and the appointment of successor advisors with respect to trust x will not change the beneficial interests in trust x otherwise provided for under the terms of decedent's will therefore based on the facts submitted and representations made we conclude that the proposed change_of advisors of trust x will not result in a taxable gift_for federal gift_tax purposes sec_1001 provides that the gain from the sale_or_other_disposition of sec_1001 states that the amount_realized from the sale_or_other_disposition ruling sec_61 provides that gross_income includes gains derived from dealings in property and under ' a from an interest in a_trust property shall be the excess of the amount_realized there from over the adjusted_basis provided in ' for determining gain and the loss shall be the excess of the adjusted_basis provided in ' for determining loss over the amount_realized of property shall be the sum of any money received plus the fair_market_value of the property other than money received under ' c except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under ' on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides that the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or loss sustained issue of when a sale_or_exchange has taken place that results in realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender's interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution concluded that sec_1_1001-1 reasonably interprets sec_1001 and that an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans cottage savings u s pincite the supreme court of the united_states in cottage savings u s pincite 499_us_554 concerns the the resignation of current advisory committee members and the subsequent plr-165611-04 appointment of replacement advisory committee members will take place in accordance with the existing terms of the trust moreover the successor advisory committee members must abide by the same terms and conditions of the trust as the current advisory committee members accordingly the proposed resignation of the current advisory committee members and the immediate appointment of their successors once done will merely be an exercise of the administrative provisions of the trust and will not result in the recognition of gain_or_loss for federal_income_tax purposes to the trust or any beneficiaries in accordance with the power_of_attorney on file with this office a copy of this the rulings contained in this letter are based upon information and except as expressly provided herein no opinion is expressed or implied letter is being sent to your authorized representative concerning the 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 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 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer s requesting it sec_6110 sincerely yours _________________________ katherine a mellody senior technician reviewer office of the associate chief_counsel passthroughs and special industries enclosure cc copy for sec_6110 purposes


internal_revenue_service number release date index number 468a ---------------------------- ---------------------------------------------------- -------------------------- ---------------------------------- -------------- ----------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b06 plr-114598-08 date september re schedule of deductions ----------------------------------------------------------- legend taxpayer company a company b plant location independent study -------------------------------------------------------------------------------------------------------------- method fund director -------------------------- ein ---------------- ------------------------------------------- ein ---------------- ---------------------------------------------- ein ---------------- ----------------------------------------------------------- ---------------------------------------------------------- --------------------------------------------------------------------------------- ----------- ------------------------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- dear ------------ this letter responds to your request dated --------------------- for an initial schedule of deduction amounts pursuant to sec_1_468a-8t c of the income_tax regulations and a mandatory request for a revised schedule of ruling amounts pursuant to sec_468a of the internal_revenue_code and regulations sec_1 468a- 3t f iii for the fund taxpayer was previously granted schedules of ruling amounts most recently on ----------------------- taxpayer submitted supplemental information by letter on --------------------and ---------------------- information was submitted pursuant to sec_1_468a-3t e taxpayer represents the facts and information relating to its requests as follows plr-114598-08 taxpayer a corporation is a holding_company and the sole member of company a a single member limited_liability_company that is disregarded for federal_income_tax purposes company b the legal owner of the plant is a single-member limited_liability_company that is disregarded for federal_income_tax purposes and is wholly-owned by company a taxpayer files a consolidated federal_income_tax return with its affiliated companies taxpayer owns --- percent of the plant through company a and company b the plant is situated at location the estimated base cost for decommissioning plant is based on an independent study and the proposed method of decommissioning the plant is method based upon the assumptions derived from the independent study it is estimated that fund assets will earn an after-tax rate of return of ---- percent the total cost of decommissioning taxpayer’s interest in the plant is estimated to be dollar_figure----------------- in -- ------- dollars this base cost of decommissioning plant is escalated at a ------ percent yearly rate resulting in a total future cost of decommissioning taxpayer’s interest in the plant of dollar_figure------------------- in ------- through ------- dollars under ratemaking assumptions used during the first proceeding before commission a the plant would no longer be included in rate base in ------- in the prior schedule of ruling amounts issued under sec_468a of the code as in effect prior to the estimated_useful_life of the plant is --- years --------------- and the estimated period for which the fund is to be in effect is --- years --------------- thus the percentage of the total estimated costs qualifying for deduction in the schedule of ruling amounts under prior_law was -------- percent sec_468a as amended by the energy tax incentives act of the act publaw_109_58 119_stat_594 allows an electing taxpayer to deduct payments made to a nuclear decommissioning reserve fund sec_468a limits the amount that may be paid into the nuclear decommissioning fund in any year to the ruling_amount applicable to that year prior to the changes made by the act the deduction was limited to the lesser_of the amount included in the utility’s cost of service for ratemaking purposes or the ruling_amount generally as a result only regulated utilities could take advantage of sec_468a the act amendment of sec_468a eliminated the cost-of-service limitation accordingly decommissioning costs of an unregulated nuclear power plant may now be funded by deductible contributions to a qualified nuclear decommissioning fund plr-114598-08 sec_468a provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund the total nuclear decommissioning cost of that nuclear power plant over the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate prior to the changes made by the act deductible contributions were limited to the amount necessary for an electing taxpayer to fund the plant’s post-1983 nuclear decommissioning costs determined as if decommissioning costs accrued ratably over the estimated_useful_life of the plant provided that the taxpayer elected to establish a fund in prior_law also did not allow a taxpayer electing to establish a fund later than to contribute to that fund any amount in excess of that amount necessary to fund the ratable portion of the plant’s nuclear decommissioning costs beginning in the year the fund is established sec_468a now allows a taxpayer to contribute to a nuclear decommissioning fund the entire cost of decommissioning the plant including both the pre-1984 amount that was denied under the law prior to the act as well as any amount attributable to any year after in which a taxpayer had not established a fund under sec_468a sec_468a provides that the deduction for the contribution of the previously-excluded amount is allowed ratably over the remaining useful_life of the nuclear plant sec_468a provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within 2½ months after the close of the tax_year this section applies to payments made pursuant to either a schedule of ruling amounts or a schedule of deduction amounts sec_1_468a-1t a provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1t b of the regulations is a taxpayer that has a qualifying interest in any portion of a nuclear power plant a qualifying interest is among other things a direct ownership_interest sec_1_468a-2t b provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year the limitation on the amount of cash payments for purposes of sec_1 468a- 2t b does not apply to any special transfer permitted under sec_1_468a-8t plr-114598-08 sec_1_468a-3t a provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3t a provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on reasonable assumptions concerning the after-tax rate of return to be earned by the amounts collected for decommissioning the total estimated cost of decommissioning the nuclear plant and the frequency of contributions to a nuclear decommissioning fund for a taxable_year under sec_1_468a-3t a the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3t a provides that the taxpayer bears the burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the regulations and that it is based on reasonable assumptions that section also provides additional guidance regarding how the service will determine whether a proposed schedule of ruling amounts is based on reasonable assumptions for example if a public_utility commission established or approved the currently applicable rates for the furnishing or sale by the taxpayer of electricity from the plant the taxpayer can generally satisfy this burden_of_proof by demonstrating that the schedule of ruling amounts is calculated using the assumptions used by the public_utility commission in its most recent order in addition a taxpayer that owns an interest in a deregulated nuclear plant may submit assumptions used by a public_utility commission that formerly had regulatory jurisdiction over the plant as support for the assumptions used in calculating the taxpayer’s proposed schedule of ruling amounts with the understanding that the assumptions used by the public_utility commission may be given less weight if they are out of date or were developed in a proceeding for a different taxpayer the use of other industry standards such as the assumptions underlying the taxpayer's most recent financial assurance filing with the nrc are described by the temporary regulations as an alternative means of demonstrating that the taxpayer has calculated its proposed schedule of ruling amounts on a reasonable basis sec_1_468a-3t a further provides that consistency with financial_accounting statements is not sufficient in the absence of other supporting evidence to meet the taxpayer’s burden_of_proof sec_1_468a-3t b provides that in general the ruling_amount for any_tax year in the funding_period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3t c the funding_period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and plr-114598-08 ends on the last day of the taxable_year that includes the last day of the estimated_useful_life of the nuclear power plant to which the fund relates sec_1_468a-3t c provides rules for determining the estimated_useful_life of a nuclear plant for purposes of sec_468a in general under sec_1_468a-3t c i a if the plant was included in rate base for ratemaking purposes for a period prior to date the date used in the first such ratemaking proceeding as the estimated date on which the nuclear plant will no longer be included in the taxpayer’s rate base is the end of the estimated_useful_life of the nuclear plant sec_1_468a-3t c i b provides that if the nuclear plant is not described in sec_1_468a-3t c i a the last day of the estimated_useful_life of the nuclear plant is determined as of the date the plant is placed_in_service under sec_1_468a-3t c i c any reasonable method may be used in determining the estimated_useful_life of a nuclear power plant that is not described in sec_1_468a-3t c i a sec_1_468a-3t d provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant sec_1_468a-3t d provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3t e enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3t f provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3t e the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year sec_1_468a-8t a provides that under the provisions of sec_468a as described above a taxpayer may make a special transfer of cash or property to the nuclear decommissioning fund this special transfer is not subject_to the sec_468a limitation the amount of the special transfer is the present_value of the pre-2005 nonqualifying percentage of the estimated future costs of decommissioning the nuclear plant that was disallowed under sec_468a prior to the act sec_1_468a-8t a defines the pre-2005 nonqualifying percentage as equal to percent reduced by the sum of the qualifying percentage used in determining the taxpayer’s last schedule of ruling amounts for the fund under sec_468a as it existed prior to the act and the percentage transferred in any previous special transfer plr-114598-08 sec_1_468a-8t a provides that the taxpayer is not required to transfer the entire amount eligible for the special transfer in one year but must take any prior special transfers into account in calculating the pre-2005 qualifying percentage further pursuant to sec_1_468a-8t c a taxpayer making a special transfer in more than one year must request a new schedule of deduction amounts in connection with each special transfer sec_1_468a-8t b provides that the deduction for the special transfer is allowed ratably over the remaining useful_life of the nuclear plant under sec_1 468a- 8t b iii the deduction for property contributed in a special transfer is limited to the lesser_of the fair_market_value of the property or the taxpayer’s basis in the property under sec_1_468a-8t b the taxpayer recognizes no gain_or_loss on the special transfer of property the taxpayer’s basis in the fund is not increased by reason of the special transfer of property and the fund’s basis in the property transferred in the special transfer is the same as the transferee’s basis in that property immediately prior to the special transfer sec_1_468a-8t c provides that taxpayer may not make a special transfer to a qualified nuclear decommissioning fund unless the taxpayer requests from the irs a schedule of deduction amounts in connection with such transfer a request for a schedule of deduction amounts may be made in connection with a request for a schedule of ruling amounts but in such case the calculations for both the schedule of ruling amounts and the schedule of deduction amounts must be separately_stated as stated above prior to the changes made by the act deductible contributions were limited to the lesser_of the amount necessary to fund the plant’s post-1983 nuclear decommissioning costs or the amount necessary to fund the plant’s decommissioning costs for that portion of the plant’s estimated_useful_life for which a fund had been established under that prior_law taxpayer was allowed to contribute --- -------- percent of the amounts necessary to fully decommission its share of the plant sec_468a allows a taxpayer to contribute to the nuclear decommissioning fund the pre-1984 amount that was denied under the law prior to the act taxpayer is able to contribute the additional -------- percent of the amounts necessary to decommission its ownership share of plant this special transfer occurred in ------- we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we conclude that because the useful_life of the plant as defined by sec_1_468a-3t c ended in ------- taxpayer may make a special transfer of dollar_figure--------------- in ------- and may deduct the amount contributed in -------- as set forth below schedule of deduction amounts plr-114598-08 year ------- deduction amount dollar_figure---------------- the special transfer amount stated above is the maximum amount permitted to be transferred to the fund under sec_468a if taxpayer transfers a lesser amount to the fund the taxpayer may deduct that lesser amount ratably over the period of years described above further in the event that taxpayer transfers a lesser amount for ----- ------- in order to make an additional special transfer in a later year including a special transfer of the difference between the special transfer amount stated above and the lesser amount transferred in ------- taxpayer must request a new schedule of deduction amounts and in that request must take the ------- transfer into account and recalculate the pre-2005 qualifying percentage in such request we note that if taxpayer elects to make a special transfer of property for all or a portion of this special transfer the amount of the deduction is the lesser_of the fair_market_value of the property transferred or the basis of the property in the hands of the taxpayer immediately prior to the transfer in either event the deduction of the taxpayer with respect to the property is limited to the taxpayer’s basis in the property we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we reach the following conclusions pursuant to sec_1_468a-3t a taxpayer has met its burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the code and regulations and is based on reasonable assumptions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1t b of the regulations taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3t d of the regulations the proposed schedule of ruling amounts was derived by following the assumptions contained in an independent commissioning study that taxpayer has represented is a standard type study used in the industry based on that representation taxpayer has demonstrated pursuant to sec_1_468a-3t a that the proposed schedule of ruling amounts is based on reasonable assumptions and is consistent with the principles of sec_468a and the regulations thereunder plr-114598-08 the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the ruling_amount applicable to the fund as set forth under sec_1_468a-2t b of the regulations based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code we have approved the following revised schedule of ruling amounts the mandatory review date for this matter remains the same approved schedule of ruling amounts year ------- deduction amount dollar_figure-- if any of the events described in sec_1_468a-3t f occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above specifically no determination is made whether the independent commissioning study conforms to industry standards and practices this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7t a a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch passthroughs special industries


internal_revenue_service number release date index numbers -------------------------- ----------------------------- --------------------------------------- -------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc corp plr-104686-05 date date legend distributing ----------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------ ----------------------------------------------------- ------------------------ controlled --------------------------------------------------------------------------------------------------------------- ----------------------------------------------------- ------------------------------------------------------ ----------------------------------------------------- --------------------------------------------------------------------------------------- group parent ----------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------ ------------ fsub ------------------------------------------ ------------------------------------------------------ ------------------------- fsub ------------------------------------------------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------- domestic parent ---------------------------------------------------------------------------------------------- --------------------------------------- ------------------------ target holdco ------------------------------------ plr-104686-05 business a date date date state a state b state c state d state e state f a b c d e f g h ------------------------ ------- ---------------------- ------------------ -------- ---------- ------------ ------ ------------- ------------ ------- ------ -- ---- -------------- ---- ---- ---- dear -------------- this letter responds to your date letter requesting rulings on certain federal_income_tax consequences of a completed transaction the information provided in that letter and in later correspondence is summarized below plr-104686-05 the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover this office has not reviewed any information pertaining to and has made no determination regarding whether the distribution described below i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 and iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 summary of facts group parent a foreign_corporation is the common parent of a corporate group composed of various domestic and foreign_corporations engaged in business a group parent wholly owns fsub which has conducted business a directly since date fsub wholly owns fsub fsub wholly owns domestic parent domestic parent is a domestic holding_company and the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return domestic parent conducts business a indirectly through subsidiaries before date distributing was wholly owned by target holdco on date domestic parent acquired all of the outstanding_stock of distributing except for certain shares owned by directors of distributing described below in a two-step transaction first domestic parent formed a wholly-owned subsidiary which merged into target holdco merger in merger target holdco’s shareholders received cash in exchange for their target holdco stock and target holdco became a wholly owned subsidiary of domestic parent second target holdco merged into domestic parent merger the taxpayer treated merger as an acquisition of the stock of target holdco for cash and merger as a liquidation of target holdco under sec_332 following merger and immediately before the distribution domestic parent owned a shares representing approximately b percent of distributing’s voting common_stock its sole class of stock outstanding distributing common_stock the remaining c shares representing approximately d percent of distributing common_stock were owned by directors of distributing in satisfaction of certain non-tax federal_law requirements distributing directly conducts business a principally through offices located in states a b c d e and f domestic parent believes that the transfer of distributing’s plr-104686-05 business a located in states e and f into a separate organization will permit domestic parent to replicate its successful model of regionally focused and managed operations financial information has been received indicating that business a as conducted by fsub has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years completed transaction to effect the separation of distributing’s business a located in states a b c and d from distributing’s business a located in states e and f the following transaction was completed on date i distributing contributed its business a assets located in states e and f and cash in the amount of approximately dollar_figuree to newly formed controlled in exchange for all of controlled’s common_stock the controlled common_stock all of controlled’s preferred_stock the controlled preferred_stock and controlled’s assumption of the liabilities of the transferred business the contribution taxpayer represents that the controlled preferred_stock is not nonqualified_preferred_stock within the meaning of sec_351 distributing immediately transferred f shares of its controlled preferred_stock representing approximately g percent of the controlled preferred_stock outstanding directly to the five initial members of controlled’s board_of directors to satisfy certain non-tax federal_law requirements the preferred_stock transfer distributing distributed to domestic parent all of its controlled common_stock and all of its controlled preferred_stock the distribution no securities or other_property of controlled was distributed in the distribution it is expected that the number of directors of controlled will increase and that each new director will be granted h shares of controlled preferred_stock which will reduce the percentage of controlled preferred_stock held by domestic parent but not below percent ii immediately after the contribution and the preferred_stock transfer following the distribution distributing has continued to conduct business a in states a b c and d and controlled has conducted the business a formerly conducted by distributing in states e and f representations the taxpayer has made the following representations regarding the contribution a any indebtedness owed by controlled to distributing after the distribution did and the distribution not constitute stock_or_securities e the distribution was carried out for the following corporate business b no part of the consideration distributed by distributing was received by a d following the transaction distributing and controlled have each continued plr-104686-05 shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation c the five years of financial information submitted on behalf of business a as conducted by fsub is representative of the corporation’s present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted independently and with its separate employees the active_conduct of its share of all the integrated activities of the business conducted by distributing before consummation of the transaction purposes to more easily align the business of and marketing efforts associated with distributing’s business a located in states e and f with the highly successful regional management and marketing strategy that domestic parent’s corporate group currently employs the distribution was motivated in whole or substantial part by one or more of these corporate business purposes earnings_and_profits of distributing or controlled or both g the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing in the contribution each equaled or exceeded the sum of the liabilities assumed as determined under sec_357 by controlled contribution were incurred in the ordinary course of business and were associated with the assets transferred of or after the distribution however distributing and controlled may engage in certain transactions that are customary between affiliated corporations engaged in business a and credit were taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d at the time of the distribution distributing did not have an excess_loss_account in the controlled stock i no intercorporate debt existed between distributing and controlled at the time f the transaction was not used principally as a device for the distribution of the h the liabilities assumed as determined under sec_357 by controlled in the j immediately before the distribution items of income gain loss deduction k payments made in connection with all continuing transactions if any between m none of the shares of controlled preferred_stock distributed in the n for purposes of sec_355 immediately after the distribution no person l no two parties to the transaction are investment companies as defined in plr-104686-05 distributing and controlled have been and will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length sec_368 and iv distribution were nonqualified_preferred_stock as defined in sec_351 determined after applying sec_355 held stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and and by application of sec_1 b iii during the five-year period determined after applying sec_355 ending on the date of the distribution determined after applying sec_355 held stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation p pursuant to sec_355 the distribution was not part of a plan or series of o for purposes of sec_355 immediately after the distribution no person rulings based solely on the information submitted and the representations made we rule as follows on the contribution and the distribution the contribution followed by the distribution qualified as a reorganization under sec_368 distributing and controlled were each a_party_to_a_reorganization under sec_368 no gain_or_loss was recognized by distributing on the contribution sec_357 and sec_361 plr-104686-05 no gain_or_loss was recognized by controlled on the contribution sec_1032 the basis of each asset received by controlled in the contribution equals the basis of that asset in the hands of distributing immediately before its transfer sec_362 the holding_period of each asset received by controlled in the contribution will include the period during which distributing held that asset sec_1223 no gain_or_loss was recognized by distributing on the distribution sec_361 no gain_or_loss was recognized by and no amount will otherwise be included in the income of domestic parent on its receipt of controlled stock in the distribution sec_355 the aggregate basis of the distributing stock and the controlled stock in the hands of domestic parent after the distribution will equal the aggregate basis of the distributing stock held by domestic parent immediately before the distribution allocated between the stock of distributing and controlled in proportion to the relative fair_market_value of each immediately following the distribution in accordance with sec_1_358-2 sec_358 and c the holding_period of the controlled stock received by domestic parent in the distribution includes the holding_period of the distributing stock on which the distribution was made provided the distributing stock was held as a capital_asset on the date of the distribution sec_1223 earnings_and_profits if any will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 caveats we express no opinion about the tax treatment of any transaction described above under other provisions of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the completed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding i whether the distribution satisfied the business_purpose requirement of sec_1_355-2 ii whether the transaction was used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both see sec_355 and sec_1_355-2 iii whether the distribution and an acquisition or acquisitions are part of a plan or series of related transactions under sec_355 iv whether the controlled preferred_stock is sec_306 stock and v the preferred_stock transfer plr-104686-05 procedural matters this ruling letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent each taxpayer involved in this transaction should attach a copy of this ruling letter to the taxpayer’s federal_income_tax return for the taxable_year in which the transaction was completed to your authorized representatives under the power_of_attorney on file in this office a copy of this letter is being sent sincerely _________________________ richard k passales senior counsel branch office of associate chief_counsel corporate


department of the treasury internal_revenue_service washington d c office of ‘chief counsel number info release date date conex-100407-09 ccita uil no dear for real_property in property are currently not available overview of sec_1031 of the code taxpayers do not recognize gain_or_loss on the exchange of business or investment_property for like-kind business or investment_property an exchange does not qualify for nonrecagnition of gain_or_loss under this provision unless the taxpayer receives timely identified replacement_property by the earlier of congressman costello has asked me to reply to your date letter-to him requesting immediate emergency relief from the internal_revenue_service if you cannot timely complete an exchange of real_property intended to qualify for deferral of gain under sec_1031 of the internal_revenue_code the code this letter describes your situation provides general information about sec_1031 of the code and addresses your requests for relief facts you intended to exchange real_property in on both of these properties you intended to build your new permanent residence your plans were disrupted when the qualified_intermediary you were using in the exchange filed for bankruptcy protection under chapter of the bankruptcy code this situation threatens to prevent you from completing the exchange because the proceeds from the sale of your the due_date including extensions of the taxpayer's federal_income_tax return for the year in which the transfer of the relinquished_property occurs the statutory replacement_period days after the date on which the taxpayer transfers the property telinquished in the exchange the relinquished_property or conex-100407-09 business or investment_property requirement you were exchanging real properties on which you intended to build your permanent residence as indicated above however only property a taxpayer holds for business or investment use is eligible for nonrecognition_of_gain_or_loss under sec_1031 of the code in 602_f2d_1341 cir the court held that a taxpayer's personal_residence was not held for investment under sec_1031 explaining that it has long been the rule that use of property solely as a personal_residence is antithetical to its being held for investment if a taxpayer does not hold the exchanged properties for business or investment use the transaction will not qualify under sec_1031 even if the exchange occurs within the statutory replacement_period statutory replacement_period as noted above a transaction will not qualify under sec_1031 of the code unless the taxpayer acquires the replacement_property within the statutory replacement_period we can extend this period only when authorized by statute we cannot extend it administratively the oniy statutory authority to extend the replacement_period is sec_7508a of the code which authorizes an extension for taxpayers affected by a federally_declared_disaster or a terroristic_or_military_action the bankruptcy of your qualified_intermediary and its significant adverse consequences do not qualify under sec_7508a request therefore we cannot grant the extension you if no exclusion relief from tax_liability you also asked for relief from tax_liability under sec_61 of the code all income irom whatever source derived including income from gain from the sale of property is subject_to tax unless excluded by statute applies you must generally recognize gain in the year that you or your agent actually or constructively receive payments for the property or the year you receive the purchaser's note that is secured_by cash or its equivalent section 18a b i of temporary income_tax regulations if you must recognize gain some relief may be available for deductions for losses in the year incurred i have enclosed a copy of publication casualties disasters and thefts which provides guidance on loss deductions use of qualified intermediaries you also indicate that the federal government is partly responsible for your situation because sec_1031 of the cade contemplates use of qualified intermediaries in deferred like-kind_exchanges the regulations pertaining to deferred like-kind_exchanges however have always permitted security devices such as standby letters of credit qualified escrows and qualified trusts which afford a measure of safety to taxpayers who use qualified intermediaries in these transactions sec_1 k -1 g and of the income_tax regulations a federally_declared_disaster is any disaster that the president subsequently determines warrants assistance by the federal government under the robert t stafford disaster relief and emergency assistance act the stafford act disaster is a natural catastrophe such as a hurricane tornado storm or high water or a fire flood or explosion united_states_code sec_5122 and see sec_165 h c of the code under the stafford act a major conex-100407-09 cannot respond to your request for bailout’ tarp money or federal deposit insurance corporation funds to replace your exchange investigation of your qualified_intermediary for fraud because these matters are not directly connected with the administration of federal_income_tax law funds or for a federal although cannot grant the relief that you request sympathize with your difficult situation please call c if you have additional questions or would like to discuss this situation further jat enclosure sincerely michael j montemurro branch chief office of associate chief_counsel income_tax accounting department of the treasury internal_revenue_service washington d c orrice of chief_counsel date ‘the honorable jerry f costello member u s house of representatives washington dc attentior dear mr costello lam responding to your letter dated date on behalf of your constituents they asked for immediate emergency relief if they are unable to complete an exchange of real_property as you requested addressing their concerns and am have prepared a letter to forwarding it to you along with a copy of publication casualties disasters and thefts for their benefit jhope this is helpful if you have any questions please contact me or at sincerely michael j montemurro branch chief office of associate chief_counsel income_tax accounting enclosures


wernal revenye uniform issue list may t ep ra legend individual a individualb ira x company m amount c dear this is in response to your request dated date as supplemented by correspondence dated date submitted on your behalf by your authorized representative and a telephone conversation on date with your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested individual a age asserts that his failure to accomplish a timely rollover of amount c was caused by his deteriorating mental condition which impaired his ability to make financial decisions and prevented him from understand the nature of his action in withdrawing amount c from ira x individual a further asserts that amount c has not been used individual a is married to individual b individual a and b file joint federal_income_tax returns individual a maintained two accounts with company m an individual_retirement_arrangement ira ira x and an individual_account invested in a state tax-free bond fund which was not an ira individual a has been diagnosed with a mental condition and has received medical treatment for cognitive disabilities since date due page to this medical_condition individual a must rely on individual b for assistance with financial matters without individual b’s knowledge on date individual a telephoned a company m representative and directed that the total assets in ira x be converted to an investment in a state tax-free bond fund pursuant to individual a’s instructions company m liquidated ira x’s entire account and transferred amount c the total account balance in ira x into individual a’s company m personal non-ira account individual a’s mental condition impaired his ability to make financial decisions regarding ira x’s investments due to his mental condition he did not understand that amount c was being distributed to him in a taxable_distribution on date company m issued form 1099-r for individual a did not immediately disclose the receipt of this form to individual b on date individuals a and b gave their certified_public_accountant cpa tax- related information including the form 1099-r from company m in conjunction with the preparation of their and b on date to inform them that they owed significant additional and unanticipated income taxes for on account of the distribution from ira x this point that individual b first became aware of the distribution of amount c from ira x federal_income_tax return the cpa contacted individuals a to individual a it was at based on the facts and representations individuals a and b request the following rulings pursuant to sec_408 of the code the internal_revenue_service waives the 60-day rollover requirement with respect to the entire erroneous distribution to individual a from ira x individual a must receive required minimum distributions for the years based upon his age pursuant to sec_401 of the code and individual a is granted a period of days from the date of the issuance of the requested ruling letter to contribute the amount of the erroneous distribution into a rollover ira provided however that all other requirements of sec_408 of the code are otherwise satisfied except the 60-day rollover requirement if the conditions in sec_408 of the code other than the 60-day rollover requirement are satisfied the amount of the considered a timely sec_408 rollover ira contribution by individual a within the meaning of erroneous distribution will be sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers page sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the one-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 of the code where failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred sec_401 of the code provides the rules for required minimum distributions from a qualified_plan sec_401 provides in pertinent part that a_trust shall not constitute a qualified_trust unless the plan provides that the entire_interest of each employee will be distributed to such employee not later than the required_beginning_date sec_401 defines term required_beginning_date as april of the calendar_year following the later of the calendar_year in which the employee attains age or the calendar_year in which the employee retires page sec_408 of the code provides that rules similar to the rules of sec_401 shall apply to the distribution of the entire ira interest of an individual for whose benefit the ira is maintained sec_408 of the code sets forth the denial of rollover treatment for required minimum distributions from an ira specifically sec_408 provides that rollover treatment shall not apply to any amount to the extent such amount is required to be distributed under sec_408 pertaining to iras the information presented and the documentation submitted is consistent with the assertion that the failure to accomplish a timely rollover was caused by individual a’s mental_disability which impaired his ability to make financial decisions and caused him to be unable to understand the consequences of his instructions to the company m representative and therefore we conclude with respect to requested ruling sec_1 and that pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount c less required minimum distributions for issuance of this ruling letter to contribute amount c less required minimum distributions for into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contributions the contribution of amount c less required minimum distributions for and rollover_contribution within the meaning of sec_408 of the code into one or more iras described in code sec_408 will be considered a individual a is granted a period of days from the and with respect to ruling_request since individual a i sec_82 years old and retired he must receive required minimum distributions pursuant to sec_401 of the code made applicable to an ira pursuant to code sec_408 with respect to the and calendar years in accordance with sec_408 of the code this ruling does not authorize the rollover of amounts that were required to be distributed by sec_401 of the code made applicable to an ira pursuant to code sec_408 with respect to the and calendar years no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter expresses no opinion as to whether the ira described herein satisfied the requirements of sec_408 of the code this letter is directed only to the taxpayers who requested it sec_6110 of the code provides that it may not be used or cited as precedent page pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact not a toll-free number please address all correspondence to ld at sincerely yours iamz er employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose


internal_revenue_service department of the treasury washington dc index number person to contact number release date telephone number refer reply to cc dom p si - plr-114327-99 date date x a d1 year dear this letter responds to a letter dated date and subsequent correspondence written 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 of year a the sole shareholder of x intended that x elect to be an s_corporation beginning in year its first taxable_year a relied on x’s accounting firm and attorney to take care of all of the filings required to be an s_corporation however a form_2553 election by a small_business_corporation was not timely filed on behalf of x because x’s accountant and x’s attorney each believing the other would file the form did not timely file a form_2553 for x for year sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted mr a jett reeve sec_2 we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x’s first 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 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’s authorized representatives sincerely yours branch h grace kim assistant to the chief 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 info release date index no washington dc person to contact donna m crisalli id no 50-18843r telephone number refer reply to cc it a - cor-118862-00 date date dear commissioner rossotti has requested me to respond to your letter of date in which you suggest that the internal_revenue_service allow a deduction as a medical expense for the costs associated with exercise we appreciate receiving your suggestion however in carrying out its mission the irs must administer federal tax law as enacted by congress and as interpreted by courts medical_care for purposes of sec_213 of the internal_revenue_code is defined in part as expenses paid primarily for the diagnosis cure mitigation treatment or prevention of disease judicial decisions have established that in order for an expense to be for the prevention of disease there must be an existing disease or an imminent probability of incurring a disease an expenditure that is merely beneficial to the general health of an individual is not an expense for medical_care but is a nondeductible personal_expense based on the above the position of the irs is that fees that a taxpayer pays to a health club for exercise facilities and rubdowns ordinarily are nondeductible personal expenses however such expenses would be deductible medical_expenses if a physician determines that the services are necessary to treat or alleviate a specific physical or mental illness i hope this information is helpful please call donna m crisalli at the number above not a toll-free number if you have any questions sincerely associate chief_counsel income_tax accounting by robert a berkovsky chief branch