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 intl b02 plr-105325-14 date date shareholder ------------------------------------ fc ---------------------------------------- year ------ year ------ year ------ date ------------------- tax advisor ------------------------------- legal advisor ------------------- dear ------------ this is in response to a letter dated date and subsequent correspondence submitted by shareholder’s authorized representatives that requested the consent of the commissioner of the internal_revenue_service commissioner to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code the code and sec_1_1295-3 with respect to shareholder’s investment in fc the ruling contained in this letter is based upon information and representations submitted by shareholder 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 facts shareholder has resided in the united_states since year on date shareholder acquired common shares of fc effective date fc became a passive_foreign_investment_company pfic with respect to shareholder and continues to be a pfic with respect to shareholder plr-105325-14 for all relevant years shareholder relied on tax advisor to prepare her income_tax returns although tax advisor was aware of shareholder’s acquisition of fc shares tax advisor did not inform her that fc was a pfic or that a qef election was available in year shareholder received a letter from legal advisor indicating that in her view fc was not a pfic recently tax advisor consulted with an international tax specialist regarding possible transactions by fc during this consultation it became clear that fc likely was a pfic with respect to shareholder since year shareholder submitted affidavits under penalties of perjury describing the events that led to her failure to make a qef election with respect to fc by the election due_date including the role of tax advisor shareholder has paid an amount sufficient to eliminate any prejudice to the united_states government as a consequence of her inability to file amended returns in accordance with a signed closing_agreement between shareholder and the commissioner further shareholder has filed an amended_return for each of her subsequent taxable years affected by the retroactive election shareholder represents that as of the date of her request_for_ruling the pfic status of fc had not been raised by the irs on audit for any of the taxable years at issue ruling requested shareholder requests the consent of the commissioner to make a retroactive qef election with respect to fc under sec_1_1295-3 retroactive to year law sec_1295 provides that a pfic will be treated as a qef with respect to a taxpayer if an election by the taxpayer under sec_1295 applies to such pfic for the taxable_year and the pfic complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company under sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic plr-105325-14 under sec_1_1295-3 a shareholder may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united state sec_3 government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1_1295-3 the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe the events that led to the failure to make a qef election by the election due_date the discovery of such failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on such professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made with shareholder’s ruling_request we conclude that shareholder has satisfied sec_1_1295-3 accordingly consent is granted to shareholder to make a retroactive qef election with respect to fc for year provided that shareholder complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election we have consequently approved a closing_agreement with shareholder with respect to those issues affecting her tax_liability on the basis set forth above pursuant to our practice with respect to such agreements the agreement contains a stipulation to the effect that any change or modification of applicable statutes enacted subsequent to the date of this agreement and made applicable to the taxable_period involved will render the agreement ineffective to the extent that it is dependent upon such statutes except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter plr-105325-14 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely kristine crabtree assistant to the branch chief branch international cc


t c memo united_states tax_court estate of john david mccoy deceased michele mccoy personal representative petitioner v commissioner of internal revenue respondent docket no filed date charles r brown for petitioner mark h howard for respondent memorandum findings_of_fact and opinion goeke judge respondent determined a deficiency of dollar_figure in the estate_tax of the estate of john david mccoy the issue to be decided is whether the federal and state estate_taxes due from john david mccoy’s decedent estate were required to be allocated to property that would have otherwise passed to the surviving_spouse thereby reducing the marital_deduction under sec_2056 or whether the estate_taxes should be allocated to the property included in decedent’s taxable_estate under utah’s equitable_apportionment law we hold that utah’s equitable_apportionment law applies and the marital_deduction is not reduced findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the accompanying exhibits are incorporated herein by this reference decedent a resident of utah died on date the estate’s personal representative michele mccoy ms mccoy resided in utah at the time the petition was filed decedent left an executed last will and testament dated date the will on date decedent also executed a revocable_living_trust agreement for the john d mccoy trust sometimes referred to as the original trust agreement the 1unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure 2in the petition the estate argued that respondent erroneously denied a deduction of special attorney’s fees paid in connection with the collection of estate_taxes from beneficiaries of life_insurance_proceeds included in decedent’s estate the estate did not produce any evidence regarding this issue at trial and did not address the issue on brief accordingly we deem the estate to have conceded this issue and sustain respondent’s adjustment to the attorney’s fees will and the original trust agreement stated that decedent’s spouse was roxanne mccoy however at the time of his death decedent was divorced from roxanne mccoy and married to ms mccoy the will was not updated to reflect that ms mccoy was decedent’s spouse at the time of his death decedent had earned a living in the printing industry in real_estate and by leasing and operating the heber utah airport because he had dyslexia decedent had trouble understanding and communicating with other people decedent and ms mccoy discussed estate issues during the course of their marriage but did not specifically discuss taxes or tax planning in planning his affairs decedent generally tried to minimize the taxes he paid shortly after decedent’s death ms mccoy learned that decedent had amended and restated the original trust agreement on date the restated trust agreement decedent told ms mccoy that he had been meeting with an attorney sara henry regarding his estate ms henry drafted the restated trust agreement and sent it to decedent for his review and decedent signed the draft without ms mccoy’s knowledge after decedent’s death ms mccoy spoke with ms henry regarding decedent’s estate after they discovered how complex the restated trust agreement was ms henry recommended that ms mccoy hire a second attorney because ms henry did not feel confident that she could prepare the estate_tax_return ms mccoy followed ms henry’s recommendation and hired tom christensen who has practiced in the area of estates and trusts for years mr christensen prepared the estate_tax_return article of the will provides that all of decedent’s tangible_personal_property with several enumerated exceptions would pass to his wife article of the will entitled disposition of residue provides i give the residue of my estate to the trustee of the john d mccoy trust created under the declaration of trust executed on date by john d mccoy as settlor and trustee the trustee of that trust shall add the residue of my estate to the trust principal and hold administer and distribute the property in accordance with the provisions of that declaration of trust including any amendments of that declaration of trust that have been made before or after execution of this will the original trust agreement provided that if decedent was survived by his wife payment of estate_taxes and other debts and expenses were to be charged to the nonmarital share of the trust however the restated trust agreement is not as clear paragraph states trustee’s authority to pay expenses debts and taxes the trustee shall pay from the residue of the trust estate prior to any distributions provided for herein all of the settlor’s debts expenses of last illness expenses of disposal of remains all expenses of administration and trust termination including attorneys’ fees and shall pay all estate_taxes if any attributable to settlor’s entire taxable_estate paragraph states in pertinent part distributions upon settlor’s death a on the death of the settlor and after all payments are made pursuant to paragraph above the trustee shall distribute from the trust estate the following specific bequests specific bequests to decedent’s children grandchildren and spouse omitted b should settlor be survived by michele mccoy the rest residue and remainder of the trust estate shall remain in trust to be held and distributed as follows distribution directions omitted paragraph b provided for distributions of income and principal solely for the benefit of ms mccoy nowhere in the restated trust agreement or elsewhere is it stated expressly whether paragraph was intended to govern both the method of paying the estate_taxes and the manner in which the estate_tax burden was to be borne by the beneficiaries furthermore the parties dispute whether the residue of the trust estate discussed in paragraph of the restated trust agreement is the residue of decedent’s estate referred to in article of the will or the residue of the trust estate referred to in paragraph b of the restated trust agreement certain other_property such as life_insurance and property that decedent and ms mccoy jointly owned passed outside the will and trust according to the legal terms of the property decedent’s estate filed a form_706 united_states estate and generation-skipping_transfer_tax return on date the estate claimed a marital_deduction of dollar_figure which was stated as the value of all of the assets of the gross_estate except those assets specifically passing to beneficiaries other than ms mccoy in determining the amount of estate_tax mr christensen charged the specific_bequest beneficiaries other than ms mccoy using equitable_apportionment generally by reducing their shares for estate_taxes before the shares were distributed on date respondent issued to decedent’s estate a statutory_notice_of_deficiency determining that the estate’s marital_deduction should be reduced by dollar_figure to dollar_figure resulting in a deficiency of dollar_figure respondent determined that decedent’s estate improperly failed to reduce the value of the property passing to ms mccoy by the amount of estate_taxes imposed on the estate the internal_revenue_service agent who conducted the audit determined that the estate_taxes should have been paid out of the residue defined in paragraph b of the restated trust agreement i the marital_deduction opinion a tax is imposed on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2001 in computing the value of the taxable_estate an estate may generally deduct the value of any interest in property that passes from the decedent to the decedent’s surviving_spouse to the extent that that property is included in determining the value of the gross_estate marital_deduction however the marital_deduction is reduced by estate succession legacy or inheritance taxes estate_taxes allocable to the surviving spouse’s interest sec_2056 the issue in this case is whether the estate_taxes owed on the transfer of decedent’s estate are allocable to the portion of the estate passing to ms mccoy ii burden_of_proof deductions are a matter of legislative grace and a taxpayer generally bears the burden of proving entitlement to the deductions claimed rule a 290_us_111 this rule applies to the marital_deduction the parties dispute whether sec_7491 applies to shift the burden_of_proof to respondent however we need not decide whether decedent’s estate has satisfied the requirements under sec_7491 to shift the burden_of_proof to respondent because no factual issue affects the outcome of this case iii utah apportionment law state law governs the manner in which estate_taxes are apportioned to the assets included in a decedent’s gross_estate 317_us_95 73_tc_1 in this case utah law governs the apportionment of the estate’s taxes utah code ann sec provides in pertinent part as used in this section d person interested in the estate means any person including a personal representative conservator guardian or trustee entitled to receive or who has received from a decedent while alive or by reason of the death of a decedent any property or interest in property included in the decedent’s taxable_estate unless otherwise provided in the will or other dispositive instrument the estate_tax shall be apportioned among all persons interested in the estate the apportionment shall be made in the proportion that the value of the interest of each person interested in the estate bears to the total value of the interests of all persons interested in the estate the values used in determining the tax shall be used for that purpose if the decedent’s will or other dispositive instrument directs a method of apportionment of tax different from the method described in this code the method described in the will or other dispositive instrument controls emphasis added the apportionment described in this statute is referred to as equitable_apportionment equitable_apportionment is a rule that estate_taxes should be charged only to the property that generates or creates the tax_liability estate of brunetti v commissioner tcmemo_1988_517 most state estate_tax apportionment statutes provide that this or a similar rule applies unless a contrary intent is clearly expressed in the testator’s will or other documents id accordingly the issue we must decide is whether the will and the restated trust agreement direct a method of apportioning the estate_taxes that is different from the method prescribed in the utah code iv analysis respondent argues that the equitable_apportionment statute does not apply because paragraph of decedent’s restated trust agreement clearly directs that the residue of the trust estate described in paragraph b of the restated trust agreement which was created solely for the benefit of ms mccoy should bear the burden of the estate_taxes respondent argues that there is no ambiguity to be resolved using utah law while it is possible that the residue discussed in paragraph of the restated trust agreement refers to the residue discussed in paragraph b of the restated trust agreement we find that it is at least as likely that it refers to the residue of decedent’s estate described in article of the will which includes all of the property passing by the will except for personal_property specifically given to decedent’s wife the fact that the payments referred to in paragraph of the restated 3the equitable_apportionment statutes were added when utah adopted the uniform probate code in accordingly cases decided before that time such as 386_fsupp_245 d utah are not controlling trust agreement were intended to be made before the rest of the estate was divided according to paragraph of the restated trust agreement supports this construction however the fact that decedent uses the term residue in both article of the will and paragraph b of the restated trust agreement creates an ambiguity that cannot be resolved by looking at these provisions alone furthermore it is not clear whether decedent intended these provisions to govern the allocation of the taxes at all or whether he merely intended them to be the source of the estate_tax payments the restated trust agreement states that the trustee shall pay from the residue of the trust estate prior to any distributions provided for herein all estate_taxes if any attributable to settlor’s entire taxable_estate emphasis added while decedent may have intended the word from to indicate that the taxes were to be both charged to and paid out of the residue this intention is not as clear as the statement in the original trust agreement that if the settlor is survived by his wife payments under this section shall be charged to the nonmarital share the restated trust agreement provides no similar clear guidance as to whether the residue of the restated trust agreement whether the residue described in the will or in paragraph b of the restated trust agreement is also to bear the burden of the estate_tax while it is possible that as respondent argues decedent intended for the residue of the trust estate to both be the source of the estate_tax payment and bear the burden of the estate_tax we find that this intent is not clear the utah supreme court in in re estate of huffaker p 2d utah directed there is a strong policy in favor of the equitable allocation of the tax burden provided in the statute prescribing apportionment and that a direction to the contrary in a will or other dispositive instrument must be expressed in terms that are specific clear and not susceptible of reasonable contrary interpretation in support of this statement the utah supreme court cited and therefore implicitly approved of cases from a number of other states where the rule is that if there is any ambiguity as to how the estate_taxes are to be apportioned the ambiguity should be resolved in favor of apportionment bolstad v wells fargo bank am trust co in re estate of armstrong p 2d cal but running through the cases generally is the thought that apportionment of the taxes is the general_rule to which exception is to be made only when there is a clear an unambiguous direction to the contrary ambiguities are to be resolved in favor of apportionment jackson v hubbard estate of carley cal rptr ct app finding unanimous agreement in the courts that equitable_apportionment applies unless there is a clear and unambiguous direction to the contrary either in the will or the trust agreement and any ambiguity appearing in the instrument must be resolved in favor of apportionment new york trust co v doubleday a 2d conn discussed below hunter v manhan p 2d nev applying proration in the absence of a clause prohibiting it in re estate of erieg a 2d pa discussed below zerbe v eggleston in re estate of hilliar p 2d wyo a directive against apportionment should be expressed in clear and unambiguous language see also hamilton v hamilton p 2d utah ct app quoting in re estate of huffaker supra pincite and stating that equitable_apportionment will not apply only if there is specific and clear language in the testator’s will directing that the tax burden should be otherwise divided we particularly note that the utah supreme court cited new york trust co v doubleday supra pincite which presents a situation very similar to ours in that case the testator’s will made certain legacies to his widow and other persons and then left his remaining assets in a residuary_estate id pincite the residuary_estate was to be divided into five parts one part to go to the testator’s widow and the other four to go to his children and grandchildren id the last paragraph of article twelfth of the will provided i direct my executors to pay from my residuary_estate all estate inheritance transfer succession and other death taxes or other taxes in the general nature thereof which may be payable with respect to any property included in my gross taxable_estate id the parties agreed that under this clause all estate and succession taxes were payable from the residuary_estate including taxes on the specific legacies not included in the residuary_estate however the parties disputed how the actual federal estate_tax should be borne within the residuary_estate id the children argued that the ninth article of the will governed not only payment of the taxes but also how they should be borne they argued that the beneficiaries of each of the five parts should bear one-fifth of the total_tax including the widow despite the fact that the widow’s share was exempt from federal estate_tax id pincite the widow argued that connecticut’s proration statute applied like the utah statute it provides that in the absence of a directive in the will to the contrary federal and state estate_taxes are equitably prorated among the beneficiaries in proportion to the values of their gifts except that those whose legacies do not create or add to the tax burden are not required to bear it id pincite citing jerome v jerome a 2d conn the court found that the ninth article of the will only directed the payment of the taxes and did not settle the question of whether the residuary beneficiaries should bear the taxes equally or whether proration should apply the directive in the will that all estate_taxes be paid from the residue is not a directive against the prorating of estate_taxes among residuary gifts new york trust co v doubleday supra pincite the court found that some doubt existed as to the testator’s intention and the testator failed to speak clearly on the question of proration id accordingly the court found that the will did not override the usual proration rule and that the four nonmarital shares were required to bear all of the estate_tax burden id pincite similarly in in re estate of erieg supra pincite also cited with approval by the utah supreme court the testator left all of his tangible_personal_property to his wife then gave percent of the residue of his estate to his widow and the remaining percent to his niece the testator included a clause that stated all taxes and interest and penalties thereon payable by reason of my death with respect to property comprising my gross taxable_estate whether or not passing under this will shall be paid from my residuary_estate id the parties disagreed as to whether this meant that the widow and the niece should each bear a portion of the estate_taxes or whether pennsylvania’s proration statute similar to connecticut’s proration statute and utah’s equitable_apportionment statute should apply id pincite the court agreed with the executor that the tax payment clause cited above did not trump the usual proration rules we do not find that the directive in item iv that a ll taxes shall be paid from my residuary_estate provides the explicit expression of a contrary intent necessary to render the statutory presumption inapplicable both the executor’s and jane laher’s the niece proposed methods of distribution would be consistent with the direction that all taxes be paid from the residue the question in this case is not whether the taxes are to be deducted from the residue but from whose share of the residue they should be taken and item iv can hardly be said to contain any guidance on this point id pincite like the testators in these cases decedent specified that the residue was to be the source of the payment of the estate_taxes but failed to specify how the taxes were to be apportioned between the beneficiaries of the residue furthermore decedent did not even clearly define what he meant by residue respondent argues that the wording of the restated trust agreement is similar to that found in cases such as 90_tc_1068 affd without published opinion 885_f2d_879 11th cir estate of miller v commissioner tcmemo_1998_416 affd without published opinion 209_f3d_720 5th cir estate of lewis v commissioner tcmemo_1995_168 and estate of lurie v commissioner tcmemo_2004_19 affd 425_f3d_1021 7th cir in which we found that equitable_apportionment did not apply because the testators’ wills unambiguously overrode the apportionment rules of those states virginia texas new hampshire and illinois respectively in estate of fine v commissioner supra pincite the court found that the testator specifically directed that the virginia apportionment statute would not apply because the testator’s will specifically stated ‘all such taxes including estate_taxes are to be paid out of the residuary_estate without apportionment’ emphasis added similarly in estate of miller v commissioner supra the testator’s will stated ‘ estate_taxes shall be borne by my residuary_estate such payment shall be made as an expense of administration without apportionment and without contribution or reimbursement from anyone whomsoever’ emphasis added also similarly in estate of lewis v commissioner supra the testator’s will stated estate_taxes shall be paid out of the residue of my estate without apportionment and with no right of reimbursement from any recipient of any such property’ emphasis added in estate of lurie v commissioner supra the court found that illinois equitable_apportionment law did not apply and the testator intended for estate_taxes to be paid from the residuary probate_estate or a revocable_trust which would benefit the surviving_spouse but not from other notice trusts which would benefit other beneficiaries the testator’s will provided that estate_taxes were to be paid from the testator’s residuary_estate if the testator’s estate was insufficient the revocable_trust instrument provided that the taxes should be charged against the principal of the trust and that such payments should be made without reimbursement from the grantor’s executor or administrator from any beneficiary of insurance upon the grantor’s life or from any other person we find that the facts of the case before us more closely resemble the facts set forth in new york trust co v doubleday a 2d conn and in re estate of erieg a 2d pa neither the will nor the restated trust agreement contains the without apportionment language that the court found significant in the first three cases that respondent cited furthermore neither the will nor the restated trust agreement specify whether the estate_taxes should be borne by or charged against the residue whichever residue that may be or whether the residue should merely be the source of payment potentially entitled to reimbursement from the other beneficiaries while the testator’s trust agreement in estate of lurie v commissioner supra did not clearly specify whether apportionment should apply the court found that such a specific direction was not necessary to opt_out of illinois equitable_apportionment law because the illinois apportionment law applies only if the decedent provided no direction about payment of federal estate_tax id emphasis added citing fleming v gowling in re estate of gowling n e 2d ill and roe v estate of farrell n e 2d ill by contrast given the utah supreme court’s approval of new york trust co and in re estate of erieg under utah law a payment clause alone does not meet the standard set out in in re estate of huffaker p 2d pincite that a direction to opt_out of utah’s equitable_apportionment statute must be expressed in terms that are specific clear and not susceptible of reasonable contrary interpretation see also estate of brunetti v commissioner tcmemo_1988_517 applying the california equitable_apportionment statute even though the testator’s will provided that estate_taxes were to be paid out of the residue of the testator’s estate without apportionment because of the strong presumption that equitable_apportionment applies absent a clear and unambiguous direction to the contrary because the restated trust agreement does not specify how the estate_taxes should be apportioned and does not specify which residue those taxes should be paid from we find that equitable_apportionment applies 4the parties dispute whether we should consider extrinsic evidence respondent argues that extrinsic evidence is not necessary because the will and the restated trust agreement unambiguously provide that the estate_taxes are to be borne by ms mccoy’s share of the estate the estate argues that under utah law extrinsic evidence is admissible to show that a continued accordingly we need not address the parties’ alternative arguments on the basis of the foregoing decision will be entered under rule continued provision in a document is ambiguous see gillmor v macey p 3d utah ct app we need not address these arguments because we find the will and the restated trust agreement fail on their face to direct the apportionment of estate_taxes and the little extrinsic evidence that is available supports our conclusion that decedent did not intend to direct the apportionment of estate_taxes in his testamentary documents the facts that ms henry was not experienced in the area of estate_tax planning decedent had no background in estate_tax planning decedent had difficulty communicating with and understanding others and decedent generally tried to minimize the taxes he paid but did not discuss tax matters with his wife when discussing estate_planning all indicate that decedent most likely gave no consideration to which portion of his estate would bear the burden of the estate_taxes under the restated trust agreement if he had been aware of the issue it appears he most likely would have directed the apportionment of the estate_taxes as he did in the original trust agreement


department of the treasury internal_revenue_service washington d c date number info release date uil no dear i am responding to your letter of date on behalf of helicopter tour companies in the tour companies believe scenic tours are not subject_to the federal excise_tax on the amount_paid for taxable air transportation the internal_revenue_code provides an exception from the tax on air transportation for certain small aircraft however the exception does not apply to aircraft operated on an established line under sec_49_4263-5 of the facilities and services excise_tax regulations operated on an established line refers to flights operated with some degree of regularity between definite points this term does not necessarily mean that strict regularity of schedule is maintained the full run is always made a particular route is followed intermediate stops are restricted the term implies the person rendering the service has control_over the direction route time and number of passengers court cases recognize the air_transportation_tax applies to scenic tours if certain conditions are met 991_fsupp_1209 d nev found the tax applied because the some degree of regularity requirement had been satisfied for morning and afternoon circular air tours and an air and land tour of the grand canyon the air tour company retained control_over the direction route time and number of passengers and regularly flew over a certain scenic area lake mead air also found the requirement that the flights be operated between definite points was satisfied even though the flights were circular tours the flights in question always started and ended at the same point so the flights were between definite points therefore the court concluded circular tours over the grand canyon were taxable_transportation in 781_fsupp_669 d haw which was resolved on other grounds the court noted a one-day excursion covering eight of the hawaiian islands was subject_to the tax on air transportation the material you sent points out that technical_advice_memorandum tam date found certain circular flight tours were not operated between definite points as defined in the applicable regulations however as stated above the position of the regulations is that the term operated on an established line means that flights be operated with some degree of regularity between definite points in tam the tour operator’s method of operation differed from that of most other operators the tour operator advertised for business but provided no departure times and followed no set schedule thus the tour was not operated with some degree of regularity other more recent tams have addressed factual situations closer to that presented in the material you forwarded to us and have concluded those tours are taxable_transportation see tam march and tam may please note a technical_advice_memorandum addresses the particular facts of the taxpayer therein the internal_revenue_code provides that a technical_advice_memorandum may not be used or cited as precedent i hope this information is helpful to you in responding to the helicopter tour companies if you need additional information please contact me or mr william d hussey at sincerely associate chief_counsel passthroughs and special industries by richard a kocak chief branch


id office uilc cca_2010021213571437 ---------- number release date from ------------------- sent friday date pm to ------------------------------------------ cc --------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------- subject re ---------- one caveat if we send an fpaa directly to an indirect_partner less than days after we issued an nbap to the pass-thru_partner we would include the untimely notice letter in the fpaa to the indirect_partner notice to the pass-thru_partner constitutes notice to the indirect_partner for these purposes


t c summary opinion united_states tax_court claude d mayo sr and lessie m mayo petitioners v commissioner of internal revenue respondent docket no 14686-99s filed date claude d mayo sr and lessie m mayo pro_se dustin m starbuck for respondent on date this court filed its summary opinion __________________ t c summary opinion in this case and a decision was entered on date on date respondent notified the court that petitioner claude d mayo sr had filed a petition with the united_states bankruptcy court for the western district of virginia on date before the filing of our opinion and entering the decision but after the filing of the petition pursuant to u s c sec_362 on date we withdrew our opinion vacated the decision and stayed the proceedings in this court on date the bankruptcy court lifted the stay imposed by u s c sec_362 on date this court issued an order to show cause to petitioners as to why our opinion should not be released and our decision entered petitioners have not responded to that order the order to show cause has been made absolute our summary opinion therefore is unchanged powell special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined deficiencies in petitioners’ and federal income taxes of dollar_figure and dollar_figure respectively respondent also determined that petitioners are liable for negligence penalties under sec_6662 for and of dollar_figure and dollar_figure respectively the issues are whether petitioners are entitled to deduct losses on schedule c profit or loss from business for the years in issue arising from a used-car activity of petitioner claude d mayo sr petitioner entitled to deduct greater medical and mortgage interest_expenses than the amounts allowed by respondent and liable for the negligence penalties under sec_6662 for and at the time the petition was filed petitioners resided in moneta virginia the relevant facts may be summarized as follows during and petitioners reported income from interest unless otherwise indicated subsequent section reference sec_1 are to the internal_revenue_code in effect for the years in issue and rule references are to the tax_court rules_of_practice and procedure dividends pensions and wages of dollar_figure and dollar_figure respectively petitioners deducted losses of dollar_figure in and dollar_figure in from the used-car activity mayo’s auto sales petitioners’ schedule c for the years in issue showed the following gross_income less dollar_figure insurance interest big_number legal expense sec_130 office expense sec_291 repairs big_number supplies big_number taxes license sec_470 utilities -0- car truck wages -0- other expenses -0- big_number dollar_figure dollar_figure dollar_figure big_number -0- -0- -0- -0- big_number big_number total expenses big_number loss dollar_figure big_number dollar_figure 1other expenses consisted of cleaning supplies dollar_figure tags and licenses dollar_figure auto parts dollar_figure state inspection dollar_figure car purchases dollar_figure rental uniforms dollar_figure and office and car phone dollar_figure mayo’s auto sales began operations in or and has never operated at a profit for the taxable years and petitioners reported losses of dollar_figure and dollar_figure respectively from this activity the records of the virginia department of motor vehicles show that petitioners sold four automobiles during the income also includes gambling income and capital gains the period of date through date two of those vehicles were sold to petitioners’ relatives upon examination of both years respondent disallowed the deductions claimed on schedule c with respect to mayo’s auto sales on the ground that the activity was not engaged in for profit with respect to schedule a itemized_deductions deductions for respondent disallowed dollar_figure of the dollar_figure claimed for mortgage interest for lack of substantiation with respect to the schedule a deductions respondent disallowed dollar_figure of the dollar_figure claimed for medical_expenses for lack of substantiation respondent also determined that petitioners are liable for penalties under sec_6662 for the years in issue mayo’s auto sales discussion sec_162 allows a deduction for ordinary and necessary expenses paid_or_incurred in carrying_on_a_trade_or_business generally under sec_183 and b an individual is not allowed deductions attributable to an activity_not_engaged_in_for_profit except to the extent of gross_income generated by the activity sec_183 defines an activity_not_engaged_in_for_profit as any activity other than one for which deductions are allowable under sec_162 or under paragraph or of sec_212 essentially the test for determining whether an activity is engaged in for profit is whether the taxpayer engages in the activity with the primary objective of making a profit see 893_f2d_656 4th cir affg 91_tc_686 although the expectation need not be reasonable the expectation must be bona_fide see 91_tc_371 furthermore in resolving the question greater weight is given to the objective facts than to the taxpayer’s statement of intentions see 84_tc_1244 affd 792_f2d_1256 4th cir sec_1_183-2 income_tax regs contains a nonexclusive list of factors to be used in determining whether an activity is engaged in for profit these factors are the manner in which the taxpayer carries on the activity the expertise of the taxpayer or his advisers the time and effort expended by the taxpayer in carrying on the activity the expectation that assets used in the activity may appreciate in value the success of the taxpayer in carrying on similar or dissimilar activities the history of income or losses with respect to the activity the amount of occasional profit if any the financial status of the taxpayer and any elements of personal pleasure or recreation no single factor nor simple numerical majority of factors is controlling see 949_f2d_345 10th cir affg tcmemo_1990_148 petitioners presented no evidence concerning many of the factors contained in the regulations while petitioner claims that he maintained books_and_records he did not produce any records at trial he could not explain the dollar_figure deduction claimed for supplies in and he could not explain the components of the dollar_figure deduction for other expenses in while people may not normally associate trading in used cars as a recreation we do recognize that some people do get a certain pleasure from repairing cars but what concerns us more is the history of losses while a person may start out with a bona_fide expectation of profit even if it is unreasonable there is a time when in light of the recurring losses the bona fides of that expectation must cease see 224_f3d_16 1st cir affg tcmemo_1999_92 this is particularly pertinent here where petitioner could not estimate when the activity might become profitable moreover there is nothing in the record to reasonably suggest that the activity as petitioner operated it during the years in issue had been or would ever be profitable we are also concerned that there is no evidence that petitioner despite losses of more than dollar_figure from to ever sought expert advice concerning the profitability of the venture in the same vein there is no evidence that petitioner altered his method of doing business to cut the stream of losses the bottom line is that whatever this activity was it was not operated for profit there is one aspect of respondent’s determinations with regard to mayo’s auto sales that we think was erroneous it appears to us that the computation of tax in the notice_of_deficiency incorrectly adds the schedule c gross_receipts to the total adjustments for both years respondent disallowed the total schedule c expenses for both years and then added the schedule c gross_income to petitioners’ taxable_income and subtracted the same amounts as miscellaneous deductions on schedule a the taxable_income for and appears to be overstated by dollar_figure and dollar_figure respectively this can be corrected in the rule computation medical and mortgage interest_expenses with regard to the disallowance of the deduction for medical_expenses for petitioners have the burden of establishing that respondent’s determination is erroneous rule a sec_7491 does not affect the burden_of_proof where the taxpayer has not substantiated deductions 116_tc_438 the deduction was disallowed because petitioners had not substantiated the expenditure petitioners presented no evidence from which the court could conclude that respondent’s determination was erroneous and we affirm that determination the determination with respect to the mortgage interest is different petitioners claimed deductions of dollar_figure for and dollar_figure for petitioners apparently substantiated the amount but could substantiate only dollar_figure of the deduction petitioner testified that petitioners had paid the amount deducted considering the substantiation of the deduction and petitioner’s testimony we believe that it is highly likely that petitioners incurred and paid the amount claimed for we hold for petitioners on this issue negligence sec_6662 imposes a penalty with respect to any portion of an underpayment_of_tax required to be shown on a return in an amount equal to percent of the portion of the underpayment to which this section applies sec_6662 applies inter alia to underpayments attributable to negligence or disregard of rules or regulations see sec_6662 negligence includes any failure to make a reasonable attempt to comply with the provisions of the internal_revenue_code and disregard includes any careless reckless or intentional disregard sec_6662 also ‘negligence is a lack of due care or the failure to do what a reasonable and ordinarily prudent person would do under the circumstances ’ 89_tc_849 quoting marcello v commissioner 380_f2d_499 5th cir affg on this issue 43_tc_168 and t c memo affd 904_f2d_1011 5th cir affd on other grounds 501_us_868 the question then is whether petitioners’ conduct meets the reasonably prudent person standard see id petitioner is a lineman for the power company and his wife is a brusher with a furniture company they are not sophisticated with respect to financial matters petitioners’ returns were prepared by a professional tax_return_preparer we have recognized that reliance on the advice of a professional is a factor to be considered in determining whether a taxpayer uses reasonable care see id pincite moreover while we conclude that the schedule c losses are not deductible because the activity was not entered into for profit there are factors that may be viewed as being favorable to petitioners accordingly we do not sustain the sec_6662 penalties reviewed and adopted as the report of the small_tax_case division decision will be entered in accordance with respondent’s previous rule_155_computations


internal_revenue_service department of the treasury number release date index number decedent washington dc person to contact telephone number refer reply to cc psi - plr-130468-00 date date a b_trust successor trust successor trust successor trust successor trust gc gc 1’s spouse ggc 1a ggc 1b gc gc 2’s spouse ggc 2a ggc 2b gc gc 3’s spouse ggc 3a ggc 3a’s spouse gggc 3a gggc 3aa ggc 3b ggc 3c gc gc 4's spouse ggc 4a ggc 4a’s spouse ggc 4b plr-130468-00 ggc 4b’s spouse gggc 4b ggc 4c ggc 4c’s spouse gggc 4c ggc 4d bank bank state state d1 d2 d3 d4 dear this letter responds to your letter dated date and subsequent correspondence submitted by you as the authorized representative of the trustee of trust requesting certain rulings under the internal_revenue_code the information submitted states that decedent created trust as an irrevocable_trust on d1 with decedent’s child a as trustee for the benefit of a’s issue the spouses of a’s issue and a’s spouse decedent died on d2 article first of trust provides the trustee with the discretionary authority to pay part or all of the net_income or principal to any one or more of a class of beneficiaries consisting of a's spouse a’s issue and the spouses of any issue however the trustee may not pay net_income or principal to any child of a who has not attained his or her twenty-first 21st birthday any accumulated net_income is to be added to principal unless sooner terminated by payments of principal trust is to continue until the date that is twenty-one years after the death of the survivor of the children of a who were living on d1 the children of a alive on d1 were gc gc gc and gc article second of trust provides that subject_to the exercise of the powers conferred in articles third and fourth at the termination of trust the trustee is to pay the entire principal then remaining forty percent to a's spouse and sixty percent or the whole thereof if his spouse is not then living to the issue of a then living in equal shares per stirpes or if there are no issue then living to the issue of decedent’s child b then living in equal shares per stirpes article third of trust provides a with the discretionary authority at any time during his life to divide the principal then remaining into shares for or among any one or more of a class consisting of a's spouse his issue and the spouses of any issue after plr-130468-00 the division a as trustee is to hold each share as a separate trust fund for the benefit of a’s spouse his issue and the spouses of any issue a is to either pay part or all of the net_income and the principal of the separate trust fund to the beneficiary or accumulate all or part of the net_income and add the same to principal upon the death of a beneficiary prior to receiving the entire principal of the separate trust fund for his or her benefit or in the case of a separate trust fund for a beneficiary who was not living on the date trust was executed then upon the termination of trust if the termination occurs during the life of the beneficiary the principal of the separate trust fund then remaining is to be paid to the beneficiary if the beneficiary is not then living the trust fund is to be paid in equal shares per stirpes to the issue of the beneficiary then living or if there is no issue then living to the other issue of a then living or if there is no issue of a then living to the issue of b then living article fourth of trust provides a with the power to appoint by will the principal of trust remaining at his death either outright to or in further trust for the benefit of one or more of a class consisting of his spouse his issue and the spouses of any issue this power is to be exercisable whether or not the power conferred in article third has been exercised by a during his lifetime and if and to the extent that this power is to be validly exercised in this manner the trust fund is to be held or disposed of in accordance with the terms of a’s will in lieu of the terms of trust paragraph xi of article seventh of trust provides that the trustee and each successor trustee in his or her sole discretion is fully authorized and empowered with respect to any property held in trust to make a just and equitable division or partition of any property and to distribute portions thereof or undivided interests therein in cash or in_kind and in connection with any division partition or distribution to make a binding appraisal of the property article eleventh of trust provides that the trustee or each individual successor trustee may designate by instrument in writing an individual or a bank or trust company to serve as successor trustee in the event that he or she should for any reason cease to act each designation is to be revocable until the occurrence of the event upon which the same is to become effective in the event that despite the foregoing provisions there is no trustee bank is to become the trustee a is to receive no compensation_for his services as trustee but each successor trustee is to be entitled to receive and may retain compensation at the rates and in the manner specified by the laws of state no bond or other security is to be required of any trustee acting and each of them is to have and may exercise all of the duties and powers discretionary and otherwise imposed or conferred upon the trustee named excepting only that powers conferred upon a by name are to be exercisable only by a on d3 a exercised his power under article third and appointed a portion of trust principal to separate trusts for the benefit of gc gc gc and gc each of the trusts continued to operate under the terms of trust it is represented that no additions have been made to trust or each grandchild’s trust after date plr-130468-00 on d4 a petitioned local court of state to distribute the remaining property in trust to four new trusts one for the benefit of each grandchild’s family collectively the successor trusts the beneficiaries of successor trust will be gc gc 1's spouse and children ggc 1a and ggc 1b the beneficiaries of successor trust will be gc gc 2's spouse and children ggc 2a and ggc 2b the beneficiaries of successor trust will be gc gc 3's spouse gc 3's children gc 3's child’s spouse and gc 3's grandchildren ggc 3a ggc 3a’s spouse gggc 3a gggc 3aa ggc 3b and ggc 3c the beneficiaries of successor trust will be gc gc 4's spouse gc 4's children gc 4's children’s spouses and gc 4's grandchildren ggc 4a ggc 4a’s spouse ggc 4b ggc 4b’s spouse gggc 4b ggc 4c ggc 4c’s spouse gggc 4c and ggc 4d the petition to distribute the property in each grandchild’s trust is subject_to the issuance of a favorable ruling from the internal_revenue_service concerning the transfer_tax consequences of the successor trusts except for the beneficiaries the provisions of all successor trusts are substantially the same as the provisions of trust except that each successor trust will be created for the primary benefit of only one grandchild the grandchild’s spouse the grandchild’s children and the grandchild’s grandchildren bank will be the trustee new trustee of each successor trust new trustee will have the discretionary authority to distribute net_income and principal to the grandchild the grandchild’s spouse and the grandchild’s children each successor trust will provide that any power to remove and replace trustees and to appoint co-trustees and successor trustees held by a person are to be exercised by that person subject_to the requirement that at all times all trustees serving must be disinterested persons a disinterested person is defined as a bank or an individual other than a beneficiary that i is either domiciled in state or in a jurisdiction in which the grandchild is not domiciled and ii is not within the meaning of sec_672 of the internal_revenue_code related or subordinate to any beneficiary each successor trust will be governed by the laws of state and will terminate no later than the date that is twenty-one years after the death of the last survivor of the children of a who were alive on the date trust was executed each successor trust will receive a pro_rata share of each asset held in each grandchild’s trust further each successor trust will grant the grandchild a testamentary power to appoint the balance of the trust to or for the benefit of a limited class of beneficiaries within the grandchild’s family specifically the property may only be appointed to the individual’s issue who would if such date were the termination_date be among the recipients of a terminating distribution from trust in conjunction with this plan a intends to release the power to appoint the property to his spouse and issue provided in article fourth of trust ruling sec_61 provides that gross_income includes gains derived from dealings in property plr-130468-00 sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss will be the excess of the adjusted_basis provided in such section for determining loss over the amount_realized in order for a transaction to result in a sec_1001 taxable_event the transaction must be a sale exchange or other_disposition revrul_56_437 1956_2_cb_507 holds that the severance of a joint_tenancy in stock under a state partition action to compel the issuance of separate stock certificates is not a sale_or_exchange similarly the conversion of a joint_tenancy in stock into a tenancy_in_common is a nontaxable_transaction in contrast in revrul_69_486 1969_2_cb_159 a trustee made a non-pro rata distribution of trust property pursuant to an agreement of the beneficiaries although neither the trust instrument nor local law authorized the trustee to do so the ruling holds that the transaction was equivalent to a pro_rata distribution of the trust assets followed by an exchange between the beneficiaries and was a taxable_event under sec_1001 this case is more akin to revrul_56_437 than to revrul_69_486 the beneficiaries of the trust will not acquire their interests in the successor trusts as a result of an exchange of their interests in the trust but by reason of the trustee's authority to divide the trust under the trust instrument and state law the transaction thus is similar to the partition of the property in revrul_56_437 therefore the trust the successor trusts and the beneficiaries of any of these trusts will not realize gain_or_loss under sec_1001 because no gains will be realized under sec_61 no income will result from this transaction to the trust the successor trusts or any beneficiary ruling sec_1015 provides in part that if property was acquired by gift after date the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift except that if such basis adjusted for the period before the date of the gift as provided in sec_1016 is greater than the fair_market_value of the property at the time of the gift then for the purpose of determining loss the basis shall be such fair_market_value sec_1223 provides that in determining the period for which the taxpayer has held property however acquired there shall be included the period for which such property was held by any other person if such property has for purposes of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in the taxpayer’s hands as it would have in the hands of the other person if under sec_1015 each successor trust’s basis in an asset transferred to it by the trust will equal the trust’s basis in the asset at the time of the transfer then under sec_1223 each plr-130468-00 successor trust’s holding_period for an asset transferred to it by the trust will include the trust’s holding_period for the asset at the time of the transfer we conclude that each asset transferred to the successor trusts from trust will have the same basis and holding_period as it had prior to the proposed transaction ruling sec_643 provides that for purposes of subchapter_j under regulations prescribed by the secretary two or more trusts shall be treated as one trust if such trusts have substantially the same grantor or grantors and substantially the same primary beneficiary or beneficiaries and a principal purpose of such trusts is the avoidance of the tax_imposed_by_chapter_1 for purposes of the preceding sentence a husband and wife shall be treated as one person we conclude that while the successor trusts have the same grantor they have different primary beneficiaries therefore based on the facts and representations submitted we conclude that the successor trusts will be treated as separate trusts for federal_income_tax purposes under sec_643 ruling sec_2514 provides that the exercise or release of a general_power_of_appointment created after date is deemed to be a transfer of property by the individual possessing the power for gift_tax purposes sec_2514 defines the term general_power_of_appointment as a power which is exercisable in favor of the individual possessing the power his estate his creditors or the creditors of his estate however under sec_2514 a power to consume invade or appropriate property for the benefit of the decedent which is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent is not a general_power_of_appointment sec_25 c of the gift_tax regulations provides that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the decedent or his creditors or the decedent’s estate or the creditors of his estate in this case a has a testamentary power to appoint the assets held for the benefit of his family because this power may be exercised only in favor of a limited class of beneficiaries within a's family this power is not a general_power_of_appointment as defined in sec_2514 accordingly a's power_of_appointment is not a general_power_of_appointment and the release of this power will not constitute a deemed transfer subject_to gift_tax under sec_2514 ruling plr-130468-00 sec_2501 imposes a tax 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 subject_to certain limitations the gift_tax applies whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is real or personal tangible or intangible in this case the beneficial interests rights and expectancies of new trustee gc gc gc or gc and their respective family members will remain substantially the same both before and after the proposed distribution to each successor trust accordingly based on the facts submitted and the representations made we conclude that the distributions to and the pro_rata allocation of trust assets among the successor trusts will not be deemed to be a taxable gift under sec_2501 ruling sec_2601 imposes a tax on every generation-skipping_transfer gst which is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip under a of the tax_reform_act_of_1986 the generation-skipping_transfer_tax gstt is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that the transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor held a power with respect to the trust that would have caused the value of the trust to be included in the settlor’s gross_estate for federal estate_tax purposes by reason of sec_2038 or by reason of sec_2042 if the settlor had died on date 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 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 gstt 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 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 gst or the creation of a new gst plr-130468-00 in this case the proposed distribution of trust’s corpus to successor trust successor trust successor trust and successor trust will not result in a shift of any beneficial_interest to any beneficiary who occupies a generation lower than the persons holding the beneficial interests prior to the distribution further the proposed distributions will not extend the time for vesting of any beneficial_interest in either trust beyond the period provided for in the original trust accordingly based on the facts submitted and the representations made we conclude that the proposed distributions of each grandchild’s trust principal into four successor trusts successor trust successor trust successor trust and successor trust and any subsequent distribution from or termination of any interests in the successor trusts will not cause the trusts to lose their exempt status for generation-skipping_transfer_tax purposes under sec_2601 ruling sec_2041 provides that the value of the gross_estate is to include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date sec_2041 defines general_power_of_appointment as a power which is exercisable in favor of the decedent his estate his creditors or creditors of his estate however under sec_2042 a power to consume invade or appropriate property for the benefit of the decedent which is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent is not a general_power_of_appointment section c of the estate_tax regulations provides that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the decedent or his creditors or the decedent’s estate or the creditors of his estate in this case each successor trust provides a respective grandchild with a testamentary power to appoint the assets held for the benefit of his or her family because these powers of appointment may be exercised only in favor of a limited class of beneficiaries within the grandchild’s family these powers are not general powers of appointment as defined in sec_2041 furthermore if a trustee is removed from office the trustee may only be replaced with another trustee that is not within the meaning of sec_672 related or subordinate to any beneficiary of the successor trust accordingly a grandchild’s power_of_appointment is not a general_power_of_appointment and will not cause the property in successor trust to be includible in the grandchild’s gross_estate under sec_2041 except as specifically ruled above we express no opinion concerning the federal tax consequences of the transaction described above under any other provision of the code plr-130468-00 this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office copies of this letter are being forwarded to the trustee of trust and to the other authorized representative of the trustee of trust sincerely yours j thomas hines chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of a letter copy for sec_6110 purposes cc


significant index number department of the treasury l internal_revenue_service washington d c aug commissioner tax_exempt_and_government_entities_division a1 ep rte re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning date this extension applies to the eligible amortization charge bases established as of date the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan’s actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the and to the this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact sincerely yours david m ziegler manager ep actuarial group


internal_revenue_service number info release date uil cor-115808-00 date the honorable j c watts jr u s house of representatives washington d c dear mr watts thank you for your letter of date signed by you and a number of your colleagues encouraging the internal_revenue_service to immediately readjust the business standard mileage rate to reflect the recent increase in gasoline prices you note that the increased cost has particularly burdened self-employed taxpayers who use automobiles for business purposes gasoline prices we realize increased gasoline prices are an economic burden however the cost of gasoline is only one part of the business standard mileage rate which includes fixed and operating automobile costs these costs include depreciation or lease payments maintenance and repairs insurance and license and registration fees in addition to gasoline and oil less than one-third of the cents per mile rate comes from the cost of gasoline and oil thus an immediate adjustment in the rate taking into account the recent increase in gasoline prices might not be significant setting the business standard mileage rate the rate is a national average amount determined by an annual study performed by an independent_contractor who is an expert in the cost analysis of business use of automobiles the contractor uses recent data from each state on the component costs of operating the most popular automobiles the contractor then combines this data to achieve a national composite cents-per-mile rate advantages of using the business standard mileage rate reducing a taxpayer’s record-keeping burden is the principal advantage of using the rate gasoline prices rise and fall during the year but taxpayers may continue to use the same rate without having to keep records of actual expenses although rising gasoline prices can be a disadvantage for taxpayers who use the rate falling prices can work to their advantage for example although gasoline prices fell in for all of and through date taxpayers were able to use the rate that reflected the earlier higher prices taxpayer’s options to deduct the ordinary and necessary expenses of using an automobile for business purposes a taxpayer must substantiate the cost date place and business_purpose of each use of the automobile by adequate_records for the cost the taxpayer has two options cid substantiate actual cost by keeping records or by other_sufficient_evidence cid use the business standard mileage rate using the rate gives approximate not actual costs taxpayers can deduct the actual business_expenses of using a personally-owned automobile and this may be advantageous when automobile costs are rising publication travel entertainment gift and car expenses contains further information on how taxpayers should substantiate expenses i have enclosed the relevant pages from that publication i am sending a similar letter to your colleagues i hope this information is helpful please call me at or robert a berkovsky at if you have any questions sincerely charles o rossotti enclosure


department of the treasury internal_revenue_service washington d c jan tax_exempt_and_government_entities_division epl rat a ‘ uniform issue list legend taxpayer a ira b financial_institution c company d company e individual f amount dear this is in response to your request dated date in which you request through your authorized representative 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 taxpayer a represents that he received a distribution equal to amount from ira b which was maintained by financial_institution c taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by d a was due to erroneous information provided by individual f on behalf of company d an investment_company as a result of which taxpayer a believed amount had been directly transferred to a self-directed_ira company d is an entity the affiliates of which provide investment services to clients company d established company e a limited_liability_company that sells membership units in an apartment complex to investors individual f is the chief_executive_officer ceo of company d and the manager of company e in april financial_institution c informed taxpayer a that it invests ira assets only in instruments that can be traded on an exchange wanting to invest his ira assets in real_estate taxpayer a entered into an llc membership interest purchase agreement agreement on date to purchase membership units in company e from company d equal to amount the agreement was signed by individual f on behalf of company d and by taxpayer a on behalf of his self-directed_ira an addendum to the agreement was signed by taxpayer a for his self-directed_ira and the execution page lists his self-directed_ira as the type of entity investing in the membership units on date pursuant to taxpayer a’s instructions financial_institution c directly transferred amount to company d by check payable to company d taxpayer a represents that he believed that based on discussions with individual f he had transferred amount to a self-directed_ira taxpayer a only discovered that amount was not held in an ira when he met with his accountant to prepare hi sec_2011 federal_income_tax return based on the above facts and representations taxpayer a requests that the service waive the 60-day rollover requirement with respect to the distribution of amount from ira b 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 sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money or 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 ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ra which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary_of_the_treasury may waive the 60-day requirement under sec_408 and sec_408 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 i revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 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 the information and documentation submitted by taxpayer a is consistent with his assertion that the failure to accomplish a timely rollover of amount was due to erroneous information provided by individual f on behalf of company d to taxpayer a as a result of which taxpayer a believed amount had been directly transferred to a self-directed_ira account therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount into a rollover ira account provided all other requirements of sec_408 except the 60-day requirement are met with respect to such contributions amount will be considered a rollover_contribution within the meaning of sec_408 this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer 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_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact sincerely yours c bts wether carlton a watkins manager employee_plans technical group enclosures notice of intention to disclose deleted copy of this letter cc