t c memo united_states tax_court estate of melvine b atkinson deceased christopher j macquarrie personal representative petitioner v commissioner of internal revenue respondent docket no 2865-05l filed date a petition was filed on behalf of the estate for judicial review pursuant to sec_6330 i r c in response to a determination by r that levy action is appropriate held r’s determination to proceed with collection is sustained mitchell i horowitz for petitioner stephen r takeuchi for respondent memorandum findings_of_fact and opinion wherry judge this case is before the court on a petition for judicial review of a notice_of_determination concerning collection action s under sec_6320 and or the issue for decision is whether respondent abused his discretion in sustaining the proposed levy action for the estate of melvine b atkinson’s the estate federal estate_tax liabilities findings_of_fact some of the facts have been stipulated and are so found 1unless otherwise indicated all section references are to the internal_revenue_code code of as amended 2in the stipulation of facts the estate and respondent both reserved relevancy objections to attached exhibits fed r evid provides the general_rule that all relevant evidence is admissible while evidence which is not relevant is not admissible fed r evid defines the relevant evidence as evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence while the relevancy of some exhibits is certainly limited the court finds that the exhibits meet the threshold definition of relevant evidence and are admissible the court will give the exhibits only such consideration as is warranted by their pertinence to the court’s analysis of the case the estate also reserved objections based on fed r evid alleging that exhibits failed to include communications between the respondent’s counsel and the petitioner’s prior counsel who represented the petitioner in protracted tax_court litigation including two appeals thereof the court overrules the estate’s objection as the evidence the estate seeks admitted is not relevant to the instant case the estate also reserved objections based on fed r evid to the introduction of the petitioner’s personal affairs continued the stipulations of the parties with accompanying exhibits are incorporated herein by this reference melvine b atkinson decedent was a resident of miami beach florida when she died testate on date christopher j macquarrie mr macquarrie was appointed executor of decedent’s estate mr macquarrie was already serving as the trustee of decedent’s trusts the melvine b atkinson irrevocable_trust and the melvine b atkinson charitable_remainder_annuity_trust collectively the trusts at the time the petition was filed on behalf of the estate mr macquarrie resided in ocala florida continued because its probative value is substantially outweighed by the danger of unfair prejudice and confusion of the issues the court concludes that the documents in question do not create an undue risk of prejudice or confusion of the issues and are admissible respondent also reserved objections to certain exhibits based on the ground that these documents were not submitted to the revenue_officer or settlement officer and therefore are not part of the administrative record the court noted respondent’s objection but reserved its ruling e vidence that a taxpayer might have presented at the sec_6330 hearing but chose not to is not admissible in a trial conducted pursuant to sec_6330 because where as here the appeals officer was open to receive the evidence at or before the hearing and was not ignoring proffered evidence it is not relevant to the question of whether the appeals officer abused her discretion 125_tc_301 affd 469_f3d_27 1st cir the estate had ample opportunities to present evidence to respondent’s revenue and appeals officers accordingly the court sustains respondent’s objection 3on date decedent created the trusts and executed her last will and testament an estate_tax_return was filed for decedent on date thereafter respondent audited the estate and determined a deficiency in response the estate timely petitioned this court the court found that the estate was liable for a reduced deficiency see 115_tc_26 affd 309_f3d_1290 11th cir on date a deficiency of dollar_figure plus interest was assessed against the estate respondent issued to the estate a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 on date with respect to the estate’s unpaid estate_tax the estate did not respond respondent then issued to mr macquarrie a summons for appearance on date at respondent’s ocala florida office additionally the summons required mr macquarrie to bring to his summons appearance the following documents relating to the period of date to date a listing of all assets of the estate copies of statements of all bank accounts stock accounts or other asset accounts owned or controlled by the estate copies of all canceled checks for any bank accounts owned or controlled by the estate and a listing of all distributions made from the assets of the estate by source date amount and payee mr macquarrie designated his attorney robert s williams mr williams as his attorney-in-fact on date by executing and delivering to respondent an internal_revenue_service irs form_2848 power_of_attorney and declaration of representative mr williams began correspondence with amelia clark ms clark the revenue_officer appointed to handle the estate’s unpaid tax_liabilities on date the day before mr macquarrie was to appear in response to the summons mr williams spoke with ms clark and requested that the summons appearance date be rescheduled to date on date mr macquarrie and mr williams met with ms clark and her manager richard bartholomew at the irs office in ocala florida to discuss the following the filing_status of the estate’s tax returns the current_assets and liabilities of the estate the administrative expenses of the estate charitable distributions of approximately dollar_figure to the mayo clinic from the estate and some personal affairs of mr macquarrie during the meeting ms clark prepared a financial statement for the estate based on the information provided by mr macquarrie and mr williams but mr macquarrie acting on advice from mr williams declined to sign the statement at the end of the meeting ms clark informed mr macqaurrie and mr williams that the estate’s delinquent tax returns were to be filed within days and that mr macquarrie needed to submit a signed financial statement for the estate on date ms clark spoke with mr williams and requested the following charles schwab account information from date through date for the trusts information about the class action lawsuits in which the estate was a class member information about the estate’s real_estate an original signed copy of the estate’s financial statements including those of the trusts a copy of the estate’s court pleadings regarding fees and mr macquarrie’s presence at the next meeting shortly after ms clark’s and mr williams’ telephone conversation the estate received by mail a notice_of_intent_to_levy and your right to a hearing which had been issued by respondent on date in response the estate timely submitted a form request for a collection_due_process_hearing on date in an attachment to form mr williams described the estate’s disagreement with the levy in pertinent part as follows the collection action in this case is premature and the internal_revenue_service should grant an extension of time to pay the outstanding estate_taxes the assets remaining in the estate consist of cash and security class action lawsuits of unknown value the cash remaining in the estate is needed for administrative expenses to deal with the outstanding tax_liability and the class action lawsuits the class action lawsuits have no value that can be determined at this time but have significant potential however the expenses of levying them could 4the estate was a class member in the citigroup sun micro systems tyco and worldcom class action lawsuits exceed the actual value of such assets as a result the estate’s assets cannot be rightfully levied by the government as a result of the revenue officer’s failure to suggest a course for working this matter out the taxpayer has not had the opportunity to seek possible collection alternatives such alternatives would include a partial payment immediately with some cash being used to pursue the class action claims hopefully the class action cases will then bring sufficient sums to cover the outstanding estate_taxes or the estate could pursue an offer_in_compromise based on doubt as to the estate’s ability to pay the tax_liability or the taxpayer could pursue some other alternative based upon the good_faith suggestions of the government in any event a levy is not an appropriate action to take under the circumstances on date the estate submitted a form 433-b collection information statement for businesses which indicated that the estate had dollar_figure in investments and dollar_figure in cash by letter dated date to mr williams a face- to-face appeals_conference was initially scheduled for date at the appeals_office in tampa florida on date mr williams spoke with james feist mr feist the appeals officer assigned to the estate’s case and they agreed to postpone the scheduled hearing for to weeks to allow the estate additional time to prepare the delinquent tax returns the face-to-face hearing was rescheduled for date mr williams called mr feist the morning of the rescheduled hearing to request another postponement mr williams explained that he had changed law firms and was experiencing difficulty in obtaining client files from his previous firm that were needed to complete the estate’s tax returns mr feist declined mr william’s request for another extension and told mr williams that the hearing would be held that day either in-person or telephonically a telephonic collection hearing was held on date between mr feist and mr williams during the hearing mr feist declined to discuss collection alternatives explaining to mr williams that the estate was precluded from collection alternatives due to its delinquent tax returns and informed mr williams that he would issue a notice_of_determination sustaining the levy mr feist provided mr williams with the following suggestions forward the delinquent returns and old brokerage statements to ms clark estimate the remaining administrative costs needed to close the estate including the collection activity and pay to respondent the money the estate receives from the mayo clinic 5mr williams changed law firms from akerman senterfitt to straley robin williams both of which were located in tampa florida mr williams was experiencing difficulty in obtaining files because of an alleged dispute between the estate and akerman senterfitt over allegedly unpaid fees related to the estate’s litigation in the tax_court and the court_of_appeals for the eleventh circuit 6the estate was to request the return of approximately dollar_figure in charitable distributions to the mayo clinic the notice_of_determination in this case was issued on date the notice_of_determination reflected that the unpaid estate_tax liability was dollar_figure as calculated through date an attachment to the notice_of_determination stated in relevant part the four basic collection alternatives to avoid enforced collection action are full payment installment_agreement offer_in_compromise or closing the account as currently not collectible based on financial hardship outside of full payment procedures for the other collection alternatives require that the entity file any outstanding tax returns and that the entity submit a full financial statement and verification information for analysis neither of these two requirements has been fulfilled by the estate at the point the notice_of_intent_to_levy was mailed the value of the estate had dwindled from a reported dollar_figure million in date to dollar_figure as reported on the form 433-b financial statement signed by mr macquarrie on date no payments of any amount have been remitted toward the assessments of date without full financial disclosure and full compliance with outstanding returns no collection alternative is available outside of full payment the class action lawsuits have not been initiated by the estate therefore there should be no administrative expenses necessary to monitor them the only known administrative expenses accruing at this time are for return preparation and collection appeals representation the enforcement action taken by the collection_division in issuing the notice was appropriate and reasonable under the circumstances and all legal and procedural requirements were met the estate has failed to file returns failed to provide full financial disclosure failed to make significant voluntary payments on the amount due and failed to submit a viable collection alternative as a result it has failed to show that the issuance of the notice is overly intrusive or that a better collection alternative is available therefore the issuance of the notice balances the efficient collection of the taxes with a concern that the collection action be no more intrusive than necessary a timely petition was filed with this court on date a hearing was held on date where pending motions were disposed of and the trial was started with the filing of the stipulation of facts the parties indicated that the only witness would be mr williams unless there was a rebuttal witness called the estate asked to delay mr williams’ testimony for up to days so that another attorney could be employed to conduct mr williams’ examination the request was granted and the trial was adjourned until date subsequently on date the trial was continued so 7in the stipulation of facts the estate reserved evidentiary objections to the contact sheets based on fed r evid which provides in pertinent part evidence of a person’s character or trait of character is not admissible for the purpose of proving action in conformity therewith on a particular occasion the estate’s reliance on fed r evid is misplaced as respondent is not attempting to prove any act on the part of mr macquarrie and mr macquarrie was not called as a witness at trial the court concludes that the contact sheets are admissible that mr williams could provide testimony regarding his contact with respondent’s revenue and appeals officers at trial mr williams’ uncontested testimony established that at the time the estate received the notice_of_intent_to_levy the estate and respondent were still communicating exchanging documents and information and working to arrange for the payment of the estate_taxes specifically mr williams stated that during his conversation with ms clark on date she did not inform him that the notice_of_intent_to_levy had been issued and instead requested information and documents which caused him to believe that they were still cooperating opinion i collection action a general rules pursuant to sec_6331 if a taxpayer liable to pay taxes fails to do so within days after notice_and_demand for payment the secretary is authorized to collect such tax by levy upon the taxpayer’s property the secretary is obliged to provide the taxpayer with days’ advance notice_of_levy and to include in the notice information regarding the administrative appeals available to the taxpayer sec_6331 sec_6330 elaborates on sec_6331 and provides that upon a 8the court granted mr williams’ oral motion to withdraw as counsel on date mitchell i horowitz replaced mr williams as the estate’s counsel timely request a taxpayer is entitled to a collection hearing before the irs office of appeals sec_6330 and b at the collection hearing the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy including appropriate spousal defenses challenges to the appropriateness of collection actions and offers of collection alternatives sec_6330 the taxpayer may not contest the validity of the underlying tax_liability unless the taxpayer did not receive a notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute the tax_liability sec_6330 in rendering a determination the appeals officer must verify that the requirements of any applicable law and administrative procedure have been met also the appeals officer must consider and weigh relevant issues relating to the unpaid tax or proposed levy and whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary sec_6330 the taxpayer is entitled to appeal the determination of the appeals_office if made on or before date to the tax_court or a u s district_court depending on the type of tax at issue sec_6330 where the validity of the underlying tax_liability is properly at issue the court will review the matter de novo 114_tc_604 114_tc_176 the court reviews any other administrative determination regarding the proposed levy action for an abuse_of_discretion sego v commissioner supra pincite goza v commissioner supra pincite b review for abuse_of_discretion the estate_tax liability was previously litigated and determined by this court that decision was affirmed by the court_of_appeals for the eleventh circuit see 115_tc_26 affd 309_f3d_1290 11th cir accordingly the estate’s underlying tax_liability is not properly at issue and the administrative record will be reviewed for an abuse_of_discretion an abuse_of_discretion has occurred if the commissioner exercised his discretion arbitrarily capriciously or without sound basis in fact or law 112_tc_19 the estate argues that respondent abused his discretion for the following reasons the estate’s administrative expenses were not considered adequately by respondent ms clark had 9determinations made after date are appealable only to the tax_court see pension_protection_act of publaw_109_280 120_stat_1019 insufficient information to make any collection determination mr feist issued the notice_of_determination after being assigned the case for only months which was a grossly inadequate period of time given the complexities of the case and mr feist insisted on proceeding with the final hearing even though mr williams had not yet recovered his files the estate alleges that respondent failed to consider adequately the administrative expenses of the estate however the notice_of_determination indicates that mr feist considered all of the administrative expenses that the estate raised the appeals officer determined that expenses relating to the class action lawsuits were not appropriate expenses of the estate because the estate did not initiate the litigation and did not need to incur those expenses the notice_of_determination also indicates that mr feist considered the administrative expenses of the estate related to preparing the estate’s tax returns and pursuing the collection hearing thus the record reflects that appropriate consideration was given to the administrative expenses raised by the estate accordingly the court concludes that respondent did not abuse his discretion in this regard the estate contends that respondent abused his discretion because ms clark lacked sufficient information to make a collection determination and mr feist held the collection hearing before mr williams retrieved his files an appeals officer does not abuse her discretion when she fails to take into account information that she requested and that was not provided in a reasonable_time 125_tc_301 affd 469_f3d_27 1st cir ms clark initially requested at mr macquarrie’s date summons appearance that the estate file the estate’s delinquent tax returns within days after the days had lapsed and the estate failed to comply ms clark issued the above-mentioned notice_of_intent_to_levy and your right to a hearing on date almost months later on date and only days before the estate’s previously scheduled collection hearing the estate requested a delay in the hearing date to afford the estate additional time to prepare the returns mr feist obliged and rescheduled the collection hearing for date on the morning of the rescheduled hearing the estate once again asked for additional time to prepare the returns mr feist declined the estate’s request in total from the time ms clark initially requested the estate’s delinquent tax returns the estate had approximately months to prepare and file the returns and failed to do so in roman v commissioner tcmemo_2004_20 this court stated no statutory or regulatory provision requires that taxpayers be afforded an unlimited opportunity to supplement the administrative record nor are petitioner’s contentions regarding lack of warning well taken where the record in this case is replete with explicit deadlines that respondent generously extended for petitioner’s benefit the court concludes that respondent did not abuse his discretion by failing to take into account information respondent requested of the estate and that the estate failed to produce and proceeding with the collection hearing despite the estate’s lack of files see morlino v commissioner tcmemo_2005_203 roman v commissioner supra the estate also alleges that mr feist spent a grossly inadequate period of time considering the case the regulations promulgated under sec_6330 provide that there is no period of time within which the appeals_office must conduct a collection hearing or issue a notice_of_determination the regulations provide in pertinent part that while there is no set time deadline to conduct the appeals hearing appeals will however attempt to conduct a cdp hearing and issue a notice_of_determination as expeditiously as possible under the circumstances sec_301_6330-1 q a-e9 proced admin regs t here is neither requirement nor reason that the appeals officer wait a certain amount of time before rendering his determination as to a proposed levy clawson v commissioner tcmemo_2004_106 see murphy v commissioner supra pincite manjourides v commissioner tcmemo_2005_242 morlino v commissioner supra in clawson v commissioner supra the notice_of_determination was issued less than months after the taxpayers requested a collection hearing and only days after the telephonic collection hearing was conducted in manjourides v commissioner supra less than weeks passed between the telephonic collection hearing and the issuance of the notice_of_determination in the instant case the notice_of_determination was issued more than months after the estate requested a collection hearing the record reflects that mr feist had the estate’s case under consideration starting sometime between september and date the telephonic collection hearing was held on date and the notice_of_determination was issued approximately weeks later on date in total mr feist had the estate’s case under consideration for at least months and as many a sec_4 months while mr feist may have been predisposed to an expeditious conclusion of the estate’s case the court sees nothing wrong with that given the facts of the instant case see morlino v commissioner supra suffice it to note that the determined deficiency to be collected was dollar_figure plus interest and that as of date the total amount due was dollar_figure due to questionable investments and other factors including legal fees contesting this very tax_deficiency the estate had already shrunk from over dollar_figure million to dollar_figure10 by date ignoring speculative class action assets respondent did not abuse his discretion by expeditiously deciding the estate’s case if in fact to months is expeditious ii conclusion the court concludes that respondent’s determination to proceed with collection by levy of the estate_taxes was not an abuse_of_discretion and respondent may proceed with collection the court has considered all of the estate’s contentions arguments requests and statements to the extent not discussed herein we conclude that they are meritless moot or irrelevant to reflect the foregoing for respondent decision will be entered 10this amount consists of dollar_figure in investments and dollar_figure in cash


t c memo united_states tax_court michael r davis petitioner v commissioner of internal revenue respondent docket no filed date larry d harvey for petitioner randall l preheim for respondent memorandum opinion vasquez judge this case is before the court on respondent’s motion for summary_judgment pursuant to rule unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect for the year in issue after a concession the sole issue for decision is whether petitioner can exclude from income wages earned during from working in antarctica background at the time he filed the petition petitioner resided in eagle river alaska during petitioner performed services at mcmurdo station in ross island antarctica on his federal_income_tax return petitioner excluded wage income earned and received during for services performed in antarctica i summary_judgment discussion rule a provides that either party may move for summary_judgment upon all or any part of the legal issues in controversy full or partial summary_judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact and that the legal issues presented by the motion may be decided as a matter of law see rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law respondent concedes that no penalty pursuant to sec_6662 is due from petitioner for ii in general sec_61 provides that gross_income means all income from whatever source derived accordingly citizens of the united_states generally are taxed on income earned outside the geographical boundaries of the united_states unless the income is specifically excluded from gross_income 117_tc_95 affd sub nom 68_fedappx_44 9th cir affd sub nom 357_f3d_1108 10th cir exclusions from income are construed narrowly and taxpayers must bring themselves within the clear scope of the exclusion id iii sec_911 in 126_tc_89 473_f3d_790 7th cir arnett ii we addressed the arguments made by the parties herein regarding sec_911 the u s court_of_appeals for the seventh circuit agreed with our analysis of sec_911 and affirmed our conclusion that antarctica is not a foreign_country pursuant to sec_911 and the regulations thereunder arnett v commissioner f 3d pincite we shall not repeat our analysis from arnett i herein we follow our analysis and holding in arnett i and the analysis and holding of the court_of_appeals in arnett ii in 126_tc_89 affd 473_f3d_790 7th cir we concluded our opinion with a continued iv conclusion accordingly for the reasons stated in arnett i arnett ii and herein we conclude that petitioner cannot exclude from gross_income wages earned during from working in antarctica to reflect the foregoing an appropriate order and decision will be entered continued citation of sec_863 suggesting that sec_863 provided an additional reason to rule against the taxpayer id pincite see also sec_863 providing that income earned in antarctica by a u_s_person is sourced in the united_states in arnett v commissioner f 3d pincite the u s court_of_appeals for the seventh circuit addressed sec_863 in greater detail stating at the outset we think that it is important to note that considering antarctica not to be a foreign_country is compatible with the general statutory scheme notably sec_911 is found under subtitle a chapter subchapter_n of the irc which is designated tax based on income from sources within or without the united_states part i of this subchapter entitled source_rules and other general rules relating to foreign_income deems any activity in antarctica to be space_or_ocean_activity in turn the united_states is designated the source country of income from such activity when earned by a citizen_of_the_united_states sec_863 although this provision does not provide a definitive answer as to whether antarctica is a foreign_country it supports the conclusion that sec_911 is not intended to apply to income earned for services provided in antarctica we take this opportunity to state our agreement with the court of appeals’ conclusion set forth above see also 450_us_1


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom p si 4-plr-122345-98 date date number release date re legend settlor trust trust1 trust trust trust daughter grandchild grandchild grandchild grandchild a b c state this is in response to your letter of date and prior correspondence in which you request a ruling on the application of the generation-skipping_transfer gst tax to two amendments to be made to the trust agreement executed by the settlor with respect to trust the settlor created the trust in under the trust agreement trust trust trust and trust are administered as four separate trusts with each such trust owning an undivided one-fourth interest in the trust property daughter the settlor’s adult child is a beneficiary of each of the four trusts in addition grandchild and his children and other descendants are the beneficiaries of trust grandchild and her children and other descendants are the beneficiaries of trust grandchild and his children and other descendants are the beneficiaries of trust and grandchild and his children and other descendants are the beneficiaries of trust there have been no additions constructive or otherwise to any of the trusts since date the trust agreement designates grandchild and a as co-trustees b was designated to succeed a as co-trustee if b resigned he was to designate a successor co-trustee who as to trustor the settlor is not a_related_or_subordinate_party within the meaning of such terms as used in the internal_revenue_code grandchild continues to serve as co-trustee a resigned as co-trustee and he was succeeded by b b resigned and designated c as co-trustee article i of the trust agreement states that daughter is referred to as the primary beneficiary each of grandchild grandchild grandchild and grandchild is referred to as a secondary beneficiary and the respective children or other descendants of grandchild grandchild grandchild and grandchild are referred to as the ultimate beneficiaries of that grandchild’s trust the distribution and termination provisions are identical for each of the four trusts under article iii and article viii the trustees are granted discretionary powers to distribute income and or principal among the trust beneficiaries depending on whether the beneficiary is a primary secondary or ultimate beneficiary and other circumstances under article v these distributions are to be made only after approval by a the co-trustee or his successor under article viii the trustees may terminate a_trust at any time if they consider it necessary and advisable and for the best interests of any trust and the beneficiaries thereof and in such event to thereupon make distribution of principal and accumulated income to trust beneficiaries in conformity with the provisions of the agreement article ii duration of the trusts presently provides as follows each of the trusts created by the provisions hereof will continue and remain in existence for the benefit of the beneficiaries named or referred to above for a period of time not to exceed twenty-one years after the death of the last survivor of the ultimate beneficiaries referred to above who is living on the date of the execution of this agreement subject_to the power of my trustees to terminate any of these trusts at any time prior to the date on which such trust would otherwise be terminated under these provisions however the trust does not specify who will be the distributees in the event that the trust terminates as provided in article ii on the expiration of years after the death of the last survivor of the ultimate beneficiaries living on the date of execution of the trust agreement you propose to petition the appropriate local court to construe and amend the trust instrument to provide for the disposition of the trust assets on termination of the trust under article ll you will also request that the court approve an amendment authorizing the trustee to employ others to perform administrative duties specifically the petition will propose that article ll be construed and amended to include a further provision stating that upon the termination of a_trust on the expiration of years after the death of the last survivor of the ultimate beneficiaries living on the date of execution of the agreement the income and principal remaining in that trust shall be distributed to the primary beneficiary if the primary beneficiary is not then living the income and principal remaining shall be distributed to the secondary beneficiary if living of that trust if the secondary beneficiary is not then living the income and principal remaining shall be distributed to the issue of that secondary beneficiary per stirpes if the secondary beneficiary of that trust and his or her issue are not then living the income and principal remaining in that trust shall be divided equally among the other trusts and distributed accordingly further article viii powers of trustees section will be amended to include the following sentence the trustees shall have the power to employ and discharge accountants brokers custodians investment counsel attorneys and other agents or servants and to delegate to them such administrative duties of the trustees for such period as the trustees shall select and to pay any such person reasonable_compensation out of the trust property you have asked us to rule that these amendments to the trust agreement will not affect the exempt status of trust for generation-skipping_transfer_tax purposes and that neither distributions from the trusts nor the termination of the trusts will be subject_to the generation-skipping_transfer_tax imposed by sec_2601 of the internal_revenue_code sec_2601 provides that a tax is imposed on every generation-skipping_transfer gst made after date under b a of the tax reform act act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the gst tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date however this exemption does not apply to additions actual or constructive that are made to the trust after date sec_26_2601-1 provides that if an addition is made after date to an irrevocable_trust that is otherwise exempt from the application of chapter the gst tax by b a of the act a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the provisions of chapter a modification of a_trust that is otherwise exempt for gst tax purposes under the act will generally result in a loss of its grandfathered exempt status if the modification changes the quality value or timing of any powers beneficial interests rights or expectancies originally provided for under the terms of the trust you have represented that trust was irrevocable on date and no additions were made to the trusts after that date we conclude that the construction and amendment of article ll as proposed is consistent with applicable state law as would be interpreted by the highest court of state and therefore will not alter the quality value or timing of any powers or beneficial interests rights or expectancies originally provided for under the terms of the trust agreement similarly the proposed amendment to article viii will not alter the quality value or timing of any beneficial interests rights or expectancies originally provided for under the terms of the trust agreement therefore the construction and amendments as proposed will not subject trust to the generation-skipping_transfer_tax accordingly the proposed action with respect to the trust agreement will not affect the gst tax status of trust and thus will not result in a transfer of property that will subject any of the four trusts to the generation-skipping_transfer_tax imposed under sec_2601 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 this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel passthroughs and special industries by george masnik chief branch enclosure copy for purposes


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 corp plr-146347-09 date february legend parent ----------------------------------------------------------- -------------------------------------------------------- sub ----------------------------------------------------------- ------------------------------------------------------- sub ----------------------------------------------------------- -------------------------------------------------------------- sub ----------------------------------------------------------- ---------------------------------- sub ----------------------------------------------------------- ------------------------------------------------------ sub --------------------------------------------------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------------------------- sub ----------------------------------------------------------- ------------------------------------------------------------- sub ----------------------------------------------------------- -------------------------------------------------------- sub ----------------------------------------------------------- --------------------------------- plr-146347-09 ------------------------------------ -------------------- ----------------------- --------------------------- ---------------------------- -------------------- ------- ---------------- seller date date date date date a accounting firm dear ---------------- this letter responds to your request dated date as submitted by your authorized representatives on behalf of parent requesting a ruling under sec_1_1502-75 that sub has joined in the making of the initial consolidated_return filed by parent for the taxable_year ended date the information submitted in that request and in later correspondence is summarized below the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the taxpayer’s ruling_request verification of information representations and other data may be required as part of the audit process summary of facts parent was newly formed on date on date parent acquired all of the stock of sub through sub from seller sub is a holding_company that owns an a interest in a foreign joint_venture the other joint_venture partners objected to and blocked seller’s legal transfer of sub 8’s stock to parent in response seller and parent agreed that seller would hold the sub stock for parent’s benefit on date parent timely filed a consolidated_income_tax_return for the short_period beginning date and ending date including the income and deductions of sub through sub for the period beginning the day after date and ending date plr-146347-09 parent’s form_1120 included an affiliations schedule form_851 identifying sub through sub and forms for each of sub through sub based upon its determination that it did not have legal ownership of sub parent’s tax department concluded that sub could not join in the making of parent’s initial consolidated_income_tax_return for the taxable_year ended date parent did not include a form_1122 for sub nor did it include sub on the affiliations schedule form_851 parent however did include the income and deductions associated with sub on its consolidated_return for the taxable_year ended date and for taxable years thereafter because it believed it had acquired the financial rights and responsibilities of sub on date parent received notification from seller that sub had not filed a tax_return for the taxable_year ended date parent retained accounting firm which determined that parent had acquired beneficial_ownership of sub on date parent has made the following representations representations parent acquired beneficial_ownership of sub on date parent and each of sub through sub were eligible to file a consolidated federal_income_tax return for the taxable_year ended date for the taxable_year ended date parent owned directly stock meeting the requirements of sec_1504 in each of sub through sub for the taxable_year ended date and for all taxable years thereafter all of the income and deductions of sub were included in the consolidated federal_income_tax return filed by parent sub did not file a separate_income tax_return for the taxable_year ended date or for any taxable_year thereafter sub was not included on the affiliations schedule form_851 for the taxable_year ended date sub was included on the affiliations schedule form_851 for taxable years thereafter as of the date of this request the internal_revenue_service has not contacted parent about the failure to timely file a form_1122 with respect to sub for the taxable_year ended date plr-146347-09 applicable law sec_1_1502-75 provides in part that an affiliated_group_of_corporations that did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation that has been a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents to the regulations under sec_1502 in accordance with sec_1_1502-75 if a group wishes to exercise its privilege of filing a consolidated_return such return must be filed not later than the last day prescribed by law including extensions of time for the filing of the common parent’s tax_return with regard to a corporation’s consent for a group’s first consolidated_year sec_1_1502-75 provides as a general_rule that the corporation’s consent shall be made by such corporation joining in the making of the consolidated_return for such year a corporation shall be deemed to have joined in the making of such return if it files a form_1122 in the manner specified in sec_1_1502-75 sec_1_1502-75 provides that if a group wishes to file a consolidated_return for a taxable_year a form_1122 must be executed by each subsidiary for taxable years relevant to this ruling_request the group must attach to the consolidated_return for the taxable_year either executed forms or unsigned copies of the completed forms and retain the signed originals in its records in the manner required by sec_1_6001-1 form_1122 is not required for a taxable_year if a consolidated_return was filed or was required to be filed by the group for the immediately preceding_taxable_year sec_1_1502-75 provides that if a member of the group fails to file form_1122 the commissioner may under the facts and circumstances determine that such member nevertheless has joined in the making of a consolidated_return by such group factors that the commissioner will take into account in making this determination include i whether or not the income and deductions of the member for such taxable_year were included in the consolidated_return ii whether or not a separate_return was filed by the member for that taxable_year and iii whether or not the member was included in the affiliations schedule form_851 if the commissioner determines under the facts and circumstances that the member has joined in the making of the consolidated_return such member will be treated for purposes of sec_1_1502-75 as if it had filed a form_1122 for such year sec_1_1502-75 provides that if any member has failed to join in the making of a consolidated_return under either sec_1_1502-75 or b then the tax_liability of each member of the group shall be determined on the basis of separate returns unless the common parent_corporation establishes to the commissioner’s satisfaction that the failure of such member to join in the making of the plr-146347-09 consolidated_return was due to a mistake of law or fact or due to inadvertence in such case such member shall be treated as if it had filed a form_1122 for such year for purposes of sec_1_1502-75 and thus joined in the making of the consolidated_return for such year ruling based solely on the information submitted and the representations made we rule that sub will be treated under sec_1_1502-75 as if it had filed a form_1122 with parent’s consolidated federal_income_tax return for the taxable_year ended date and thus will be treated as having joined in the making of the consolidated_return for such year sec_1_1502-75 within days of the date of this letter parent shall file an amended_return for the taxable_year ended date and subsequent years if necessary to include sub on parent’s form_851 and to include a form_1122 and the necessary statements and schedules for sub procedural statements except as expressly provided herein no opinion is expressed or implied concerning the tax treatment of any other aspect of any transaction or item discussed or referenced in this letter or about the tax treatment of any condition existing at the time of or effects resulting from any transaction or item that is not specifically covered by the above ruling further no opinion is expressed on whether parent’s interest in the stock of sub met the requirements of sec_1504 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 plr-146347-09 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely _______________________________ frances l kelly assistant to the branch chief branch office of associate chief_counsel corporate


number release date internal_revenue_service index numbers - ---------------------------------------- ------------------------------------------- ------------------------- ------------------------- --------------------- department of the treasury washington dc person to contact ----------------------------------------------------- -------- telephone number -------------------- refer reply to cc psi - plr-100339-06 date date legend x ------------------------------------------- --------- ----------- ----- ---------- ------------------ d1 country dear -------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an election to be treated as a disregarded_entity under the laws of country was acquired by a single owner with limited_liability on d1 x intended to be treated as a disregarded_entity for federal tax purposes effective d1 however x did not timely file a form_8832 entity classification election according to the information submitted all of the interest in x an entity formed sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes under sec_301_7701-3 except as provided in sec_301 b unless it elects otherwise a foreign eligible_entity is classified as an association if all members have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a sec_301_7701-3 provides that an election under sec_301_7701-3 member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member will be effective on the date specified on form_8832 or on the date filed if no such date is specified on the form the effective date specified on form_8832 cannot be more than days prior to the date the form is filed and cannot be more than months after the date on which the form is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 sets forth the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 and elect to be treated as a disregarded_entity for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 based on the facts submitted and representations made we conclude that the except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the transaction described above under any other provision of the code sec_6110 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer on whose behalf it was requested in accordance with the power_of_attorney on file with this office a copy of this sincerely letter is being sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes heather c maloy associate chief_counsel passthroughs and special industries


t c memo united_states tax_court magdy s ellabban petitioner v commissioner of internal revenue respondent docket no filed date magdy s ellabban pro_se halvor n adams iii and joan casali for respondent memorandum findings_of_fact and opinion colvin judge respondent determined that petitioner has a deficiency in federal_income_tax of dollar_figure for and additions to tax of dollar_figure under sec_6651 and dollar_figure under sec_6654 petitioner was president of elan leather corp elan after concessions we must decide the following with respect to dollar_figure of elan’s income that petitioner received but did not deposit in elan’s bank accounts whether petitioner used dollar_figure of that income to pay elan’s expenses as respondent contends dollar_figure as petitioner contends or some other amount we hold that he used dollar_figure to pay elan’s expenses of the dollar_figure of elan’s income that petitioner did not deposit in elan’s bank accounts or use to pay elan’s expenses whether all of it is taxable to petitioner as respondent contends or only one-half of it is taxable to petitioner as petitioner contends we hold that dollar_figure is taxable to petitioner whether petitioner is liable for the addition_to_tax under sec_6651 for failing to file a return for we hold that he is whether petitioner is liable for the addition_to_tax under sec_6654 for underpaying his estimated_tax for we hold that he is section references are to the internal_revenue_code in effect for the year in issue unless otherwise stated rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and are so found a petitioner petitioner lived in bellerose new york when he filed his petition petitioner was elan’s president his former spouse kept elan’s books_and_records petitioner had checking savings and credit accounts at chemical bank in he had an american express card in petitioner and his former spouse were divorced in date petitioner did not file a federal_income_tax return for b elan leather corp elan was formed in or emile wahba wahba has been elan’s accountant and tax preparer since or or about a year after elan was incorporated wahba prepared and elan filed new york city and state corporate_income_tax returns for petitioner’s former spouse signed the state and city returns with his approval on the returns elan reported that petitioner was its only officer and stockholder who owned more than percent of its issued capital stock and who received any compensation wahba filed an s_corporation_election for elan before wahba prepared elan’s form_1120s u s income_tax return for an s_corporation which petitioner signed on it elan reported that petitioner and his former spouse each owned percent of the stock of elan elan reported that it had dollar_figure in negative retained earnings at the end of at a date not specified in the record elan applied to the state insurance fund for a disability insurance_policy the application states that both petitioner and his former spouse owned elan c petitioner's receipt of elan's funds in sharif designs ltd sharif and jay herbert handbags inc jay herbert were customers of elan in petitioner received dollar_figure in checks from sharif and jay herbert in sharif and jay herbert made the checks payable to petitioner petitioner endorsed and cashed them petitioner deposited dollar_figure of the dollar_figure into elan’s checking account he did not deposit dollar_figure petitioner used dollar_figure of the dollar_figure to pay expenses for elan d elan's tax_return late in or early in petitioner’s present spouse contacted kabir sheikh sheikh an accountant and gave him some of elan’s records sheikh prepared a form_1120 u s_corporation income_tax return for not knowing that elan could have been an s_corporation on date petitioner filed that return for elan on it he reported that the dollar_figure from sharif and jay herbert was gross_income to elan elan reported a cost_of_goods_sold of dollar_figure and a loss of dollar_figure respondent audited elan’s corporate return and determined that elan's cost_of_goods_sold should be reduced by dollar_figure because of lack of substantiation thus respondent determined that elan had taxable_income of dollar_figure rather than a dollar_figure loss on date petitioner consented to immediate_assessment and collection of elan’s deficiency in income_tax and additions to tax for negligence and delinquency opinion a whether petitioner paid more than dollar_figure of elan's expenses in petitioner received dollar_figure which was payable to elan deposited dollar_figure of that amount in elan’s checking account and did not deposit dollar_figure the parties agree that petitioner paid at least dollar_figure of elan’s expenses from the remaining dollar_figure which he received for elan but did not deposit in elan’s bank account petitioner contends that he used more than dollar_figure of the dollar_figure to pay elan’s expenses a taxpayer is required to keep adequate_records to prepare income_tax returns sec_6001 respondent’s determination is presumed to be correct and petitioner bears the burden of proving otherwise rule a 290_us_111 telephone expenses rent taxes and unemployment insurance petitioner contends in his posttrial brief that he paid more than respondent allowed for business_expenses as follows dollar_figure for telephone expenses dollar_figure for rent dollar_figure for new york state tax dollar_figure for federal tax and dollar_figure for unemployment insurance petitioner did not testify or offer any other evidence that he paid these amounts and so he failed to meet his burden of proving he is entitled to deduct them gas tolls and parking petitioner contends that he spent more than respondent allowed as follows dollar_figure for gas dollar_figure for tolls and dollar_figure for business parking we disagree a taxpayer may not deduct car and truck expenses unless he or she substantiates by adequate_records or sufficient evidence corroborating the taxpayer’s own statement the amount time and place and business_purpose of the expense sec_274 petitioner calculated the dollar_figure for gas expenses by multiplying his estimate that he used his car big_number miles per year for business by cents per mile he estimated that his toll expenses were dollar_figure per day respondent concedes that petitioner spent dollar_figure for parking expenses and that dollar_figure of that amount was for business respondent included this dollar_figure in the dollar_figure amount that respondent allowed for elan expenses petitioner testified generally about his parking expenses but did not testify or provide any evidence about his gas expenses or tolls petitioner did not have a log records or other corroboration showing the mileage dates locations or business_purpose of any of the vehicle trips as required under sec_274 we conclude that he may not deduct more than respondent has allowed american express charges petitioner contends that he used his american express credit card to pay dollar_figure more than respondent allowed for elan’s expenses he testified that the payments were for business meals but he conceded that he could not substantiate that any of these meals had a strict business_purpose petitioner has not met the substantiation requirements of sec_274 depreciation petitioner contends that respondent should have allowed elan to claim an additional dollar_figure for depreciation we disagree elan is not a party here even if it were petitioner has not offered any evidence to show that elan is entitled to additional_depreciation conclusion we conclude that petitioner paid dollar_figure of elan’s business_expenses from the dollar_figure which he received for elan but did not deposit in elan’s bank account b whether all or one-half of the remaining dollar_figure is includable in petitioner’s gross_income the parties dispute how much of the remaining dollar_figure is petitioner’s gross_income petitioner contends that he owned only percent of the stock of elan and that at most one-half of the remaining dollar_figure is includable in his gross_income because elan was an s_corporation in respondent contends that petitioner owned all of the stock of elan respondent also contends that even if petitioner owned only one-half of the stock of elan all of the remaining dollar_figure is income to him whether petitioner owned all or one-half of the stock of elan we are not convinced that petitioner owned only percent of the stock of elan in petitioner signed elan's corporate tax_return which states that he owned percent of the common_stock he also authorized his former spouse to sign elan's new york city and state returns for which state he was the only shareholder of elan who owned more than percent of elan's stock petitioner testified that he and his former spouse were equal business partners wahba testified that he believed petitioner and his former spouse were each 50-percent partners based on what petitioner's former spouse told him and his observation that they both worked at the business petitioner testified that elan never issued any shares of stock and that the stock certificates were blank wahba testified that he did not help to incorporate elan or help to maintain elan's corporate minutes and stock register or to transfer stock certificates wahba prepared elan's new york city and state tax returns for which show that petitioner was the only shareholder who owned more than percent of elan’s stock wahba could not explain why he did not report petitioner’s former spouse as a shareholder owning more than percent of elan's stock as required on those returns petitioner points out that elan’s corporate_income_tax return which wahba prepared and an undated application by elan to the state insurance fund for a disability insurance_policy that petitioner signed state that both petitioner and his former spouse owned elan however based on all of the evidence in this case we are not convinced that petitioner owned only percent of the stock of elan in as discussed next the dollar_figure is taxable to petitioner even if he did not own all of the stock of elan whether the dollar_figure petitioner retained is taxable to him the dollar_figure that petitioner retained is taxable to him as an accession to wealth because he did not use it for corporate purposes sec_61 348_us_426 913_f2d_1486 9th cir revg 91_tc_160 850_f2d_32 2d cir petitioner points out that he paid his former spouse dollar_figure from the cash that he retained petitioner testified vaguely that he gave his former spouse more than dollar_figure however petitioner’s testimony does not give us a sufficient basis to reduce his taxable_income a taxpayer may not avoid income by assigning it to another 281_us_111 petitioner did not show that the dollar_figure was an expense of elan thus the fact that he transferred dollar_figure to her does not reduce his taxable_income by that amount id 98_tc_165 conclusion we conclude that all of the dollar_figure is gross_income to petitioner because he owned percent of elan and received that amount as an accession to wealth c whether petitioner is liable for the addition_to_tax for failing to timely file his return under sec_6651 petitioner did not file a federal_income_tax return for sec_6651 provides for an addition_to_tax for failure_to_file a federal_income_tax return unless the taxpayer shows that the failure was due to reasonable_cause and not willful neglect the burden_of_proof is on the taxpayer to show that the failure is due to reasonable 1in light of our conclusion we need not decide whether elan was an s or a c_corporation and whether the dollar_figure was a distribution in respect of stock cause and not willful neglect 469_us_241 84_tc_859 81_tc_806 affd without published opinion 767_f2d_931 9th cir to prove reasonable_cause a taxpayer must show that he exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time 92_tc_899 to disprove willful neglect a taxpayer must prove that the late filing did not result from a conscious intentional failure or a reckless indifference united_states v boyle supra pincite petitioner contends that he is not liable for the addition_to_tax for failing to file his return because he did not know until the end of that elan had not filed a return we disagree elan’s late filing does not excuse petitioner petitioner also contends that he is not liable for the addition_to_tax for failing to file his return because he believed that he did not owe any_tax we disagree petitioner did not keep records required under sec_6001 to support his claim that he spent most of the dollar_figure for business he does not contend that he relied on wahba or sheikh the fact that petitioner thought he owed no tax without more does not excuse his failure_to_file a return 82_tc_514 absent advice from competent counsel a taxpayer’s erroneous belief that he or she did not have taxable_income is usually not reasonable_cause under sec_6651 614_f2d_815 1st cir affg tcmemo_1979_146 see 283_f2d_227 8th cir affg 32_tc_479 erroneous belief that no tax is due is not reasonable_cause for failure_to_file fiduciary return there is no evidence that petitioner tried to calculate his taxable_income for petitioner has not shown that he had reasonable_cause under sec_6651 we conclude that petitioner is liable for the addition_to_tax for failure_to_file his return under sec_6651 d whether petitioner is liable for the addition_to_tax for failure to pay estimated_tax under sec_6654 the addition_to_tax for failure to pay estimated_tax under sec_6654 is mandatory unless the taxpayer shows that he meets one of the exceptions in sec_6654 none of which apply here baldwin v commissioner supra pincite 75_tc_1 extenuating circumstances and reasonable_cause are not relevant under sec_6654 baldwin v commissioner supra 66_tc_817 remanded on other issues 603_f2d_491 5th cir petitioner did not argue this issue on brief we conclude that he is liable for the addition_to_tax for for failure to pay estimated_tax to reflect concessions and the foregoing decision will be entered under rule


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp 1-plr-126003-02 date date legend company state a business b year year redeeming shareholder z shareholders family l family m family n trust w plan p x y k dollar_figuref dollar_figureg q r s t u v dear we respond to your letter dated date in which you requested rulings under sec_302 of the internal_revenue_code concerning the federal_income_tax consequences of a proposed transaction the information submitted in that letter and in letters dated date and date is summarized below company is an s-corporation incorporated in state a and is engaged in business b company is an accrual_method taxpayer with a december year end company has outstanding a single class of common_stock comprised of both voting common_stock and non-voting common_stock all of the outstanding common shares of company are held by members_of_family l and trusts whose beneficiaries are members_of_family l family l is divided along two descendent lines the family m line and family n line company is owned q percent by family m and r percent by family n family m cannot assert control of company in year company adopted plan p whereby company would annually at the discretion of company’s board_of directors offer to purchase outstanding shares of company from its shareholders the purpose of plan p was to provide shareholders of company with an opportunity to dispose_of their outstanding shares as company is a closely_held_corporation and therefore there is no public market on which to dispose_of company stock under the rules of plan p the board_of directors determines on a yearly basis whether it is in the best interest of company and the shareholders to redeem any shares if company decides to redeem the shareholders are notified in writing of the opportunity and in response company obtains an independent appraisal of the fair_market_value of company stock the redemption price for any shareholder who tenders her stock for redemption is set at the appraised value per share after the appraisal is complete neither company nor the shareholders who expressed interest in redeeming shares is obligated to actually complete the redemption furthermore although a shareholder may tender any shares for redemption company may elect to reject the tender and not redeem any stock in that year additionally company may on a yearly basis set limits related to the aggregate number of shares that will be redeemed or the aggregate amount of money that will be spent on the redemption in a given year redeeming shareholder is a member_of_the_family m descendent line of family l redeeming shareholder is not active in the management of company and he is not an employee director or officer of company additionally neither redeeming shareholder’s wife children nor any of the trusts in which he possesses a beneficial_interest are involved in the management of company redeeming shareholder is a minority shareholder who directly owns x shares of voting_stock of company which represent s percent of the total shares of common_stock outstanding in company as part of plan p redeeming shareholder has notified company that he would like to redeem x shares of company stock in year at an appraised value of dollar_figuref per share for a total of dollar_figureg since the adoption of plan p redeeming shareholder has not redeemed any of his shares of stock through the attribution_rules under sec_318 redeeming shareholder is deemed to own shares held by his wife children and several trusts of which he is a beneficiary the total shares attributed to redeeming shareholder is y shares therefore redeeming shareholder owns directly and through attribution t percent of company redeeming shareholder has no power_of_appointment over any of the trusts through which shares are attributed to him redeeming shareholder is a trustee of trust w one of the trusts through which shares are attributed to him the other trustees of trust w however are unrelated to redeeming shareholder and trust w’s rules require a majority of the trustees to agree in order for the trust to act z shareholders certain company shareholders other than redeeming shareholder have notified company that they wish to redeem or may wish to redeem in the aggregate k shares of company stock in year redeeming shareholder is not attributed any of the shares of stock held by z shareholders and the impact of their redemptions on the redemption by redeeming shareholder is minimal after the proposed redemption redeeming shareholder will own u percent of company outright and v percent of company through attribution assuming z shareholders redeem in the aggregate k shares of company stock in year the following representations have been made in connection with the proposed transaction a b c d e f g h there are no outstanding options or warrants to purchase company’s stock nor are there any outstanding debentures or other obligations that are convertible into company stock or would be considered company stock no notes or other obligations of company will be distributed to a redeemed shareholder no shareholder of company has been or will be obligated to purchase any of the stock to be redeemed none of the stock to be redeemed is sec_306 stock within the meaning of sec_306 of the code there are no declared but unpaid dividends or funds set apart for dividends on any of the stock to be redeemed at the time of the exchange the fair_market_value of the consideration to be received by redeeming shareholder will be approximately equal to the fair_market_value of company stock to be exchanged therefore the price to be paid for company stock to be redeemed will not result in a loss with respect to those shares of stock to the best knowledge of company’s management and directors there is no current plan or intention to redeem company stock other than the redemptions of company stock held by redeeming shareholder and z shareholders described above based solely upon the information submitted and the representations set forth above we hold as follows provided that no company shares are redeemed in year other than k shares by z shareholders noted above the redemption by redeeming shareholder of x shares of company stock is not essentially_equivalent_to_a_dividend under sec_302 the distribution in redemption of the stock owned by redeeming shareholder shall be treated as a distribution in full payment in exchange for stock owned by redeeming shareholder as provided in sec_302 see u s v davis 397_us_301 revrul_75_512 1975_2_cb_112 revrul_75_502 1975_2_cb_111 revrul_56_183 1956_1_cb_161 redeeming shareholder will realize and recognize gain under sec_1001 measured by the difference between the redemption price and the adjusted_basis of the shares of company surrendered the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination we express no opinion concerning the federal_income_tax treatment of the transactions under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the above rulings 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer and another taxpayer’s representative sincerely yours ____________________________ mark s jennings chief branch office of associate chief_counsel corporate


t c summary opinion united_states tax_court larry ray zedaker and marjorie z zedaker petitioners v commissioner of internal revenue respondent docket no 18876-10s filed date larry ray zedaker and marjorie z zedaker pro sese rebecca s duewer-grenville for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any unless otherwise indicated all subsequent section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure other court and this opinion shall not be treated as precedent for any other case this matter is before the court on respondent’s motion for summary_judgment filed date after a concession by petitioners the issue for decision is whether respondent correctly determined that petitioners were required to report in gross_income dollar_figure of a dollar_figure retirement annuity distribution for as explained in greater detail below we hold that petitioners were so required and we shall therefore grant respondent’s motion for summary_judgment background petitioners resided in the state of california when the petition was filed all references to petitioner in the singular are to marjorie z zedaker before petitioner was a teacher for the state of california and during her tenure as a teacher she made contributions to and accumulated interest in the california state teachers’ retirement_system calstrs in petitioner in the notice_of_deficiency respondent determined that petitioners failed to report dollar_figure in wage income in the petition petitioners did not contest respondent’s determination regarding this adjustment nor have they otherwise raised any issue regarding it under rule b any issue not raised in the assignment of errors in the petition is deemed conceded by the taxpayer 78_tc_646 73_tc_736 withdrew all of her contributions and accumulated interest from her calstrs account and paid the appropriate federal_income_tax on the amount withdrawn in petitioner returned to teaching and redeposited dollar_figure into her calstrs account petitioner subsequently retired from teaching and on date her calstrs retirement annuity became effective in petitioner attained the age of as of date petitioner’s calstrs monthly annuity benefit was dollar_figure which monthly benefit would continue for petitioner’s lifetime during petitioner received a gross distribution of dollar_figure from her calstrs account calstrs reported on a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc the dollar_figure gross distribution and indicated thereon a taxable_amount of dollar_figure on their federal_income_tax return petitioners did not report any of the dollar_figure gross distribution in gross_income in a notice_of_deficiency respondent determined inter alia that petitioners failed to report dollar_figure of the dollar_figure distribution in gross_income the record suggests that petitioner’s annuity was index linked on date petitioners filed a petition for redetermination and issue was subsequently joined as stated above respondent filed his motion for summary_judgment on date petitioners filed an objection to respondent’s motion on date discussion a summary_judgment summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 summary_judgment may be granted with respect to all or any part of the legal issues in controversy if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule a and b after carefully reviewing the record we are satisfied that there is no genuine issue as to any material fact and a decision may be rendered as a matter of law accordingly we shall grant respondent’s motion for summary_judgment b includability of annuity payments sec_72 generally requires that any amount_received_as_an_annuity be included in gross_income sec_72 allows taxpayers to exclude the benefits that represent a return of their own investment in a qualified_employer_retirement_plan under the simplified_method for recovery_of investment the simplified_method excludes from gross_income the amount of any monthly annuity_payment that does not exceed the amount obtained by dividing the taxpayer’s contribution to the plan by the number of anticipated payments sec_72 if the age of the annuitant on the annuity_starting_date is more than but not more than the number of anticipated payments is sec_72 respondent contends that petitioners may exclude from gross_income each month dollar_figure ie dollar_figure dollar_figure of petitioner’s annuity_payment from calstrs under the simplified_method in sec_72 therefore respondent contends that petitioners are entitled to a yearly exclusion of dollar_figure ie dollar_figure mo x mos or in other words petitioners must report in gross_income dollar_figure of the dollar_figure gross distribution ie dollar_figure - dollar_figure dollar_figure in contrast petitioners argue that under the simplified_method it will take years for petitioner to recover her investment_in_the_contract at which time petitioner would be years old and beyond her life expectancy therefore petitioners argue that fairness dictates a more reasonable approach and they calstrs is a qualified_employer_retirement_plan see sec_403 see also sec_4974 sec_170 cross- referenced in sec_403 suggest that the court adopt the first in first out formula advocated by the aarp under this formula petitioners argue that all payments received under the annuity_contract would be tax free until petitioner had recovered her dollar_figure initial investment thereafter the full amount of all payments received by petitioner would be subject_to income_tax petitioners argue that under this method petitioner would recoup her initial investment within years we are cognizant of the inequity that petitioners perceive in the application of the simplified_method under the circumstances of their case the result that petitioners request was available to taxpayers whose annuity_starting_date was on or before date when the predecessor to the current sec_72 provided a 3-year basis recovery rule under certain circumstances under that provision if a taxpayer would recover his or her total contribution in the first years of the annuity then the taxpayer could exclude all amounts received under the contract until there had been so excluded an amount equal to the taxpayer’s contribution thereafter all amounts received would be fully includable in gross_income id however this provision was repealed by the tax_reform_act_of_1986 publaw_99_514 sec c h - 100_stat_2467 petitioners should understand that the tax_court is a court of limited jurisdiction and that we are not at liberty to make decisions based solely in equity see 484_us_3 92_tc_776 73_tc_1014 40_tc_436 affd 331_f2d_422 7th cir in other words absent some constitutional defect we are constrained to apply the law as written see 736_f2d_1168 7th cir affg 80_tc_783 and we may not rewrite the law because we may deem its ‘effects susceptible of improvement’ see 516_us_235 quoting 464_us_386 accordingly petitioners’ appeal must in this instance be addressed to their elected representatives the proper place for a consideration of petitioner’s complaint is in the halls of congress not here hays corp v commissioner supra pincite the court notes that even if petitioner’s annuity_starting_date was on or before date petitioner would not have recovered her basis within the first years of the annuity and therefore the 3-year basis recovery rule under former sec_72 would not have applied petitioners impress us as conscientious taxpayers who take their tax responsibilities seriously and try to follow the rules unfortunately for them we are constrained by the law as discussed above to hold that they are required to include in gross_income dollar_figure of the dollar_figure gross distribution from calstrs conclusion finally in reaching the conclusions described herein we have considered all of the arguments made by petitioners and to the extent not expressly discussed above we find that those arguments do not support a result contrary to that reached herein to reflect the foregoing an order granting respondent’s motion for summary_judgment and decision for respondent will be entered


third party communication date of communication month dd yyyy cca_2014082111422601 id uilc number release date from sent thursday date am to cc bcc subject re amended 1040x and partner aar's sec_6201 and sec_301_6201-1 allow assessment on any_tax shown on a return this includes any amount on an amended_return sec_301 a -1 last sentence and sec_6213 sec_6213 and sec_301_6213-1 allow assessment of any amount_paid before or after the issuance of a notice_of_deficiency for partner level aar’s sec_6227 provides d other requests if any partner files a request for an administrative adjustment other than a request described in subsection c the secretary may- assess any additional tax that would result from the requested adjustments section b allows a partner to waiver any restriction under the tefra procedures


department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-134465-10 date date internal_revenue_service number release date index number ------------------------------------ ---------------------------- ---------------------------------- ------------------------------ legend x ----------------------------- ------------------------------------ state ------------- date ---------------------- dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was formed on date under the laws of state x represents that x intended to be an s_corporation effective date however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 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 plr-134465-10 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 then the secretary may treat such an election as timely made for such taxable_year based solely on the facts submitted and the representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date accordingly provided that x makes an election to be an s_corporation by filing a complete form_2553 effective date along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for date except as expressly provided herein no opinion is expressed or implied concerning the federal_income_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 requesting it sec_6110 of the code provides that 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 representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes