department of the treasury internal_revenue_service washington d c may ep fa aa tax_exempt_and_government_entities_division u i l kekkaerekeeraereerreererererer mrr kekekkkeekrekeekerekeereererererer attn ereekekererrerererereerereeere legend employer m _ krkrkkrereererkeekerrerrerikree state a reece rerererekrererereree group n employees vrekrerrerekreerrererrrrerkee statute p coe gg rmr ker keir r irr iie irr eet reekeerererererrerererekrere statute q statute r statute s rekrereraekekrererekreererrreere -_ khekeekeaeerererereeekrkeakakiee _ kererreeererreeeeeekekrkekkkek plan xx _ krrekrkeekcerereeererererererkee proposed resolution n ae kx krkeekekrerreererereeererrere krrerreeekrrerererereeerererer form o ordinance o city c dear kerekekekrkkkrkrekkk ee khkkkkekerekeerekkeke kkk rie ee kkkkkkkrkkeekekekrekerkeerekrekere kekeererkekereekreeeeke rrr een kkkekreerrereekekekekekekerere this is in response to a ruling_request dated date which was received in our office on date as supplemented by correspondence dated april may and date submitted on your behalf by your authorized representative concerning the federal_income_tax treatment under sec_414 of the internal_revenue_code code of certain contributions to plan x your authorized representative has submitted the following facts and representations employer m is a municipal corporation duly organized and existing under the laws of state a ordinance o signed by the mayor of city c and dated date created and established plan x in accordance with statute p for the benefit of its group n employees statute p provides that in each municipality as defined in statute q the city council or the board_of trustees shall establish and administer a plan for the benefit of its group n krrkkkkkekekeerererereeeere employees their surviving spouses children and certain other dependents you represent that plan x meets the qualification requirements set forth under sec_401 a of the code statute r provides that each group n employee shall contribute dollar_figure percent of his her salary to plan x _ statute s provides that a municipality such as employer m may pick up the group n if a municipality decides not to pick up the employees’ contributions required by statute r contributions the required contributions shall continue to be deducted from salary statute s further provides that if contributions are picked up they shall be treated as employer contributions in determining tax treatment under the internal_revenue_code statute s also provides that a municipality shall continue to withhold federal and state income taxes based on these contributions until the internal_revenue_service or the federal courts rule that pursuant to sec_414 of the code these contributions shall not be included as gross_income of the group n employees until such time as they are distributed or made available the municipality shall pay these contributions from the same source of funds which is used to pay the salaries of the group n employees employer m may pick up these contributions by a reduction in the cash salary of the group n employees or by an offset against a future salary increase or by a combination of both prior to the inception of the pick up program employer m will give present group n employees an opportunity to elect on form o whether to participate in the pickup program new employees hired subsequent to the inception of the pick up program will also be given an opportunity to elect whether or not to participate in the pick up program to effectuate the pickup as provided for in statute s employer m intends to adopt proposed resolution n and form o sec_1 of proposed resolution n provides that in accordance with the provisions of statute s employer m shall pick up the group n employees’ contributions to plan x sec_2 of proposed resolution n as amended in your correspondence dated date provides in pertinent part that employer m’s pick up of the group n employees’ pension contributions shall be treated as employer contributions in determining tax treatment under the code provided however that employer m shall continue to withhold federal and state income taxes on these amounts until it is ruled that these contributions shall not be included as gross_income of the group n employees until such time as they are distributed or made available _ proposed resolution n further provides that a group n employee is not given the option to receive the contributed amounts directly employer m proposes to give current and future employees an opportunity to make a one time irrevocable election to participate in the proposed pick up arrangement or to continue to make after tax employee contributions to plan x to facilitate this election each group n employee whether newly hired or presently employed by employer m shall be provided an election document form o which requests the employee to identify whether he or she elects to continue making after-tax contributions to plan x or to participate in the pick up program the election to participate in the pick up program is irrevocable further the election to not participate in the pick up program and to continue to make after-tax employee contributions to plan x is also irrevocable for currently instated employees the one-time irrevocable election shall be exercised in writing no later than days from the effective date of the pick up keekkerrekrkeeerieerererrere arrangement for employees hired subsequent to the effective date of the pick up arrangement the one-time irrevocable election must be filed in writing no later than days from the date he or she was accepted as a member of plan x the election_period shall be extended for an additional thirty days in the event the subject group n employee has been unable to acknowledge his or her election for reasons other than fault of his or her own employer m represents in the letter it intends to give to all group n employees that the election to accept or reject the pension pick up is irrevocable that the group n employee may not subsequently change or amend the election and that failure to make a written election within the prescribed election_period shall be interpreted as an acceptance of the pick up program based on the aforementioned facts and representations you request the following rulings the mandatory employee contributions to plan x which are picked up for the group n employees who so elect in an irrevocable written election are picked-up within the meaning of sec_414 of the code thereby rendering the picked-up contributions excludible from the current gross_income of the group n employees on whose behalf the pickup is made the picked up contributions to plan x are not considered wages of the group n employees for federal_income_tax withholding purposes and as such federal income taxes need not be withheld on the picked up contributions sec_414 of the code provides that contributions otherwise designated as employee contributions shall be treated as employer contributions if such contributions are made to a plan determined to be qualified under sec_401 established by a state government or a political_subdivision thereof and are picked up by the employing unit the federal_income_tax treatment to be accorded contributions which are picked up by the employer within the meaning of sec_414 of the code is specified in revrul_77_462 1977_2_cb_358 in that revenue_ruling the employer school district agreed to assume and pay the amounts employees were required by state law to contribute to a state pension_plan revrul_77_462 concluded that the school district's picked-up contributions to the plan are excluded from the employees’ gross_income until such time as they are distributed to the employees the revenue_ruling held further that under the provisions of sec_3401 of the code the school district's contributions to the plan are excluded from wages for purposes of the collection of income_tax at source on wages therefore no withholding is required from the employees’ salaries with respect to such picked-up contributions the issue of whether contributions have been picked up by an employer within the meaning of sec_414 of the code is addressed in revrul_81_35 1981_1_cb_255 and revrul_81_36 1981_1_cb_255 these revenue rulings established that the following two criteria must be met the employer must specify that the contributions although designated as employee contributions are being paid_by the employer in lieu of contributions by the employee and the employee must not be given the option of choosing kekrereeeerereeeerherereeaee s to receive the contributed amounts directly instead of having them paid_by the employer to the pension_plan in revrul_87_10 1987_1_cb_136 the internal_revenue_service considered whether contributions designated as employee contributions to a governmental_plan are excludable from the gross_income of the employee the service concluded that to satisfy the criteria set forth in revenue rulings and with respect to particular contributions the required specification of designated employee contributions must be completed before the period to which such contributions relate in this request proposed resolution n satisfies the criteria set forth in revrul_81_35 and revrul_81_36 by providing in effect that employer m will make contributions to plan x in lieu of contributions by the group n employees under proposed resolution n group n employees participating in plan x are not given the option to receive the contributed amounts directly in lieu of having such contributions paid_by employer m to plan x accordingly we conclude with respect to ruling requests number sec_1 and that the amounts picked up by employer m on behalf of the group n employees who participate in pian x shall be treated as employer contributions and will not be includible in the group n employees’ gross_income in the year in which such amounts are contributed for federal_income_tax treatment these amounts will be includible in the gross_income of the group n employees or their beneficiaries in the taxable_year in which they are distributed to the extent that the amounts represent contributions made by employer m because we have determined that the picked-up amounts are to be treated as employer contributions they are excepted from wages as defined in sec_3401 of the code for federal_income_tax withholding purposes in addition no part of the amounts picked up by employer m will constitute wages for federal_income_tax withholding purposes in the taxable_year in which they are contributed to plan x these rulings apply only if the effective date for the commencement of the pick-up is no earlier than the later of the date proposed resolution n is signed or the date the pick-up is put into effect this ruling is based on proposed resolution n as set forth in your letter dated date and the amendment to proposed resolution n submitted with your correspondence dated date and form o as submitted with your correspondence dated date this ruling is based on the condition that a group n employee who makes a one-time irrevocable election to participate in the pick up provisions of plan x within employer m’s prescribed election_period may not subsequently alter or amend the pick up provisions of plan x further this ruling is also based on the condition that a group n employee who makes a one-time irrevocable election not to participate in the pick up provisions of plan x within employer m’s prescribed election_period may not subsequently alter or amend this election to not participate in the pick up provisions of plan x this election to participate in for purposes of the application of sec_414 of the code it is immaterial whether an employer picks up contributions through a reduction in salary an offset against future salary increases or a combination of both hekeekrerekrerekerereererek these rulings are based on the assumption that plan x will be qualified under sec_401 of the code at the time of the proposed contributions and distributions no opinion is expressed as to whether the amounts in question are subject_to tax under the federal_insurance_contributions_act no opinion is expressed as to whether the amounts in question are paid pursuant to a salary reduction agreement within the meaning of sec_3121 these rulings are directed only to the taxpayer who requested them sec_6110 of the code provides that they may not be used or cited by others as precedent a copy of this letter has been sent to your authorized representative in accordance with the power_of_attorney on file with this office if you have questions regarding this ruling you may contact t ep ra t at sincerely yours joyce e floyd manager employee_plans technical group enclosures deleted copy of this letter notice


t c memo united_states tax_court sue taylor petitioner v commissioner of internal revenue respondent docket no filed date p filed federal_income_tax returns for p and two llcs for and r subsequently determined deficiencies and penalties with respect to p’s income taxes which p contested primarily on the basis of tax_protester arguments p also argued that r did not provide to either of the llcs a final_partnership_administrative_adjustment and therefore the deficiency_notice mailed to her was premature held following a concession by r p is liable for the remaining deficiencies except for an adjustment for a reduced share of income from one llc in determined by r for and including self-employment taxes pursuant to sec_1401 i r c held further p is liable for a penalty under sec_6662 i r c for and sue taylor pro_se cameron m mckesson for respondent memorandum findings_of_fact and opinion wherry judge respondent determined federal_income_tax deficiencies in the amounts of dollar_figure and dollar_figure together with penalties pursuant to sec_6662 in the amounts of dollar_figure and dollar_figure for taxable years and respectively after concessions the issues for decision are unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended and in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure respondent conceded petitioner’s allegedly unreported income derived from national land bank llc national land bank in the amount of dollar_figure for because respondent determined that a tax_return was filed for national land bank however there was a mathematical subtraction error on national land bank’s form_1065 u s partnership return of income for instead of reporting dollar_figure in income national land bank reported a dollar_figure loss petitioner’s form_1040 u s individual_income_tax_return schedule e supplemental income and loss consistent with the erroneous form_1065 schedule_k-1 form_1065 partner’s share of income credits deductions etc reported her 50-percent alleged distributive_share loss of dollar_figure the notice_of_deficiency for eliminated the dollar_figure loss but because of the claimed dollar_figure income adjustment did not contain an adjustment to properly reflect her mathematically corrected share of reported national land bank income furthermore as discussed infra in text the court finds that petitioner is taxable in and on the income of speck trust the other 50-percent member of national land bank therefore petitioner has a total of dollar_figure her 50-percent dollar_figure share plus speck trust’s 50-percent dollar_figure share of additional income for from national land bank in lieu of the conceded dollar_figure continued whether petitioner is liable for deficiencies for her taxable years and whether petitioner is liable for penalties under sec_6662 for her taxable years and and whether the court should impose a penalty sua sponte under sec_6673 i background findings_of_fact some of the facts have been deemed stipulated pursuant to rule f and are so found the stipulated facts with accompanying exhibits are incorporated in our findings by this reference at the time this petition was filed petitioner resided in gilbert arizona continued as to respondent’s concession this court has the discretion to accept or reject an offered concession 67_tc_599 all concessions including stipulated settlement agreements are subject_to the court’s discretionary review only through this process can the interests of justice be protected id pincite in this case we reject dollar_figure of respondent’s concession due to the mathematical calculation error petitioner objected to many of the paragraphs in the stipulation of facts as well as questions from respondent during direct examination on fifth_amendment grounds the court informed petitioner on more than one occasion that even if it was found to be applicable she was not permitted to use the fifth_amendment privilege as both a sword and a shield see 460_us_752 346_f3d_223 1st cir affg tcmemo_2002_91 63_fedappx_412 9th cir see also infra part ii petitioner’s fifth_amendment claims petitioner initially filed a timely form_1040 u s individual_income_tax_return for on which she reported a dollar_figure loss on her schedule c profit or loss from business from her nature’s herb tea garden business and a dollar_figure schedule e loss the schedule e loss arose from her membership in miroyal llc miroyal from which she reported income of dollar_figure and her membership in national land bank llc national land bank from which she reported a loss of dollar_figure for a net_loss from the two entities combined of dollar_figure adding this alleged loss to the dollar_figure loss from schedule c resulted in a negative adjusted_gross_income of dollar_figure and no taxable_income petitioner adopted an aggressive approach to federal income_taxation when she filed her form_1040 for that approach utilizing discredited protester arguments resulted in petitioner’s timely filing of a form_1040 for which reported amounts on all relevant lines of the tax_return in date petitioner filed a form 1040x amended u s individual petitioner included with her form_1040 for a letter entitled asseveration of claimed gross_income claiming among other things that she did not have gross_income or any items of gross_income from any taxable sources listed by the secretary with her form 1040x amended u s individual tax_return for petitioner submitted similar letters and made similar statements that she did not earn any income taxable under sec_861 petitioner as managing member of miroyal and national land bank submitted similar documents with miroyal’s and national land bank’s forms for the taxable_year and national land bank’s amended form_1065 for its taxable_year the court deems petitioner’s claims to be frivolous and will not discuss the issue any further in this report see woods v commissioner tcmemo_2006_38 income_tax return for reflecting in the corrected amount column of the return respondent audited her individual and income_tax returns on date respondent issued to petitioner a notice_of_deficiency determining that petitioner received dollar_figure and dollar_figure of taxable_income for and respectively had tax deficiencies and owed tax penalties petitioner timely filed her petition with this court on date ii income during and petitioner earned_income as a real_estate sales and property manager and as the proprietor of a business nature’s herb tea garden petitioner was also a member of two limited_liability companies llcs miroyal and national land bank for and at trial petitioner objected to confirming her occupations and associations stating that the answers might incriminate her and she chose to invoke the fifth_amendment as a defense petitioner was warned that she should assume she had the burden_of_proof and was given the opportunity to present her case to the court however she chose not to do so she presented no evidence nor did she offer any witnesses on her behalf in resting her case petitioner stated i don’t have any witnesses to call and i will just let the government go ahead with the case and proceed i don’t believe that i owe the deficiencies that they are claiming and i’ll just let them go ahead and bring forth their case i rest my case because petitioner would not cooperate with or provide documents for the audit respondent computed petitioner’s income using an indirect bank deposit analysis this was accomplished by examining copies of checks and bank statements and determining whether the bank_deposits reflected in the statements constituted gross_income to petitioner petitioner had signatory authority over four accounts which respondent contends are relevant to this case arizona federal credit_union account no - sue taylor norwest bank arizona n a account no - sue taylor d b a nature’s herb tea garden san tan credit_union account no - national land bank llc and arizona federal credit_union account no - sue taylor d b a miroyal l l c in addition respondent disallowed expenses claimed on the filed tax returns for which no substantiation was provided a miroyal llc taxable_year on date petitioner signed and then on date filed form_1065 u s partnership return of income on behalf of miroyal for miroyal claimed the following deductions for repairs and maintenance dollar_figure interest dollar_figure and other deductions dollar_figure attached to form_1065 was a listing of these other deductions insurance dollar_figure miscellaneous dollar_figure and utilities dollar_figure during and miroyal had two members according to the filed form_1065 partnership tax_return each member sue taylor and gerald ricks had a 50-percent interest sue taylor was designated as the tax_matters_partner on the calendar_year form_1065 federal tax_return on its form_1065 miroyal reported dollar_figure of income for petitioner’s form_1065 schedule_k-1 reflected her one-half distributive_share of miroyal’s income in the amount of dollar_figure taxable_year on date petitioner filed miroyal’s form_1065 for miroyal reported no income and no deductions for in addition petitioner attached form_8275 disclosure statement referencing tax_protester rhetoric claiming that miroyal did not have any income from any taxable sources during the filed form_1065 partnership tax_return indicated petitioner and gerald miroyal’s form_1065 for did not designate a tax_matters_partner ricke6 had a 95-percent and 5-percent membership interest in miroyal respectively the form_1065 schedules k-1 for both petitioner and gerald ricke reflected a distributive_share of zero dollars for b national land bank llc taxable_year national land bank filed its form_1065 for on date with attached schedules k-1 showing petitioner and speck trust speck each with a 50-percent membership interest in national land bank reported dollar_figure in gross_receipts and sales and claimed other deductions totaling dollar_figure for a claimed dollar_figure loss revenue_agent wayne johnson mr johnson testified that petitioner made a mathematical error on national land bank’s form_1065 for the dollar_figure loss should have been reflected as dollar_figure of income on date petitioner filed an amended form_1065 for national land bank’s taxable_year showing zero dollars in taxable_income and changing the membership interest petitioner percent and speck international trust percent attached the court noting that the letters e and s are diagonally adjacent on a standard typewriter keyboard assumes that gerald ricks and gerald ricke are the same person in any event it is not material to this opinion see supra note the court assumes speck trust and speck international continued to the amended form_1065 was form_8275 including tax_protester rhetoric similar to that on form_8275 attached to the return filed by miroyal in during and national land bank had a bank account at the san tan credit_union account no mr johnson testified that petitioner controlled account no at the san tan credit_union in the name of national land bank and authorized all payments from this account in the name of national land bank taxable_year on date petitioner filed form_1065 for on behalf of national land bank showing no income as in the instance of the amended tax_return the attached form_8275 contained tax_protester rhetoric in addition a form_4852 substitute for form_w-2 wage and tax statement or form 1099-r distributions from pensions annuities retirement or profit- sharing plans iras insurance contracts etc stating that national land bank had in petitioner’s opinion been unable to obtain a correct form_1099 miscellaneous income from its employer circle g property development accompanied national land bank’s form_1065 tax_return for continued trust are one and the same entity and shall hereafter refer to both as speck despite the amended federal_income_tax returns for petitioner and national land bank respondent audited the original returns and the audit adjustments are keyed to those returns as is our report in this case speck petitioner did not explain nor did she provide any documents illuminating her relationship with speck although petitioner testified that she did not control all the assets held in the name of speck during and she offered no evidence or documentation that anyone other than herself was the grantor of was a beneficiary of or controlled speck on date speck issued to krismon buttes llc krismon buttes an entity in the business of real_estate investment invoice no for international marketing services rendered for the years thru in the amount of dollar_figure krismon buttes issued check no to speck on date in the amount of dollar_figure william a mcglothlin mr mcglothlin bookkeeper for krismon buttes from testified that he issued to speck a form_1099 after check no was issued check no did not clear krismon buttes’s checking account mr mcglothlin was instructed to void check no more than a year later on date krismon buttes issued check no in the amount of dollar_figure to property resources as a replacement for the original check no check no cleared krismon buttes’s checking account and was deposited into a payee account at swiss american bank limited high street st john’s antigua respondent attributed the dollar_figure payment made to property resources by check no for taxable_year to petitioner mr mcglothlin stated that petitioner whom he personally knew for years was a friend of the owners of krismon buttes and petitioner provided marketing services to krismon buttes at trial respondent’s counsel asked petitioner whether she provided marketing services to krismon buttes during petitioner responded i do not provide services personally myself that was through speck trust the original schedules k-1 from national land bank for both speck and petitioner listed their address and national land bank’s as north gilbert road gilbert arizona however when national land bank filed its amended form_1065 for speck’s address was changed to w vista drive glendale arizona for schedules k-1 for speck and petitioner did not list their respective addresses although the form_1065 schedule_k-1 instructions and the form respectively required and provided space for those addresses see sec_1_6031_b_-1t temporary income_tax regs fed reg date c nature’s herb tea garden for and respondent contended that petitioner operated a business named nature’s herb tea garden respondent provided copies of numerous checks written during the relevant time period payable to nature’s herb tea garden which had been deposited into the norwest bank arizona n a account titled sue taylor d b a natures’s herb tea garden respondent also provided copies of checks drawn on nature’s herb tea garden’s norwest bank arizona n a account and signed by petitioner as well as copies of the account’s bank statements reflecting sue taylor dba nature’s herb tea garden opinion i contentions of the parties on the premise of tax_protester arguments petitioner contends that she did not receive any taxable_income for and she also maintains among other things that any income received by any llcs in which she was a member cannot be attributed to her because respondent did not issue the llcs a final_partnership_administrative_adjustment fpaa before issuing the notice_of_deficiency further petitioner states that even if income in and can be attributed to her she is entitled to deductions allowances and credits that should have reduced her tax_liability to zero petitioner also asserts that she should be entitled to recover her litigation and or administrative costs lastly petitioner raises tax_protester although petitioner claimed in her petition that she should be entitled to recovery_of her administrative or litigation costs she did not argue for costs at trial or on brief in any event consideration of her eligibility for costs continued arguments under the fifth_amendment to the constitution in opposition to the filing requirement respondent claims that petitioner received income in and from various sources respondent maintains that the entities national land bank and speck should be disregarded for tax purposes due to each entity’s lack of economic_substance thus the income from these entities should be attributed to petitioner because petitioner did not pay taxes on self- employment income respondent maintains that petitioner is liable for self-employment_tax and since petitioner did not substantiate miroyal’s or her deductions respondent seeks to disallow the claimed deductions ii petitioner’s fifth_amendment claims a person does not have a blanket fifth_amendment privilege to avoid filing a federal_income_tax return or to refuse signing a federal_income_tax return under penalties of perjury see 274_us_259 see also major v commissioner tcmemo_2005_141 n brunner v commissioner tcmemo_2004_187 affd per curiam 142_fedappx_53 3d cir in order for an individual validly to continued under sec_7430 would be premature and the court will not further discuss the issue in this report see rule claim the privilege_against self-incrimination there must be a real and appreciable danger from substantial hazards of self incrimination and the individual must have ‘reasonable cause to apprehend such danger from a direct answer’ to questions posed to him 615_f2d_1235 9th cir quoting 341_us_479 a taxpayer cannot base his failure either to cooperate with the irs or to produce records on a generalized fear of self- incrimination the fifth_amendment privilege cannot be used as a method of evading payment of lawful taxes 829_f2d_828 9th cir affg tcmemo_1986_223 respondent confirmed at trial and represented to both the court and petitioner that there were no open contemplated anticipated or planned criminal investigations of petitioner petitioner when asked indicated she had no specific basis for fearing criminal action but nevertheless insisted on asserting her fifth_amendment claim as she felt it was inappropriate to testify against herself the court are you talking about your right against self-incrimination ms taylor yes in the fifth_amendment the court and do you have some other right that you’re standing on beside that one ms taylor no just the fifth the court all right do you have some reason to believe that you’re under criminal investigation or ms taylor no i don’t but any time that you testify it becomes a record and you know it’s not a good idea to testify against yourself so other people can use that so you know i don’t know what would ever happen in the future or it could become -- it’s public record so i’m not going to testify against myself would you petitioner did not demonstrate that there was any real or appreciable danger of self-incrimination nor did she offer to provide to the court in_camera any particularized basis or facts supporting the claimed fifth_amendment privilege therefore petitioner was not entitled to use the fifth_amendment as a defense to participating in the required rule stipulation process and answering questions posed to her at trial iii petitioner’s income_tax_liability a burden_of_proof in general the commissioner’s determination of a taxpayer’s tax_liability is presumed correct and the taxpayer bears the burden of proving that respondent’s determination is improper rule a 290_us_111 the presumption of correctness is appropriate where respondent has furnished evidence linking the taxpayer to the tax generating activity 910_f2d_1374 7th cir affg malicki v commissioner tcmemo_1988_559 the court_of_appeals for the ninth circuit the court to which an appeal of this case would normally lie has made clear that if respondent introduces evidence that the taxpayer received unreported income as respondent did here the burden generally is on the taxpayer to show by a preponderance_of_the_evidence that the deficiency was arbitrary and erroneous 181_f3d_1002 9th cir affg tcmemo_1997_97 see also palmer v united_states f 3d 9th cir the commissioner’s deficiency determinations and assessments for unpaid taxes are normally entitled to a presumption of correctness so long as they are supported by a minimal factual foundation emphasis added 680_f2d_1268 9th cir t he commissioner’s assertion of deficiencies are presumptively correct once some substantive evidence is introduced demonstrating that the taxpayer received unreported income however sec_7491 may shift the burden to respondent in specified circumstances for example where the taxpayer produces credible_evidence and meets other requirements sec_7491 the legislative_history of sec_7491 clarifies the meaning of credible_evidence credible_evidence is the quality of evidence which after critical analysis the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted without regard to the judicial presumption of irs correctness a taxpayer has not produced credible_evidence for these purposes if the taxpayer merely makes implausible factual assertions frivolous claims or tax protestor- type arguments the introduction of evidence will not meet this standard if the court is not convinced that it is worthy of belief if after evidence from both sides the court believes that the evidence is equally balanced the court shall find that the secretary has not sustained his burden_of_proof h conf rept pincite 1998_3_cb_747 in addition to effectuate a shift in the burden_of_proof petitioner must maintain all records required by the code and regulations and cooperate with reasonable requests by the secretary for witnesses information documents meetings and interviews sec_7491 petitioner did not satisfy the prerequisites under sec_7491 and to shift the burden_of_proof to respondent consequently except for any penalties subject_to sec_7491 as to which respondent bears the initial burden of production the general premise of rule a remains applicable b bank_deposits method for computing taxable_income the irs has broad powers under sec_446 to compute the taxable_income of a taxpayer sec_446 92_tc_661 generally such computation is made using the taxpayer’s regularly employed method_of_accounting sec_446 if the taxpayer’s method_of_accounting does not clearly reflect income then the method used shall be the method which in the commissioner’s opinion clearly reflects income sec_446 see palmer v united_states supra pincite respondent is afforded great latitude in determining a taxpayer’s liability and is entitled to use any reasonable method to reconstruct a taxpayer’s income especially where a petitioner refuses to cooperate in ascertaining her income petzoldt v commissioner supra 54_tc_1530 petitioner did not provide any evidence regarding her liability and respondent was able to acquire petitioner’s bank records only by summons respondent used the bank_deposits method to determine that petitioner earned the income attributed to her in the statutory notices of deficiency for and where the commissioner’s method of calculating income is rationally based courts afford a presumption of correctness to the commissioner’s determination palmer v united_states supra pincite the use of the bank_deposit_method for computing income has long been sanctioned by the courts 64_tc_651 and cases cited thereat affd 566_f2d_2 6th cir a bank deposit is prima facie evidence of income and respondent need not prove a likely source of that income 87_tc_74 citing estate of mason v commissioner supra pincite the bank_deposits method assumes that all money deposited in a taxpayer’s bank account during a given period constitutes taxable_income but the government must take into account any nontaxable source or deductible expense of which it has knowledge 102_tc_632 when a taxpayer keeps no books_or_records has large_bank deposits and offers no plausible explanation of such deposits the commissioner is not arbitrary or capricious in resorting to the bank_deposit_method for computing income estate of mason v commissioner supra pincite at trial mr johnson thoroughly explained the method used to reconstruct petitioner’s income for and mr johnson reviewed each of the bank_deposits to determine whether the deposit was from a taxable or nontaxable source petitioner did not offer into evidence any books records or receipts on her behalf nor did she offer any evidence challenging respondent’s income calculations c final_partnership_administrative_adjustment petitioner argues that any or llc income cannot be attributed to her because respondent did not issue miroyal or national land bank an fpaa before issuing her notice_of_deficiency generally the commissioner may not assess a deficiency attributable to any partnership_item until the 150th day after the day on which the fpaa was mailed to the tax_matters_partner sec_6225 for purposes of sec_6221 through a partnership is defined by sec_6231 to mean in general any partnership required to file a return under sec_6031 sec_6231 provides an exception to the definition of a partnership for small partnerships the term partnership for this purpose does not include any partnership having or fewer partners each of whom is an individual other than a nonresident_alien a c_corporation or an estate of a deceased partner miroyal is a partnership with only two partners petitioner and gerald ricke both partners are individuals thus miroyal falls within the sec_6231 partnership exception however a small_partnership can elect to have subchapter_c of chapter apply see sec_6231dollar_figure miroyal did not make this election in or because miroyal falls a partnership may elect to have subchapter_c apply to the tax treatment of partnership items by checking the proper box on form_1065 schedule b and by attaching a statement to the partnership return for the first taxable_year for which the election is effective sec_301_6231_a_1_-1 proced admin regs miroyal neither checked the box on line of form_1065 schedule b on its or form_1065 nor did it attach a statement to the form_1065 electing to have subchapter_c of chapter apply under the exception to the definition of a partnership as provided in sec_6231 and did not elect out of the exception respondent was not required to issue it an fpaa before mailing the deficiency_notice to petitioner national land bank does not fall within the small_partnership_exception because one of its partners speck is a_trust and not an individual however respondent used the indirect bank_deposit_method to calculate petitioner’s income sec_6231 establishes a special rule where indirect methods of proof of income are utilized this rule permits respondent to treat what would otherwise be partnership items as nonpartnership_items for purposes of sec_6221 through dollar_figure the rule applies to the extent regulations issued by the secretary provide that treatment of an item as a partnership_item will interfere with the effective and efficient enforcement of the revenue laws sec_301_6231_c_-6t temporary proced admin regs fed reg date provides that the treatment of items as partnership items with respect to a partner whose income is determined by an indirect method of proof will interfere with a partnership_item with respect to a partnership is defined as any item required to be taken into account for the partnership’s taxable_year under any provision of subtitle a to the extent regulations prescribed by the secretary provide that for purposes of this subtitle such item is more appropriately determined at the partnership level than at the partner level sec_6231 the effective and efficient enforcement of internal revenue laws consequently the partnership items of such partner arising in a partnership taxable_year ending on or before the last day of the taxable_year of the partner for which a deficiency_notice based upon an indirect method of proof is mailed to the partner shall be treated as nonpartnership_items as of the date on which the deficiency_notice is mailed therefore respondent was not required to issue national land bank an fpaa before mailing the statutory_notice_of_deficiency to petitioner d miroyal income at trial petitioner asserted the fifth_amendment privilege and refused to admit or deny whether she provided real_estate services in and similarly petitioner refused to confirm or deny whether she managed real_property in and on the same fifth_amendment reasoning respondent for lack of substantiation disallowed miroyal’s claimed deductions for as follows dollar_figure for repairs and maintenance dollar_figure of interest and dollar_figure of other deductions ie insurance dollar_figure miscellaneous dollar_figure and utilities dollar_figure petitioner signed miroyal’s and federal tax returns naming herself the tax_matters_partner for yet she provided no receipts or records but provided only a typed list showing the total_amounts miroyal allegedly expended on the claimed deductionsdollar_figure she did not offer any testimony receipts or canceled checks regarding any of miroyal’s claimed deductions the list she prepared will not suffice as substantiation therefore respondent’s disallowance of the claimed deductions in is sustained respondent attributed percent of miroyal’s income to petitioner as her distributive_share however miroyal’s form_1065 schedule_k-1 for which respondent introduced into evidence showed that petitioner was only a 50-percent member of miroyal during that year respondent’s revenue_agent apparently did not distinguish between and when testifying that petitioner held a 95-percent interest in miroyal miroyal’s form_1065 schedule_k-1 for reflected this ownership split and neither the revenue_agent nor respondent presented any other basis for or facts explaining the revenue agent’s conclusion that the reported 50-percent membership percentage evidenced by petitioner’s form_1065 schedule_k-1 for was inaccurate thus respondent’s conflicting evidence presents the court with a conundrum the filed form_1065 schedule_k-1 which was prepared before petitioner commenced her overt tax_protester activities miroyal did not designate a tax_matters_partner for in any event a tax_matters_partner is necessary only for partnerships subject_to sec_6221 through as previously discussed miroyal is not subject_to sec_6221 through has independent tax significance as it allocated dollar_figure of taxable_income to the other reported 50-percent member gerald ricke who presumably paid tax on this amount this is a substantial indicium that he was in fact a 50-percent member in because respondent stipulated miroyal’s form_1065 through his own rule f motion and also introduced it as evidence at trial the court finds based on a preponderance_of_the_evidence that petitioner’s distributive_share of miroyal’s income for wa sec_50 percent of dollar_figure ie dollar_figure of which dollar_figure was reported leaving an adjustment of dollar_figure dollar_figure for respondent allowed miroyal a deduction for taxes and licenses of dollar_figure as substantiated by the revenue_agent via miroyal’s canceled checks on the basis of an examination and analysis of miroyal’s bank_deposits the revenue_agent determined that miroyal had unreported income for of dollar_figure petitioner introduced no evidence to challenge or refute respondent’s determination and therefore failed to carry her burden_of_proof because miroyal’s filed federal tax_return miroyal’s form_1065 schedule_k-1 for did not contain an address or social_security_number for gerald ricke however the form_1065 schedule_k-1 for contained a social_security_number but no address for gerald ricke utilizing the supplied taxpayer_identification_number respondent’s revenue_agent could have checked gerald ricke’s federal tax_return to see whether it was filed and whether it properly reported the dollar_figure of allocated income if not evidence to that effect would have supported the revenue agent’s conclusion but respondent never claimed this to be the fact signed by petitioner reflected that in she was a 95-percent member respondent correctly attributed percent of miroyal’s dollar_figure of ordinary_income for that year ie dollar_figure to petitioner e speck and national land bank income taxable_year a income from speck a fundamental principle of tax law is that income is taxed to the person who earns it see 337_us_733 281_us_111 attempts to subvert the fundamental principle that income is taxed to the person who earns it by diverting income away from its true_earner to another entity by means of contractual arrangements however cleverly drafted are not recognized as dispositive for federal_income_tax purposes regardless of whether such arrangements are otherwise valid under state law residential mgmt servs trust v commissioner tcmemo_2001_297 quoting barmes v commissioner t c memo under the assignment_of_income_doctrine gross_income from personal services must be included in the income of the person who earned it lucas v earl supra pincite such income is taxable to the person who earned it even though the taxpayer makes an anticipatory_assignment_of_income and delivers a payor’s with respect to national land bank income for see supra note check to a third party see 551_f2d_208 8th cir respondent determined that petitioner provided personal real_estate marketing services to krismon buttes for which dollar_figure was paid and that this dollar_figure was taxable to petitioner petitioner testified that marketing services were provided to krismon buttes but denied providing them in her own name stating they were provided through speck respondent sought to attribute all the income of speck to petitioner petitioner however introduced no evidence that speck was an independent taxable entity rather than a sham assignee or grantor_trust as contended by respondent where a sham_transaction has no economic_effect it will not be recognized for tax purposes 731_f2d_1417 9th cir citing 631_f2d_642 9th cir affg 66_tc_1024 affg 79_tc_714 the address for speck on national land bank’s form_1065 schedule_k-1 was the same as petitioner’s n gilbert road gilbert arizona on national land bank’s amended form_1065 the address for speck on the attached form_1065 schedule_k-1 was changed to w vista drive glendale arizona changing speck’s address on the form_1065 schedule_k-1 attached to national land bank’s amended form_1065 and completely omitting speck’s address on the form_1065 schedule_k-1 attached to national land bank’s form_1065 in the context of this case appears to the court to be deliberately deceptive and does not given mr mcglothlin’s testimony establish two different taxable entities b krismon buttes’s dollar_figure check is taxable to petitioner petitioner did not provide any evidence demonstrating an independence from or a dissociation with speck or property resources speck issued krismon buttes an invoice in the amount of dollar_figure for marketing services rendered krismon buttes issued speck check no which never cleared krismon buttes’s checking account subsequently krismon buttes issued check no in the amount of dollar_figure to property resources as a replacement for check no the court is skeptical that speck would provide marketing services worth dollar_figure to krismon buttes but absent a quid pro quo allow krismon buttes to deliver payment to property resources petitioner fails to explain this instead at trial petitioner asserted a fifth_amendment privilege when asked whether she was compensated for marketing services she provided to krismon buttes this is an indication that any facts which could have been presented by her at trial would have been unfavorable to her position 92_tc_661 the failure of a party to call such available witnesses that purportedly have knowledge about relevant facts provides sufficient basis to infer that the testimony of such witnesses would not have been favorable to the party see also 886_f2d_1237 9th cir affg 89_tc_1063 6_tc_1158 affd 162_f2d_513 10th cir little v commissioner tcmemo_1996_270 petitioner has not met her burden_of_proof accordingly the dollar_figure paid to property resources is taxable to petitioner in dollar_figure taxable_year petitioner’s form_1040 for reported no income from national land bank respondent made adjustments to national land bank’s income using the bank_deposits method because respondent did not receive any audit cooperation or documents from petitioner for using the bank_deposits method and the fact that petitioner had signatory authority over the account at san national land bank did not report the dollar_figure on its form_1065 presumably because krismon buttes at speck’s request reissued the check to property resources however because the check was originally issued to speck in payment of speck’s invoice for services rendered and because speck is a disregarded_entity for federal tax purposes the dollar_figure is taxable to petitioner because the parties did not raise the timing issue of constructive receipt of the dollar_figure in the taxable_year when the original check was made payable to and delivered to speck the court does not address this issue tan credit_union under the name of national land bank llc account no respondent effectively connected the deposits from taxable sources to national land bank’s account petitioner introduced no evidence to refute this adjustment respondent’s bank_deposit_method is an acceptable means to determine the amount of income received by national land bank in moreover speck in is treated as a disregarded_entity for federal tax purposes therefore all the income earned by national land bank dollar_figure including speck’s share is attributed to petitioner f nature’s herb tea garden income petitioner refused to confirm or deny that she maintained the business nature’s herb tea garden respondent provided bank records showing checks payable to nature’s herb tea garden deposited into an account at norwest bank arizona n a in the name of sue taylor d b a natures herb tea garden the uncontroverted evidence of bank_deposits being made to the account controlled by petitioner is sufficient to link petitioner to the income from nature’s herb tea garden because petitioner offered no evidence regarding her association with nature’s herb tea garden she has failed to rebut the presumption that respondent’s deficiency determination with respect to her income from that source was correctdollar_figure g deductions sec_162 generally allows a taxpayer to deduct all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business an ordinary_expense is one that is normal usual or customary in the type of business involved see 308_us_488 a necessary expense is one that is appropriate and helpful to the taxpayer’s business 290_us_111 deductions are a matter of legislative grace 292_us_435 taxpayers have the burden to show they are entitled to any deduction claimed on their returns and they must be able to point to some particular statute and demonstrate that they come within its terms deputy v du pont supra pincite new colonial ice co v helvering supra where taxpayers do not substantiate their claimed deductions the commissioner is not arbitrary or unreasonable in determining that the claimed deductions should be denied 62_tc_834 on petitioner’s form_1040 schedule c she reported income from the business natures herbs admitting her relationship with this business during that year where a taxpayer claims a business_expense but cannot fully substantiate it the court may approximate the allowable_amount 39_f2d_540 2d cir however the taxpayer must provide reasonable evidence from which to estimate the deductible amount 85_tc_731 if the evidence presented by the taxpayer is not sufficient to identify the nature of or estimate the extent of the expense then the taxpayer is not entitled to the benefits of the cohan_rule see 245_f2d_559 5th cir furthermore where the taxpayer fails to cooperate with the commissioner and this court we have no obligation to apply the cohan_rule 877_f2d_624 7th cir affg tcmemo_1987_295 petitioner claimed form_1040 schedule c deductions for expenses of nature’s herb tea garden accompanying petitioner’s return was a list of expenses listing only the total_amounts allegedly incurred ie dollar_figure of office expense and dollar_figure for supplies petitioner did not provide any evidence to substantiate these claimed expenses petitioner’s list of expenses is not sufficient to substantiate such expenses or to enable us to apply the cohan_rule and estimate a deductible amount the adjustments disallowing schedule c expenses are sustained h self-employment_tax sec_1401 imposes in addition to other taxes a tax on the self-employment_income of every individual subject_to exclusions not applicable in the instant case self-employment_income refers to the net_earnings_from_self-employment derived by an individual sec_1402 sec_1402 defines net_earnings_from_self-employment as the gross_income derived by an individual from any trade_or_business carried on by such individual less the claimed deductions in allowed by this subtitle which are attributable to such trade_or_business the burden_of_proof to show that respondent’s determination was in error remains with petitioner she offered no evidence and advanced no arguments with respect to liability for self- employment_taxes the burden did not shift to respondent under sec_7491 petitioner’s income from real_estate services and rental payments is documented by her receipt of several checks by filing her form_1040 for petitioner admitted her schedule c nature’s herb tea garden business income was subject_to self- employment_tax petitioner is liable for the self-employment taxes in the amounts of dollar_figure and dollar_figure for and respectivelydollar_figure for the notice_of_deficiency reported that continued iv penalties a sec_6662 with respect to examinations beginning after date the commissioner bears the burden of production in any court_proceeding involving an individual’s liability for penalties or additions to tax sec_7491 to meet this burden the commissioner must come forward with sufficient evidence indicating that it is appropriate to impose the relevant penalty or addition_to_tax 116_tc_438 in instances where an exception to the penalty or addition_to_tax is afforded upon a showing of reasonable_cause the taxpayer bears the burden of showing such cause id pincite sec_6662 provides for an accuracy-related_penalty in the amount of percent of the portion of an underpayment attributable to among other things any negligence or disregard of the rules or regulations or any substantial continued petitioner had dollar_figure of self-employment_income petitioner’s form_1040 schedule c reported big_number of income and respondent made an adjustment of dollar_figure to form_1040 schedule c income petitioner’s reported self-employment_income dollar_figure combined with respondent’s adjustment dollar_figure total dollar_figure after subtracting form_1040 schedule c taxes and licenses of dollar_figure as allowed by respondent there remains a difference of dollar_figure which was the amount of loss reported on petitioner’s form_1040 schedule c however because the dollar_figure krismon buttes payment is also self-employment_income the court concludes that respondent has shown at least dollar_figure of self-employment_income for understatement of income_tax sec_6662 an understatement is defined as the excess of the amount of tax required to be shown on the return for the taxable_year over the amount of tax imposed which is shown on the return reduced by any rebate sec_6662 sec_6662 and sec_1_6662-3 income_tax regs define negligence as including any failure to make a reasonable attempt to comply with the code and define the term disregard as including any careless reckless or intentional disregard negligence is a lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances marcello v commissioner 380_f2d_499 5th cir affg on this issue 43_tc_168 and tcmemo_1964_299 108_tc_147 85_tc_934 a substantial_understatement_of_income_tax exists for an individual where the amount of the understatement exceeds the greater of percent of the tax required to be shown on the return or dollar_figure sec_6662 the amount of the understatement shall be reduced by that portion of the understatement attributable to the tax treatment of any item by the taxpayer if there is or was substantial_authority for such treatment or as to any item if the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return and there is a reasonable basis for the tax treatment of such item by the taxpayer sec_6662 where a taxpayer can show there is reasonable_cause for any portion of the underpayment and that the taxpayer acted in good_faith with respect to that portion of the underpayment then no penalty shall be imposed under sec_6662 with respect to that portion of the underpayment sec_6664 petitioner failed to report her correct income from miroyal national land bank or nature’s herbs tea garden for and she had a substantial_understatement of tax for and the understatement amount exceeds dollar_figure per year and percent of the amount required to be shown on the return petitioner did not offer any substantial_authority or reasonable_cause for failing to report her correct income thus she is liable for a penalty under sec_6662 for and respondent is sustained on this issuedollar_figure b sec_6673 sec_6673 allows this court to award a penalty to the united_states in an amount not in excess of dollar_figure for the court need not determine whether petitioner was negligent in failing to report her income for and because there was a substantial_understatement on her and returns proceedings instituted by the taxpayer primarily for delay or for proceedings in which the taxpayer’s position is frivolous or groundless a petition to the tax_court or a tax_return is frivolous if it is contrary to established law and unsupported by a reasoned colorable argument for change in the law 791_f2d_68 7th cir imposing penalties on taxpayers who made frivolous constitutional arguments in opposition to the income_tax courts have ruled that constitutional defenses to the filing requirement such as petitioner presents are groundless and wholly without merit 611_f2d_1226 8th cir see also brunner v commissioner tcmemo_2004_187 affd per curiam 142_fedappx_53 3d cir williams v commissioner tcmemo_1999_277 morin v commissioner tcmemo_1999_240 sochia v commissioner tcmemo_1998_294 all of which imposed a sec_6673 penalty for tax_protester arguments groundless litigation diverts the time and energies of judges from more serious claims it imposes needless costs on other litigants once the legal system has resolved a claim judges and lawyers must move on to other things they cannot endlessly rehear stale arguments both appellants say that the penalties stifle their right to petition for redress of grievances but there is no constitutional right to bring frivolous suits see 461_us_731 103_sct_2161 76_led_277 people who wish to express displeasure with taxes must choose other forums and there are many available coleman v commissioner supra pincite respondent sought a sec_6673 penalty in respondent’s pretrial memorandum but respondent did not request a penalty during trial or on brief and the court declines to impose such a penalty today however the court explicitly admonishes petitioner that she may in the future be subject_to a penalty under sec_6673 for any further proceedings instituted or maintained primarily for delay or for any proceedings which are frivolous or groundless the court has considered all of petitioner’s contentions arguments requests and statements to the extent not discussed herein we have found them to be meritless irrelevant or moot to reflect the foregoing and concessions made by respondent under rule decision will be entered


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date date legend t city u geographic area v city names x geographic area b dollars amount dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 you have recently been reclassified from a public charity under sec_509 and sec_170 of the code to a private_foundation this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 description of your request you were established in response to the findings that many residents of t would be better prepared and more qualified for the jobs offered in the new visitor industry hub of t at u through increased education and training your objectives are to assist the residents of t in qualifying for and acquiring the jobs available in their region and thereby contribute to the socioeconomic development of t through education and training letter catalog number 58263t therefore you are operating a scholarship program for residents of t for the acquisition of knowledge and skills required in the visitor industry in your state availability of your scholarships and the application requirements will be made known through printed materials flyers advertisements in t community colleges and universities’ newspapers etc at public events eg in shared booth space at fairs etc word of mouth and your website your primary geographic focus is t particularly x therefore you will give priority consideration to individual applicants from these areas including the individual communities of v which are two of the most socio-economically depressed communities in your state because your goal is to assist individuals obtain and or retain jobs in the visitor industry individuals with all levels of education may apply for example you welcome applications from high school and college students as well as individuals currently in the work force without a high school or college degree your selection committee will consist of your current board members selection committee members relatives of members of the selection committee or relatives of your officers directors or substantial contributors are not eligible for the scholarships all _ awards are made on an objective and nondiscriminatory basis no scholarship will be awarded to any disqualified_person as defined in code sec_4946 the selection committee shall evaluate all applications and determine awards based on the following criteria the training or educational program being applied for content of the answer provided to the question on the application why are you applying for this training program the amounts of the scholarships are expected to vary according to the each awardee’s particular needs and circumstances for instance scholarships may be awarded to an individual for tuition and materials for a course s offered by an accredited college university while other scholarships may be awarded for books only or for the program fees of a visitor-industry-related worker enrichment course the number of scholarships will depend upon the amounts awarded per individual selected approximately b dollars per year in scholarships will be awarded tuition and fees will be paid directly to the educational_institution but in circumstances where the individual has already paid the institution you will reimburse the individual upon receiving a receipt of paid enrollment awards for study materials may be awarded directly to the individual s to ensure awardees have met the objective set forth by you awardees will forward to you either e acopy of the transcript from their post high school educational_institution upon completion of the semester or acertificate of training program upon completion e if you determine that any part of the award was used for purposes other than the objectives stated above you have the option to either terminate the award and take all letter catalog number 58263t reasonable and appropriate steps including legal action to recover the award or take all reasonable and appropriate steps to ensure the restoration of the award you agree to maintain records that include the following i it iii iv information used to evaluate the qualification of potential grantees identification of the grantees including any relationship of any grantee to you the amount and purpose of each grant and all grantee reports and other follow-up data obtained in administering your program basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you may report any significant changes to your program by completing form_8940 and sending it to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives letter catalog number 58263t e e all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely director exempt_organizations letter catalog number 58263t


internal_revenue_service number release date index number -------------------- ---------------------------- ---------------------------------- ----------------------- ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no ---------------- telephone number -------------------- refer reply to cc psi b01 plr-130088-15 date date legend x --------------------- ------------------------------------------------- state d1 d2 d3 ------------ -------------------------- --------------------- --------------------- dear ------------ this responds to the letter dated date and related correspondence submitted on behalf of x requesting a ruling that x’s election to be classified as an association_taxable_as_a_corporation was an initial classification election and not a change in classification for purposes of sec_301_7701-3 of the procedure and administration regulations plr-130088-15 facts the information submitted states that x was formed as a limited_liability_company under the laws of state on d1 prior to d2 x had no assets income deductions liabilities bank accounts business operations or board meetings and was dormant on d2 x purchased a residential and retail property and began its business operations x elected to be classified as an association_taxable_as_a_corporation by filing a form_8832 entity classification election effective d3 a date between d1 and d2 corporate classification election law and analysis 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 elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that subject_to the limitation of sec_301 c iv an eligible_entity may elect to be classified other than its default classification or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that if an eligible_entity makes an election under sec_301_7701-3 to change its classification other than an election made by an existing entity to change its classification as of the effective date of this section the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election however the commissioner may permit the entity to change its classification by election within the sixty months if more than fifty percent of the ownership interests in the entity as of the effective date of the subsequent election are owned by persons that did not own any interests in the entity on the filing_date or on the effective date of the entity’s prior election an election by a newly formed eligible_entity that is effective on the date of formation is not considered a change for purposes of sec_301_7701-3 plr-130088-15 conclusion based solely upon the facts submitted and the representations made we conclude that x’s corporate classification election was an initial classification election effective d2 and not a change in classification for purposes of sec_301_7701-3 except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the above-described facts under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter_ruling will be sent to x’s authorized representatives sincerely associate chief_counsel passthroughs special industries by joy c spies joy c spies senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 1-plr-115265-99 date nov legend x date 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 facts x was incorporated on date the sole shareholder of x desired that x elect s_corporation treatment for x effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis 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 plr-115265-99-99 corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no sec_1362 election is made for any taxable_year and 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 and sec_1362 shall not apply x did not file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative signed david r haglund sincerely david r haglund senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


cca_2017013014491696 id uilc number release date from sent monday date pm to cc bcc subject tribal settlement distributions issuance issue ------------------------------ you asked whether certain payments to tribal members made out of a settlement of litigation between the government and certain tribes related to a contract dispute are taxable based on the information provided and a review of the applicable law we do not believe there is any legal basis to exclude the payments from the tribal members’ income we will follow up this email with a memorandum with a fuller discussion of the relevant law and analysis let me know if you have any additional questions thanks ------ ------------------------------ ---------------------------------- ----------------------------- --------------- --------------------