internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc corp - plr-110201-02 date date legend parent purchaser purchaser partnership target sellers date a date b company official tax professional plr-110201-02 this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election parent is requesting an extension to file a sec_338 election under sec_338 with respect to the acquisition of the stock of target sometimes hereinafter referred to as the election on date a all citations in this letter to regulations under sec_338 are to regulations in effect on date a additional information was received in a letter dated date the material information is summarized below parent is the common parent of a consolidated_group purchaser is a wholly owned subsidiary of parent purchaser is an llc wholly owned by purchaser and disregarded as an entity separate from purchaser for federal_income_tax purposes target is a foreign_corporation wholly owned by partnership a domestic_partnership sellers were the only partners of partnership on date a pursuant to a purchase agreement of the same date purchaser and purchaser acquired all of sellers’ partnership interests in partnership in exchange for cash it is represented that the acquisition of target by means of the acquisition of all of the partnership interests in partnership qualified as a qualified_stock_purchase as defined in sec_338 prior to the acquisition target did not file a united_states income_tax return was not subject_to united_states income_taxation nor was required under sec_1_6012-2 to file a united_states income_tax return target is a controlled_foreign_corporation within the meaning of sec_957 target is not a passive_foreign_investment_company for which an election under sec_1295 was in effect or foreign_investment_company or foreign_corporation the stock ownership of which is described in sec_552 parent intended to file the election the election was due on date b but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for parent’s consolidated group’s or target’s taxable_year in which the acquisition occurred the taxable_year in which the election should have been filed or any taxable_year that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time 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 plr-110201-02 the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338-2t d therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for parent to file the election provided parent acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for parent to file the election with respect to the acquisition of the stock of target as described above the above extension of time is conditioned on the filing within days of the date on this letter of all returns and amended returns if any necessary to report the transaction in accordance with the election and the taxpayers' parent’s consolidated group’s and target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 parent must file the election in accordance with sec_1_338-2t d that is a new election on form_8023 must be executed on or after the date on this letter which grants an extension and filed in accordance with the instructions to the form a copy of this letter must be attached to the election form parent must file or amend as applicable plr-110201-02 its return to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year and to attach to the return a copy of this letter and a copy of the election we express no opinion as to whether the acquisition of the target’s stock qualifies as a qualified_stock_purchase under sec_338 or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative cc sincerely yours ken cohen senior technician reviewer branch office of associate chief_counsel corporate


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-125377-05 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities ---------------------------------------------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion dated ------------------ that the following business ceased to be an employer under the railroad retirement act and the railroad unemployment insurance act effective --------------------- ------- -------------------------------------------------------------- ---------------------------------------------------------------- ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------ --------------------------------------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb and our subsequent phone conversation with the taxpayer we believe that -----------------------------------------------------------------merely changed its name effective ---------------------- after it became affiliated with the ------------------------------------- --------------------------------------------------------------------------------------------------------------------- - -------------- the new name with the -------------------------is -------------------------------------- --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- -- ------------ is a division within --------------------------------------------------------- postn-125377-05 please take the appropriate action regarding this business cc ------------------------------------------- -------------------------------------------- -------------------------------------------- ________________ ---------------------------- janine cook


internal_revenue_service number info release date uil date dear this letter is in response to your inquiry dated constituent in his email correspondence to you dated on behalf of your expressed his concern that the business standard mileage rates published by the internal_revenue_service irs for and do not sufficiently reflect changes in automobile costs the business standard mileage rate is based on an annual study of operating and fixed costs of using an automobile the study is performed by an independent_contractor that is an expert in the field of automobile cost analysis the types of automobiles used in the study represent a cross-section of the most popular models operated in the united_states the contractor has conducted this study for two decades and has consistently taken into account the most reliable and up-to-date data available to reflect a driver’s average costs over a year the study combines this data to achieve national composite rates for operating costs and fixed costs the irs announces the mileage rate in advance of the applicable_year so that throughout the year taxpayers will know the extent to which automobile expenses may be treated as substantiated for the rate the study indicated that on average automobile costs had decreased across the board compared to the costs analyzed in the previous year’s study the most dramatic decreases were caused by reduced gasoline prices and reduced loss of automobile value on resale which resulted in a lower vehicle cost component consequently the business standard mileage rate dropped from cents per mile the rate to cents per mile for however the 31-cent rate did not take effect until date we delayed implementing the lower rate because many employers needed additional time to adjust their mileage_allowance procedures the rate for determined in the same manner as previous rates i sec_32 cents per mile we have seen gasoline and oil prices fluctuate dramatically over the last several years but it is not administratively feasible for the irs to account for these fluctuations more frequently than annually however the standard mileage rate is an optional simplified_method for substantiating reimbursed automobile expenses employers generally may instead accept substantiation of employees’ actual automobile expenses in addition employers may pay a mileage_allowance that exceeds the amount substantiated using either the published mileage rate or actual expenses but any payment in excess of the substantiated amount must be treated as wages and included in the employee’s income i hope this information is helpful please contact edwin b cleverdon identification_number at if we may be of further assistance sincerely deputy assistant chief_counsel income_tax accounting by robert a berkovsky chief branch


-ne department of the treasury internal_revenue_service washington d c mar uniform issue list tep ra ts legend taxpayer a taxpayer b company c amount d amount e country f country g amount h amount ira x roth_ira x dear page this is in response to a letter dated date as supplemented by correspondence dated date and january february and date and a telephone call on date in which you through your authorized representative requested relief under sec_301_9100-3 of the procedure and administration reguiations regulations the following facts and representations support your ruling_request taxpayer a is married to taxpayer b taxpayer a i sec_71 years old and taxpayer b i sec_65 years old for tax_year taxpayers a and b filed a joint federal_income_tax return form taxpayer a previously maintained two traditional individual_retirement_arrangements iras ira x and ira y on date ira x and jra y were converted to a roth_ira roth_ira x the amounts converted were amount d from ira x and amount e from ira y due to the conversion amount d and amount e were taxable in addition to the conversion taxpayer a made a contribution to roth_ira x on for tax_year at the time of the conversions of ira x and ira y into roth_ira x and the annual contribution to roth_ira x taxpayer a believed that he was qualified to convert ira x and ira y into roth_ira x described in sec_408a of the internal_revenue_code code form w-2c to him federal_income_tax retum to is amount i which is an amount that is exceeded dollar_figure the conversion of ira x and taxpayers a and b timely filed their calendar_year joint date taxpayer a has not recharacterized his roth_ira x as a traditional_ira furthermore your authorized representative has asserted on your behalf that prior to the submission of this ruling_request the internal_revenue_service had not notified taxpayers a or b that taxpayer a had made an improper in date company c taxpayer a’s former employer issued a this form w-2c was issued to report additional income that directly related to taxpayer a's previous assignment in country f with company c the additional income related to country f tax_payments made by company c which are considered assignment-related imputed_income taxpayer a had repatriated to country g in date prior to the receipt of the form w-2c taxpayer a’s and b’s modified_adjusted_gross_income for tax_year was amount h which is an amount that is less than dollar_figure after the receipt of the form w-2c taxpayer a's and b's modified_adjusted_gross_income for calendar_year more than dollar_figure as a result of the form w-2c since taxpayer a's and b’s modified_adjusted_gross_income for calendar_year ira y into roth_ira x was invalid based on the above facts and representations taxpayers a and b through their authorized representative request a ruling that they be granted an extension of days measured from the date of this letter_ruling to recharacterize taxpayer a’s roth_ira x to the extent it consists of amounts d and e and earnings attributable thereto as a traditional_ira pursuant to sec_301_9100-3 of the regulations ira conversion page with respect to your request for relief under sec_301_9100-3 of the regulations sec_408a of the code and sec_1_408a-5 of the income_tax regulations regulations provide that except as otherwise provided by the secretary a taxpayer may elect to recharacterize an ira contribution made to one type of ira as having been made to another type of ira by making a trustee-to-trustee transfer of the ira contribution plus earnings to the other type of ira in a recharacterization the ira contribution is treated as having been made to the transferee ira and not to the transferor ira under sec_408a and sec_1_408a-5 this recharacterization election generally must occur on or before the date prescribed by law including extensions for filing the taxpayer's federal_income_tax returns for the year of contributions sec_1_408a-5 of the regulations question and answer-6 describes how a taxpayer makes the election to recharacterize the ira contribution to recharacterize an amount that either has been contributed to a roth_ira or that has been converted from a traditional_ira to a roth_ira the taxpayer must notify the roth_ira trustee of the taxpayer's intent to recharacterize the amount the taxpayer must provide the trustee and the transferee trustee if different from the transferor trustee with specific information that is sufficient to effect the recharacterization and the trustee must make the transfer sec_408a of the code provides in relevant part that an individual with modified_adjusted_gross_income in excess of dollar_figure for a taxable_year is not permitted to make a qualified_rollover_contribution to a roth_ira from an ira other than a roth_ira during that taxable_year sec_1_408a-4 of the regulations q8 a-2 provides in summary that an individual with modified_adjusted_gross_income in excess of dollar_figure for a taxable_year is not permitted to convert an amount to a roth_ira during that taxable_year q a-2 b further provides that a married individual is permitted to convert a traditional_ira to a roth_ira only if the individual and his her spouse file a joint federal_income_tax return furthermore the modified_adjusted_gross_income is the modified_adjusted_gross_income derived from the joint_return using the couple’s combined income sec_1_408a-5 of the regulations q a-2 a provides guidance with respect to the calculation of income attributable to recharacterized amounts see also sec_1_408-4 of the regulations sec_301_9100-1 sec_301_9100-2 and sec_301_9100-3 of the regulations in general provide -guidance concerning requests for relief submitted to the internal_revenue_service on or after date sec_301_9100-1 of the regulations provides that the commissioner of the service in his discretion may grant a reasonable extension of time fixed by a regulation a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin for the making of a election or application_for relief in respect of tax under among others subtitle a of the code sec_301_9100-2 of the regulations lists certain elections for which automatic extensions of time to file are granted sec_301_9100-3 of the regulations generally provides guidance with - respect to the granting of relief with respect to those elections not referenced in sec_301_9100-2 the relief requested in this case is not referenced in sec_301_9100-2 page sec_301_9100-3 of the regulations provides that applications for relief that fall within sec_301_9100-3 will be granted when the taxpayer provides sufficient evidence including affidavits described in sec_301_9100-3 to establish that the taxpayer acted reasonably and in good_faith and granting relief would not prejudice the interests of the government sec_301_9100-3 of the regulations provides that a taxpayer will be deemed to have acted reasonably and in good_faith if i its request for sec_301_9100-1 relief is filed before the failure to make a timely election is discovered by the service ii the taxpayer inadvertently failed to make the election because of intervening events beyond the taxpayer's control iii the taxpayer failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv the taxpayer relied upon the written advice of the service or v the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election in this case taxpayer a and taxpayer b timely filed their joint_return when they filed their aware that taxpayer a was ineligible to convert his traditional iras x and y to roth_ira x because they were unaware that assignment-related imputed_income from employment services i furthermore he provided to company c prior to date would be taxable_income in the form w-2c which informed taxpayer a that he had such taxable_income was not issued to him until january federal_income_tax return taxpayers a and b were not federal_income_tax taxpayers a and b did not become aware that taxpayer a's y to roth_ira x did not comply with the requirements of sec_408a of the code and receipt of the form w-2c at that point the interpreting regulations until their january time period prescribed by sec_408a of the code had expired therefore itis necessary to determine if taxpayers a and b are eligible for relief under sec_301_9100-3 of the regulations conversion of ira x and ira in this case taxpayers a and b filed this request for relief under sec_301 of the regulations shortly after discovering that taxpayer a was ineligible to convert his traditional modified iras x and y to roth_ira x because his conversion was tainted due to their adjusted_gross_income exceeding permissible limits furthermore the form w-2c which contained the taxable_income information that caused their modified_adjusted_gross_income to exceed said limit was not available to them at the time they filed their return federal_income_tax thus with respect to taxpayers a and b's request for relief we believe that based on the information and the representations contained therein the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been met and taxpayers a and b acted reasonably and in good_faith with respect to requesting an extension of time in order to recharacterize roth_ira x as a traditional_ira specifically we conclude that taxpayers a and b have met the requirements of clauses i and iii of sec_301_9100-3 of the regulations therefore taxpayers a and b are granted an extension of time not to exceed days as measured from page ee the date of this letter_ruling to recharacterize amounts d and e held in roth_ira x plus earnings attributable thereto as a traditional_ira no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent please note that in recharacterizing taxpayer a’s roth_ira x as a traditional_ira taxpayers a and b must file an amended calendar_year therewith if they have not already done so federal_income_tax return consistent pursuant to a power_of_attorney on file with this office a copy of this ruling letter is being sent to your authorized representative if you wish to inquire about this ruling please contact please address ali correspondence to se t ep ra t3 sincerely yours y manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


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 fip b02 plr-103094-15 date february legend taxpayer operating partnership company x company y manager llc state a state b date date date date date ----------------------------------------------------------------------- ---------------------------------- ----------------------------------------------------------------------- -------------------------------------- ------------------------------------ ------------------ ----------------------------------------- ----------------------------- ------------ ------------ ------------------ -------------------------- ------------------------ ---------------- --------------------- plr-103094-15 a b c d e f ------- ------ -- ---- --- -- dear --------------------- this is in response to your letter dated date and supplemental submissions regarding the treatment of the taxpayer’s allocable share of management fees for purposes of the gross_income tests under sec_856 and c of the internal_revenue_code code facts taxpayer is a state a corporation taxpayer was formed during date and will elect to be taxed as a real_estate_investment_trust reit beginning with the taxable_year ended date taxpayer conducts substantially_all of its investment activities through operating partnership a state b limited_partnership which is treated as a partnership for federal_income_tax purposes taxpayer owns the sole general_partnership interest in operating partnership through its wholly owned subsidiary company x a state b limited_liability_company company x is disregarded for federal_income_tax purposes taxpayer also directly owns a limited_partnership_interest in operating partnership taxpayer completed an initial_public_offering ipo of its stock on date as of date taxpayer’s collective ownership percentage in operating partnership is a operating partnership is the sole owner of company y a state b limited_liability_company which elected to be treated as a corporation for federal_income_tax purposes company y and taxpayer jointly elected to treat company y as a taxable_reit_subsidiary company y owns b of manager a state b limited_liability_company treated as a partnership for federal_income_tax purposes manager owns c of taxpayer plr-103094-15 operating partnership’s primary business is to acquire invest in and manage a portfolio of re-performing and non-performing mortgage loans secured_by single-family residences and to a lesser extent loans secured_by multi-family residential and commercial mixed use retail residential properties collectively the mortgages taxpayer represents that operating partnership owns of the investments operating partnership’s portfolio predominantly consists of re-performing loans with respect to the non-performing loans operating partnership will often acquire the underlying properties securing the mortgages through foreclosure such properties referred to as real_estate owned or reos collectively the mortgages and reos are the investments reos acquired by operating partnership will be either rented or sold to third parties soon after they are acquired on date manager entered into a management agreement with taxpayer and operating partnership management agreement pursuant to the management agreement manager implements operating partnership’s business strategy and manages operating partnership’s business and investment activities and day-to-day operations manager also provides operating partnership and taxpayer with management corporate governance administrative and other services related to finance and accounting human resources legal investment_company exemption risk management corporate services vendor management operations operations support and reit qualification collectively the services including a management team and necessary administrative and support personnel to run the daily operations of operating partnership and taxpayer taxpayer represents that the services provided by manager will be usual and customary asset management of investments in mortgages and reos manager does not currently provide services to any persons as defined in sec_7701 other than operating partnership the management agreement provides that manager may provide services in the future to third parties under the condition that its services provided to taxpayer are not impaired neither taxpayer nor manager however anticipates that manager will provide services to or invest on behalf of third parties manager will not be the servicer of the mortgages or provide any services to the tenants of any reos llc will service the mortgages and provide any necessary property management lease management and renovation management required for the reos taxpayer represents that llc is an independent_contractor within the meaning of sec_856 with respect to taxpayer manager is compensated through fees paid_by operating partnership operating partnership pays a base management fee and an incentive fee to manager collectively taxpayer anticipates the rental of real_property to constitute a small part of its business if taxpayer provides any services to its tenants taxpayer will use an independent_contractor or taxable_reit_subsidiary as described under sec_856 to ensure that any impermissible_tenant_service_income does not exceed the de_minimis amount in sec_856 plr-103094-15 the management fees the base management fee is d of taxpayer’s consolidated stockholders’ equity per annum taxpayer’s consolidated stockholders’ equity is the sum of the net_proceeds from any issuances of equity by taxpayer or operating partnership since inception plus taxpayer’s and operating partnership’s retained earnings less i any amount taxpayer or operating partnership has paid to repurchase its common_stock or units since inception ii any unrealized gains and losses and other non-cash items that have affected consolidated stockholder’s equity iii any amount related to one-time events caused by changes in gaap and iv certain non-cash items not otherwise discussed above the base management fee will be paid in a combination of cash and shares of taxpayer’s common_stock the incentive fee will be payable quarterly in an amount equal to e of the dollar amount by which the sum of a aggregate cash dividends declared out of the reit taxable_income of taxpayer and b distributions declared out of the taxable_income of operating partnership without duplication exceeds the product of f and the book_value per share of taxpayer’s common_stock as of the end of each quarter the incentive fee is payable in cash taxpayer intends to restructure its operations company y will distribute its b interest in manager to operating partnership thus operating partnership will directly own the b interest in manager manager will continue to manage the investments and be compensated as provided in the management agreement as described above because operating partnership will be a partner in manager and taxpayer is a partner in operating partnership taxpayer will be allocated a portion of the fees that manager receives from operating partnership therefore taxpayer through its partnership_interest in operating partnership will have gross_income that includes taxpayer’s proportionate share of both the investment_income from operating partnership’s assets and operating partnership’s b share of the management fees law sec_856 of the code provides that at least percent of a reit’s gross_income must be derived from dividends interest rents_from_real_property gain from the sale_or_other_disposition of stock securities and real_property other than property in which the corporation is a dealer abatement and refunds of taxes on real_property income and gain derived from foreclosure_property commitment_fees and gain from certain_sales or other dispositions of real_estate_assets sec_856 of the code provides that at least percent of a reit’s gross_income must be derived from rents_from_real_property interest on obligations secured_by real_property gain from the sale_or_other_disposition of real_property other than property in which the corporation is a dealer dividends from reit stock and gain from the sale of reit stock abatements and refunds of taxes on real_property income and plr-103094-15 gain derived from foreclosure_property commitment_fees gain from certain_sales or other_disposition of real_estate_assets and qualified_temporary_investment_income sec_856 of the code provides in relevant part that to the extent necessary to carry out the purposes of part ii of subchapter_m of the code the secretary is authorized to determine solely for purposes of such part whether any item_of_income or gain which- i does not otherwise qualify under sec_856 or c may be considered as not constituting gross_income for purposes of sec_856 or c or ii otherwise constitutes gross_income not qualifying under sec_856 or c may be considered as gross_income which qualifies under sec_856 or c sec_1_856-3 of the income_tax regulations provides that a reit that is a partner in a partnership is deemed to own its proportionate share of each of the assets of the partnership and is deemed to be entitled to the income of the partnership attributable to such share for purposes of sec_856 the interest of a partner in the partnership’s assets is determined in accordance with the partner’s capital interest in the partnership the character of the various assets in the hands of the partnership and items of gross_income of the partnership retain the same character in the hands of the partners as in the hands of the partnership for all purposes of sec_856 sec_1_856-4 of the income_tax regulations provides that the directors or trustees of a reit are not required to delegate or contract out their fiduciary duty to manage the reit itself as distinguished from rendering or furnishing services to the tenants of the reit’s property or managing or operating the property thus the trustees or directors may do all things necessary in their fiduciary capacities to manage and conduct the affairs of the trust itself for example the trustees or directors may establish rental terms choose tenants enter into and renew leases and deal with taxes interest and insurance relating to the reit’s property sec_61 of the code provides that except as otherwise provided gross_income includes all income from whatever source derived the legislative_history underlying the tax treatment of reits indicates that the central concern behind the gross_income restrictions is that a reit’s gross_income should largely be composed of passive_income for example h_r rep no 2d sess pincite 1960_2_cb_819 pincite states o ne of the principal purposes of your committee in imposing restrictions on types of income of a qualifying real_estate_investment_trust is to be sure the bulk of its income is from passive_income sources and not from the active_conduct_of_a_trade_or_business the legislative_history also indicates that congress intended to equate the tax treatment of reits with the treatment accorded regulated_investment_companies id plr-103094-15 the staff of the joint_committee on taxation in its general explanation of the tax legislation enacted in the 110th congress describes sec_856 as follows the provision authorizes the treasury_department to issue guidance that would allow other items of income to be excluded for purposes of the computation of qualifying gross_income under either the percent or the percent test respectively or to be included as qualifying_income for either of such tests respectively in appropriate cases consistent with the purposes of the reit provisions footnote of the general explanation provides that income that is statutorily excluded from a reit’s gross_income computations is not intended to be within the authority granted to the treasury_department to include amounts as qualifying_income staff of the joint_committee on taxation 111th cong general explanation of the tax legislation enacted in the 110th congress 1st sess pincite analysis in the instant case manager will be providing services to operating partnership that promote operating partnership’s investment strategy through the management of investment activities as well as operating partnership’s day-to-day operations manager is managing the operating partnership’s investments in mortgages and reos taxpayer represents that the activities that manager performs are activities that a reit may under the code and regulations perform in managing the assets of the reit as well as the trust itself without adverse tax consequences all mortgage servicing and all services provided in connection with the reos are done by llc an independent_contractor in the instant case in the ordinary course of operating partnership’s investment activities operating partnership will receive interest_income and income from the sale or rental of reo foreclosure_property collectively investment_income and operating partnership will pay management fees to manager at the same time operating partnership will be allocated b of the management fees it pays to manager because it is a b partner in manager thus operating partnership’s gross_income will include both the investment_income from its assets and its b share of the management fees furthermore taxpayer as a partner of operating partnership and through its partnership_interest in operating partnership an interest holder in manager will include as income both its proportionate share of the investment_income from its direct interest in operating partnership and the management fee income from its indirect interest in manager because the management fees are derived from the same investments that generate the investment_income including the management fees in taxpayer’s gross_income would cause the amounts to be counted twice for purposes of the gross_income tests under sec_856 accordingly under the authority of sec_856 to the extent that manager earns management fees from managing operating partnership’s wholly owned investments we conclude that taxpayer may exclude from its gross_income for purposes of sec_856 and c taxpayer’s allocable pro_rata share a of operating partnership’s allocable pro_rata share b of plr-103094-15 management fees that manager receives from operating partnership under the facts of the instant case excluding the management fees as described above from taxpayer’s gross_income for purposes of sec_856 and c does not interfere with congressional policy objectives in enacting the income tests under those provisions conclusion based on the facts and representations submitted by taxpayer we rule that to the extent that manager earns management fees from managing operating partnership’s wholly owned investments taxpayer may exclude from its gross_income for purposes of sec_856 and c taxpayer’s allocable pro_rata share of operating partnership’s allocable pro_rata share of management fees that manager receives from operating partnership 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 specifically no opinion is expressed or implied as to whether taxpayer otherwise qualifies as a reit under part ii of subchapter_m of chapter of the code no opinion is expressed or implied regarding whether taxpayer’s pro_rata allocable share of the investment_income is qualifying reit income under either sec_856 or additionally no opinion is expressed or implied regarding whether the reos qualify as foreclosure_property or whether the sale of an reo is a prohibited_transaction under sec_857 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 representatives sincerely andrea m hoffenson andrea m hoffenson chief branch office of associate chief_counsel financial institutions products


‘ significant index no tax exempt ang government entities civision department of the treasur nternal revenle service washington o c 2cise aug se’ tep am ax re dear this letter constitutes notice that conditional approval has been granted for your request for a modification of the internal revenue service's service prior ruling approving a 10-year extension for amortizing the plan’s unfunded liabilities for the plan_year beginning date the unfunded liabilities are described in code sec_412 and sec_302 of the employee retirement security act of erisa prior to amendment by the pension_protection_act of ppa ‘06 the conditions of this conditional approval are outlined in this letter your authorized representative accepted these conditions in a letter dated the prior amortization extension was granted subject_to certain conditions condition sec_1 and b stated that the plan’s funded ratio calculated by dividing the plan’s market_value of assets by its actuarial accrued liability computed by using the unit credit method and the plan assumptions as of may jis a no less than for each valuation_date from may 20_ through may inclusive b for each valuation_date subsequent to may nolessthan greater than the floor funded ratio as of the previous valuation_date for example because the floor funded ratio as of may funded ratio must be atleast is asof may asofmay and the 2c the ruling would be retroactively null and void if the conditions were not met however the ruling indicated that the service would consider modifications of these conditions o h_r especially in the event that unforeseen circumstances beyond the control of the plan might cause the actual experience of the plan to fail to satisfy the funded ratio benchmarks set by this condition an example of such unforeseen circumstance would be market fluctuations which affect the value of the plan’s assets this unforeseen circumstance occurred for the plan_year ended april in asset values worldwide _with the general decline this conditional approval modifies condition sec_1 and b outlined above effective may as follows no other condition is modified the plan's funded ratio calculated by dividing the plan’s market_value of assets by it’s actuarial accrued liability computed using the unit credit method and the plan assumptions as of may is a no less than for each valuation_date from may through may _ inclusive b for each valuation_date subsequent to may greater than the required funded ratio of the previous valuation_date until a funded ratio of is achieved as of may because the floor funded ratio as of may must be atleast asofmay for example the funded ratio asof may nolessthan and is’ if any of the prior and modified conditions is not satisfied the approval to extend the amortization periods of the unfunded liabilities will be null and void retroactive to may however the service will consider modifications of these conditions especially in the event that unforeseen circumstances beyond the control of the plan may cause the actual experience of the plan to fail the funded ratio condition an example of such an unforeseen circumstance would be market fluctuations which affect the value of the plan’s assets of course any request for a modification would be considered another ruling_request and would be subject_to an additional user_fee your attention is called to sec_412 of the code and sec_302 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while the amortization extension remains in place please note that any amendment that increases liabilities for a profit sharing plan or any other retirement_plan whether qualified or unqualified maintained by the trustees for the plan and covering participants of the plan to which this ruling applies would be considered an amendment for purposes of sec_412 of the code and sec_302 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan whether qualified or unqualified maintained by the trustees for the plan and covering participants of the plan to which this ruling applies would be considered an amendment for purposes of sec_412 of the code and sec_302 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent 901v4a5uu9d we have sent a copy of this letter to the manager to the manager - and to your authorized representative pursuant to a power_of_attorney on file in this office if you require further assistance in this matter please contact sincerely yours david m ziegler manager employee_plans actuarial group