t c summary opinion united_states tax_court richard g keene petitioner v commissioner of internal revenue respondent filed date docket no 7849-06s richard g keene pro_se mark miller and jennifer viken for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure the issues for decision are whether petitioner is entitled to claim dependency_exemptions for two minor children for taxable_year and whether petitioner is also entitled to claim child tax_credits with respect to those children for the year in issue background some of the facts have been stipulated and are so found the stipulation of facts and attached exhibits are incorporated herein by this reference at the time the petition was filed petitioner resided in tomah wisconsin petitioner and lynn w keene dr keene were previously married three children were born of the marriage a k b k and m k a judgment of divorce judgment was entered in the circuit_court family court branch monroe county wisconsin on date the judgment incorporated a marital settlement agreement previously entered in the circuit_court on date the marital settlement agreement provided that dr keene would have primary physical custody for all three children with petitioner having biweekly visitation consisting of 3-day the court uses initials when referring to minor children weekends the parties agree that dr keene was the custodial_parent of the minor children at issue during the taxable_year pursuant to the marital settlement agreement the judgment ordered that petitioner pay percent of his income to dr keene as child_support with respect to the issue of which parent would claim the child dependency_exemptions the judgment in pertinent part provides as follows section vii taxes a the petitioner richard keene shall have the right to claim the child a k as a dependent for federal and state_income_tax purposes provided that one or both parents fulfill the tax code requirements for claiming a dependency_exemption petitioner’s right to claim the child as a dependent is dependent upon him being current and in compliance with the support provisions of this agreement the petitioner shall alternate the right to claim m k as a dependent for federal and state_income_tax purposes provided that one or both parents fulfill the tax code requirements for claiming the dependency_exemption petitioner shall claim m k in even numbered years petitioner paid dollar_figure in child_support to dr keene in this total comports with the amount that petitioner was ordered to pay percent of income in the underlying judgment petitioner timely filed his federal_income_tax return claiming dependency_exemptions with respect to the minor children a k and m k and two child tax_credits petitioner attached to his federal_income_tax return a form_8332 release of claim to exemption for child of divorced or separated parents form which was not signed by dr keene the custodial_parent in the notice_of_deficiency respondent explained that he was disallowing petitioner’s claimed dependency_exemptions for a k and m k on the grounds that another taxpayer had also claimed the dependency_exemptions for them for the taxable_year accordingly respondent disallowed petitioner’s claimed exemptions and correspondingly disallowed petitioner’s claimed child tax_credits prior to the filing of his return petitioner attempted to have dr keene sign the form_8332 for taxable_year petitioner sent a copy of form_8332 to dr keene asking her to complete and sign it she allegedly refused to do so problems arose between petitioner and dr keene regarding the interpretation of some of the terms of the marital settlement agreement petitioner then filed a motion for remedial contempt in the circuit_court to enforce among the other provisions in the marital settlement agreement his entitlement to claim the dependency_exemptions with respect to a k and m k in those years in which petitioner was entitled to claim the exemptions by oral decision dated date which is reflected in the proceeding’s transcript the circuit_court held that petitioner was in compliance with his child_support_obligations as provided under the judgment and that he should be entitled to claim the dependency_exemption for a k for the taxable years in question petitioner believed that because the circuit_court made this ruling with respect to his entitlement to claim the exemption for a k in he accordingly should be entitled to claim both exemptions for taxable_year discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct 290_us_111 in pertinent part rule a provides the general_rule that the burden_of_proof shall be upon the taxpayer in certain circumstances however if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the proper tax_liability sec_7491 shifts the burden_of_proof to the commissioner sec_7491 rule a petitioner did not argue that sec_7491 is applicable in this case nor did he establish that the burden_of_proof should shift to the respondent petitioner therefore bears the burden of proving that respondent’s determination in the notice_of_deficiency is erroneous see rule a welch v helvering supra pincite sec_151 allows deductions for personal exemptions including exemptions for dependents of the taxpayers see sec_151 sec_152 defines the term dependent in pertinent part to include a son or daughter of the taxpayer over half of whose support for the calendar_year was received from the taxpayer sec_152 carves out a special exception to the aforementioned in the case of parents who are divorced or separated simply put sec_152 provides that the parent having legal custody of the child a k a the custodial_parent at issue is entitled to claim the dependency_exemption deduction for that child unless the custodial_parent has validly executed a written release of his or her right to claim the deduction as the custodial_parent of record sec_152 and the parties agree and the record is clear that petitioner was not the custodial_parent of either a k or m k during the year in issue accordingly our only inquiry is whether dr keene validly executed a release of her right to claim the deduction as the custodial_parent of record petitioner argues his entitlement to the dependency_exemption deductions because the aforementioned judgment affords him the right to claim a k as a dependent so long as he is current in his child_support and health insurance obligations and gives him the right to claim m k in even years again so long as he is current in his child_support and health insurance obligations the record is silent as to any evidence contrary to the fact that during the year in issue petitioner was compliant with these obligations however although the judgment and the oral decision of the circuit_court provide that petitioner is entitled to claim dependency_exemptions in for a k and m k is it well settled that state courts by their decisions cannot determine issues of federal tax law see 327_us_280 114_tc_184 it therefore follows that irrespective of what is contained in the judgment as to petitioner’s right to claim dependency_exemptions for a k and m k the law is clear that a taxpayer is entitled to a dependency_exemption in the taxable_year if and only if he or she is in compliance with sec_152 petitioner argues that he was in compliance with sec_152 because although he could not get dr keene to relinquish her entitlement to claim the deductions by signing the form_8332 the judgment affords him an unequivocal right to claim the deductions irrespective of whether or not a form_8332 is signed he argues dr keene signed the judgment and in doing so unequivocally agreed to relinquish her right to claim the exemption at that time when a custodial_parent releases his or her right to claim a dependency_exemption for more than year the noncustodial_parent must attach the original release of claim to his tax_return for the immediate year and attach a copy of the release of claim to each succeeding return on which he claims the dependency_exemptions chamberlain v commissioner tcmemo_2007_178 failure to attach a valid form_8332 or an equivalent written declaration disqualifies a noncustodial taxpayer from claiming a dependency_exemption for his minor child miller v commissioner supra pincite sec_152 is clear it grants the dependency_exemption to a noncustodial_parent only when he attaches a valid form_8332 or its equivalent to a federal_income_tax return for the taxable_year in which he or she claims the exemption form_8332 requires a taxpayer to agree not to claim a dependency_exemption and to furnish the name of the child for whom exemption claims are released the years for which the claims are released the signature of the custodial_parent the social_security_number of the custodial_parent the date of the custodial parent’s signature and the name and the social_security_number of the parent claiming the exemption miller v commissioner supra pincite the parties agree that while petitioner did not attach a signed form_8332 to his federal_income_tax return for he did attach a copy of the sections of the marital settlement agreement pertaining to that parent who is entitled to claim the exemptions as well as the signature page petitioner argues that the combination of the custodial parent’s signature on the marital settlement agreement and the circuit court’s oral decision should qualify as an equivalent to form_8332 thus entitling him to the claimed dependency_exemptions to properly release a claim to a dependency_exemption deduction sec_152 requires a custodial_parent to sign a written declaration that contains an express and unqualified statement that the custodial_parent will not claim the dependency_exemption for that year bramante v commissioner tcmemo_2002_228 in this case the judgment specifies that petitioner would be entitled to claim the dependency_exemptions for a k only if he were in good standing with his child_support_obligations and for m k only in even years where he was also in good standing with his support obligations the marital settlement agreement signed in assent by the custodial_parent dr keene granted petitioner the right to claim the deductions if and only if he were compliant with his support obligations dr keene’s signature on the marital settlement agreement however does not necessarily comport that document with an unequivocal statement of relinquishment in boltinghouse v commissioner tcmemo_2003_134 the taxpayers also attached to their return a copy of a divorce agreement which was signed by both the custodial and noncustodial_parent the agreement in that case however unconditionally granted the noncustodial_parent the dependency_exemption the court held that the divorce agreement in boltinghouse v commissioner supra met all of the requirements of a written declaration under sec_152 because it conformed in substance to form_8332 unlike the divorce agreement in boltinghouse v commissioner supra the judgment at issue is conditional that is petitioner is entitled to claim the exemptions for a k and m k only if he is current in his child_support_obligations and with respect to m k only it is an even year this condition creates the question of whether or not petitioner would be entitled to claim the dependency_exemptions depending upon his compliance with his support obligations this condition suggests that petitioner’s compliance with his support obligations may change from year to year such that petitioner’s entitlement to the dependency_exemption for a k and m k in even years is subject_to change each year as such the order does not conform in substance to form_8332 because it fails to state with specificity the applicable tax_year or years for which petitioner is entitled to claim the exemptions therefore we find that the judgment does not constitute a written declaration under sec_152 with respect to the child tax_credits petitioner claimed for a k and m k for taxable_year sec_24 authorizes a child_tax_credit with respect to each qualifying_child of the taxpayer the term qualifying_child is defined in sec_24 a qualifying_child means an individual with respect to whom the taxpayer is allowed a deduction under sec_151 who has not attained the age of as of the close of the taxable_year and who bears a relationship to the taxpayer as prescribed by sec_32 sec_24 since petitioner was not allowed a deduction with respect to either a k or m k under sec_151 and sec_152 it follows that for the year in issue neither a k nor m k is a qualifying_child consequently irrespective of language in the judgment to the contrary petitioner is not entitled to claim a child_tax_credit for either a k or m k in finally petitioner asks us to disregard the foregoing legal analysis and respondent’s determination in the light of facts that show his ex-wife’s failure to comply with the provisions of the judgment while there is no doubt in our mind that dr keene failed to sign the form_8332 when requested to do so and that petitioner was in compliance with the terms of the judgment for taxable_year thus entitling him to enforce those provisions of the marital settlement agreement with respect to the entitlement for the dependency_exemption the tax_court is not a court of equity and we cannot intervene in matters beyond our jurisdiction scarangella v commissioner tcmemo_1969_13 affd per curiam 418_f2d_228 3d cir accordingly respondent’s determination in this matter is sustained decision will be entered for respondent


internal_revenue_service uil nos and number release date cc dom fi p plr-111793-98 date legend company taxpayer date date state a a b c d e f g h i dear this replies to your letter of date as supplemented on behalf of company and taxpayer requesting a ruling granting a waiver under sec_101 and sec_7702 of the internal_revenue_code you ask that certain flexible premium universal_life_insurance contracts and certain fixed premium current assumption whole life contracts the contracts identified on exhibit a attached to this letter be treated as life_insurance contracts for federal tax purposes facts company is a life_insurance_company engaged in the business of issuing various forms of life_insurance_company owns of the shares of taxpayer a stock_life_insurance_company which also is engaged in the business of issuing various forms of life_insurance and annuities taxpayer is organized under the laws of state a which is its domicile for insurance regulatory purposes company and taxpayer together the insurance_companies file separate u s federal_income_tax returns form 1120l taxpayer’s return is filed as part of a consolidated_group the insurance_companies have in force approximately a life_insurance contracts of those a contracts the insurance_companies have identified b contracts that fail to qualify as life_insurance contracts under the applicable provisions of sec_101 or sec_7702 the failed contracts in each case the failed contract was designed to satisfy the guideline premium requirements of the applicable_provision as described below where the contract structure was sufficiently flexible to permit the policyholder to take actions that could result in violation of the applicable guideline premium test monitoring procedures were devised to ensure continued compliance in other cases the contracts were designed and structured in a non-flexible manner intended to automatically preclude the policyholder from taking any_action that could violate the applicable guideline premium test nevertheless amounts in excess of the guideline premium were accepted under each of the failed contracts all of the failed contracts are of a type of generic insurance plan that provides for_the_use_of a current interest rate to credit interest on the policies’ account values within this broad classification of interest sensitive insurance plans there are two subcategories of plans i universal life and ii current assumption whole life c of the failed contracts are universal life policies which have a variable premium structure that allows the policyholder to select and vary the amount of premium paid the remaining d failed contracts are current assumption whole life policies which have a fixed premium structure that requires the regular payment of a predetermined premium because the universal life plans allow for variable payments the insurance_companies instituted monitoring procedures to ensure that each universal life policy complied with the guideline premium rules whenever an amount_paid into the contract caused the total premiums_paid to exceed the guideline premium the insurance companies’ computer system produced a coded message called a highlight because both the legal requirements and the computer system were relatively new the insurance_companies instituted manual confirmation procedures intended to ensure that the system operated properly once the computer system produced a highlight customer service personnel manually reviewed the appropriate calculations occasionally personnel’s manual recalculations did not agree with the calculations of the computer system the highlight system correctly identified c policies which required a refund to the policyholder of excess premium payments with respect to e of these policies personnel’s manual recalculations indicated that the amount to be refunded to the policyholder was smaller than the amount calculated by the computer system checks were sent to the policyholders of these e policies refunding the excess premium in the manually recalculated amounts however the original computer generated amounts were correct and the manually recalculated amounts were incorrect thus the amounts of the checks were insufficient to prevent these e policies from violating the guideline premium requirements of sec_7702 with respect to f of these policies personnel’s manual recalculations were incorrect in that they indicated that the guideline premium had not been exceeded again the original computer generated amounts were correct and the manually recalculated amounts were incorrect although checks were issued to the policyholders of these f policies personnel cancelled the checks in the mistaken belief that the guideline premium had not been exceeded for these f policies in the case of the current assumption whole life plans the insurance_companies instructed their product actuary to design a fixed-premium policy which precluded the policyholders from taking any actions that could cause the policies to violate the guideline premium requirements of sec_7702 policyholders either paid an initial lump sum premium to produce a paid up policy or paid the scheduled premium although the lump sum amounts were appropriately limited to the then-current maximums allowed under the guideline premium tests subsequent scheduled premium payments caused the sum of premiums_paid into the contract to exceed the permitted amounts due to a product design error by the product actuary the terms of the current assumption whole_life_insurance contract did not permit decreases in the face_amount of the policy due to the fact that the product design purportedly did not permit the policyholder to take actions that could cause the policies to violate the guideline premium requirements the insurance_companies did not implement a computer_program or administrative procedure to monitor compliance in the course of servicing the current assumption whole life product policyholders were permitted to execute g types of transactions that resulted in d failed contracts in the case of h of these failed contracts policyholders were allowed to make lump sum payments into the policies the subsequent excess premium payments were not detected by the insurance_companies because as noted above no ongoing compliance system was believed to be necessary with respect to the current assumption whole life product in the case of the remaining i failed current assumption whole life contracts personnel permitted extracontractual decreases in the face_amount upon processing these decreases personnel reduced the contractual fixed premium in proportion to the amount of the face reduction rather than in accordance with the attained-age decrement method mandated by the legislative_history to the tax_reform_act_of_1986 p l date because the proportionate reduction method resulted in higher fixed premiums than would have been permitted under the attained-age decrement method policyholders made premium payments in excess of the guideline_premium_limitation the actions by personnel in these cases was entirely outside of the terms of the insurance_contract and the insurance_companies customary procedures had policyholders not been permitted to take such extracontractual actions the policies would not and could not have violated the guideline premium requirements the insurance_companies did not become aware of the existence of the failed contracts until date when the insurance_companies began to convert the records for their entire portfolio of products to a new computer system as the insurance_companies began to convert the interest sensitive block of business the new computer system indicated that amounts in excess of the guideline_premium_limitation had been paid into the failed contracts when this discovery was brought to its attention management ordered a more detailed investigation as a result of the discovery of the failed contracts the insurance_companies undertook measures to ensure that the errors resulting in premium payments in excess of the guideline_premium_limitation would not recur the new computer system includes a fully automated compliance procedure which will not accept premium payments in excess of the guideline_premium_limitation when the system determines that all or part of a premium payment causes total premiums_paid to exceed the guideline_premium_limitation the system automatically creates a refund check in all cases these checks are mailed to the policyholder along with a cover letter personnel cannot override the system by cancelling the check because the system will continue to reject such excess premium payments this new computer system is currently operational with respect to the interest sensitive portfolio the insurance_companies also took measures to ensure compliance during the conversion process in the case of the universal life policies the insurance_companies relied on manual intervention procedures in the event that the old computer system generated an overpayment highlight the previous manual recalculation procedures were changed to require automatic refund of excess premium in addition customer service personnel were required to provide daily written confirmation to the responsible manager as to the disposition of each highlight the customer service manager then correlated the written confirmations against the list of daily highlights and followed up with responsible personnel in the event that any highlight remained unconfirmed with respect to current assumption whole life policies the insurance_companies created a separate computer_program to test the policies every month for guideline premium compliance where amounts were paid in excess of the guideline_premium_limitation customer service personnel followed the same revised automatic refund procedure applicable to universal life products law and analysis sec_101 of the code excludes from gross_income any amount_paid by reason of the death of the insured under a life_insurance_contract known as a flexible premium contract only if the contract satisfies either the guideline_premium_limitation and the applicable_percentage limitation of sec_101 and ii or the cash_value test of sec_101 the mandate of sec_101 applies to contracts issued before date sec_7702 of the code provides a statutory definition that a life_insurance_policy must meet to be treated as a life_insurance_contract for federal tax purposes a contract must be a life_insurance_contract under applicable laws and must also meet either of two alternative tests the cash_value_accumulation_test of sec_7702 or the guideline premium and cash_value_corridor_test of sec_7702 and b sec_7702 applies generally to contracts issued after date pursuant to sec_101 and sec_7702 of the code the secretary_of_the_treasury may waive a failure to satisfy the requirements of sec_101 and sec_7702 this waiver is granted if a taxpayer establishes that the statutory requirements were not satisfied due to reasonable error and that reasonable steps are being taken to remedy the error under the facts as submitted the failure of the b life_insurance contracts to satisfy the requirements of sec_101 or sec_7702 of the code as applicable is due to reasonable error the errors were a result of inadvertent human error in the implementation and or execution of the compliance procedures taxpayer has instituted procedures to reduce the likelihood that such errors will recur taxpayer has also proposed steps to cure the failure which steps are reasonable actions to remedy the failure of such contracts to satisfy the requirements of sec_101 and sec_7702 as the case may be holding accordingly based on the information submitted the failure of the contracts listed in exhibit a to satisfy the requirements of sec_101 or sec_7702 of the code is waived pursuant to sec_101 and sec_7702 respectively however any contracts that are not cured within days of the date of this letter are not covered by this waiver we express no opinion as to the tax treatment of the contracts under the provisions of any other sections of the code and income_tax regulations that may also be applicable thereto no opinion is expressed as to the compliance of these contracts with other provisions of sec_7702 this ruling is directed only to the taxpayers who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the next federal_income_tax return to be filed by taxpayer sincerely yours assistant chief_counsel financial institutions products by donald j drees jr donald j drees jr senior technician reviewer branch


department of the treasury internal_revenue_service number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-165290-02 date date x a b c d1 dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 a b and c are the shareholders of x c x’s treasurer represents that x was intended to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year plr-165290-02 based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective d1 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for d1 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x’s authorized representative sincerely yours j thomas hines chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division apr t ep2a al re substitute mortality_table ruling taxpayer plans for which substitute mortality tables are requested included group plan plan plan3 u s m a i e b t i dear this letter is to inform you that your request to use substitute mortality tables for making computations under sec_430 of the internal_revenue_code the code for the included group has been granted with respect to the populations specified in this letter this ruling is effective for a period of plan years beginning with the plan_year commencing date your request has been granted in accordance with sec_430 of the code and sec_303 of the employee_retirement_income_security_act_of_1974 this approval applies to the following specific populations e e plan sec_1 through combined - male annuitants including disabled participants plan sec_1 through combined - female annuitants including disabled participants e e plan sec_1 through combined - male nonannuitants including disabled participants plan sec_1 through combined - female nonannuitants including disabled participants in granting this approval we have only considered whether the substitute mortality rates were developed in accordance with sec_1_430_h_3_-2 of the treasury regulations regulations and revproc_2017_55 accordingly we are not expressing any opinion as to the accuracy or acceptability of any calculations or other material submitted with your request permission is hereby granted to use the substitute mortality rates shown in the table below for the included group approved for use beginning with the plan_year commencing date substitute mortality tables base_year o k o male annuitants female annuitants male nonannuitants female nonannujtants h n w a m o n m o c _ - _ - a o n w m n w n n o m o a n o m n n n o m a o n n o n o o a male annuitants female annuitants male nonannuitants female nonannuitants age cee e a - - 2v194 female nonannuitants male nonannuitants female annuitants male annuitants age male female annuitants annuitants nonannuitants nonannuitants female male age the above rates were developed based on an experience study period from date through date with a base_year of the rates were calculated by adjusting the applicable standard mortality tables in sec_1_430_h_3_-1 of the regulations using the mortality ratio and credibility weighting factor determined by aggregating male and female experience as shown in the table below male and female male and female annuitants nonannuitants mortality ratio credibility weighting factor the internal_revenue_service has reviewed the substitute mortality rates and supporting information and has determined that based on the information submitted the rates were developed in accordance with sec_1 h - -2 of the regulations and revproc_2017_585 __ the above rates must be applied on a generational basis as provided in sec_1_430_h_3_-2 of the regulations - your attention is called to sec_430 of the code and sec_1 h - d of the regulations which describe the circumstances in which the use of the substitute mortality_table will terminate before the end of the 5-year period described above in general the substitute mortality tables can no longer be used as of the earliest of fora plan using a substitute mortality_table for only one gender the first plan_year for which there is full or partial credible mortality information with respect to the other gender that had lacked credible mortality information unless an approved-substitute mortality tablé is used for that gender - the first plan_year in which the plan fails to satisfy the requirements of sec_1_430_h_3_-2 of the regulations regarding the requirement that other plans and populations in the controlled_group must also use substitute mortality tables unless it can be demonstrated that they do not have credible mortality information taking into account the transition_period for newly affiliated companies in sec_1_430_h_3_-2 of the regulations the second plan_year following the plan_year for which there is a significant change in individuals covered by the plan as described in sec_1_430_h_3_-2 of the regulations the plan_year following the plan_year in which a substitute mortality_table used for a plan population is no longer accurately predictive of future mortality of that population as determined by the commissioner or as certified by the plan's actuary to the satisfaction of the commissioner or the date specified in guidance published in the internal_revenue_bulletin pursuant to a replacement of mortality tables specified under sec_430 of the code and sec_1_430_h_3_-1 of the regulations other than annual updates to the static mortality tables issued pursuant to sec_1_430_h_3_-1 of the regulations or changes to the mortality improvement rates pursuant to sec_1_430_h_3_-1 of the regulations in particular sec_1_430_h_3_-2 provides that the use of substitute mortality tables must be discontinued after a significant change in coverage unless the plan’s actuary certifies in writing to the satisfaction of the commissioner that the substitute mortality tables used for the population continue to be accurately predictive of future mortality of the population taking into account the effect of the change in the population for this purpose a significant change in coverage occurs if the number of -individuals covered-by-the substitute mortality_table for a plan_year is less than percent or more than percent of either the average number of individuals in that - population over the years covered by the experience study on which the substitute mortality_table is based or the number of individuals covered by the substitute mortality_table in a plan_year for which a certification described in sec_1 h - c iii a of the regulations was made the numbers of annuitants and nonannuitants as of date were already less than of the average number of annuitants and nonannuitants covered during the experience study respectively accordingly this certification is needed each year that the number of annuitants or nonannuitants remains less than or becomes greater than of the average number of annuitants or nonannuitants included in the experience study respectively or becomes less than or more than of the number of annuitants or nonannuitants as of date the date of the ‘ most recent certification that the mortality tables are accurately predictive of the - mortality of the remaining population ’ so that the service can review these certifications the following information must be provided by the october immediately following the end of each plan_year beginning with the plan_year due october the number of actual deaths during the experience study period used to develop the substitute mortality tables and the beginning and ending dates of the experience study period a table showing the number of expected deaths and actual deaths reported separately for each year beginning with deaths during through the year preceding the most recent actuarial valuation and in total a table similar to the stability demonstration required under section of revproc_2017_55 showing the average number of participants in the population included in the experience study and the number of participants in the population as of the end of each plan_year beginning with date through the date immediately preceding the most recent actuarial valuation expressed both as a headcount and as a percentage of the average number of participants in the experience study a table showing a comparison of i the average ages and ii percentage of the population by the following monthly single_life_annuity brackets under dollar_figure _between dollar_figure and dollar_figure between dollar_figure to dollar_figure between dollar_figure to dollar_figure between dollar_figure and dollar_figure and dollar_figure and over for the population in the ’ experience study and at the end of each plan_year beginning with date through the date immediately preceding the most recent actuarial valuation the table should also show the average age and average benefit - -amount for-the population in-total for both the experience study data and at the end of each plan_year beginning with date through the date _ immediately preceding the most recent actuarial valuation an explanation of any material changes in the population and a certification by the enrolled_actuary for the plan as to whether the substitute mortality_table is accurately predictive along with any additional demographic or other information to substantiate this claim a certification signed by the enrolled_actuary stating that a the enrolled_actuary is current with educational requirements set forth by the joint board for the enrollment of actuaries as well as any other actuarial designations asserted ub the enrolled_actuary was personally involved in the determination that the substitute mortality_table is still accurately predictive and provides the actuary’s best estimate for the plans c in determining that the substitute mortality_table is still his or her best estimate the enrolled_actuary took into consideration the effect of business combinations plan mergers or spinoffs and settlements other risk transfers and other events that would have similar effects on the relevant populations and d the enrolled_actuary has the specific knowledge and experience to make the judgements set forth above and attests to these representations this information must be provided to david m ziegler or to another individual designated by the service by fax at or to the following address internal_revenue_service attn mr david m ziegler te_ge se t ep ra t a2 nca-630 constitution ave nw washington dc failure to provide this information by the due_date may result in the requirement that the standard mortality tables must be used for purposes of sec_430 of the code beginning with the plan_year during which the deadline for providing this information is missed 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 when filing form -5500-for the plan years for which the substitute mortality tables are ‘used please note the information that is required to be attached to schedule sb actuarial information in accordance with the instructions to that form we have sent a copy of this letter to your authorized representative pursuant to a power_of_attorney on file in this office and to the manager ep classification in columbus ohio and to the manager ep compliance unit in chicago illinois if you require further assistance in this matter please contact sincerely david m ziegler manager employee_plans actuarial group cc


t c memo united_states tax_court edward a drozdowski and diana d drozdowski petitioners v commissioner of internal revenue respondent docket no filed date edward a and diana d drozdowski pro sese ladd c brown jr and ellen t friberg for respondent memorandum findings_of_fact and opinion foley judge by notice dated date respondent determined the following deficiencies additions to tax and penalties relating to petitioners' federal income taxes additions to tax’ penalties’ year deficiency sec_6653 b sec_6653 b a sec_6653 b sec_6663 dollar_figure --- dollar_figure -- dollar_figure -- -- --- big_number -- -- -- dollar_figure big_number -- -- -- big_number the additions to tax and the penalties apply only to petitioner edward drozdowski fifty percent of the statutory interest due on dollar_figure computed from date to the earlier of the date of assessment or the date of payment respondent concedes that dollar_figure dollar_figure and dollar_figure of the income adjustments in the notice_of_deficiency for and respectively are not gross_income to petitioners all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure the issues for decision are whether petitioners have failed to report wage income relating to and and whether mr drozdowski is liable for additions to tax and penalties for fraud findings_of_fact petitioners husband and wife resided in boca raton florida at the time their petition was filed prior to the years in issue mr drozdowski served years in the united_states air force and was employed by various businesses his previous employers withheld taxes from his wages and issued him forms w-2 wage and tax statements during the years in issue mr drozdowski was an employee of continental plastic card co cpc and earned wages and bonuses totaling dollar_figure in dollar_figure in dollar_figure in and dollar_figure in at mr drozdowski's request cpc did not withhold income_tax from and did not issue forms w-2 relating to his wages cpc employed mrs drozdowski in and at mrs drozdowski's request cpc withheld taxes from and issued forms w-2 relating to her wages during cpc was purchased by continental card acquisition cca cca employed mr drozdowski for the remainder of withheld taxes from his wages and issued him a form_w-2 on their income_tax returns for the years in issue petitioners reported mrs drozdowski's wages from cpc and mr drozdowski's wages from cca but did not report mr drozdowski's wages from cpc in date mr drozdowski was charged pursuant to sec_7201 with evading income_tax relating to mr drozdowski pleaded guilty to the charge was sentenced to years' probation and was ordered to pay a fine and restitution pursuant to the plea agreement petitioners amended their tax returns for the years in issue to report mr drozdowski's wages from cpc opinion respondent determined that petitioners failed to report mr drozdowski's wages from cpc for and petitioners concede that they failed to report mr drozdowski's wages from cpc for the years in issue but contend that the payments mr drozdowski received were net of income_tax withholdings in effect petitioners contend that the amount of unreported wages is greater ie by the amount of the alleged tax withholdings than the amount determined by respondent and that petitioners are entitled to a withholding_tax credit relating to mr drozdowski's wages from cpc the record does not support petitioners' contention cpc did not withhold taxes from mr drozdowski's wages and he did not receive forms w-2 which would have indicated the amounts of income_tax withholdings thus petitioners are not entitled toa withholding_tax credit relating to mr drozdowski's wages from cpc see sec_31 39_tc_78 holding that an employee is not entitled to a credit for taxes that were never withheld petitioners bear the burden_of_proof see 290_us_111 yet have failed to establish that they are entitled to a withholding_tax credit respondent determined that mr drozdowski pursuant to sec_6653 a and b b and is liable for additions to tax and penalties for fraud respondent must establish by clear_and_convincing evidence that for each year in issue an underpayment_of_tax exists and that some portion of the underpayment is due to fraud see 92_tc_661 a taxpayer's attempts to conceal income mislead the internal_revenue_service or prevent the collection of income_tax may establish the requisite fraudulent intent see 80_tc_1111 respondent has established that for each year in issue petitioners' underpayment_of_tax was attributable to mr drozdowski's fraud each of petitioners' amended returns is an admission of a tax underpayment see 464_us_386 in addition mr drozdowski's actions warrant an inference of fraud mr drozdowski knew that his wages from cpc were subject_to income_tax yet he requested that cpc not withhold taxes from and intentionally failed to report such wages as a result he underreported substantial amounts of income relating to each year in issue see 348_us_121 holding that a pattern of consistently and substantially underreporting income may justify an inference of fraud 53_tc_96 holding that underreporting income coupled with other circumstances showing an intent to conceal justifies an inference of fraud accordingly we hold that mr drozdowski is liable for the additions to tax and penalties for fraud contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number --------------------------- ---------------------------- -------------------------------------- in re ---------------------------------------------------- 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 b04 plr-112098-15 date date legend taxpayer trust date year dear ------------------ --------------------------- ------------------------------ ------------------- ------- this letter responds to your authorized representative's letter of date requesting an extension of time pursuant to sec_2642 of the internal_revenue_code and sec_301 of the procedure and administration regulations to allocate generation-skipping_transfer gst_exemption to a transfer to a_trust the facts submitted and the representations made are summarized as follows on date in year taxpayer made a transfer to trust an irrevocable_trust trust has gst tax potential taxpayer retained a tax professional to advise him the tax professional inadvertently failed to advise taxpayer to allocate gst_exemption to the transfer on a timely filed form_709 united_states gift and generation-skipping_transfer_tax return it has been represented that taxpayer has sufficient gst_exemption available to allocate to the date transfer to trust taxpayer requests an extension of time pursuant to sec_2642 and sec_301 to allocate gst_exemption to the date transfer to trust with such allocation being effective as of date law and analysis sec_2601 imposes a tax on every gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip plr-112098-15 sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2631 provides that for purposes of determining the inclusion_ratio every individual is allowed a gst_exemption amount which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made is irrevocable sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor's lifetime other than in a direct_skip is made on form_709 a federal gift_tax_return sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-1 through sec_301 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 plr-112098-15 sec_301_9100-2 provides an automatic_extension of time for making certain elections sec_301_9100-3 provides in part that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if 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 to advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to allocate taxpayer's available gst_exemption to the date transfer to trust the allocation will be effective as of date and the fair_market_value of the date transfer as determined for federal gift_tax purposes will be used to determine the amount of taxpayer's gst_exemption to be allocated to this transfer the allocation should be made on a form_709 united_states gift and generation-skipping_transfer_tax return for year and filed with the cincinnati service_center at the following address internal_revenue_service cincinnati service_center - stop cincinnati oh a copy of this letter should be attached to each supplemental form_709 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 we are not ruling on whether trust will have a zero inclusion_ratio as a result of the allocation of taxpayer’s exemption to the date transfer this ruling is directed only to the taxpayer requesting it sec_6110 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury plr-112098-15 statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely leslie h finlow leslie h finlow senior technician reviewer branch passthroughs special industries enclosures copy for sec_6110 purposes cc


internal_revenue_service number release date date cc el gl br2 tl-n-4153-99 uiln memorandum for district_counsel south texas district from joseph w clark acting branch chief branch general litigation subject significant service_center advice erroneous refunds this responds to your request for significant service_center advice dated date in connection with questions posed by the austin service_center issues does misrepresentation of a material fact under sec_6532 have to be deliberate willful or intentional can the service establish general case criterial to determine when a refund was induced by misrepresentation of a material fact or must such a determination be made on a case-by-case basis conclusions no misrepresentation of a material fact need not be deliberate willful or intentional yes with the assistance of local counsel the service may establish criteria to be used to determine the applicability of the five-year period under sec_6532 facts the austin service_center has requested your assistance in establishing and implementing procedures to comply with the changes to internal_revenue_manual sec_3 dollar_figure and these provisions contain the new procedures governing the discovery and recovery_of the many erroneous refunds the service issues each year in relevant part sec_3 b and sec_21 require the service to coordinate with the local counsel every erroneous refund case where the service intends to rely on the five-year statute_of_limitations under sec_6532 according to your memorandum the austin service_center has approximately cases tl-n-4153-99 where the erroneous refund resulted from payment of a refund check over cancellation after the taxpayer claimed that the original refund check was lost stolen or destroyed in these cases the taxpayer generally files with the service a form_3911 taxpayer statement regarding refund claiming that the original refund check was either lost stolen or destroyed and requests a replacement check see irm if the service determines that the taxpayer’s claim is valid it issues a replacement refund check to the taxpayer although the original refund check is canceled often the taxpayer is able to cash both refund checks this results in a nonrebate erroneous refund to the taxpayer when this happens the department of treasury financial management service fms provides the service with the photocopy of the original cashed check the service then send the taxpayer a form fms claim against the united_states for the proceeds of a government check along with the photocopy of the refund check requesting that the taxpayer complete and return the form to the service if the taxpayer denies having endorsed the original refund check the signature on the check is analyzed to determine whether it belongs to the taxpayer you propose that when the taxpayer admits that he has endorsed and cashed both refund checks or where fms determines that the signature on the check belongs to the taxpayer the service may rely on the five-year statute_of_limitations under sec_6532 without additional opinion from counsel you state that the service should not rely on the five-year statute without counsel’s approval in cases where taxpayer denies having cashed both checks and fms either agrees with the taxpayer’s claim or is unable to conclusively determine whether the signature belongs to the taxpayer law analysis with the exception of the right of offset pursuant to lewis v reynolds 248_us_281 the service’s remedies to recover a nonrebate or nonassessable erroneous refund are subject_to the time limitations set forth in sec_6532 this section provides as follows recovery_of an erroneous refund under sec_7405 shall be allowed only if such suit is begun within years after the making of such refund except that such suit may be brought at any time within years from the making of the form provides in relevant part as follows under penalties of perjury i declare that i have examined this form and to the best of my knowledge and belief the information is true correct and complete i request that you send a replacement refund and if i receive two refunds i will return one tl-n-4153-99 the refund if it appears that any part of the refund was induced by fraud or misrepresentation of a material fact sec_6532 you ask under what circumstances may the service rely on the five-year rather than the two-year period when recovering an erroneous refund specifically you would like to know whether the service may rely on the five-year period under the factual circumstances described above as stated sec_6532 provides that the service may recover an erroneous refund within five years if it appears that any part of the refund was induced by fraud or misrepresentation of a material fact sec_6532 neither sec_6532 or sec_7405 nor the regulations thereunder define the terms fraud or misrepresentation of a material fact see sec_301_6532-3 fraud is however commonly thought of as an intentional misrepresentation concealment or nondisclosure for purpose of inducing another to part with some valuable thing a false representation of a matter of fact by words or conduct webster’s third new international dictionary third ed in order to show that an erroneous refund was induces by fraud therefore the service will have to show that the taxpayer either made false representations or concealed or failed to disclose important facts with the intent of obtaining funds to which he or she was not entitled thus intent is an integral part of fraud the government’s burden_of_proof with respect to the misrepresentation of a material fact is somewhat lower that in cases of fraud misrepresentation is defined as an untrue incorrect or misleading representation webster’s third new international dictionary third ed the representation can be in a form of a statement assertion or a failure to disclose relevant information the representation need not be willful or intentional it must however be with regard to a fact that is material or essential to the service’s decision to issue the erroneous refund in 785_fsupp_1336 s d ind the court followed a three-part analysis proposed by the government to determine whether the refund was induced by misrepresentation of a material fact we believe that this three-part test should be used by the service and counsel when determining whether an erroneous refund was may be recovered within the five-year rather than the two-year limitations_period therefore before the service may rely on the five-year statute it must establish three things first it must establish that a misrepresentation of fact as opposed to a conclusion of law was in fact made second the service while the court accepted the government’s proposed test it held that the refund at issue was not caused by the misrepresentation of a material fact but rather by a conclusion of law thus the five-year period did not apply in that case tl-n-4153-99 must show that the fact was material third it must show that the decision to issue the erroneous refund was induced by the misrepresentation id pincite when a taxpayer requests a duplicate or a replacement refund he makes two representations to the service both of these are made under the penalties of perjury first the taxpayer represents that the original refund check was either lost stolen or destroyed and that as such the taxpayer did not benefit from the first check second the taxpayer represents that he or she will not negotiate both refund checks if he happens to receive two the service relies on both of these representations in determining whether to issue a replacement refund to the taxpayer thus to the extend that these representations of a fact are untrue incorrect or misleading they constitute misrepresentation s of a material fact for purposes of sec_6532 thus the service should be able to pursue these cases within the five-year period without obtaining prior approval from counsel hazards other considerations in addition to the erroneous refund liability a taxpayer who submits a claim for a replacement check but fails to return the replacement refund after receiving two may also be subject_to criminal liability by endorsing and negotiating for payment the replacement refund check the taxpayer could face criminal liability for conversion of government property to one’s own use in violation of u s c sec_641 or possibly for filing a false claim against the united_states in violation of u s c it may be advisable to explore the possibility of a criminal prosecution in appropriate cases as always we appreciate the opportunity to assist you and hope that the advice provided herein is helpful if you have any comments or questions regarding the above please contact the attorney assigned to this matter pincite-3620


department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c march cc psi b06 conex-104313-11 o f f i c e o f t h e c h i e f c o u n s e l number release date uil 25c --------------------- ------------------------ -------------------------------- dear ------------- i am responding to your fax dated date in this fax you discuss several aspects of the tax_credits for nonbusiness energy_property available to tenant-stockholders in cooperative housing corporations this letter describes well-established interpretations and principles of tax law without applying them to a specific set of facts this letter is advisory only and has no binding effect on the internal_revenue_service this letter only provides general guidance for determining how to comply with applicable law you stated in your fax that irs officials had promised to send you a comprehensive document that would address the spectrum of issues affecting your fellow high-rise housing cooperative homeowners stockholders and you we agreed to send a follow-up letter to you correcting an error on a prior letter that we sent to you additionally in a phone conversation with you i agreed to also address in that follow-up letter some additional questions about which you had asked for further clarification i am addressing both the correction and clarifications in this letter along with my response to your fax dated date i believe the content of this letter addresses all issues that we have discussed first i want to provide the correction and clarification for the letter we sent to you dated date in response to your fax dated date on the tax_credit for nonbusiness energy_property under sec_25c of the internal_revenue_code the code as part of my response dated date i included general information about the credit including information stating when taxpayers must place property in service to qualify for a credit there are errors in the paragraph describing the required placed_in_service dates this paragraph should read the credit is available for qualified_property placed_in_service before date recently enacted legislation the tax relief unemployment insurance reauthorization and job creation act of extended the conex-104313-11 placed_in_service_date to allow property that is placed_in_service before date to qualify for the credit and made other changes to the credit that are not relevant to this letter i spoke on the phone with you on date about our letter to you dated date during this phone call you requested additional clarification about two different issues first you requested clarification about a sentence in the date letter this sentence reads a s discussed the law treats a tenant-stockholder in a cooperative_housing_corporation as having made his or her proportionate share of any expenditures of the corporation this sentence means the law treats a tenant-stockholder in a cooperative_housing_corporation as having made his or her proportionate share of the corporation’s expenditures_for property that is eligible for a tax_credit under sec_25c second you requested clarification about whether a taxpayer must have a manufacturer’s certification to claim a tax_credit i will include a full response to this question in my discussion about the sec_25c tax_credit included in this letter however i also wanted to note that i responded to this question in my letter to you dated date as i have discussed in previous letters to you tenant-stockholders in a cooperative_housing_corporation are eligible for the tax_credits for nonbusiness energy_property such as qualified exterior windows and qualified exterior doors sec_25c of the code provides this tax_credit qualifying property under sec_25c of the code sec_25c as originally enacted in the energy policy act of epact provided a tax_credit for qualified_energy_efficiency_improvements including qualifying exterior windows and exterior doors the credit was available with respect to qualifying property placed_in_service after date and before date the energy improvement extension act of eiea enacted on date revived the sec_25c credit that expired at the end of neither of these laws the epact nor the eiea provided any credit under sec_25c for property placed_in_service during but the eiea provided a credit for qualified_property placed_in_service after date and before date to qualify for this tax_credit the law required that the energy efficiency improvements meet certain energy efficiency standards the eiea required an exterior window or door to meet the requirements of the supplement of the iecc or the supplement of the iecc because of the difficulty taxpayers would have in determining whether they satisfied statutory efficiency standards for property that they purchase the irs allowed homeowners including a tenant stockholder in a cooperative conex-104313-11 housing corporation and the owner of a condominium to rely on certifications of the manufacturer that the property that the manufacturer produced satisfies these efficiency standards in the law the irs issued a notice on date that allowed manufacturers to issue a certification statement that the property that they manufactured met the energy efficiency requirements in the law the irs also allowed taxpayers who purchased exterior windows and skylights that bore the energy star label to rely on the energy star label to show that a window or skylight satisfied the statutorily required efficiency standards if the taxpayer installed the window or skylight in the region s identified on the label see notice_2006_26 the american recovery reinvestment tax act of arrta enacted on date extended the credit for qualified_property placed_in_service before date the arrta also made further changes to the credit by amending the efficiency standards required in the law therefore to qualify for this tax_credit for qualified_energy_efficiency_improvements including exterior windows skylights and doors that are installed the day after enactment_date the improvements had to meet the energy efficiency standards in the arrta the arrta generally raised the efficiency standards for property placed_in_service after date thus the arrta requires that an exterior window skylight or door meet both the prescriptive criteria of the iecc and have a u factor and shgc that is equal to or less than dollar_figure to qualify for the tax_credit after the arrta a reference to the iecc may also refer to the iecc the irs provided a limited exception to this change in energy efficiency standards this limited exception specifically provides that for amounts actually paid_or_incurred before date taxpayers may rely on a manufacturer’s certification issued before date if the manufacturer based the certification on the efficiency standards in place before the arrta that is before date and on the energy star label for exterior windows or skylights if the taxpayer installed the windows or skylights in the region identified on the label note-the exception allowing a taxpayer to rely on an energy star label does not apply to doors the irs provided this limited exception because notice_2006_26 provided that taxpayers could rely on a manufacturer’s certification statement for sec_25c property or on an energy star label for exterior windows and skylights a taxpayer who claims this limited exception should retain in his or her records the manufacturer’s certification or the energy star label on which he or she relied we published this limited exception in section and of notice_2009_53 copy attached notice_2009_53 also includes an updated manufacturer’s certification procedure to allow manufacturers to certify property that meets the new energy efficiency standards enacted in the arrta conex-104313-11 taxpayers who made purchases before date and did not rely on a manufacturer’s certification issued before the arrta for sec_25c property or an energy star label for exterior windows and skylights cannot claim this exception to qualify for the credit for property placed_in_service after date these taxpayers must install property that meets the energy efficiency standards enacted as part of the arrta specifically for windows doors and skylights the arrta requires that these properties meet both the prescriptive criteria of the iecc and have a u factor and shgc that is equal to or less than dollar_figure to qualify for the tax_credit as stated in my letter dated date a taxpayer may qualify for the nonbusiness_energy_property_credit without a manufacturer’s certification statement for sec_25c property or the energy star label for exterior windows and skylights that the taxpayer installs between date and date if the taxpayer can show that the sec_25c property meets the requirements in the law as in effect prior to the arrta likewise a taxpayer may qualify for the credit without a manufacturer’s certification statement for sec_25c property that the taxpayer installs after date if the taxpayer can show that the sec_25c property meets the requirements in the law made effective by the arrta of course either a manufacturer’s certification for any sec_25c property or the energy star label for windows and skylights is necessary to rely on the exception for amounts actually paid_or_incurred before date based on either a manufacturer’s certification issued before date if the manufacturer based the certification on the efficiency standards in place before the arrta that is before date and the energy star label for exterior windows or skylights if the taxpayer installed the windows or skylights in the region identified on the label therefore to reiterate in response to your fax dated date only taxpayers claiming a credit under the limited exception must have the certification statement property that meets the applicable statutory requirements at the time it is installed is qualified_property without a manufacturer’s certification the installation dates are critical however to determining the applicable statutory requirements in your fax dated date you stated your concern about confusing language for fenestration product purchase dates and installation dates the congress provided in the arrta that property installed after date must meet the arrta requirements the law specifically stated in the arrta that the change in the efficiency standards applies to property installed after date thus an exterior window skylight or door installed after date must meet both the iecc and the requirement that the shgc and u factor be equal to or less than windows skylights and doors that meet the prescriptive criteria of the supplement of the iecc but not the requirement that the window skylight or door has a u factor and shgc that is equal to or less than will only qualify if installed prior to date unless this property also qualifies for the limited exception conex-104313-11 discussed above based on reliance on a manufacturer’s certification or the energy star label i am sorry that manufacturers may not have been aware of the certification procedure however as explained a taxpayer does not have to have a certification statement to claim the credit if the installed exterior window skylight or door meets both the prescriptive criteria of the iecc and has a u factor and shgc that is equal to or less than dollar_figure to qualify for the tax_credit the manufacturer’s certification is necessary for a taxpayer claiming a credit under the exception to show that the taxpayer relied on the certification additionally in response to your fax dated date i believe i have indicated to you in almost every if not every discussion i have had with you that we have never intended to provide any discussion of how to apply any provision of the iecc i am sorry if anything i said caused you to think that we would provide any discussion of the application of the supplement to the iecc to large cooperative buildings or to any other buildings eligibility of tenant-stockholders for a tax_credit for the purpose of this credit sec_25c treats an individual who is a tenant-stockholder in a cooperative_housing_corporation as making the tenant-stockholder's proportionate share of any expenditures of the corporation for exterior windows and doors similarly in the case of an individual who is a member of a condominium_management_association for a condominium unit that the individual owns sec_25c treats the individual as making the individual's proportionate share of any expenditures of the association for windows and doors for the purpose of determining that individual’s eligibility for the sec_25c credit as i discussed in my letter to you dated date a cooperative_housing_corporation is not eligible for these tax_credits for new fenestration or other products that benefit all of the individual tenant-stockholders this credit is a personal individual credit for individual taxpayers and the law specifically allows tenant-stockholders in their individual and personal capacity to claim these tax_credits the congress would have to amend the law to allow a cooperative to claim the credit the law deems a tenant-stockholder as making his or her proportionate share of the qualifying expenditures of the corporation generally the term tenant-stockholder’s_proportionate_share means the proportion that the stock of the cooperative_housing_corporation owned by the particular tenant-stockholder is of the total outstanding_stock of the corporation including any stock held by the corporation thus if property installed in a common area of the cooperative meets the efficiency standards in the law and qualifies for the tax_credit each tenant-stockholder is allocated a proportionate share of these eligible expenditures of the corporation however a conex-104313-11 taxpayer is eligible for the credit only for the proportionate share of the expenditures attributable to a unit that the taxpayer owns and uses as a principal_residence within the meaning of sec_121 of the code eligible tenant-stockholders should not adjust their proportionate share to take into account the share of the expenditures attributable to tenant-stockholders who cannot take the credit because they do not meet the principal_residence requirement therefore a tenant-stockholder that owns and uses his or her unit as a principal_residence within the meaning of sec_121 will be eligible for the credit based on his or her proportionate share of the qualifying expenses of the corporation for qualifying property that meets the requirements of sec_25c a taxpayer residing in a unit with qualifying property only receives a tax_credit based upon that tenant-stockholder’s_proportionate_share of the cooperative’s expenses regardless of whether the qualifying property was installed in that tenant-stockholder’s individual unit you stated in your fax dated date that it is difficult to determine which benefits-distribution process is best you also stated in your fax that it is necessary for the irs to determine the best process by which energy conservation tax_credit benefits are distributed the law treats a tenant-stockholder as making his or her tenant-stockholder’s_proportionate_share as described above as discussed the law treats a tenant-stockholder in a cooperative_housing_corporation as having made his or her proportionate share of the corporation’s expenditures_for property that is eligible for a tax_credit under sec_25c the expenditures taken into account are only those expenditures that the corporation made for property that meets the requirements in the law that applied to the property during the applicable time period conclusion in conclusion the law allows a tenant-stockholder to qualify for these credits the law does not provide different rules for cooperatives for example the installation date requirements and references to efficiency requirements are the same for a tenant-stockholder as those that apply to any taxpayer claiming the credit furthermore the credit is available only for individual taxpayers and is not available for the cooperative i understand this is disappointing for you but for the law to provide different rules for a cooperative would require the congress to amend the law conex-104313-11 i hope this information addressing the information you discussed in your fax dated date and our telephone call is helpful i hope these explanations of the law will clarify how the law applies if you have any further questions please contact --- ------------------------ identification_number ------------ or me at ---------------------for assistance sincerely charles b ramsey chief branch office of associate chief_counsel passthroughs special industries enclosure


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc fip 4-plr-142960-02 date date legend taxpayer a taxpayer b_trust c subtrust d subtrust e date date date date date contract a contract b contract c dear this is in response to a ruling_request dated date as supplemented by correspondence dated date and date in which you request rulings under sec_72 and sec_408 of the internal_revenue_code the code by virtue of the correspondence dated date our office is not considering the first and second ruling requests contained in your original submission related to sec_408 of the code those requests were handled separately by letter dated date plr the following facts and representations have been submitted in support of the rulings requested taxpayers a and b were married on date taxpayers a and b created trust c a revocable inter_vivos_trust taxpayers a and b were the grantors co-trustees and beneficiaries of trust c the trust agreement provided that the survivor of taxpayer a and taxpayer b would be the surviving grantor trustee and sole beneficiary of trust c subsequently taxpayer a transferred ownership of two deferred variable annuities contracts a and b to trust c and named trust c the beneficiary of contracts a and b taxpayer a died on date before the starting date of the annuities trust c is an a b type trust which upon the first death of a grantor is to be divided into two subtrusts subtrust d a survivor's trust and subtrust e a credit_shelter_trust taxpayer b as surviving grantor trustee has the power of allocation between the subtrusts of trust c and is the trustee and beneficiary of both subtrusts with respect to subtrust e taxpayer b is entitled to all net_income to that trust and can invade the principal on an unascertainable standard further taxpayer b has the right to withdraw the entire or any amount of income and or principal from subtrust d and this right cannot be limited by trustee discretion taxpayer b as surviving_spouse proposes to transfer contracts a and b from trust c to subtrust d and exchange contracts a and b for a new deferred variable_annuity contract contract c contract c will be issued in favor of taxpayer b taxpayer b will be both owner and beneficiary at no point in the exchange will subtrust d or taxpayer b receive any money or property other than contract c based upon the foregoing you have requested rulings that taxpayer b will be considered the designated_beneficiary of the annuities contracts a and b within the meaning of sec_72 of the internal_revenue_code and the proposed exchange of contracts a and b for contract c will qualify for nonrecognition treatment under sec_1035 issue sec_72 provides a comprehensive scheme for the taxation of life_insurance endowment and annuity_contracts sec_72 and b provide in general for the taxation of amounts received as an annuity sec_72 in general taxes amounts received under life endowment and annuity_contracts that are not received as annuities sec_72 in general provides that a contract will not be treated as an annuity_contract for federal_income_tax purposes unless with certain exceptions it provides for certain distributions in the event that the holder of the contract dies under sec_72 the contract must provide that if any holder dies on or after the annuity_starting_date and before the entire_interest in the contract has been distributed the remaining portion of such interest will be distributed at least as rapidly as under the method of distribution being used as of the date of death under sec_72 the contract must also provide that if any holder dies before the annuity_starting_date the entire_interest in the contract will be distributed within five years after the holder’s death sec_72 provides an exception for certain amounts payable over the life of a designated_beneficiary specifically s provides that if a any portion of the holder's interest is payable to or for the benefit of a designated_beneficiary defined in sec_72 of the code as any individual designated a beneficiary by the holder of such contract b such portion will be distributed in accordance with regulations over the life of such designated_beneficiary or over a period not extending beyond the life expectancy of such beneficiary and c such distributions begin not later than year after the date of the holder's death or such later date as the secretary may by regulations prescribe then for purposes of sec_72 the portion referred to in subparagraph a shall be treated as distributed on the day on which the distributions begin sec_72 defines designated_beneficiary as any individual designated a beneficiary by the holder of the contract sec_72 provides that if the designated_beneficiary referred to in sec_72 is the surviving_spouse of the holder of the contract sec_72 and shall be applied by treating such spouse as the holder of such contract in this instance although trust c is the named holder and beneficiary of taxpayer a's annuities taxpayer b has the right to allocate funds between subtrust d and subtrust e upon the division of trust c at taxpayer a's death and to withdraw all of the principal of trust c from subtrust d taxpayer b thus has complete control and dominion over trust c and subtrusts d and e and over the disposition of the assets of trust c and subtrusts d and e taxpayer has represented that trust c subtrust d and subtrust e are grantor trusts for purposes of the code and income_tax regulations as a result taxpayer b is treated as the owner of the assets of trust c subtrust d and subtrust e including contracts a and b under sec_671 taxpayer b must take into account items of income deductions and credits attributable to the assets of the trusts including contracts a and b based upon the facts and representations set forth above we conclude that taxpayer b is the designated_beneficiary of contracts a and b within the meaning of sec_72 issue sec_1035 of the code provides that no gain_or_loss shall be recognized on the exchange of an annuity for another annuity_contract for this purpose sec_1035 defines the term annuity_contract as a contract with an insurance_company and which depends in part on the life expectancy of the insured-annuitant but which may be payable during the life of the annuitant only in installments see sec_72 and u setting forth certain situations in which a contract is not treated as an annuity_contract for purposes of various tax provisions including sec_1035 sec_1_1035-1 of the income_tax regulations provides that sec_1035 does not apply to such exchanges if the policies exchanged do not relate to the same insured the exchange without recognition of gain_or_loss of an annuity_contract for another annuity_contract under sec_1035 is limited to cases where the same person or persons are the obligees under the contract received in the exchange as under the original contract in this instance although trust c is nominally the obligee under contracts a and b as explained above taxpayer b is the owner of contracts a and b for tax purposes and the designated_beneficiary under sec_72 taxpayer accordingly is the obligee of contracts a and b within the meaning of sec_1_1035-1 of the regulations because taxpayer b will also be the obligee under contract c the same obligee requirement of sec_1_1035-1 will be satisfied the legislative_history indicates that sec_1035 was designed to eliminate the taxation of individuals who merely exchanged one insurance_policy for another better suited to their needs but who have actually recognized no gain h_r rep no 83rd cong 2d sess thus sec_1035 operates as the insurance analogue to sec_1031 which relates to like-kind_exchanges of certain types of property held for productive use in a trade_or_business or for investment the similarity of sec_1031 and sec_1035 is evidenced in sec_1035 which provides that the recognition of gain_or_loss on an exchange that is not solely like-kind will be made under the terms of sec_1031 and c in addition sec_1035 states that sec_1031 provides rules relating to the basis_of_property acquired in an exchange described in sec_1035 sec_1031 c and d similarly cross- reference sec_1035 sec_1031 permits exchanges of one property for more than one property see j -1 relating to exchanges of multiple properties see also revrul_85_135 1985_2_cb_181 exchange of assets of two television stations for the assets of another television station revrul_73_476 1973_2_cb_300 exchange of three undivided interests in three parcels of land for percent ownership in one parcel because sec_1035 is written in the singular one might argue that it does not apply to exchanges of one annuity for two annuities or exchanges of two annuities for one annuity_contract however sec_7701 cross-references title i sec_1 of the united_states_code which provides that in determining the meaning of any act of congress unless the context indicates otherwise words importing the singular include and apply to several persons parties and things thus just as sec_1031 applies to exchanges of multiple properties sec_1035 applies to exchanges of multiple annuities accordingly based solely on the information submitted and the representations made we conclude with respect to your ruling_request as follows that taxpayer b will be considered the designated_beneficiary of contracts a and b within the meaning of sec_72 and that the proposed exchange of contracts a and b for contract c will qualify for nonrecognition treatment under sec_1035 except as expressly provided herein no opinion is expressed concerning the tax consequences of any aspect of any transaction or item discussed or references in this letter under the provisions of any other section of the code or the income_tax regulations specifically no opinion is expressed as to whether or not the annuities are in fact annuity_contracts under sec_72 of the code or as to whether they meet the requirements of sec_72 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely mark smith chief branch office of associate chief_counsel financial institutions products